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Discontinuing employment

i Dismissal

As a general rule, employment will only be terminated for cause by an employer in Japan. There is no concept of termination 'at will'.

Cause for dismissal includes poor performance, repeated misconduct, serious misconduct, redundancy and medical incapacity. However, an employer's right to dismiss its employee is severely restricted. Article 16 of the LCA stipulates that a dismissal will, if it lacks objectively reasonable grounds and is not considered to be appropriate in general societal terms, be treated as an abuse of right and be invalid.

Other laws (such as the LSA) set forth certain restrictions on dismissals, such as during maternity leave or medical treatment of work-related injury.

Where an employer wishes to dismiss its employee, the employer must provide at least 30 days' advance notice. An employer who does not give the 30-day notice is required to pay the average wage for no less than 30 days, except under certain conditions. An employer is not generally required to give notice to a works council or trade union when the employer dismisses its employee.

Based on its work rules, an employer may dismiss its employee because of a disciplinary action (punitive dismissal). In a case of punitive dismissal, courts will judge the validity of the dismissal pursuant to Articles 15 and 16 of the LCA.

ii Redundancies

As mentioned in subsection i, the validity of the redundancy is also judged by whether it lacks objectively reasonable grounds and whether it is considered to be appropriate in general societal terms. Under case law, for redundancies to be deemed reasonable and appropriate, the following criteria must be met:

  1. Necessity: the business circumstances of the employer are in a situation that renders redundancies unavoidable and necessary.
  2. Efforts to avoid redundancy: in short, redundancies should be the measure of last resort.
  3. Reasonable selection: the standards for selection of employees who are subject to redundancies were reasonable and redundancies were fairly carried out.
  4. Reasonable process: the employer conducted sufficient consultations with its employees and labour unions.