In a court case in which a doctor employed by a health care corporation sought extra pay for overtime and late-night work (collectively, "overtime"), the Supreme Court (Second Petty Bench) issued a decision on July 7, 2017 overruling the Tokyo High Court's original decision dismissing the claim for extra pay and remanded the case to the Tokyo High Court.
In the case, there was an agreement between the health care corporation and the doctor that the doctor's annual wage of JPY 17,000,000 included extra pay for overtime (except for certain limited allowances paid pursuant to overtime rules established by the health care corporation). However, it was not clear how much of the doctor's annual wage corresponded to pay for work done during regular working hours and how much corresponded to the extra pay mentioned above. The High Court decision affirmed the validity of the agreement by taking into account factors such as the characteristics of the work of a doctor, the fact that the doctor was able to control his work at his own discretion, and his considerably high salary.
In contrast, the decision did not give special consideration to the fact that the employee was a doctor in deciding the extra pay issue. The decision mentioned the purpose of Article 37 of the Labor Standards Act, which obliges employers to provide extra pay for overtime, and referred to judicial precedents that held that if a company intends to provide extra pay to an employee by including the extra pay in his or her basic wage or allowances, it is necessary to differentiate clearly the portion corresponding to pay for regular working hours and the portion corresponding to extra pay. The decision concluded that the payment of the annual wage to the doctor could not be considered the provision of extra pay for overtime because there was no clear differentiation in the agreement.
While the scope of the decision is debatable, since the decision held that it is not permissible even in the case of a doctor—a typical job involving high expertise and a high salary—to include extra pay for overtime in the basic wage without clear differentiation, there is the possibility of similar rulings in the future with respect to employees with other jobs involving high expertise and a high salary. In cases in which an employer enters into an agreement with its employee to include extra pay for overtime in his or her basic wage, the employer should carefully examine the validity of such agreement regardless of the employee's job type, and if such an agreement is already provided for in an existing contract, the employer should reconsider the agreement in light of the decision.