The Supreme Court of Japan has recently handed down decisions in cases on sexual harassment and maternity discrimination which support the current Abe government's efforts to retain women in the workforce. On sexual harassment, the Supreme Court upheld a company's disciplinary action against two managers for persistent harassment of their subordinates; a first for a case of verbal sexual harassment. In the discrimination case, the Supreme Court held that demotion or other unfavourable maternity-related treatment is discriminatory unless specific circumstances apply. The Ministry of Health, Labour and Welfare ("MHLW") has subsequently adopted a similar working policy for its assessments of unlawful pre and post-partum discrimination by employers.

Maternity Discrimination

On 23 October 2014 the Supreme Court allowed the appeal of an employee who was demoted when she asked for physically less demanding duties after she became pregnant. The employee argued that the demotion breached Article 9 (3) of the Act on Securing Equal Opportunity and Treatment between Men and Women in Employment ("Equal Employment Opportunity Law"), which prohibits disadvantageous treatment of female workers due to matters such as pregnancy, child birth and pre or post-partum maternity leave under Article 65 of the Labour Standards Act.

The employee, a senior hospital physical therapist, had held a managerial position for four years when she applied for lighter duties while pregnant pursuant to Article 65(3) of the Labour Standards Act. She was transferred from a home care facility to the in-hospital rehabilitation team, losing her managerial status at the same time, allegedly with her consent. After returning from maternity leave, the employee returned to her former team, but not to her managerial position, as that role was filled by another employee in the interim.

The employer argued the demotion was a reasonable exercise of their discretion in relation to human resources issues, as at the time of the appellants transfer to lighter duties and subsequent return to work, the employer did not have an opening at the managerial level.

The employee's discrimination claim was dismissed twice by the Hiroshima District and High Courts. The Supreme Court allowed the appeal and remanded the case to the Hiroshima High Court for further findings of fact.

The Supreme Court held the demotion would be discriminatory unless one of the following two circumstances applied:

  • it was found on objective and reasonable grounds that the employee voluntarily consented to the transfer, taking into account: advantages and disadvantages of the transfer, explanations by the employer, and the employee's intent; or
  • there were special circumstances which were found to necessitate demotion to meet legitimate business or personnel needs, including after considering the advantages and disadvantages of the demotion to determine whether it negated the purpose of the Equal Employment Opportunity Law.

The Court found that the first circumstance did not apply as the disadvantages far outweighed the advantage: lighter duties, but demotion from a managerial role it took the employee 10 years of service to earn, loss of income in the form of a special managerial allowance and no evidence the employer explained that she would not regain her managerial position after returning from maternity leave. The Court held that there were insufficient findings of fact to determine the applicability of the second circumstance, and remanded this case back to the Hiroshima High Court.

In considering potential breach of the Equal Employment Opportunity Law in this case, the Supreme Court justice considered numerous factors, including the following employer obligations:

  1. the obligation under the Child and Family Care Leave Act to ensure a smooth return to work for employees; 
  2. the presumption that employees returning from child care leave will return to the same or an equivalent position; and
  3. MHLW Guidelines which indicate that employers should take presumption (ii) into account when managing the deployment/employment of other staff.

On (iii), the Supreme Court justice noted that the employer promoted another physical therapist with six years less experience than the appellant to a managerial role shortly after transferring the appellant to lighter duties, in a decision which was not well thought out. It was this decision which forced the appellant to continue to work in a non-managerial role for an extended period of time even after her return from maternity leave.

Ministry Announcement of 23 January 2015 and 30 March 2015

Following this judgment, the MHLW announced its new policy that labour bureaus would presume breach of the Equal Employment Opportunity Law in cases of unfavourable treatment such as demotion or dismissal within one year of an employee becoming pregnant, giving birth or returning to work after giving birth. There are limited exceptions to the presumption, such as incompetence which was raised with the employee before their pregnancy, where the employee has been given help to improve, but has subsequently shown no prospects of improving.

If labour bureaus find the unfavourable treatment to be unlawful, they can issue administrative guidance and subsequently name and shame rogue employers who are found to be malicious or unrepentant offenders.

Sexual Harassment: Judgment of 26 February 2015

On 26 February 2015 the Supreme Court upheld disciplinary action taken against two male managers for repeated verbal sexual harassment of female employees under their supervision.

In February 2012 the men were suspended for 30 days and 10 days respectively and demoted, over the following repeated behaviour toward two female labour hire workers:

  • cornering a female employee who was working alone in the office on multiple occasions to discuss the age and occupation of the manager's mistress, his own sexless marriage, his growing libido and photos of "candidates" for his next mistress, and commenting on any female visitors to the aquarium that he liked (30 day suspension);
  • commenting on the female employee's age, the fact she was not yet married and that that would make her parents cry; her salary, the fact that permanent employees make more money, and that she should do "night work" to earn more money. After sexual harassment prevention training, the manager said, "We can't talk to girls like that", and "Girls avoid those who talk like that" (10 day suspension).

The men claimed that the punishment was excessive and therefore an abuse of the employer's rights to discipline, as the women did not indicate that they found the comments offensive, and they believed that their conduct was permissible. They also claimed that they were not aware of the company's sexual harassment policy, nor were they given any warnings that their conduct infringed the policy.

All three courts at first instance and in subsequent appeals found the above conduct constituted sexual harassment. Only the Osaka High Court found that there were insufficient warnings or instructions. This was overturned by the Supreme Court, which found that the company had prioritised sexual harassment awareness in the workplace, distributed the company's policy prohibiting sexual harassment to all its employees, and implemented mandatory annual sexual harassment prevention workshops. Additionally, the Court found that the men had attended the sexual harassment prevention workshops, and that as managers it was part of their duties to instruct subordinates on the company's sexual harassment policy. Despite this, the sexual harassment had continued for over a year on numerous occasions.

In light of the above, the Supreme Court held that the company did not abuse their right to discipline their employees, as the suspensions and demotions did not lack objectively reasonable grounds, nor were they inappropriate in "general societal terms" (Article 15, Employment Contract Act).

What to be aware of

The October 2014 judgment highlights the need for employers to carefully manage the process of employee requests for accommodations during pregnancy, maternity leave and return to work. This includes ensuring full consultation and explanation to the affected employee, and obtaining and documenting the employee's informed consent to any ostensibly disadvantageous change to their employment terms around this time. Employers will also need to bear in mind that employees on maternity leave should be returned to work in the same or an equivalent position, when making decisions on the deployment or promotion of other staff in the interim.

Female employees in Japan have traditionally enjoyed protected status from termination during their statutory pre and post-partum maternity leave period and for 30 days thereafter. For risk-conscious employers, the MHLW's announcement means this protected status has now effectively been extended to:

  1. a period beginning with pregnancy, and ending 1 year after return to work; and
  2. any disadvantageous treatment during this period, unless covered by one of the MHLW's limited exceptions.

The February 2015 judgment emphasises the need for a rigorous anti-harassment policy and training, which would enable employers to take appropriate disciplinary action if there are breaches. While not examined specifically in this judgement, employers should also be aware that in practice, this decision may mean that going forward, employers may be held vicariously liable in tort law in Japan for not only physical but also verbal sexual harassment of their employees toward subordinates and temporary dispatch staff, unless such behaviour is caught and quashed promptly.