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Forums For Adjudicating Employment Disputes

Civil courts handle ordinary litigation and provisional disposition procedures for employment disputes. In some large-scale district courts, there are special departments exclusively handling labour disputes. There is a special mediation and hearing procedure for individual labour disputes called Rodo Shinpan (labour tribunal), which is comprised of a judge and two other members appointed respectively from the labour and employer sides. The Labour Relations Commission (“LRC”), under administrative agencies, covers unfair labour practice disputes with labour unions or the members thereof, but decisions of the LRC may be contested in the civil courts.

The Main Sources Of Employment Law

The main source of employment law is legislation, such as the Labour Standards Act (“LSA”), Labour Contract Act (“LCA”), Equal Employment Opportunity Act, Childcare and Nursing-Care Leave Act, or Labour Union Act (“LUA”). However, legislation is supplemented by judicially created doctrines to a large extent.

National Law And Employees Working For Foreign Companies

As to the application of national law, there are some special rules for employment contracts. If the parties failed to make choice of the law of the place which will govern them, employment contracts are presumed to be most closely connected with the law of the place where the work is carried out and therefore, they will be governed by such law. Where the work is not to be carried out in a particular place, the parties will be governed by the law of the place of business through which the employee was engaged

Even if a law other than the law of the place with which the contract is most closely connected was chosen as the governing law, when the employee indicates to the employer his or her intention that a particular mandatory rule from within the law of the place with which the employee is most closely connected should apply, such mandatory rule will apply. The employee can make this election even after the dispute arises.

National Law And Employees Of National Companies Working In Another Jurisdiction

Whether Japanese law will be applied to employment contracts with employees of Japanese companies working outside Japan will be determined according to the special rules regarding application of the national law for employment contracts, as explained above. However, if a Japanese employee who was hired in Japan is seconded to an overseas branch or subsidiary, the relationship with the employer in Japan would be regulated by Japanese law.

Data privacy

An employer must not acquire personal information by deception or other wrongful means. Further, an employer may not acquire any "special care-required personal information" (race, religion, medical history, criminal record, etc.) without the prior consent of the individual concerned, in principle. After acquiring personal information about an employee or job applicant, in principle, an employer must promptly notify the individual about the purpose of use or publicly announce this purpose. An employer must not transfer "personal data" (personal information which is a part of "personal information database, etc.") to third parties without the prior consent of the individual concerned, in principle, except in certain circumstances.

Legal Requirements As To The Form Of Agreement

Certain important terms and conditions of the employment agreement have to be in writing (or via email, etc. if the employee requests) and handed to employees at the start of their employment. Also, “Rules of Employment” have to be prepared by employers who continuously employ 10 or more employees at any one workplace. The “Rules of Employment” stipulate the important working conditions, which will uniformly apply to those employees unless there is any special agreement more favourable to an individual employee.

Mandatory Requirements
  • Trial Period
  • The trial period cannot be extended unless the “Rules of Employment” set out reasons for the extension of the period and the extended period, etc.

  • Hours Of Work
  • Overtime work (exceeding 40 hours per week or eight hours per day), without certain statutory procedures, is illegal. Extra pay for overtime work, whether legal or illegal, is required. However, such extra pay for overtime is not required to be paid to “persons occupying supervisory or management positions” (so-called “Supervisors and Managers”). “Persons occupying supervisory or management positions” refers to those who are in positions integrated with top management in terms of decisions or other administration regarding working conditions of subordinates or other day-to-day company operations. Whether a person falls within this category is determined by taking into consideration his or her duties and responsibilities, discretion to manage his or her own work hours, and the level of remuneration; it is not simply based on his or her title.

  • Special Rules For Part-time Work
  • Upon the execution of an employment agreement with a part-time worker, an employer must stipulate 1) period of employment, 2) standards of renewal of the fixed-term employment agreement, 3) the workplace and type of work, 4) starting time and finishing time, rest periods, days off, leave and change in shifts (in case employees work in two or more shifts), 5) wages (except retirement allowances etc.), the dates for closing the account for wages and for payment of wages, and 6) retirement (including grounds for dismissal). In addition, an employer must stipulate whether salary raise, retirement allowance and/or bonuses exist and contact the person in writing (or via email, etc. if the employee requests). Also, discriminatory treatment including unreasonable discrimination in work conditions between ordinary workers and part-time workers is prohibited

  • Earnings
  • The employer must pay the employee a wage not less than the minimum wage under the Minimum Wages Act. The minimum wage is fixed according to region.

    As to the payment of salary, except for a few exceptions, salary should be paid in cash, in full, at least once a month and directly.

  • Holidays/Rest Periods
  • One day off per week is required, in principle.

    The employer must allow a rest period of a minimum of 45 minutes if the employee works more than six hours in one day, or a rest period of a minimum of one hour if the employee works more than eight hours in one day.

  • Minimum/Maximum Age
  • Employers are prohibited from hiring children under the age of 15. More specifically, once a child turns 15, he/she cannot be employed until the first March 31 after his her 15th birthday.ons under the age of 15 is prohibited. There is no maximum age limit.

    The mandatory retirement age (which needs to be not less than 60 years old) may be prescribed in the “Rules of Employment”. If an employer has a mandatory retirement age less than 65, such an employer is required to provide a re-employment scheme for its employees up to 65.

  • Illness/Disability
  • Employers are not required to provide paid sick leave to an employee for an illness or injury resulting from non-job-related causes. However, employers often implement the system of “suspension from work” in the “Rules of Employment” for the purpose of delaying dismissal due to such illness or injury.

    The Act for Employment Promotion, Etc., of the Disabled requires employers to employ a certain percentage of physically disabled, mentally impaired or intellectually challenged persons. If an employer cannot achieve this percentage, it must pay money to a relevant government agency for the support of disabled people. The Act prohibits unjust discriminatory treatment by reason of handicap in labour and employment and places an obligation on employers to take measures with the purpose of improving conditions that would otherwise impede people with disabilities from working.

  • Location Of Work/Mobility
  • There are no mandatory requirements relating to the location of work and mobility. However, the employer’s right to order relocation and reshuffling can be limited under the employee’s relevant agreement or can be treated as invalid because of abuse of rights by the employer.

  • Pension Plans
  • There is compulsory participation in government pension insurance (kousei-nenkinhoken). Under the scheme, benefits will be provided to insured persons or their survivors when they retire from their working-lives, become handicapped, or die. Company pension plans are not mandatory but are sometimes introduced in Japanese companies and are regulated by the Corporate Pension Act.

  • Parental Rights (Pregnancy/ Maternity/ Paternity/ Adoption)
  • Any pregnant employee is, upon her request, entitled to go on maternity leave six weeks before her due date. Employers must not have employees work within the period eight weeks after childbirth. However, should an employee wish to return to work after six weeks following childbirth, she may do so, but only for duties that a doctor has recognized would not adversely affect her health.

    Female employees raising an infant below the age of one may request time to care for the infant of at least 30 minutes twice a day, in addition to the statutory rest period.

    Under the Childcare and Nursing-Care Leave Act, an employee (whether male or female) who is raising a child and has custody (whether natural or adopted) under the age of one (or one year and six months of age in specific cases), who lives in the same household, may request childcare leave for a specified period of time.

  • Compulsory Terms
  • When entering into an employment agreement, the wages, working hours and other working conditions must be clearly stated to the employee. Certain important conditions that relate to the following terms of employment should be clearly stated in writing (or via email, etc. if the employee requests): 1) period of employment, 2) standards of renewal of fixed-term employment agreement, 3) the workplace and type of work, 4) starting time and finishing time, rest periods, days off, leave, change in shifts (in case employees work in two or more shifts), 5) wages (except retirement allowances etc.), the dates for closing account for wages and for payment of wages, and 6) retirement (including grounds for dismissal).

    In respect of leave, the LSA requires employers to provide their employees with annual paid leave in the amount of 10 days upon working 6 months consecutively (subject to reporting to work for 80% or more of working-days in the preceding 6 months) and increase up to 20 days depending upon years of service with the same employer.

  • Non-Compulsory Terms
  • Japanese law, including Japanese labour law, includes certain default provisions which apply where a contract is silent. The parties may agree to the same or additional terms in an employment agreement, except where such terms include provisions that would violate Japanese public policy or which terms may be said to be prohibited by mandatory law.

Types Of Agreement

There are two main types of employment agreements, regular employment agreements (without term) and non-regular employment agreements. Non-regular employment agreements include 1) fixed term agreements and 2) agreements with part-time workers. However, independent contractors or extra-company workers under contract hire agreements and dispatch workers from temporally-employment agencies do not have any employment agreements with companies where they work.


The confidentiality obligation of the employer in respect of employees’ personal information is clarified by the Act on the Protection of Personal Information and the guidelines issued by the Ministry of Health, Labour and Welfare.

Employees owe a duty of confidentiality and good faith to the employer. Also, such employees are prohibited from disclosing trade secrets under the Unfair Competition Prevention Act. Such duties are often agreed in writing in employment agreements or employees are requested to submit separate written pledges to the employer.

Ownership of Inventions/Other Intellectual Property (IP) Rights

Under the Patent Act, if an employee has obtained a patent for his/her invention which falls within the scope of the business of the employer, which was achieved by acts categorized as present or past duties of the employee (“employee invention”), the employer will have a nonexclusive license on the patent right for such employee invention. The employer may acquire the right to obtain a patent or patent right for the employee invention, if there is a provision to such effect in the employment contract or “Rules of Employment”. In such case, the employee has the right to receive reasonable remuneration.

Hiring Non-Nationals

Non-nationals are required to obtain certain types of residence status under immigration control law in order to legally work in Japan.


Hiring Specified Categories Of Individuals

There are specific rules which apply to disabled workers which are set out above.

Outsourcing And/Or Sub-Contracting/Temporary Agency Work

Employers using sub-contracted workers may not give direct instructions to such workers. Employers using dispatched workers may give direct instructions provided the employers comply with restrictions under the Workers Dispatch Act. There has been a persistent problem where quite a lot of companies work around the Worker Dispatch Act by giving direct instructions to sub-contracted workers (so-called “disguised sub-contracting”). Companies engaging in such disguised sub-contracting are subject to administrative penalties, and, furthermore, a direct employment relationship with such company may be established if such worker so wishes.

Changes To The Contract

Under the LCA, in principle, an employer cannot change any of the working conditions that constitute the contents of a labour contract in a manner disadvantageous to the employee even by changing the “Rules of Employment”, without the agreement of the employee. Notwithstanding the above, the employer can change the “Rules of Employment” unilaterally if the employee is informed of the change and if the change is reasonable. In determination of the “reasonableness” of the change, the disadvantage to be incurred by the employee, the need for changing the working conditions, the appropriateness of the contents of the changed “Rules of Employment”, the status of negotiations with a labour union etc., or any other circumstances pertaining to the change to the “Rules of Employment” will be looked at.

Change In Ownership Of The Business

There are no rules which apply when there is a change in the ownership of the business.

Social Security Contributions

Health insurance and the government pension insurance (kousei-nenkin-hoken) are compulsory social security contributions. Unemployment insurance and workers’ accident compensation insurance also require employer contributions.

Accidents At Work

The LSA provides that employers are required to provide compensation to employees who suffer injury, illness, or death at or from work. The Industrial Accident Compensation Insurance Act provides for mandatory insurance to cover most of such employers’ statutory liability under the LSA.

Discipline And Grievance

An employer cannot subject employees to any disciplinary action unless provisions regarding the reasons and the sort of disciplinary action have been set out in the “Rules of Employment”. Furthermore, if the disciplinary action lacks objectively reasonable grounds and is not found to be an appropriate response to the act committed by the employee, such disciplinary order will be treated as an abuse of rights and be invalid under LCA.

Harassment/Discrimination/Equal pay

The LSA covers equal pay between men and women. Under the Act on Securing, Etc. of Equal Opportunity and Treatment between Men and Women in Employment, employers must provide equal opportunity with regard to the recruitment and employment for all persons irrespective of gender. Act on Securing, Etc. of Equal Opportunity and Treatment between Men and Women in Employment prohibits employers from requiring their employees to accept relocation to a different geographical area upon being recruited, employed, promoted or having their job category changed without any rational reason.

With regard to sexual harassment, the Act on Securing, Etc. of Equal Opportunity and Treatment between Men and Women in Employment obligates employers to take necessary measures to prevent sexual harassment. A guidance issued by Ministry of Health, Labour and Welfare provides the concrete measures to be taken by the employer, such as creation of a clear policy regarding sexual harassment, making said policy known, and providing related education, establishing a clear channel for responding to consultations and complaints, and prompt and appropriate response after the fact in cases where sexual harassment has occurred. There are similar provisions regarding “maternity harassment” (discrimination and/or harassment against workers because of their pregnancy, childbirth and/or childcare, etc.) and “power harassment” (harassment based on supremacy at a workplace) (the provisions regarding “power harassment” has been enforced in June 2020).

Unreasonable discrimination in work conditions and discriminatory treatment between ordinary workers and fixed-term workers/part-time workers is prohibited.

Compulsory Training Obligations

There are no rules regarding compulsory training obligations. Dispatching business operators are required to give education and training to dispatch workers who have been employed by the dispatching business operator so that the dispatch workers can gradually obtain the skills and knowledge necessary to work as a dispatch worker. The client is obliged to give the same level of training to dispatch workers as education which is given to workers who have been employed by the client.

Offsetting Earnings

The LSA prohibits employers from offsetting earnings against an employee’s debts where money or credit has been advanced as a condition of such employee’s future employment for any reason.

In principle, an employer cannot offset earnings against an employee’s debts in all other situations (full-payment principle). However, if there is a written agreement with a union organized by a majority of the employees at the workplace or with a person representing a majority of the employees at the workplace where no such union exists which allows such offsetting, the employer may offset earnings against such debts. In the absence of such an agreement, if the employer obtains the employee’s consent to the set-off, such a set-off does not violate the full-payment principle as long as such consent is based on the employee’s free will.

Payments For Maternity And Disability Leave

The rule of “no work, no pay” is applied, in principle.

Compulsory Insurance

Labour insurance (unemployment insurance and workers’ accident compensation insurance) and social insurance (health insurance and government pension insurance) are compulsory.

Absence For Military Or Public Service Duties

An employer may not refuse a request by an employee, if he/she requests time off to exercise voting rights or other civil rights or to perform public duties during working hours.

Works Councils or Trade Unions

Under the LUA, trade unions have the right to bargain collectively with companies at which their members work, regardless of the number of members. An employer may not refuse to bargain collectively without justifiable reasons; otherwise, it may constitute an unfair labour practice.

Employees’ Right To Strike

Employees have the right to strike or take other labour dispute action under the Constitution and LUA. Employers have no right to claim for damages caused by the strike or other labour dispute actions against trade unions or members of trade unions insofar as such actions are justifiable. Employers may continue their business during the strike or other labour dispute actions by using the workers who do not belong to the trade union.

Employees On Strike

An employer cannot fire employees who are on a justifiable strike. The employer is not required to pay employees when they are on strike as a result of the application of the rule of “no work, no pay”.

Employers’ Responsibility For Actions Of Their Employees

Employers are responsible for damages inflicted on a third party by its employees in the course of their employment. When the employer compensates a third party for such damages, it may exercise a right to obtain reimbursement from the employee who caused such damages. However, the courts tend to limit the employer’s right to obtain reimbursement to a reasonable amount from the standpoint of a fair share of the damages by applying the principle of good faith.

Procedures For Terminating the Agreement

Among other things, any case of dismissal lacking objectively reasonable grounds or which is not considered to be appropriate according to general societal norms will be treated as an abuse of rights and be invalid under the LCA (“doctrine of abusive dismissal”). The Japanese courts are pro-labour and, when applying this doctrine, they often try to consider all facts and circumstances advantageously to the dismissed employee. In general, dismissal due to an employee’s lack of qualification with respect to his or her prescribed duties would be allowed only where the causes of such lack of qualification are so extreme that the employee’s performance has not improved or been corrected after repeated education, training or warning for a considerably long period of time..

Instant Dismissal

Employers can instantly dismiss employees by paying an amount equivalent to the average salary of the employee for more than 30 days without prior notice.

Employee's Resignation

An employee with an indefinite term may resign upon giving two weeks' notice. [A worker may not cancel his or her employment agreement for an indefinite term without unavoidable grounds.]

Termination On Notice

In order to dismiss an employee, the employer must provide at least 30 days’ prior notice (or 30 days’ payment in lieu of notice)..

Termination By Reason Of The Employee's Age

An employment agreement will be terminated upon the employee attaining the mandatory retirement age, if stipulated in the “Rules of Employment”.

Automatic Termination In Cases Of Force Majeure

In the event that the continuance of the employer’s business has been made impossible by a natural disaster or other unavoidable causes, provided that the relevant authorities authorize the employer to dismiss without prior notice or payment in lieu of notice, the employer can do so.

Collective Dismissals

Collective Dismissals (i.e., dismissal without worker’s cause) has to meet the requirements of “adjustment dismissal” (See “Specific Rules For Companies in Financial Difficulties”)

Termination By Parties’ Agreement

An employer and an employee can terminate the agreement by mutual consent. An employee’s consent must be given freely without undue influence or under duress.

Directors Or Other Senior Officers

Directors are not protected by labour laws, in principle, but are subject to the Companies Act.

However, a director, especially one that does not have the authority to represent the company, could enjoy the protection of labour laws depending on the circumstances.

Special Rules For Categories Of Employee

Employees who are taking leave for medical treatment for injuries or illnesses suffered in the course of their duties as employees, or within 30 days thereafter and who are taking the leave before and after childbirth, or within 30 days thereafter are protected from dismissal.

Whistleblower Laws

The Whistleblower Protection Act prohibits employers from disadvantageously treating workers, etc. (including dismissal, demotion, reduction of salary) on the basis of the workers’, etc. whistleblowing (i.e., to report the targeted fact (criminal act and violation of law which might result in criminal offence, etc.) to the designated report destination without unjustifiable purpose (integrity). Regarding whether disadvantageous treatment on the basis of an employee’s report (which is not whistleblowing) is allowed, the court comprehensively considers the contents of the report (whether a reasonable reason to believe the reported fact is true exists), the purpose of the report (public purpose or personal purpose), measures/methods/circumstances, etc. in rendering its decision.

Specific Rules For Companies in Financial Difficulties

Even when a company is in financial difficulties and dismisses employees for the purpose of personnel reduction (“adjustment dismissal”), 30 days’ notice, or pay in lieu of such notice is still required. Moreover, the courts usually consider four elements when considering whether the adjustment dismissal is valid, i.e., 1) Necessity of personnel reductions; 2) Whether other methods have been implemented, including a voluntary retirement program (offering a reasonable package as compensation would be considered as one of the criteria whether every alternative other than dismissal had been considered); 3) Fair selection by reasonable criteria; and 4) Due procedures, including sincere discussion with the affected employees and the union, if any. The Japanese courts are not likely to uphold an adjustment dismissal unless it was as a last resort in a situation where the company experienced significant financial difficulties.

Special Rules For Garden Leave

It is possible for an employer to instruct an employee who will leave the company to stay at home; however, the employer basically must pay 100% of salary for such period. An employer might instruct an employee to stay at home without paying their salary if there is an urgent and reasonable reason such as the existence of risks of reoccurrence of fraudulent action or destruction of evidence.

Restricting Future Activities

Confidentiality obligation under the Unfair Competition Prevention Act (which is set out above) is effective with respect to retired employees. Other confidential obligations may be agreed upon, e.g., in an employment agreement, as effective post termination. However, post-termination non-competition covenants can be enforceable under limited circumstances and conditions.

Severance Payments

Many Japanese companies have a retirement allowance (lump-sum payment) scheme under the “Rules of Employment”. Since the level of retirement allowance or pension is often computed by multiplying the employee’s base salary immediately prior to retirement by the rate reflecting the number of years of continuous service, it is generally characterized and protected as “a deferred payment of salary.” In addition to such scheduled retirement allowances, when employers induce their employees to resign for business reasons, packages including additional severance payments are often offered, in practice.

Special Tax Provisions And Severance Payments

Under the Income Tax Act, the deduction from income and the rate of tax on retirement allowances (lump-sum payment) are much more advantageous to employees than for salary and bonus payments.

Allowances Payable To Employees After Termination

Allowances payable to employees after termination depend on the “Rules of Employment” or company pension plans of the employer.

Time Limits For Claims Following Termination

The LSA stipulates that claims for retirement allowances should be made within 5 years and all other claims, such as salary, within 2 years after entitlement (5 years regarding salary that accrued in or after April 2020; however, 3 years as interim measures for the time being).

Specific Matters Which Are Important Or Unique To This Jurisdiction

Two concepts that characterize the traditional Japanese labour and employment situation found typically in regular employees of major companies have been “lifelong employment” (Shushin-Koyo) and “seniority system” (Nenko-Joretsu). With respect to the habitual practice of lifelong employment, an employer’s right to dismiss an employee has been severely restricted by the courts. With respect to the seniority system, under which it has been assumed that the base salary should continue to increase with advancing age, pay systems have been rigidly structured and most employers do not have the right to reduce the base salary of their employees.

However, in the past fifteen or more years, such trends have been rapidly changing. Some employers that are starting to abandon their lifelong employment policies no longer hesitate to implement a restructuring of human resources, including dismissals, as much as they did in the past. In the meantime, against the background of increased worker mobility, unfair competition and leakage of trade secrets by former employees have become major risks that many employers are facing.

Moreover, the implementation of performance-based pay is becoming more prevalent among a considerable number of employers. Greater potential conflicts between employers who want to pay for performance, not for working hours, and employees who feel forced to work longer hours without sufficient compensation are often realized as a claim for unpaid overtime pay in the wake of reluctant resignation or an inspection by the labour authorities.

On the other hand, atypical workers, such as part-timers, dispatched workers and fixed-term employees, who work for considerably lower wages and have no relation to lifelong employment have increased up to nearly 40% of the total workers, and are predominately young, female and elderly workers. Employment instability and a gap in treatment as compared with regular workers have emerged as social issues. These days, the laws protecting such atypical workers have been very frequently amended so that employers have to timely update their employment systems for atypical workers, including revisions of their “Rules of Employment.” (For example, effective as of April 1, 2013, the amended law prohibits unreasonable employment conditions in fixed-term labour contracts as compared to those in indefinite-term labour contracts and grants fixed-term employees the right to convert their contracts into contracts without a fixed term after repeated renewals beyond a total of five years (as counted from contracts commencing on or after April 1, 2013).) Also, unreasonable discrimination in work conditions and discriminatory treatment between ordinary workers and fixed-term workers/part-time workers/dispatch workers is prohibited

These drastic and structural changes for all types of workers have been a source of increased stress in the workplace with prolonged recession and intensified global-scale competition. Therefore, mental health disorders and bullying (known as “power harassment” in Japan) are shared as common issues facing all employers. Based on that, the amended act to impose an employer to take necessary measures to prevent “power harassment” has been in force effective as of June 2020.

For these reasons, individual labour disputes in Japan are increasing in number and complexity

Finally, employers should be aware of a recent trend whereby an employee at even a non-union company will join a regional union to protest being subjected to pressure to resign, dismissal or other personnel measures after the fact in order to have that union make a request for collective bargaining and put pressure on the employer. Any union, whether it unionizes a majority of the employees at the relevant workplace or not, has the right to collectively bargain with the employer, and rejection of such collective bargaining without a justifiable reason would constitute an unfair labour practice.

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Rikisuke Yamanaka
Ushijima & Partners


© 2021, Ushijima & Partners. All rights reserved by Ushijima & Partners as author and the owner of the copyright in this chapter. Ushijima & Partners has granted to Multilaw non-exclusive worldwide license to use and include this chapter in this guide and to sublicense Lexis Nexis, a division of RELX Inc. and its affiliates certain rights to use and distribute this Guide.

The information in the How to Hire and Fire Guide provides a general overview at the time of publication and is not intended to be a comprehensive review of all legal developments nor should it be taken as opinion or legal advice on the matters covered. It is for general information purposes only and readers should take legal advice from a Multilaw member firm.

Publication Date: June 2021