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EmploymEnt law ovErviEw 2017

Japan

i. GEnEral 01ii. hirinG practicEs 02iii. EmploymEnt contracts 03iv. workinG conditions 05V. Anti-DiscriminAtion LAws 07vi. social mEdia and data privacy 09vii. authorizations for forEiGn EmployEEs 10 viii. tErmination of EmploymEnt contracts 11iX. rEstrictivE covEnants 13X. riGhts of EmployEEs in casE of a transfEr of undErtakinG 14Xi. tradE unions and EmployErs associations 15Xii. othEr typEs of EmployEE rEprEsEntativE BodiEs 16Xiii. social sEcurity / hEalthcarE / othEr rEquirEd BEnEfits 17

Table of contEnts

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3. legal framework

employment law in Japan is mainly based upon the following sources:

• TheConstitution• Laws,inparticulartheLaborStandardsAct,Labor ContractAct,LaborUnionAct,andtheCivilCode;• Governmentordinancesandimplementation regulations;• Collectiveagreements;• Workrules;• Employmentcontracts;• Establishedworkplacecustom

Furthermore, case-law is treated as importantprecedence,asseenbythefactthattheLaborContractAct includes provisions, which reflect past decisionsmade by Japanese courts.

4.NewDevelopments

Anewlawcalled“ActonPromotionofActiveWork-lifeforFemales”wasestablishedandpromulgatedon4Sep2015,andtheobligationontheprivatesectorhasbeenimplemented from 1 April 2016. The government hasissued a guideline on what employers with more than 300employeeswillneedtodotofulfilltheobligationtoanalyze the status of female workers at its workplace and issues,establish/publicizea“BusinessOperator’sActionPlan”establishedbasedpursuanttosuchanalysis,andto disclose information regarding active utilization offemaleemployees, from1April 2016. Employerswithless number of employees are encouraged to do the same,butnotobligated.Thislawisonlyeffectiveuntil31March2026andwillexpireatsuchtime.

Theplanneedstobebasedoncertaininformationsuchas percentage of femaleworkers, length of service inaccordance with gender, length of work hours at theworkplace,percentageoffemalemanagementworkers,and the employer needs to set out numerical targets as wellashowandwhentheyplantoachievesuchtargets.


i. GEnEral

1. Introductory Paragraph

Employment law applies to the relationship betweenthe employer and its employee(s). The definition ofemploymentis“provisionoflaborundertheinstructionsandmanagement of the employer” and distinguishedfrom other relationships such as independentcontractors and consignees based on the level ofindependence/subordinationandtheframeworkoftheworkforce.MembersoftheboardundertheCompaniesact are not employees protected by employment law,althoughadirector that isnot the representativedirector can concurrently be an employee. employment lawwouldapplytothepartoftherelationship,whichisemployment.

2. Key Points

• Acontractofemploymentmaybemadeorallyorin writing,providedcertaintermsandconditionsare met.• Foreignnationalsneedtoobtain“statusof residence”(oftencalledworkvisa,althoughstrictly speakingvisaisnecessarytoenterJapanandstatus ofresidenceisrequiredtoworkafterentering Japan)toworkorstaylong-terminJapan,and their work needs to be within the scope of their status of residence.• Allgroundsfordismissalneedtobesetoutinthe employment contract and work rules (if there are work rules). a dismissal of an employee without anobjectiveandlogicalreasonbaseduponsocial conventionwillbeinvalidasanabuseofright todismiss(Article16ofJapaneseLabourContract Act).Inpractice,theJapanesecourtsareverystrict intheirdefinitionastowhatis“objective,logical and reasonable”. • Therecanbeacompany-specificunion,which coversacertaingeographicareaorindustry,unions whicharebranchesofalargenationalcentersuch asRengou,oracombinationoftheabove.• Inacompanysplit,merger,sharetransfer,the takeoverpartyisobligatedtorespectallofthe rightsandobligationsthattheoriginalemployer had with its employees.

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Thereisnostatutorylimitationonbackgroundchecks,although there are guidelines recommending that employersrefrainfromaskinginvasivequestionsunlessthereisastatutoryorspecialoccupationalneed.AgovernmentalguidelinebasedonthePersonalInformationProtectionActreferstocriminalrecord,race,religion,placeofbirth,amonginformationidentifiedas“sensitiveinformationwhichcanleadtodiscrimination”andfrownsuponcollectingsuchinformationwithoutaspecialoccupationalrequirement,andrecommendsthatinadditiontohavingsuchaneed,therelevantinformationisobtainedwiththesubject’sconsent,andtobeparticularlyconsiderate/carefulinhandlingsuchinformationsecurelysothatitisnotused/divulgedinappropriately.

Thatsaid,guidelinesarenotlegallybinding,althoughwidelyacceptedassocialstandardorbestpractice,soaslongastheinformationisobtainedinasociallyacceptablemethodandsecurelymaintained,andnotusedinadiscriminatorywayafterhiring,itisnotillegaltoaskforinformationtheemployerwishestoobtainatthetimeofhiring,anditiscommonpracticetoaskfordeclarationoncriminalrecord.Also,whilediscriminationbasedonreligion/politicalbeliefisprohibitedafterhiring,adecisionnottohirebasedonsuchbeliefsisnotviewedasillegal.


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ii. hirinG practicEs


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1. Minimum Requirements

an employment contract may be made orally or inwriting,providedthattheemployernotifiesthefollowingtermsandconditionsofemploymentinwritingtotheemployeewhenanemploymentagreement is reached:

• Whetheritisafixedtermoropen-endedcontract• Whethertherewill,ormaybe,arenewal(for fixedtermemployment)andifyesthecriteriafor determining renewal• Placeofwork,anddescriptionofwork• Commencementandfinishtimeofworkhours, whether there will be work beyond prescribed workhours(i.e.overtime/holidaywork),break period,daysoff,holiday,andifemployees aredividedintotwoormoregroups(indifferent timeframes)rulesregardingswitchingtimeframes• Methodofdeterminingtheamount,calculation, payment,cutoffdateofcalculationofsalary (excludingretirementallowance)• Causesforretirement(includingcausesfor dismissal).

Thelawstipulatesthatrulesconcerningthefollowingmatters,ifany,mustbeindicated(methodnotnecessarilyinwriting)ifapplicable,alsowhenemployment agreement is reached:

• Scopeofeligibleemployees,methodof determiningtheamount,calculation,methodof paymentandtimingofretirementpay• Specialsalary(excludingretirementpay),bonus• Safetyandhealth• Vocationaltraining• Compensationforaccidents/sicknessorinjurynot caused by work• Awardsanddisciplinarymeasures• Leave

2. Fixed-term/Open-endedContracts

Theemployerandemployeearefreetoexecuteafixedterm contract, which does not need to be renewedunlessthepartiesagree.

However,whenfixedtermemploymentcontracts,whichstartedafter1April2013,arerenewedtoreachaperiodexceeding5years,theemployeewillacquirearighttorequestandchangetherelationshiptoopen-end.Therehave already been two separate legislative acts withexceptionstothismaximumtimeperiod:(1)professors,researchers, etc. at universities and research anddevelopmententitiesforwhichthemaximumperiodis10 insteadof5years,and(2) (a)employeeswithhighlevelofexpertisewhowillwork inabusinesswhich isscheduled to end in a period between 5 to 10 years and (b) employees re-employed after reaching retirementageaspartofprotectionofseniorageemployees,whoare wholly exempt (the employee will need to submit certain documents to the Labor Standards InspectionOfficetoutilizethisexception).

Themaximumtermofasinglefixed-termemploymentcontracts is three years. For employees who have ahigh level of specified professional knowledge, skillorexperience,oremployeeswhoare60orolder, themaximum length is five years. However, an employeris required to be considerate not to set out a fixed-term, shorter than necessary in light of the purposeof the employment, and repeat renewals. There is nominimumtermforfixedtermemployment.

3. Trial Period

Aprobationaryperiodmaybeappliedatthebeginningofanemployment relationship– there isnostatutoryruleonthelength,althoughit isviewedasvoid if it istoolongorotherwiseplacestheemployeeinanoverlyunstablesituation.Atypicalperiod is6months.Whilethe employer has a wider discretion to dismiss anemployee due to performance during a probationaryperiod, a “reasonable” cause is still necessary for adismissal.

4. NoticePeriod

As a general principle, the employer must give theparticularemployeeoneofthefollowing:

• atleast30calendardays’priornotice;

iii. EmploymEnt contracts


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• payment in lieu of such notice equivalent to theparticularemployee’saveragewagefor30days,whichshould be paid when notifying the employee of thedismissal;

• a combination of notice and payment where theemployershallpayforthenumberofdaysofnotificationshort of 30 (e.g., if the employer gives 14 days’ priornotice, itmust pay an amount equivalent to 16 days’worthoftheaveragewageoftheparticularemployee).

However, during the first 14 days of a probationaryperiod, the above notice requirement does not applyandnoticecanbecomeeffectiveimmediately.

Also,anemployercanapplyforapprovalbytherelevantLaborStandardsInspectionOfficeforwaiverofnoticeifthecauseforterminationisattributabletotheemployeeand the Labor Standards Inspection Office views thecase as serious enough to exempt the employer from thenoticeperiod.


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iv. workinG conditions

1. MinimumWorkingConditions

Minimumworkingconditionssuchasminimumnumberof annual leave, rate of overtime, and holidays, arestipulated under the Labor Standards Act. There arevariousotherlaws,whichstipulatespecificaspectssuchas child care/ nursing care to ensure minimum workconditionsforemployees.

2. Salary

ThereisaMinimumWageActandtherateofminimumwage is renewed around october each year. There are twotypesofstatutoryminimumwage–oneisforeachprefectureandanotherisforcertainindustries,andthehigher of the two needs to be met. The more commonly applied prefectural minimum wage is reviewed andannouncedaroundOctobereachyear,andthehighestisfor Tokyo at JPY907 per hour applicable from 1 october 2015(fromJPY888applicablethepreviousyear).

3. MaximumWorkingWeek

as a general principle a standard workweek should not exceed 40 hours.

4. Overtime

Workmustnotexceed8hoursperdayor40hoursperweekasageneralprinciple.Workbeyondsuchthresholdswouldbeovertimework,andcanbeordered by the employer if (a) the employer has a basis forsuchorderintheemploymentcontract/workrules,and(b)hasexecutedalabormanagementagreement,which must be renewed annually and needs to be submittedtothelocalLaborStandardsInspectionOffice.Whiletheguidelineformonthlyovertimeiscappedat45hoursasageneralprinciple,thereisamechanismtoallowovertimebeyondsuchacapwhenthere is a special agreement.

Otherexceptionstothisrulemayapplydependingonthe status of the employee (e.g. exempt “managerial andsupervisory”positionemployees)ortheapplicable

workhourscheme(e.g.discretionaryworkhoursystem,flex-hoursystem).

Overtimeworkneedstobecompensatedwithovertimeallowance,whichmustbeatleast125%ofnormalhourlywagesforovertimeupto60hourspermonth–forfurtherovertimetherateneedstoincreaseto150%.Thereisanexemptionforsmallersizedcompaniesfromincreasingtherateto150%whenexceeding60hoursinamonth,butthereisaproposaltoamendtheLaborStandardsActtoceasetheapplicationoftheexceptionfrom1April2019atthe Diet.

5. Holidays

Theemployermustprovideatleast1dayoffperweek,or4daysoffper4weeks.Workonsucharestdayrequiresthesametworequirementsasovertimework.

Workonastatutoryrestdayrequirespaymentofholidayallowance,whichis135%ofnormalhourlywage.Sincemanycompanieshavea5dayworkweektoavoidconstantovertimeinsuchcasethereisaneedtodesignatewhichdayoffisthestatutorydayoff.

Statutoryannualleavemustbeprovidedwhentheemployee’sattendanceratewas80%oraboveintherelevantperiod.Forfulltimeemployees:

Year(s)ofservice Annualpaidholidaysgranted

0.5 years 10 days1.5 years 11 days2.5 years 12 days3.5 years 14 days4.5 years 16 days5.5 years 18 days6.5 years or more 20 days


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6. Employer’sObligationtoProvideaHealthyandSafeWorkplace

An employer is obligated to provide “due care forsafety” to protect the life and health of its workers in its workplace. This obligation has stemmed from theobligation of good faith and had been made into astatutory obligationwhen the Labor ContractActwasimplemented.Initiallythisobligationhadbeendiscussedin thecontextofpreventingworkplaceaccidents suchas in use ofmachineries, but is nowmore commonlydiscussedinthecontextofpreventinglongworkhours,harassment (bullying) at the workplace, that leads tomental or physical sickness.

This obligation has led to a recent implementation ofannual “stress check” at the workplace for any single workplacewith50employees,tobeimplementedfrom1December2015, aimedatpreventingmental healthissues by grasping stress levels and promoting stressmanagement.


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V. Anti-DiscriminAtion LAws

1.BriefDescriptionofAnti-DiscriminationLaws

Nationality, Creed (beliefs including religious/ politicalbeliefs),SocialStatus(interpretedtoincluderace)–theLaborStandardsActprohibitsdiscriminatorytreatmentinsettingoutanytermsandconditionofemployment,suchasforsalary,andworkhours,basedonsuchcause.

GEndEr – the Equal Employment Opportunity Actprohibits discrimination based on gender in hiring,placement, promotion, demotion, training, benefits,change in position and type of employment, seekingresignation, retirement age, dismissal or renewal offixed term contract. The Labor Standards Act alsoexplicitly prohibits discriminatory treatment based on gender for salarypurposes. Further, this lawprohibitsdisadvantageoustreatmentofafemaleemployeewhobecomespregnant,giveschildbirth,appliedforortookstatutory maternity leave, or any other maternity/childbirthrelatedcause,andanydismissalofafemaleemployee who is pregnant or within 1 year of givingbirth will be invalid, unless the employer can provethatthecauseofdismissal isnotduetosuchmatters.Employersarealsoprohibitedfromstipulatingmarriage,pregnancy or childbirth as a cause for resignation ormarriage as cause for dismissal. Further, the LaborStandardsActprohibitsdismissaloffemaleemployeesduringmaternity leave and 30 days thereafter, unlesscontinuationofthebusinessbecameimpossibleduetonaturaldisaster,etc.

aGE – The Employment Measures Act prohibitsdiscriminationbasedonageforhiring(thatsaid,thereareexceptions,suchasretirementagebeinglawfulandcommonpracticeandnotviewedasagediscrimination,sohiringofpeopleagedyounger than theemployer’sretirementageisallowed,andhiringyoungpeoplewhenthepurposeistoensurealongcareerisalsopermitted,soseekingnewgraduatesisalsopermitted.)

child carE/ nursinG carE – the Child Care andNursingCareActprohibitsdisadvantageous treatmentofanyemployeewhoappliedfor,ortook,childcareornursingcareleaveandothermeasuresunderthislaw.

disaBility–UndertheActtoPromoteEmploymentofPersonswithDisability,employerswithmorethan100employeesareobligatedtohirepersonswithdisabilitiestoreach2%oftheworkforce,andiftheyfailtodoso,must pay a certain sum. Further, from April 1, 2016,employers are prohibited to treat persons with disability in a discriminatory manner, and from April 1 2018,employers will be required to implement measures to assist persons with disabilities to work (unless themeasure will cause undue burden).

union mEmBErship – the Labor Union Actprohibits discriminationby employers basedonunionmembership, joining or trying to form a union, orparticipating in a justifiable union activity, or tomakeitaconditionforhiringthatanindividualwillnotjoinaunionorwillleaveaunion.

PArt-time workers – The Part-Time Workers Actstipulates that part time workers who have similarjob descriptionswith full timeemployees and subjectto similar job positions (e.g. will not be exempt fromtransferringtootherlocations),mustbetreatedequallywithrespecttosalary,training,benefitsandothertermsandconditionsofemployment.

2.ExtentofProtection

The restriction on gender prohibits indirectdiscrimination, such as unreasonably applying height/weight/strengthrequirementsunrelatedtothejob.

For prohibition of discrimination in setting out orapplying terms and conditions of employment, anemployee seeking equal treatment may seek the same terms and conditionswith the employee(s) they seekequal employment with.

For union discrimination, unions can also initiate aprocess to claimUnfair Labor Practice before a LaborRelationsCommission,whichspecializesinsuchclaims.


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3.ProtectionsAgainstHarassment

In addition to the types of remedies explained in 2above, sexual harassment is prohibited under theEqualEmploymentOpportunitiesAct (andcan lead toclaims for damage against both the perpetrator and the employer if the employer failed to carry out its duty to provideduecareforasafeworkingenvironment).

Power harassment (bullying) can also lead to a similar situation,althoughthereisnospecificlegislationandisviewedasanillegaltortactundertheCivilCode.

A recentaddition to themajor typesofharassment iscalled “maternity harassment” and is prohibited under theprotectionofmaternityrelatedmeasuresandchildcare related measures under the equal employment OpportunitiesActandChildCareandNursingCareAct.


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vi. social mEdia and data privacy

1.Cantheemployerrestricttheemployee’suseofInternetandsocialmedia during working hours?

Yes. That said, whether an employee who usesthe internet/ social media during work hours maybe disciplined or terminated will depend on the circumstance, including how strict the employer hadimplemented itspolicy,howoften theemployeeusedthe internet/ social media (procrastinated), and howlong the employee had been bound to work (length of work hours).

2.Employee’suseofsocialmediatodisparagetheemployerordivulgeconfidentialinformation

Same restrictions apply as disparagement/divulgingconfidentialinformationusingothermeans.


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Foreignnationalsneed toobtain“statusof residence”(oftencalledworkvisa, although strictly speakingvisais necessary to enter Japan and status of residence is requiredtoworkafterenteringJapan)toworkorstaylong-terminJapan,andtheirworkneedstobewithinthe scope of their status of residence. There are types ofstatuswhichdonotlimitthetypeofworkactivitiesallowed, which are “permanent resident”, “spouse ofpermanent resident”, or “spouse, etc. of a Japanesenational”.Thetypesofstatususuallyobtainedtoworkin companies in Japan are as follows:

a. Investor/businessmanager(ex.company presidents,officers)b. Legal/accountingservices(ex.attorneyscertifiedin Japan)c. Engineer(ex.scientificengineers)d. Specialistinhumanities/InternationalServices(ex. foreign language teachers)e. Intra-companytransferee(ex.peopletransferredto theJapanesebranch(headofficeofthesame company,etc.)f. Skilledlabor(ex.chefsspecializinginthefoodofa foreign country)

The process of obtaining a status of residence is expeditedbyacquisitionofa“CertificateofEligibility”issuedby theMinistryof Justicebasedon the foreignnational’s application and assistance from the hostentity in Japan. As a general principle, application forstatus of residence takes 5 business days if the applicant obtainedaCertificateof Eligibility and theapplicationformsareinorder,andseveralweekstomonthsifnot.

vii. authorizations for forEiGn EmployEEs


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viii. tErmination of EmploymEnt contracts1.GroundsforTermination

all grounds for dismissal need to be set out in the employment contract and work rules (if there are work rules).Adismissalofanemployeewithoutanobjectiveand logical reason based upon social convention willbeinvalidasanabuseofrighttodismiss(Article16ofJapaneseLabourContractAct).Inpractice,theJapanesecourts are very strict in their definition as to what is“objective,logicalandreasonable”.

Typicalexamplesof“objective,logicalandreasonable”reasons for dismissal are:

• employee’sinabilitytoworkorinsufficientabilityto workduetoreasonsofillness,injury;• theemployeeisperformingataconsistentlylow levelincarryingouthis/herduties;• theemployeeisinsubordinate/disruptive/ uncooperativeorhassimilarattitudeproblemsin carryingouthis/herduties;• theemployeehascommittedamaterialbreachof his/heremploymentcontractand/ortheworkrules ofthecompany(e.g.grossmisconduct);• theemployeeisfoundunfitasanemployeeduring aprobationaryperiod;• decisionsbythemanagementtorestructurethe companyduetotheseriousfinancialill-healthof the company or other similar causes and as a result of such restructuring there is a need to reduce the workforce(redundancy);and• othercausessimilartotheabove.

2.CollectiveDismissals

Whiletheremaybeanumberofconcurrentdismissalsincaseofaredundancydismissal, there isnoconceptof “collective” dismissal under Japanese law. If therehappens to be dismissals performed simultaneously orwithinacloseperiod,theremaybeanobligationtonotify the relevant Public Employment SecurityOfficedependingonthecause/numberofemployeesleaving/timing/ageofemployees.

3.IndividualDismissals

Alldismissalsare individualdismissalsunder Japaneselaw.

a. is sEvErancE pay rEquirEd?

There is no statutory obligation to pay any severancepayfortermination,exceptforpaymentinlieuofnoticeifthenoticeperiodfordismissalislessthan30days,andthe employer had not obtained prior approval by therelevantLaborStandardsInspectionOfficeforwaiverofnotice.Thatsaid,inordertoamicablyendemploymentandavoidadispute,itiscommonpracticeforemployersto voluntarily offer severance payment to obtain theemployee’s consent to leave voluntarily, since thevalidityofadismissalisoftenstrictlyappliedwithoutaclear standard by the courts because it is considered on acase-by-casebasisandfactintensive.In reality it is almost requisite unless the employer can demonstratethatthefinancialsituation issodirethatthereissimplynocashtopayoutasseverance.

4.SeparationAgreements

a. is a sEparation aGrEEmEnt rEquirEd or considErEd BEst practicE?

Ifthereisnocausefordismissal,oranyothercauseforterminationsuchasreachingretirementageorexpiryofafixedtermcontract,employeeconsentonterminationwillbecomenecessary–thiscanbeanoralagreement,but having a separation agreement would be bestpractice.

B. what arE thE standard provisions of a sEparation aGrEEmEnt?

Termination date, mutual agreement on termination,severance pay, confidentiality,waiver (confirmation ofno other rights and obligations existing between theparties), confirmation of return of company property,jurisdiction.


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c. doEs thE aGE of thE EmployEE makE a diffErEncE?

In practice, it may, but separation agreements aresubject to individual negotiations, so there is nostatutorydifference.

d. arE thErE additional provisions to considEr?

Whethertoincluderestrictivecovenants.

5. Remedies for employee seeking to challengewrongfultermination

When a court holds that dismissal of an open-endemployeeisvoid,thecourtwillordertheemployertoreinstatetheemployee,providebackpayandotherwisetreat the employee as if he/she had been employed

during the period he/she was dismissed. If theemploymentrelationshipwasfixedterm,andtheexpiryhadpassedbythetimeofthedecision,theemployeewould be awarded damages in the amount of the salary theemployeewouldhaveearneduntiltheexpiryofthefixedtermemploymentcontract.

Inalabortribunalcaseatacourt,thetribunalcommitteehasmoreflexibilityonthetypesofremediesavailable,and may not necessarily award reinstatement if they do notviewthatitisappropriatetoresolvethecase.


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iX. rEstrictivE covEnants

1.DefinitionofRestrictiveCovenants

There is no legal definition of restrictive covenants.Restrictive covenants commonly include non-competeand non-solicitation of customers and/or otheremployees.

2.TypesofRestrictiveCovenants

A. non-comPete cLAuses

A non-compete clause must be agreed upon in theemployment agreement. Whether such a clauseis enforceable will depend on the circumstances surroundingterminationofemployment,andabalancebetween the need to protect the employer’s assets,and theemployee’s Constitutional right to freely seekemployment and maintain a livelihood. Additionalconsiderations include: the employee’s access toinformation, whether financial compensation issufficient to impose such a restriction, the reason fortermination,length/scopeoftherestriction,andimpacton business.

b. non-soLicitAtion of customers

Non-solicitation of customers is easier to implementthannon-competition,astherestrictionontheeconomicactivitytowardstheemployeetendstobemorelimited.

c. non-soLicitAtion of emPLoyees

Since non-solicitation also means restriction on theactivitiesof employeeswhoare subject to solicitationand may infringe their Constitutional right to seekemployment,enforceabilityisusuallydeterminedbasedon the test of whether the employee acted in bad faith andwentbeyondreasonable/fairmeanstosolicitotheremployees, such as by using false accusations againstthe employer, or planning to leave the employer in alarge group in a way to damage the business.

3.EnforcementofRestrictiveCovenants—processandremedies

The following are the three typical legal procedures takentoenforcearestrictivecovenant:

a. ProvisionalInjunctiontoseekcessationofthe actioninfringingarestrictivecovenant–thisisa swiftwaytotakeaction,butmayrequireprovision ofcollateral.Also,sincetheactionisprovisional (unlessasettlement,orotherresolutionisreached duringtheprovisionalinjunctionprocess),aformal injunctionwillbenecessary.b. FormalInjunctiontoseekcessationoftheaction infringingarestrictivecovenant.c. Claimfordamages(ifdamagehasbeencaused)

4.UseandLimitationsofGardenLeave

There is no law regarding garden leave, although it ispermissible for employers to order employees to stay athome(notcometowork)duringthenoticeperiod,as long as theemployer continues topay salary. Theemployee has a right to continue employment unlessthe employer has a cause for dismissal, but does nothave a right to request actualwork, except in specialcircumstances.


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X. riGhts of EmployEEs in casE of a transfEr of undErtakinG1.Employees’Rights

There are two situations the law addresses formaintaining employment in a merger/ acquisitionsituation.One is transferofemployees ina “companysplit”undertheCompaniesActandanotheris“transferofemployees”undertheCivilCodeforindividualcasesoftransfer,oraspartofalargerbusinesstransferwhentransfer of employee(s) is part of the deal.

TheCompaniesActestablishesthatinacompanysplitemployees who predominantly work in the business which is the target of the split have a right to beincluded in the transfer and can object to be included if the employer hadnot includedhim/her in the list.employees who do not predominantly work in the business that is the target of the split can object and stay at the current employer if they are included by their employer in the list of employees to be transferred.

In a business transfer, all of the relevant parties(transferor and transferee of the business, relevantemployee) need to agree to transfer the employee if it requirestheemployeetotransfertoadifferententity.

Thereisnodirectchangetotheemploymentrelationshipin cases of merger or share transfer.

2. Requirements for Predecessor and SuccessorParties

In a company split, merger, and share transfer, thetakeover party is obligated to respect all of the rightsandobligationsof theemployer that theparty,whichhadbeentakenover,hadwiththeemployees.

In a business transfer, the requirements will dependon the agreement – the takeover partymay agree toreestablish the employment relationship with eachemployee anew, or agree to succeed certain rights/obligationsoftheformeremployerandbeboundtotherights/obligationspersuchanagreement.


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Xi. tradE unions and EmployErs associations1.BriefDescriptionofEmployees’andEmployers’Organizations

Employees’participationinunionshavebeeninsteadydeclinesincereachingapeakin1949at55.8%-asof30June2013, theapproximate rateofunionmembers is17.7%(16.6%amongprivatecompanies).

Japaneseunionshavetraditionallyrepresentedregular(open end, full time) workers, and more common attraditional and larger companies. The percentage ofworkerswhotraditionallyhavenotbeenrepresentedbyunions,suchaspart-timeworkers,isslightlyontherise,althoughnot in numbers to cover theoverall decline.The trendwithin unions is increase of “joint” unions,which represent members from various employers,meaning the union may only have 1 or 2 membersfrom a particular company. There can be a companyspecificunion,whichcoversacertaingeographicareaorindustry,unionswhicharebranchesofalargenationalcentersuchasRengou,oracombinationoftheabove.

2. Rights and Importance of Trade Unions

The rights of unions are set out under the labor Union Act, and the Constitution. Unions have a rightto organize, collective bargain (which can lead to acollective agreement), and act collectively such asto strike. Actions by the employer to interfere withunionactivityby treatingemployeeswho joinaunionunfavorably are prohibited as “unfair labor practice”.Unfair labor practice includes provision of benefits tounions,as it isviewedasawaytocontrolor interferewith union activity, and anybenefitmust beminimal,suchaslettingaunionuseminimalofficespacefortheunion’sactivity,iftheemployeragreestoprovidesuchbenefit. The employer has an obligation to engage incollective bargaining requests in good faith, but thereis no obligation to agree to the union’s request if theemployerdoesnotagreeafteragoodfaithnegotiation.

3.TypesofRepresentation

Themain typeofemployeerepresentationenvisionedunder law is the system of having the employeesdemocraticallychooseasinglerepresentative,amongstthemselves,to:

• executealabormanagementagreementwhichis requisiteincertainsituations,suchashaving employeesworkovertimeoronarestday(holiday), orimplementingspecialworkhourschemessuchas flex-hourschemes,or• provideopinion(whichcouldbeanopposing opinion–therequirementfortheemployeristo obtain the opinion) for any change to the work rules

The representativeshouldbechosenbymajorityvoteof the union, and if no such union exists, chosen bythe majority of employees at the workplace. The law doesnotspecifythemethodofchoosing,simplythatitshouldbedemocratic,andthatemployeemanagers(ex.HRmanager),cannotbechosen.Typicallytheelectionisdonebywayof showofhands,discussionamongstemployees,orwritten/electronicballots.

4.NumberofRepresentatives

Pleaseseeabove–onerepresentative.

5.AppointmentofRepresentatives

Pleaseseeabove–theemployeeswillneedtochoosetheirrepresentativeamongstthemselvesinademocraticway.

6.TasksandObligationsofRepresentatives

Thetaskfortheemployeerepresentativeistoconsiderthe employer’s proposal for the relevant matter, andeitherprovidetheiropinion,ordecidewhethertheywillagree to the proposal or not.


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WorkscouncilsdonotexistinJapan.

Health Safety – there are requirements depending onthe size of the workforce in each workplace.

Xii. othEr typEs of EmployEE rEprEsEntativE BodiEs


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1. legal framework

There are two separate legal frameworks, both runby the Japanese government – (1) social insurance(employees’ pension and health insurance) and (2)labor insurance (workers accident compensationand employment insurance). all employees must be enrolled in labor insurance. all employees of legally incorporated entities, or workplaces with 5 or moreregularly employed employees, must be enrolled insocial insurance. Directors (board members) who are not employeesalsoneedtoparticipateinsocialinsurance,but cannot participate in labor insurance as a generalprinciple.

employees who are temporarily working in Japan may beexemptfromjoiningJapan’ssocialsecurityprogramsunder a social security agreement between Japan and therelevantcountrytheemployeeissentfrom.

2. RequiredContributions

The employer and employee share the contributionsof the above programs 50% each, except for workersaccidentcompensation insurance,which is fullyborneby theemployer. The rateof the contribution isoftensubject to change due to the need of increased funds for pension payouts. Rates are on the rise.

3. RequiredMaternity/Sickness/Disability/AnnualLeaves

matErnity lEavEApregnantemployeecantakealeaveuptosixweeks,or14weeks inthecaseofamultiplefetuspregnancy,before giving birth, and eight weeks after, delivery.Maternity leave before delivery is optional and atthe employee’s discretion, but maternity leave afterdeliveryismandatory.Theperiodofpost-deliveryleavemay be reduced by two weeks upon the request of the employee, subject to obtaining a doctor’s permissionto return to work. employers are prohibited from

dismissing an employee on maternity leave and 30days after return frommaternity leave, or to treat anemployeeunfavorablyfortakingmaternityleave.

child carE lEavEStatutorychild care leave thatanemployeecanapplyforisuntilthechildreachesage1,butextensionmaybeappliedforuptothechildreachingage1.5years,ifoneof the followingsituationapplies,and issubstantiatedwithrelevantdocuments:

a. certificate showing that the employee applied fornursery, but was unable to enter her child from thechild’s first birthday (this is common occurrence inJapan, and itmaynotbeher fault that she couldnotprocure a nursery, as we are unfortunately lacking innurseries, but at the same time, regardless of whyshe could not enter her child, she needs to submit acertificate).The localmunicipalofficeofherresidenceinJapanusuallyissuesthecertificate,andwhilethetitleof thedocumentmay slightlydiffer among cities, it isusuallycalledsomething like“noticeofnon-entryofacertifiednursery”.Typically,themothermustsubmitarequest for the certificate2weeksprior to the child’sfirstbirthday.

b. Demonstrate that her spouse (could be live inpartner who is not legally married) who is the parent of herchildandhasbeen,andwastocontinuecaringforthe child when the child reached age 1 can no longer do soduetodeath,injuryorsickness,orwillnolongerlivewiththechildduetodivorce–thisexceptiondoesnotapply to other family members.

Anemployeemay take child care leaveuntil the childreaches age 1 year and 2 months if the employee alternatechildcareleavewithspouse(inotherwords,if both parents take child care leave) – themaximumperioddoesnotchangefrom1yearforeachemployee,butthissystemallowssomeflexibility inthetimingoftheleave.Thisismeanttomotivatemaleemployeestotakechildcareleave.

Xiii. social sEcurity / hEalthcarE / othEr rEquirEd BEnEfits


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nursinG carE lEavEAnemployeemayseekupto93daysoffamilycareleaveper family member who falls within “spouse, parent,child, parent of spouse, or grandparents/ brother orsister/grandchildwhotheemployee liveswithand isa dependent on the employee”, and that such familymember requires constant nursing care (which for the purpose of nursing care means assistance in daily life suchasforwalking,usingthewashroom,eating,takingabath,wearing/takingoffclothes,asanexample)foraperiodof2weeksorlongerduetoaninjury,sicknessorphysical/mentalimpediment.

sicknEss –none if thesickness/ injury isnotcausedbywork,althoughitiscommonpracticeforemployerstovoluntarilyprovideasickleave(forweeks/months/years, depending on the employer). There is no legalobligation to pay during such a sick leave, but theemployeemaybeabletoreceiveasickleaveallowancefrom the relevanthealth insuranceunion for apartialamountoftheirprevioussalary.

5.MandatoryandTypicallyProvidedPensions

Mandatory – none (the pension provided under theemployees’pensionschemethatisstatutoryisprovidedbythegovernment,althoughemployersmayvoluntarilyset up a pension scheme).

Typicallyprovidedpensions–sinceemployersarefreeto structure voluntary retirement allowance programs(itmaybeatraditionalpensionplan,lumpsumpaymentplan,oracombinationofboth),thestructurewillvarywith each company. The trend is to either change from a definedpaymentplantoadefinedcontributionplan,ordecrease/eliminateexistingpensionplans,duetothefinancialburdensuchplansarecausingforcorporations,withalargenumberintheagingpopulationandsmallernumberofworkforceswithyoungeremployees.Whetheranemployercandecreasetheamounttobepaid,ortheexisting pension scheme,will dependonwhether theschemeincludeslanguageindicatingpossiblechangeinthe amounts to be received, financial situationof theemployer,theprocesstakentoimplementsuchchange,amongotherrelevantfactors.


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