Meilin International Law Firm

Labor

Labor Laws in Japan

In Japan, rights of workers are strongly protected by the Labor Standards Act, as well as other associated laws and regulations (hereinafter collectively referred to as “Labor Laws”). Contracts and Rules of Employment which are disadvantageous for workers are invalid under the Labor Laws. Thus, it is important to firmly understand the regulations of the Labor Laws.

Labor Contracts

Employers who intend to hire workers must expressly indicate working conditions in accordance with the Labor Contract Act. Moreover, it is necessary to issue written documentation that clarifies and explains the following matters:

  1. When does the contract end (i.e., term of labor contract)
  2. Rules on renewal of a contracts with a specified term (i.e., possibility of renewal, and standard for decision to renew)
  3. Location and nature of work to be performed by the worker (i.e., place of work, contents of work)
  4. Working hours and holidays (i.e., start and finish of work times, whether overtime work is required or not, break times, days off and leave, and rotation for shift work, etc.)
  5. Wage payment system (i.e., method of determining wages, computation, dates of payment)
  6. Rules on resignation (i.e., matters pertaining to retirement (including grounds for dismissal))
Corporation (Subsidiary)Rules of Employment

Employers with ten or more regular employees must prepare Rules of Employment and submit them to the Director of the Labor Standards Office together with the opinion of a person representing a majority of the employees. When the Rules of Employment are changed, the same procedures are required. Moreover, it is the employer’s obligation to familiarize employees with the Rules of Employment so that employees can confirm them at any time.

The Rules of Employment must be appropriately established in order to properly conduct labor management. Matters which must absolutely be stipulated in the Rules of Employment are described as follows:

  1. Matters relating to start and finish of work times, break times, days off and leave, and rotation for shift work
  2. Matters relating to wages
  3. Matters relating to resignations
Insurance and pension system

Employers must have the following types of public insurance and insure their employees:

  1. Compensation insurance

    The national government provides benefits in lieu of private companies in cases of injury, illness, failure, death (employment injuries) arising from workers’ operations, or accidents while commuting to work (commuting accidents).

  2. Unemployment insurance

    Benefits are provided in order to secure living of workers and promote employment when workers become unemployed.

  3. Health insurance

    Benefits are provided in order to secure living of workers by supplying necessary medical benefits and allowances in cases where workers or their family become ill, injured, give birth, or die.

  4. Employee pension insurance

    Benefits are provided in order to secure living of workers and family of deceased workers as well as to improve welfare in cases where workers lose the ability to work as aging advances, physical disabilities remain due to illness or injury, or family of the deceased confront difficulties due to loss of financial support.

Wage System

The wage system must be clearly stipulated in the Rules of Employment and is subject to written explanation at the time of execution of an employment contract as described above.

Wages are subject to the following principles:

  1. the principle of payment in cash (i.e., payment in currency rather than payment in kind);
  2. the principle of direct payment (i.e., direct payment to workers);
  3. the principle of full payment (i.e., no amounts shall be deducted except for taxes and social insurance premiums, etc.); and
  4. the principle of regular payment more than once a month (i.e., payment should be on a fixed date at least once a month).

Deductions (in the case where a worker repays a loan from the employer by deductions from salary) can be possible only after execution of a Labor-Management Agreement with a person representing a majority of the employees.

Days off and working hours

The working hours must be eight hours or less a day and 40 hours or less a week. When overtime work or working on days off are expected, a Labor-Management Agreement must be concluded with a person representing a majority of the employees, and provided that overtime work must not exceed 45 hours a month and 360 hours a year in principle. It is necessary to pay statutory overtime premiums (i.e., 25% ~ 75%) for overtime work.

When working hours in a day exceed 6 hours, employer must provide break time of at least 45 minutes. When working hours in a day exceed 8 hours, employer must provide break time of at least 60 minutes. Furthermore, employer must provide at least one day off per week or four days off per four-week period (“Statutory Days Off”).

Dismissal

Dismissal is a one-sided termination of the Labor Contract by the employer which has an adverse effect on a worker. Therefore, workers can only be dismissed on objectively reasonable grounds and dismissal should be appropriate under the social standards. Whether the dismissal is invalid or not will be determined through a law suit in court on a case-by-case basis. Dismissals have been expressly prohibited in certain situations in accordance with the Labor Contract Act and other laws. Typical examples of prohibited cases are as follows:

Labor Standards Act
  • Dismissal during a period of absence from work for medical treatment from a work-related accident and a 30-day period thereafter
  • Dismissal during a period of absence from work before and/or after childbirth and a 30-day period thereafter
  • Dismissal on the grounds of making a report to the Labor Standards Office
Labor Union Act
  • Dismissal on the grounds of being a member of a labor union, etc
Act on Securing, Etc. Equal Opportunity and Treatment between Men and Women in Employment
  • Dismissal on the grounds of gender, etc
  • Dismissal on the grounds of absence from work for marriage, pregnancy, before and/or after childbirth
Act on Childcare Leave, Caregiver Leave, and Other Measures for the Welfare of Workers Caring for Children or Other Family Members
  • Dismissal on the grounds of applying for or taking childcare leave, caregiver leave, etc

Upon dismissal, the following points are to be noted.

  1. Employers must state the grounds for dismissal in the Rules of Employment.
  2. Even when there are reasonable grounds, employers must give the notification of dismissal at least 30 days prior to such dismissal. In the case where an employer does not give such notification of dismissal, it must pay the average wages for a period of not less than 30 days (in the case where an employer gives notification less than 30 days prior to dismissal, the average wages for the corresponding diminished days must be paid. For example, in the case where notification has been given 10 days prior to dismissal, the employer must pay the average wages for 20 days.)

When a worker requests a certificate stating the grounds for dismissal, the employer must issue such certificate without delay (Labor Standards Act, Article 22).

Retirement

The retirement age (retirement due to age) for a worker is 65 years old in principle. In the case where employment continues after the age of 60 years, but the employee is dismissed before the age of 65 years (including rejection for renewal of an employment contract), you are advised to consult with a lawyer in advance regarding the reasonable grounds.