Labor Issues

Japanese labor law places strict limits on employer termination rights, providing among the strongest employment protections globally.

Abuse of Dismissal Rights doctrine (Labor Contract Act Art. 16): Dismissals that lack objectively reasonable grounds and are not considered appropriate in general social terms are invalid as an abuse of rights. Courts rigorously examine both "reasonable grounds" and "social appropriateness."

Advance notice (Labor Standards Act Art. 20): Employers must give at least 30 days' notice or pay 30+ days of average wages as dismissal notice allowance. Combination is permitted (e.g., 15 days' notice plus 15 days' allowance).

Four requirements for economic dismissal (case law): (1) Business necessity for workforce reduction; (2) Efforts to avoid dismissal (transfers, voluntary retirement solicitation); (3) Rational criteria for selecting dismissed employees; (4) Adequate explanation and consultation with workers/unions.

Remedies when dismissal is challenged: Through labor tribunal (usually resolved within 3 sessions) or litigation — seeking confirmation of employment status and back pay. If the dismissal is found invalid, full wages for the period since dismissal are ordered.

Unpaid overtime is the most common labor law consultation topic.

Statutory working hours (Art. 32): 8 hours/day, 40 hours/week. Excess requires premium pay.

36 Agreement (Art. 36): Required for any overtime/holiday work. 2019 reform introduced caps: 45 hours/month and 360 hours/year as standard; special provisions allow up to 720 hours/year, under 100 hours/month (including holiday work), and 80-hour average over 2-6 months.

Premium rates (Art. 37): Regular overtime 25%+; Over 60 hours/month 50%+ (applied to SMEs from April 2023); Late night (10PM-5AM) 25%+; Statutory holiday 35%+; Overtime plus late night 50%+.

Fixed overtime pay: Valid only if (1) clearly separated from base salary, (2) specific hours and amount are stated, and (3) excess hours are paid separately (Tech Japan Case, Supreme Court 2012).

Calculation: Hourly wage x overtime hours x premium rate. For monthly salaries: hourly wage = monthly salary / average scheduled monthly hours.

Statute of limitations: 3 years for wages due after April 2020 (transitional measure; statutory rule is 5 years, Art. 115). Additional payment penalty (Art. 114) also 3 years.

Workplace harassment is a significant legal and business risk in Japan.

Power harassment (Employment Measures Act Art. 30-2): Prevention measures mandatory for all companies since April 2022. Defined as conduct (1) leveraging a superior relationship, (2) exceeding what is necessary and reasonable for business, and (3) harming the work environment.

Six types: Physical attack; Mental attack (threats, defamation, insults); Social isolation (exclusion, ignoring); Excessive demands; Insufficient demands; Invasion of privacy.

Sexual harassment (Equal Employment Act Art. 11): Employers must establish consultation systems and respond promptly. Includes "quid pro quo" (adverse action for rejection) and "hostile environment" types.

Maternity harassment (Art. 9-3, Child Care Act Art. 10): Adverse treatment based on pregnancy, childbirth, or childcare leave is prohibited.

Evidence importance: Audio recordings (covert recordings are generally admissible), saved messages (email/LINE/chat), and detailed contemporaneous diaries are effective evidence.

The Workers' Accident Compensation Insurance system covers all employees — including part-time, temporary, and dispatched workers.

Two-part test: Work performance (under employer's control during work) and work causation (causal relationship between work and injury/illness).

Karoshi (overwork death) threshold: Brain/heart disease claims are strongly linked to work when overtime exceeds approximately 100 hours in the month before onset, or averages approximately 80+ hours over the 2-6 months prior.

Mental disorder recognition (2023 revised criteria): Added customer harassment, disease-related discrimination, and certain supervisor conduct as psychological stress factors.

Benefits: Full medical costs; sick leave at 80% of base daily wage; disability compensation; survivor compensation; funeral expenses.

Commuting accidents: Covered under rosai insurance (Art. 7), except when deviating from or interrupting the normal commute route.

Employer liability: Since rosai insurance does not cover consolation money, civil damage claims based on the employer's duty of safety consideration (Labor Contract Act Art. 5) should also be considered.

Right to resign: For indefinite-term contracts, employees may resign at will, with the employment ending 2 weeks after notice (Civil Code Art. 627-1). Internal rules requiring longer notice (e.g., 1 month) are generally considered subordinate to the Civil Code provision.

Resignation agents: Attorneys can handle all legal matters including negotiation. Labor unions can negotiate through collective bargaining rights. Private agencies can only convey the resignation intent — conducting negotiations may violate the Attorney Act Art. 72 (prohibition of unauthorized legal practice).

Paid leave: Exercising unused paid leave before departure is the worker's right (Art. 39). The employer's right to change the timing (Art. 39-5) cannot be exercised when there are no alternative dates before the resignation date.

Labor tribunal: Established in 2006, combining one judge and two labor expert panelists to resolve disputes within 3 sessions (average 70 days). Resolution rate approximately 80%. Appeals move to ordinary litigation.

Labor Standards Office complaints: For LSA violations (unpaid overtime, 36 Agreement breaches), workers can file complaints (Art. 104) triggering inspections and correction orders. Does not resolve individual monetary claims.

Settlement amounts: In negotiated or judicial resolutions, typical severance payments range from 3-12 months' salary.