Sources of regulation
Article 27 of the Constitution of 1946, which provides for the right to
work, is considered as constitutional basis for security of employment in Japan.
The main provisions governing dismissal in Japan are
contained in the Civil Code (CC) of 1899 (as amended) and in the Labour Standards
Law (LSL) of 1947 (as amended in 2003).
Scope of legislation
The CC applies to all contracts of civil law and the LSL covers all the
employment contracts in the private sector.
Public employees and seafarers are governed by specific legislation.
Contracts of employment
Contracts of employment can be concluded either for an indefinite duration
or a fixed-term. Following amendments to the Labour Standards Law in 2003,
the employment contract cannot be made for a term exceeding three years,
exception made for the contracts concluded for completion of a specified
project. The maximum duration of five years is authorised for the contracts
of employment of highly specialized employees and those aged 60 years or
older (sec. 14, LSL).
A fixed-term contract ends automatically on the expiry of its term. If at
the expiration of a fixed-term contract of employment, the employee continues
to work and the employer does not raise any objection, the employment relationship
is deemed to be renewed under the same conditions (sec. 629, CC). Several
renewals of a fixed-term contract are possible.
Probationary periods are also frequently used in practice. There is no statutory
provision on it, exception made for the requirement put on the employer to
give the employee a 30 days’ notice after the first 14 days of the probationary
period (sec. 21(4), LSL). Under the Japanese jurisprudence, the employer
is entitled to terminate an employment relationship during the probationary
period.
Termination of employment
Contracts of employment may terminate, other than at the initiative of the
employer, in various ways, including by:
- mutual
agreement;
- resignation
of the employee;
- the
death of the employee or, where the employer is an individual, the death
of the employer; and
- termination
for cause by the employee.
The Older Person’s Employment Stabilization Law of 1971
(as amended in 2004) provides that compulsory retirement age must not be
less than 60 years and encourages employers to continue employing the employees
wishing to work and remove the retirement age.
The Succession of Employment Contracts (in case of enterprises’
reorganisation) Law of 2000 (art. 4) provides that an employee who has worked
mainly in the enterprise passing to a successor company, but whose employment
contract is not taken over by that new company, is entitled to make an objection
and his/her employment relationship is deemed to be continued with that new
company.
Dismissal
The CC provisions on dismissals are based on the principle of freedom of
termination through notice. Under the civil law, the existence of a valid
reason is not necessary for a dismissal to be justified. The employer may
exercise his or her discretion in dismissing workers at any time, provided
notice requirements are respected (see above). Nevertheless, collective agreements
often list reasons which may provide grounds for dismissal.
As a legislative consecration of the doctrine of abusive dismissal developed
by Japanese jurisprudence, since 2003, Article 18(2) of the LSL has been
providing that a dismissal where it lacks “objectively rational grounds”
and is not “appropriate in general societal terms”, must be treated as a
misuse of the employer’s right to dismiss and void.
The following are deemed valid reasons for dismissal:
- professional
incapacity of the employee;
- misconduct
or violation of a disciplinary rule;
- economic
reasons; and
- dismissal
of a non-unionized employee as a result of an agreement for “post-entry
closed shop” (or “union shop agreement”). In this case, the collective
labour agreements
allow the hiring of persons who are not members of unions, but the employer
is thereafter obliged to dismiss each employee who does not join the union.
If dismissal is contemplated on the grounds of professional incompetence,
the courts place an obligation on the employer to ascertain the possibility
of transferring the employee to another post more suitable for him/her before
proceeding to dismissal.
Dismissal on the following grounds are prohibited:
- marriage,
pregnancy or childbirth, requesting maternity leave (sec. 8, the Equal
Employment Opportunity Act of 1985);
- trade
union activities guaranteed by art. 28 of the Constitution (sec. 7, Trade
Unions Act of 1949); and
- discrimination
on the worker’s race, creed, sex, social status or family origin (art.
14, Constitution).
Under sec. 19 of the LSL, dismissal is prohibited:
- during
the absence of an employee because of work-related illness and 30 days
thereafter; and
- during
an employee’s statutory maternity leave and 30 days thereafter.
Retrenchment issues are not expressly regulated by statute.
However, the courts have developed some tests to determine the validity of
collective dismissals for economic reasons. Among these criteria are:
- the
existence of a genuine financial need to reduce the workforce;
- reasonable
efforts made by the employer to avoid dismissals;
- consultation
with trade unions; and
- reasonable
standards for selecting employees to be retrenched.[1]
The disciplinary sanctions, including dismissal, are
generally stipulated in the workplace rules which must be established in
all the enterprises employing ten or more workers (sec.89, LSL).
Notice and prior procedural safeguards
Under the Civil Code, in case of employment contracts of indefinite duration,
the employer is allowed to dismiss an employee by giving two weeks’ notice
or by paying wages in lieu of notice (art. 627, CC).
Pursuant to sec. 20 of the Labour Standards Law, a normal period
of notice is 30 days. However, in accordance with sec. 21, this rule
does not apply to the following workers:
- workers
employed on a daily basis if they have worked for less than one month;
- workers
employed for a specific period not exceeding two months;
- seasonal
workers employed for a specific period not exceeding four months; and
- workers
during a trial period if they have worked for less than 14 days.
In addition, an employer is exempt from obligations pursuant to this section
if the continued operation of the undertaking becomes impossible because
of a natural disaster or some other unavoidable cause or in the event of
dismissal for reasons attributable to the employee. In such cases, an employer
is obliged to obtain administrative approval (sec. 20, LSL).
Sec. 42 of the Seafarers Act states that notice for the dismissal
of seafarers must be given in writing 24 hours in advance.
In the event of collective dismissals for economic raisons, there is a statutory
notice requirement, in addition to that developed by jurisprudence (see above),
such as consultation of trade unions. An employer who intends to dismiss
more than 30 employees in one establishment within one month, must inform
the public employment service one month prior to the date of the workforce
reduction. If the retrenchment process does not concern all the employees
at the same time, this notification is to be given prior to the date of the
last dismissal or retirement (sec.
21, Employment Measures Law No. 132 of 1966, as amended).
At the request of the dismissed employee, the employer has to provide the
reason for dismissal in writing and without delay, i.e. between the advance
notice and the last day of employment (sec.22, LSL)
Severance pay
Collective agreements can provide for severance pay in case of dismissals.
The unemployment benefits are regulated by the Employment Insurance Law
of 1974 as amended.
Avenues for redress
A worker who has been dismissed may bring a complaint to the competent court
of general jurisdiction (summary courts).
An employee may also go before the Labour Relations Commission (LRC) if,
and only if, the complaint is of an unfair labour practice under the Trade
Unions Act. The typical remedies in case of dismissal are reinstatement and
back-pay orders which may be accompanied by an order of posting notice (the
employer is required to put up a notice to state that he/she has been recognized
guilty by the LRC and will not repeat any similar act of unfair labour practice).
The Law on Promotion of the Resolution of Individual Labour Disputes of
2000 gives the Prefectural Labour Offices the power for dealing with employment
contracts litigation.
The Labour Tribunal System Law was enacted in 2004 and came into force in
November 2005.
All the claims under the LSL must be brought within two years from the date
of statutory violation (sec. 115, LSL).
If the employer fails to observe the requirement to give notice (sec.
114, LSL), the employee concerned is entitled to request, through the
courts and in addition to the payment in lieu of notice, compensation of
the same amount.
The courts consider all unjustified dismissals as being null and void. In
such cases, the employer must continue to employ the worker concerned. If
the court nullifies the dismissal, the employee is entitled to receive his
or her normal wages for the period between the date on which the dismissal
took effect and the date of reinstatement.
Further information
[1] Tadashi A. Hanami, Fumito Komiya: “Japan”, in
R. Blanpain (ed.): International encyclopaedia for labour law and industrial
relations (The Hague, Kluwer Law International, 2006), p.126
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