Article 20 of the Japanese Labor Contract Act ("Article
20"), which was enacted in April 2013, prohibits employers
from establishing unreasonable differences between the working
conditions of fixed-term employees and indefinite-term (namely,
permanent) employees, taking into account the following
circumstances: the content of the employees' duties and the
responsibility that accompanies those duties ("content of
duties, etc."); the extent of changes in the content of
duties, etc.; the location of work; and any other relevant
circumstances. Recently, there has been an increasing number of
cases brought by employees against employers invoking Article
In the recent Nagasawa-Unyu decision, a regular employee was
rehired as a fixed-term employee upon reaching the age of
retirement. The Tokyo District Court held that there was an
unreasonable difference in the amount of wages paid to fixed-term
employees and indefinite-term employees because the content of
duties, etc. in respect of both were essentially the same. Such
treatment resulted in a violation of Article 20 by the employer.
This decision will affect companies that have a practice of
re-employing retired employees under less-favorable employment
conditions, where the content of duties, etc. remains
Further, in the recent Hamakyorex decision, a fixed-term
employee claimed that there were unreasonable differences in the
allowances paid to fixed-term employees and indefinite-term
employees and that this amounted to a violation of Article 20 by
the employer. At first instance, the court found that the only
unreasonable difference between the conditions of regular and
fixed-term employees was the nonpayment of commuting allowances.
However, on appeal, the Osaka High Court found that there were
further unreasonable differences by way of nonpayment of four types
of allowances, including food allowances. These arbitrary
differences were held to be unreasonable and constituted a
violation of Article 20, and the court subsequently ordered that
Hamakyorex pay approximately 770,000 JPY to the plaintiff.
In both of these decisions, the courts used Article 20 to rule
in favor of the fixed-term employees, including employees who had
been re-employed after reaching the age of retirement. While it is
common for companies to have generally established differences in
the conditions of fixed-term and indefinite-term employees, as a
result of these decisions, companies should carefully review their
employees' working conditions to ensure there are no
unreasonable differences in circumstances where the content of the
employees' duties, etc. is the same.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Sticking to what you know in new employment may backfire when client-specific restraints protect an employer's interest.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).