1 Legal framework

1.1 Are there statutory sources of labour and employment law?

The main laws governing employment relationships in Japan are the Labour Standards Law and the Employment Contract Law. Other relevant laws include:

  • the Civil Code;
  • the Law on Securing Equal Opportunity and Treatment between Men and Women in Employment;
  • the Law on the Comprehensive Promotion of Labour Measures and Stabilisation of Employment of Employees and Enrichment of their Work Lives, Etc (formerly known as the Employment Measures Law);
  • the Law concerning the Stability of Employment of the Elderly;
  • the Part-Time Workers Employment Improvement Law;
  • the Law concerning the Proper Operation of Worker Dispatch Undertakings and Improved Working Conditions for Dispatched Workers;
  • the Law on Special Measures to Improve Work Hours Arrangements;
  • the Law on the Improvement of Employment Management for Part-Time Workers and Fixed-Term Contract Workers;
  • the Law on Childcare Leave, Caregiver Leave, and Other Measures for the Welfare of Workers Caring for Children or Other Family Members;
  • the Industrial Safety and Health Law;
  • the Labour Tribunal Dispute Resolution Law;
  • the Labour Union Law; and
  • the laws governing labour insurance and social insurance

1.2 Is there a contractual system that operates in parallel, or in addition to, the statutory sources?

Statutory sources of labour law supplement contractual terms and conditions of employment, including work rules. Generally speaking, employers and employees are free to negotiate terms and conditions of employment. However, contractual terms must comply with statutory standards and obligations, which are implied by law as a matter of public policy. Contracting parties cannot contract out of or under these statutory standards or work rules adopted by the employer (see question 1.3), except for the benefit of employees.

1.3 Are employment contracts commonly used at all levels? If so, what types of contracts are used and how are they created? Must they be in writing must they include specific information? Are implied clauses allowed?

Employment contracts may be made orally or in writing. A written contract or an employment letter is advisable. Contracts can be minimal if supported by work rules. By law, employees must be provided with key employment terms and conditions (eg, relating to salary, place of work and working hours) in writing when they are hired. These particulars can be set out in a written contract to the extent that they are not already contained in the work rules remitted to the employee. Work rules are specific rules for the workplace setting out working conditions, including in relation to wages, working hours, holidays and other matters, including disciplinary procedures. Employers with 10 or more employees at a given workplace must adopt work rules and file them with the local Labour Standards Inspection Office. Employers with fewer employees can create work rules on a voluntary basis.

In general, contracts cannot remove statutory employee protections. Case law protects employees – in particular, with regard to dismissals. Implied terms are found in the relevant laws and regulations. In addition, where they exist, work rules are considered to be incorporated (expressly or impliedly) in the employment contracts. Contract provisions (except for better terms) are considered invalid if they do not align with the work rules. Further, contracts cannot lower the standards outlined in the work rules. Terms that are favourable to the employees in the work rules or the law will override less favourable terms in the employment contract. In addition, collective agreements between an employer and a labour union may be incorporated (expressly or impliedly) in the employment terms.

Regular employees are hired under an indefinite contract, while fixed-term contracts are used for non-regular employees and temporary workers (although they can be used for long-term employees, subject to certain judicial and statutory safeguards). Part-time workers can have fixed-term or indefinite contracts, and their working hours are shorter than those of regular full-time employees. Part-time workers who are categorised as ‘arubaito' can be hired by the day or the hour.

2 Employment rights and representations

2.1 What, if any, are the rights to parental leave, at either a national or local level?

Female employees are entitled to six weeks' unpaid maternity leave before giving birth (14 weeks for multiple pregnancies). In principle, employers cannot require a female employee to work for eight weeks after delivery.

Employees are entitled to unpaid leave until their child's first birthday (or until the child's second birthday if certain conditions are met), but employees taking such leave can be paid 67% of their salary through labour insurance, subject to certain conditions. An employee with a pre-school aged child or family member who is sick or injured and in need of full-time nursing is entitled to up to five days of unpaid leave (10 days for two or more children or family members). An employee may work reduced hours to care for his or her child under three years old. Employers may introduce limitations on eligibility under a labour management agreement.

An employee with a family member in need of full-time nursing is entitled to up to 93 days of unpaid leave to provide care. Employers may also introduce limitations on eligibility in a labour management agreement. Employees taking family care leave can be paid 67% of their salary through labour insurance subject to certain conditions.

2.2 How long does it last and what benefits are given during this time?

Please see question 2.1.

2.3 Are trade unions recognised and what rights do they have?

Although labour unions are still relatively strong in certain industries, their importance has declined in the last 30 years. Relationships between unions and employers are often peaceful and cooperative. In general, unions are sensitive to employers' economic circumstances.

Enterprise-based bargaining is more common than industry-based bargaining. A labour union has the authority to enter into enterprise agreements with the employer and to conduct other collective negotiations on behalf of member workers. The employer is obliged to hold collective bargaining sessions. Collective agreements between employers and labour unions regulate matters such as:

  • working conditions;
  • salary and benefits;
  • working hours;
  • holidays;
  • health and safety;
  • dispute resolution procedures;
  • redundancies or secondments; and
  • the re-employment of elderly employees.

Collective agreements may also regulate the relationship between employers and unions – for example, they may require labour management consultation or prior consent before certain decisions are made (eg, redundancies, closures or business transfers). Labour management agreements are designed to exempt employers from criminal penalties under the Labour Standards Law (eg, the obligation to make and file a so-called ‘Article 36' agreement to have the right to request overtime from employees) or deal with the special treatment of employees (eg, restrictions on care leave eligibility).

The breakdown of negotiations may sometimes result in labour dispute actions being taken. Provided the action taken is not beyond the pale and within the justified acts of a labour union, it will not give rise to civil or criminal sanctions. Engaging in so-called ‘concerted activities' is a right guaranteed under the Constitution and the Labour Union Law. Generally speaking, strikes, walkouts, slowdowns (occupation of the workplace) and picketing without the use of physical force are fair labour dispute actions; while physical violence, sabotage or destruction intended to damage facilities or machinery or wilfully cause product defects, and invasion of the privacy of members of management (eg, distributing leaflets or using loudspeakers outside the premises or the residence of management members to damage their reputation) are considered beyond the scope of fair labour dispute actions.

2.4 How are data protection rules applied in the workforce and how does this affect employees' privacy rights?

The Personal Information Protection Law (PIPL) regulates, among other things, the collection, storage and use of personal information, including employee-related information. The Ministry of Health, Labour and Welfare has issued guidelines on handling employees' personal data. Infringements of the guidelines can lead to fines, compensation claims from aggrieved employees or regulatory action. Sectoral guidelines have been issued.

The monitoring of employee email, internet and telephone usage and closed-circuit television recording are permissible, provided that they are carried out in accordance with the PIPL and its guidelines. The Personal Information Protection Commission's guidelines on the PIPL state that employers should:

  • specify the purpose of the monitoring and cover such monitoring in internal rules such as the work rules;
  • appoint a person responsible for the monitoring; and
  • enforce these rules.

No express statutory rules address the protection of social media passwords or employer monitoring of social media accounts.

Under the PIPL, an entity handling personal information which has an employee who handles personal information must exercise proper supervision of the employee to ensure data security. The PIPL requires employers to disclose the personal data it is keeping on an employee at the employee's request, unless the data falls within one of the exceptions to disclosure (eg, where disclosure may seriously impede the proper execution of the business). Cross-border transfers of personal information are restricted under the PIPL.

2.5 Are contingent worker arrangements specifically regulated?

Independent contractor relationships are not covered by labour law. Depending on the circumstances, an independent contractor may apply to have a contractual relationship requalified as employment in order to get the benefit of employment law protection based on the true nature of the relationship. If the court determines that the individual is in fact an employee, that employee will be afforded employment law protection.

In principle, a representative director of a joint stock company may not be an employee of the company that he or she is heading. As such, a contract for services or an entrustment agreement is generally advisable, to clarify the representative director's rights and obligations. Directors are regulated by the Companies Act.

The Workers Dispatch Law has become increasingly restrictive over the years. If a temporary agency staff contract with a temporary staffing agency is in breach of the law (eg, if the temporary agency is not licensed, an employee has been dispatched beyond the maximum statutory term or there is a disguised outsourcing arrangement), the employee will be deemed to be directly employed by the host company as a regular employee.

3 Employment benefits

3.1 Is there a national minimum wage that must be adhered to?

The Minimum Wage Law provides for a minimum wage. Wages differ per region and industry and the minimum hourly wage in Tokyo is JPY1,013 (as at 1 January 2020).

3.2 Is there an entitlement to payment for overtime?

Overtime generally must be paid for all hours worked over the statutory limits. Enhanced rates apply for overtime work and for hours worked on statutory holidays, as follows:

  • Overtime exceeding the statutory working hours: 25%;
  • Overtime in excess of the statutory working hours, exceeding 60 hours in one month: 50% (small and medium-sized enterprises (SMEs) have the benefit of a moratorium until 1 April 2023);
  • Work on statutory days off: 35%;
  • Late-night or midnight work (between 10:00pm and 5:00am): 25%; and
  • Late-night work exceeding the statutory working hours: 50%.

However, there is no requirement to pay managerial employees any extra wages for overtime work or holiday work (late-night work will still be payable). The term ‘managerial employees' is interpreted in an extremely narrow fashion under the Labour Standards Law; and even if an employer treats an employee as a managerial employee for organisational purposes, the courts may decide otherwise and order the employer to pay extra wages to that employee.

Overtime is capped at 45 hours a month and 360 hours a year. If there is a temporary surge, the annual limit may be increased to 720 hours, subject to a monthly maximum of 80 hours (averaged over a period of consecutive two, three, four, five and six months) and an absolute maximum of 100 hours a month. Specific businesses are exempted, including new technologies research and development. Penalties apply in case of breach (subject to a five-year moratorium for certain businesses, such as building construction) and a one-year moratorium for SMEs).

Under the so-called ‘white-collar exemption', high-level professionals can be exempted from overtime allowance, holiday work and late-night work compensation requirements by agreement, subject to certain formalities. To qualify, employees must earn at least JPY 10.75 million per annum and be engaged in clearly defined work requiring specific skills. These employees must take not less than 104 days off a year and are subject to other measures to secure their wellbeing and good health.

3.3 Is there an entitlement to annual leave? If so, what is the minimum that employees are entitled to receive?

Employees who have been employed continuously for six months and worked at least 80% of all working days are entitled to 10 days of annual leave. The entitlement increases over time in proportion to length of service (after one-and-a-half years of service, employees are entitled to 11 days; after two-and-a-half years, 12 days and so on). After serving more than six-and-a-half years, the entitlement is 20 days. Employers can be more generous. Also, most Japanese companies grant additional paid leave for weddings, the death of close relatives and when a spouse has given birth to a child, but do not often grant sick leave. Japan has designated 16 national holidays. Although this is common practice, employers do not necessarily have to give a day off to employees on a national holiday.

3.4 Is there a requirement to provide sick leave? If so, what is the minimum that employees are entitled to receive?

Employers must make contributions to the following insurance schemes:

  • labour insurance, which comprises workers' accident compensation insurance and unemployment insurance; and
  • social insurance, which comprises health insurance and nursing care insurance, and pension (which covers old-age and welfare benefits in the event of death or disability).

Employers also pay child benefit contributions. The employee must also make contributions to the above insurance schemes, except to the workers' accident compensation insurance and child benefit contributions. Employers pay premiums by withholding the employee's portion and paying this, together with the employer's premiums, to the authorities.

3.5 Is there a statutory retirement age? If so, what is it?

Under the current system, employers must provide any of the following three options to employees who reach the retirement age of 60 and wish to continue working:

  • Abolish the age limit;
  • Extend the employee's retirement age to 65; or
  • Introduce some form of post-retirement employment (typically one-year fixed-term contracts, which are renewable).

However, employers must make efforts to allow employees to work until 70 under a new government policy to solve a chronic labour shortage and stabilise social security revenues.

4 Discrimination and harassment

4.1 What actions are classified as unlawfully discriminatory?

The Law on Securing Equal Opportunity and Treatment between Men and Women in Employment prohibits discrimination based on gender in relation to:

  • recruitment;
  • treatment during employment (eg, in relation to assignments, promotions, demotions, dismissal, training, housing loans and fringe benefits); and
  • termination.

Under the Labour Standards Law, men and women must receive equal pay. The Law on the Comprehensive Promotion of Labour Measures and Stabilisation of Employment of Employees and Enrichment of their Work Lives, Etc prohibits discrimination based on age in connection with recruitment, except in certain circumstances. The Law concerning the Stability of Employment of the Elderly addresses the employment of senior citizens until the statutory retirement age of 65. The Worker Dispatch Law protects dispatched workers from discrimination based on several factors. The Labour Standards Law prohibits discrimination based on nationality or ethnic or national origin during employment and for termination. The Law on the Elimination of Discrimination against Persons with Disabilities prohibits discrimination against people with disabilities. The Labour Standards Law prohibits discrimination based on social status, religion or political beliefs during employment and in relation to termination. Discrimination against an employee on the grounds of membership in a trade union is unlawful.

Fixed-term contract employees/part-time employees should be treated no less favourably in respect of their terms and conditions of employment than comparable permanent/full-time regular employees.

A law renamed the Law on the Improvement of Employment Management for Part-Time Workers and Fixed-Term Contract Workers, the Employment Contract Law and the Workers Dispatch Law were amended to address the issue of irrational disparities and discrimination between regular and non-regular employees, including dispatched workers. The changes will become effective as of 1 April 2020, with a partial one-year moratorium for small and medium-sized enterprises.

4.2 Are there specified groups or classifications entitled to protection?

Please see above. Also, certain historical minorities and pariah communities are also entitled to certain protection.

4.3 What protections are employed against discrimination in the workforce?

Employers have the obligation to take measures to prevent harassment or bullying on account of pregnancy, delivery or taking childcare leave or family care leave.

4.4 How is a discrimination claim processed?

Under Article 5 of the Employment Contract Law, with an equivalent provision in the Industrial Safety and Health Law, the employer has a duty to provide a safe and proper working environment to its employees and can be held liable for breach of that duty.

Claims can be based on tort, breach of employment contract and so on, and lead to criminal penalties or claims under the Workmen's Accident Compensation Law. That said, most cases are dealt with internally without legal action in Japan (although settlements can be costly).

4.5 What remedies are available?

Different remedies are available, depending on the circumstances. Remedies may include a court judgment ordering:

  • payment of damages to compensate for breach of contract and mental distress;
  • payment of damages for specific financial loss attributable to the discrimination (ie, lost wages and expenses incurred, including medical expenses);
  • that the employer cease and desist from the discriminatory practice;
  • reinstatement of the complainant employee, if he or she has been wrongly dismissed; and
  • the introduction of measures to ensure a safe and proper working environment.

4.6 What protections and remedies are available against harassment, bullying and retaliation/victimisation?

See question 4.5. Under Article 5 of the Employment Contract Law, with an equivalent provision in the Industrial Safety and Health Law, the employer has a duty to provide a safe and proper working environment to its employees and can be held liable for breach of that duty. Today, workplace bullying and ‘power harassment' must be very carefully handled in Japan. Many employers have either turned a blind eye to such behaviour or found it difficult to distinguish between acts of power harassment and appropriate employer guidance in the course of the company's business. The dividing line between bullying and a strong management style is sometimes blurred. A 2012 Ministry of Health, Labour and Welfare (MHLW) report entitled "Report by the Working Group Roundtable regarding Workplace Bullying and Harassment" defines ‘power harassment' as "an act by an employee using his position of seniority or relationship with a co-worker which causes such co-worker mental or physical stress or a degradation of the working environment beyond the appropriate scope of the company's business". The MHLW report categorises power harassment in six categories, from assault and battery to intimidation, defamation, insults, ostracism, ordering an employee to perform menial tasks far below the employee's ability, invasion of privacy and so on.

The representative director is theoretically in charge of eliminating any form of harassment and securing a proper environment. In this context, the risk and liability is not only for the representative director (or individual perpetrators); from a legal perspective, in addition to being liable for any systemic power harassment, the company may be held liable for any specific actions which constitute power harassment by a manager over a subordinate, because the company will be considered to have failed in its duties to supervise and create a safe environment for the employees. Claims can be based on tort, breach of employment contract and so on, and lead to criminal penalties or claims under the Workmen's Accident Compensation Law. That said, most cases are dealt with internally without legal action in Japan (although settlements can be costly). Similar rules apply to sexual harassment. Detailed internal rules and grievance procedures can be established to deal with these situations.

The Whistleblower Protection Act protects those who expose corporate or government misconduct from unfair treatment and retribution (eg, dismissal, demotions or salary cuts). Under the act, a ‘public interest disclosure' involves the disclosure of relevant disclosure information by a worker to his or her employer, a government agency or official with relevant jurisdiction or any other person, to prevent a matter from occurring or worsening. Disclosures cannot be made for illegitimate purposes. ‘Relevant disclosure information' means information regarding criminal conduct or statutory violations relating to the protection of consumer interests, the environment, fair competition and generally the life, body and property of the general public, and workplace health and safety.

The Law on the Comprehensive Promotion of Labour Measures and the Stabilisation of the Employment of Employees and the Enrichment of Their Working Lives, Etc. revised on 29 May 2019 is intended to tackle workplace harassment and prevent bullying/power harassment in particular. These changes are scheduled to come into force in June 2020 for large companies and in April 2022 for small and medium enterprises. The law defines power harassment as "remarks or behaviour by people taking advantage of their superior position that go beyond business necessity, thereby harming the workplace environment". Employers will be obliged to take HR management action and preventive measures to combat power harassment, including setting up structures necessary to offer internal consultation services and respond to power harassment claims. Employers must provide training to develop their employees' awareness and understanding and ensure that the relevant employees pay attention to their verbal and physical behaviour. Employers are prohibited from dismissing employees reporting harassment cases (or cooperating in an investigation or consultation process) or from treating them unfavourably. The Director-General of a Prefectural Labour Bureau may give advice, instructions or recommendations to assist with the dispute resolution, and employers who fails to comply with a recommendation and a related administrative notice may be publicly named and shamed. Guidelines issued by the MHLW elaborate on the measures to be taken.

5 Dismissals and terminations

5.1 Must a valid reason be given to lawfully terminate an employment contract?

Employers may terminate an employment contract for just cause only. Dismissed employees can claim reinstatement and salary based on the invalidity of the dismissal or compensation for unfair dismissal, unless the employer can show that there was a serious and objective reason for dismissal (eg, misconduct, incapacity, illegality, redundancy or some other substantial reason). The misconduct or breach of law must be serious enough to meet the stringent Japanese court standards. Unless the employer's case is strong, a safer alternative to dismissal is for the employer to request that the employee resign. Resignation requests by the employer are made on an individual basis and employees need not accept them. Financial incentives are offered to encourage employees to accept the offer to resign. The arrangement is typically documented in a separation agreement covering the separation (severance) package, waivers and releases and restrictive covenants.

Redundancies: Employers can terminate employees for compelling reasons only – for example, where the employer faces significant economic necessity or reasonable operational necessity, and thus a reduction in workforce is unavoidable. The Supreme Court has established the following conditions, which employers must meet to lay off employees in this context:

  • The employer must be in a poor financial situation, making the need to act imperative;
  • The employer must attempt to cut costs and expenses, and reassign employees to other positions within the employer's organisation;
  • The employer must establish appropriate and rational selection criteria; and
  • The employer must provide proper explanations to the employees concerned.

Where a company is being liquidated, the employer has some more flexibility.

Where the above Supreme Court conditions for redundancy are met, employers must provide the affected employees with a minimum of 30 days' notice (or payment in lieu). As mentioned, there is no specific statutory provision which makes the payment of compensation mandatory. However, compensation payments are usually made to smooth out the process. When these conditions are not met, employers can try alternative approaches (eg, voluntary termination). Early retirement plans allow employers to offer financial packages to employees in order to encourage them to leave. In contrast, in more customary voluntary retirement plans, employees are offered a financial package to encourage them to resign within a short period (eg, a couple of weeks). The key to success is to determine which package to offer, target employees without discrimination and get the timing right. This can be a costly process. Packages vary depending on the employees' industry, rank, age and length of service. Certain compensation figures are published which can be used as a benchmark. As a simpler and relatively cheaper alternative, voluntary termination (at the employer's request) should be considered where the number of redundancies is limited.

5.2 Is a minimum notice period required?

There is a minimum 30-day notice period before an employer can dismiss an employee under the Labour Standards Law. If the employer does not wish the employee to work any part of this notice period, it can pay the employee's salary in lieu of notice. Unlike in certain other jurisdictions, there are few procedural requirements. In the case of an individual dismissal, a discussion will generally take place with the employee, followed by dispatch or hand delivery of a termination notice. However, employers generally seek to obtain the employee's ‘resignation' before doing so (see question 5.1). Although this procedure is cumbersome and seldom used in practice, no notice is required where the employer summarily dismisses the employee for serious misconduct, provided that it has obtained the local Labour Standards Supervision Office's consent.

5.3 What rights do employees have when arguing unfair dismissal?

Following a dismissal, employee will have several options, including litigation – either through the traditional longer route before the district court or before the popular labour tribunal (shorter timeframe; more visibility for employers; but if the employee does not agree with the ruling, he or she can take the matter before the district court – back to square one).

If a dismissal is ruled unlawful by the district court, the possible consequences are as follows:

  • Reinstatement of the employee: Although most cases are settled by paying monetary compensation, there have been cases in which the court has ordered the return of the employee;
  • Payment of unpaid wages (and default interest) from the time of dismissal until reinstatement (or until the parties reach an out-of-court settlement agreement): As a result of the nullification of the dismissal, the employer will be required to pay the employee his or her salary for the period from the time of the attempted dismissal to the time of the reinstatement. However, any income earned by the employee from another employer while the litigation is pending will be deducted from the payment by the employer with respect to that portion of the earned income which exceeds 60% of the average wages of the employee (ie, the employer will be required to pay at least 60% of the average wages regardless of any temporary income earned by the dismissed employee). There will be court costs and legal fees.

Other than bringing a legal action before a district court seeking the remedies as outlined above, the most common course of action that may be taken by an employee who is dismissed is to:

  • file for a provisional injunction order for provisional reinstatement and provisional payment of wages;
  • file a petition for proceedings before the labour tribunal under a system aimed at resolving disputes reasonably quickly and in a flexible manner; or
  • participate in a labour union (the unions being fairly flexible in regard to such new memberships), which will then compel the employer to engage in collective bargaining for withdrawal of the proposed dismissal or payment of compensation.

The labour tribunal is a customary option favoured by most parties. The upside for the employer is that there is an unwritten rule limiting compensation awarded to the employee to 12 months' salary. On top of this will be added salary for the period until the end of the procedure (eg, three to four months maximum) or the time a settlement can be agreed upon, court costs and legal fees (also for the employee). However, one may often not anticipate where the employee will bring proceedings (court or tribunal).

5.4 What rights, if any, are there to statutory severance pay?

There is no right to statutory severance pay. If the dismissal is not justified from a legal standpoint, it is simply invalid. Severance pay is more often than not the result of negotiations between the employer and employee. If the termination is legally justified, then only notice or payment in lieu must be paid, as explained above.

6 Employment tribunals

6.1 How are employment-related complaints dealt with?

Complaints are usually settled amicably between the parties and litigation is a last resort. The main dispute resolution procedures include civil litigation before the courts and labour tribunal proceedings. In addition, labour bureaus provide non-binding conciliation services through proceedings conducted by a committee comprised of labour specialists.

6.2 What are the procedures and timeframes for employment-related tribunals actions?

Generally speaking, a claim is commenced once a statement of claim or complaint is filed with the district court or labour tribunal. Proceedings are typically initiated by the employee. District court and labour tribunal processes and timeframes vary, as do the specific rules of procedure and other factors. Plaintiffs who intend to resolve their dispute quickly tend to bring proceedings before the labour tribunal, or otherwise to the district court (civil litigation; the Tokyo and Osaka District Courts have divisions that specialise in labour disputes, due to their large caseload).

Civil litigation: At first instance, the process starts with the submission of pleadings, followed by oral proceedings and the examination of evidence. It can take a year to a year and a half for a judgment to be entered. Should either party appeal, it can take another six months or more until a judgment is rendered by the second instance court. Further appeal lies to the Supreme Court. In practice, the courts strongly encourage the parties to settle. That can be done at any time during the proceedings and cases are often resolved through judicial settlement. When a settlement is reached, it is put on record and has the same effect as a final and binding judgment. In certain cases, an employee may seek a preliminary injunction to maintain the status quo until the district court has issued a final ruling in the case. A small claims action with only one court hearing is available for petty claims. Summary courts have jurisdiction over such actions.

Labour tribunal: Proceedings before a panel including a judge and two commissioners are a mixed bag of lawsuit and conciliation. The labour tribunal is usually favoured by employees who seek a speedy resolution to their dispute. The proceedings should be concluded in three meetings, unless there is some reason to hold more meetings and pursue discussions, and the process is generally wrapped up within two to three months. Should the parties fail to reach an agreement while disregarding the panel's recommendation, the panel will make a decision. The parties have two weeks to file an objection thereto, in which case the decision ceases to be effective and the case is transferred to an ordinary civil court (most often a district court). In the absence of objection, the decision becomes valid and binding on the parties.

7 Trends and predictions

7.1 How would you describe the current employment landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

The workstyle reform bills are a package of legislation enacted in 2018 and amending half a dozen employment-related laws to promote work-style innovation and flexibility, improve employment security for non-regular employees and ensure a healthy work-life balance. Some of the changes began to be rolled out in 2019, with a moratorium for the benefit of small and medium-sized enterprises (SMEs) and specified industries.

Strict overtime caps and criminal sanctions for non-compliance: Some of the changes that kicked in in 2019 will be effective as of 1 April 2020 for SMEs. The white-collar exemption (see question 3.2) applies to employees who engage in certain types of work and earn compensation above a certain threshold, subject to certain conditions. Stricter rules apply as to the manner in which employee working hours are tracked under the Industrial Safety and Health Law (exempted managers are now covered by the obligation). Employers must track the working hours of all employee by using methods prescribed by Ministerial Ordinance OR 2017, Guidelines for Measures to Be Taken by Employers to Properly Monitor Working Hours (eg, employer confirming working hours on the spot or using objective methods such as ID card clock-in/clock-out times or computer log-in/log-out times). If an employer cannot use one of these methods, then the employer can confirm and record employees' starting and finishing times based on their own reporting (self-reporting). The guidelines include several measures to ensure proper monitoring and avoid discrepancies, including:

  • the provision of explanations to employees using the method and to HR staff;
  • audit/surveys to verify the absence of discrepancies between reported time and actual working hours; and
  • no undue pressure on employees to cap their recorded times.

Flex time schemes: Employers can now average an employee's working hours over a period of up to three months, to deal with workload variations while minimising overtime allowance payments. Teleworking/working from home is encouraged and facilitated.

Annual paid leave: The Labour Standards Law requires employers to designate five days of annual paid leave for employees entitled to 10 days or more of annual paid leave, to ensure that they use at least five days a year.

Non-discriminatory treatment between regular employees and non-regular employees: The compensation levels of non-regular employees (ie, fixed-term contract employees, part-timers and temp staff) should not be unreasonably lower than those of regular staff and they should not be excluded from benefits, unless the lower pay or exclusion is justified by the nature and purpose of the compensation or benefits. If disparities between the labour conditions of fixed-term employees and indefinite-term employees are found unreasonable (based on the content of their duties and the responsibilities attached to the job, the extent of changes to duties and work locations, and other circumstances), the employer must compensate for the harm suffered by the fixed-term employees. Although the number of Article 20 lawsuits (as they concern Article 20 of the Employment Contract Law) is relatively small compared with cases involving wrongful termination or extra wage claims, they have drawn a lot of attention as dealing with an issue central to the Law on the Arrangement of Related Acts to Promote Work Style Reform. From 1 April 2020 (one year later for SMEs), an employer treating irregular employees differently will have to explain the rationale behind the differences in treatment upon an employee's request.

8 Tips and traps

8.1 What are your top tips for navigating the employment regime and what potential sticking points would you highlight?

The recent amendments referred to in question 7 are very broad and it is difficult to set out an exhaustive list of all key actions that can be taken. Compliance is key to minimising legal and reputational risks. Employers should ensure that the HR team is fully up to speed with these changes, and that they are fully compliant regarding overtime hours and extra wages and related agreements (Article 36 agreements). Employers should review compensation and benefits policies to identify risks of unfair discrimination between regular and non-regular employees.

Employee termination can be a very challenging and costly process, and should be carefully handled. Employers should therefore make sure that they hire the right people and carefully monitor probation periods. The legal framework applicable to redundancies and dismissals has been a source of frustration for many foreign employers, especially those from employment at will jurisdictions.

Co-authored by Hiroto Hirai

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.