Employment and Employee Benefits in Japan Overview

Employment and Employee Benefits in Japan: Overview, Practical Law Country Q&A...
Employment and Employee Benefits in Japan: Overview

by Shinya Tago, Hiroki Fujiwara, Landry Guesdon and Hiroki Kitagawa, Iwata Godo
Country Q&A | Law stated as at 01-Nov-2022 | Japan
A Q&A guide to employment and employee benefits law in Japan.
This Q&A gives a high-level overview of the key practical issues including: the scope of employment
regulation; employment status; background checks; regulation of the employment relationship
(including unilateral changes by an employer to the terms and conditions of employment); minimum
wage and bonuses; working time, holidays and flexible working; illness and injury of employees;
rights created by continuous employment; provisions for fixed-term, part-time and agency workers;
discrimination and harassment; termination of employment (including protection against dismissal
and protected employees); resolution of disputes between an employee and employer; redundancy/
layoff; employee representation and consultation; consequences of a business transfer; employer and
parent company liability; employer insolvency; employers' health and safety obligations; taxation of
employment income; intellectual property; restraint of trade; relocation of employees; and proposals
for reform.
Scope of Employment Regulation

Employment Status
Background Checks
Regulation of the Employment Relationship
Minimum Wage and Bonuses
Working Time, Holidays and Flexible Working
Illness and Injury of Employees
Rights Created by Continuous Employment
Fixed-Term, Part-Time and Agency Workers
Discrimination and Harassment
Termination of Employment
Resolution of Disputes Between an Employee and Employer
Redundancy/Layoff
Employee Representation and Consultation
Consequences of a Business Transfer
Employer and Parent Company Liability
Employer Insolvency
Health and Safety Obligations
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Taxation of Employment Income

Intellectual Property (IP)
Restraint of Trade
Relocation of Employees
Proposals for Reform
Contributor Profiles
Shinya Tago, Managing Partner
Hiroki Fujiwara, Partner
Landry Guesdon, International Practice Committee
Hiroki Kitagawa, Associate
Scope of Employment Regulation
1. Do the main laws that regulate the employment relationship apply to:
• Foreign nationals working in your jurisdiction?
• Nationals of your jurisdiction working abroad?
Laws Applicable to Foreign Nationals
The main laws regulating the employment relationship for Japanese nationals also generally apply to foreign
nationals working in Japan, although the employer and employee can agree to apply a different law to the
employment relationship (Law on the General Rules of Application of the Law). However, certain mandatory
provisions cannot be contracted out (for example, the provisions concerning dismissal and overtime).
Japan has entered into social security agreements with more than 20 countries, including Germany, the United
Kingdom, the United States, The Netherlands, Belgium, France, Ireland, Switzerland, Canada, Australia, South
Korea, Brazil, India, the Philippines and the People's Republic of China (PRC). Individuals insured under pension
and social security schemes from one of these countries may be exempt from enrolling in Japan's pension scheme
and paying social security insurance premiums, depending on the scope of the bilateral agreement.
Laws Applicable to Nationals Working Abroad
The employment relationship can be governed entirely by a foreign law.

Employment Status
2.Does the law distinguish between different categories of worker? If so, what are the requirements
to fall into each category, the material differences in entitlement to statutory employment rights
and are there any maximum time periods for which each category of worker can be engaged?
Categories of Worker
Employee/worker. 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). 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 that are categorised as "arubaito" can be hired by the day or hour.
Independent contractor/self-employed. The Labour Standards Law defines a worker as a someone who is
employed at, and is paid wages from, a business or office, and a worker is protected by the labour laws. An
independent contractor is distinguished from an employee and the relationship is governed by contract law. In
certain cases, the distinction is a fine one. To determine whether a person is an employee or an independent
contractor, certain factors are considered to identify the degree of control a company has in the relationship with
that employee/independent contractor (the greater the degree of control, the more likely that an employment
relationship exists). For example:
• Does the company control, or have the right to control, what the worker does and how the worker does the
job (working hours, instructions and supervision, job title, and so on)?
• Does the company control the business aspects of the worker's job? These include arrangements such as:
• how the worker is paid;
• whether expenses are reimbursed; and
• who provides equipment, tools and supplies?
• Will the relationship continue and is the work a key aspect of the business?
One of the consequences of misclassifying an employee as an independent contractor is that the relevant worker
can seek the protections afforded by the labour laws.
In principle, a representative director of a joint stock company cannot be an employee of the company they are
managing. As such, a contract for services (entrustment agreement) is advisable to clarify rights and obligations.
Directors are otherwise regulated by the Companies Act.
Entitlement to Statutory Employment Rights

In principle, fixed-term employees/part-time employees must be treated at least the same as comparable
permanent/full-time employees in relation to the terms and conditions of their employment (for example, job
descriptions, level of responsibilities and human resources management systems in relation to changes to job
descriptions and reassignment).
The Law on the Improvement of Employment Management for Part-Time Workers and Fixed-Term Contract
Workers aims at further reducing status inequalities between the various categories of worker (that is, between
regular employees and non-regular workers, such as part-time workers, fixed-term contract workers and
temporary work agency staff workers). Guidelines on the Prohibition against the Unreasonable Treatment of
Part-Time Workers, Fixed-Term Workers, and Dispatched Workers, and Guidelines for the Measures concerning
Employment Management Improvement, etc. for Part-Time Workers and Fixed-Term Workers, published in
December 2018, clarify the rules and provide some guidance.
The compensation level for non-regular employees (that is, fixed-term/part-time employees and temporary staff)
must not be unreasonably lower than that of regular staff. These employees must not be excluded from benefits,
unless the lower pay or exclusion is justified by the nature and purpose of the compensation or benefits.
An employer treating irregular employees differently must be able to explain the rationale behind the differences
in treatment at the request of employees. If disparities between the labour conditions of fixed-term employees
and indefinite-term employees are found to be unreasonable (based on the content of their duties and the
responsibilities attached to the job, the extent of changes in the content of duties and work locations, and other
circumstances), the employer is required to compensate for the harm suffered by the fixed-term employees.
To ensure the elimination of irrational differences in treatment and discriminatory treatment between regular
workers and part-time/fixed-term workers, alternative dispute resolution (ADR) procedures operated by the
government are now available to help employees solve related disputes.
Time Periods
Fixed-term contracts cannot exceed either three or five years, depending on the circumstances. Employers need
not renew fixed-term contracts. However, if a contract has been renewed several times and the employee can
reasonably expect renewal, the courts can require the employer to justify a refusal to renew. Unless the employer
has objective and socially acceptable reasons, it cannot refuse to renew a fixed-term employment contract which
has been repeatedly renewed, as refusal may be construed as termination of an indefinite contract (Employment
Contract Law). A fixed-term contract renewed for more than five years can be converted into an indefinite contract
at the employee's request.
If a temporary agency staff contract with a temporary staffing agency is in breach of the law (for example, the
agency is not licensed, an employee has been dispatched beyond the maximum statutory term or there is a disguised
outsourcing arrangement), the host company will be deemed to offer direct employment to the employee under
the same terms and conditions as those prevailing between the agency and the employee (Worker Dispatch Law
(see Question 10)).
Background Checks

3. Are there any restrictions or prohibitions on carrying out background checks in relation to
applicants?
Restrictions/Prohibitions on Conducting Background Checks
Employers cannot access criminal records. They can check social media accounts to check information on
references, past convictions or any trouble with the law. Over the years, the practice of screening employees has
been significantly curbed as a result of the enactment of new or tougher legislation relating to discrimination, data
protection and privacy.
Public job placement offices, recruitment agencies and employers who are collecting, retaining and using the
personal information of job seekers and those intending to become workers in response to recruitment ads, offers
or solicitations, must:
• Do so only within the scope necessary to achieve their business purpose.
• Use and retain the information only for its purpose (except where the person concerned consents or there
is some other good cause).
(Article 5-4(1), Employment Security Law.)
The following information must not be obtained (except as permitted by law or where the information is essential
for the employer's business and the applicant is informed of the purpose of use):
• Race, ethnicity, social status, family origin, registered domicile, birthplace or other information that may
cause discrimination.
• Creed or personal beliefs.
• Union membership or activities (unless permitted by law or a collective agreement).
(Guidelines of the Ministry of Health, Labour and Welfare (MHLW).)
These Guidelines apply whether an employer directly conducts the background checks or hires a third party to
do so.
In principle, the MHLW does not support drug and alcohol testing, but testing is permissible provided this is
done with the employee's consent and for a legitimate business-related purpose. Employers can inquire about
an applicant's medical history, provided that inquiries are consistent with the purpose of the interview. Medical
examinations can be performed during initial hire and must then be conducted with employees at least once a
year. The immigration status of foreign national employees must be checked, as it is a criminal offence to employ
someone who is subject to immigration control without the appropriate permission to work in Japan.
Background Checks by Third Parties
Third parties can conduct background checks (see above, Restrictions/Prohibitions on Conducting Background
Checks) subject to compliance with the Personal Information Protection Law.

Regulation of the Employment Relationship
4. How is the employment relationship governed and regulated?
Written Employment Contract
Contracts can be made orally or in writing. A written contract or an employment letter is advisable (in particular,
to document a fixed-term relationship). They can be minimal if supported by work rules. Work rules are specific
rules for the workplace. They set out working conditions, including in relation to wages, working hours, holidays
and the rules with which employees must comply, including disciplinary procedures.
Employers with ten 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 do so on a voluntary basis.
Implied Terms
In general, employment contracts cannot remove statutory employee protections. Case law and statutes protect
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 in employment contracts. Contract
provisions (except for more favourable terms) are considered invalid if they do not align with the work rules. They
cannot lower the standards outlined in the work rules. Terms that are favourable to the employee in the work rules
or the law will override less favourable terms in the employment contract.
Where an employee is treated in the same manner repeatedly and continuously for a long period of time, that
treatment can be regarded as an implied term of the employment.
Collective Agreements
Collective agreements between an employer and a labour union can be incorporated (expressly or impliedly) into
the employment terms.
Enterprise-based bargaining is more frequent than industry-based bargaining. Collective agreements between
employers and labour unions can regulate matters such as working conditions, pay, bonuses, fringe benefits,
working hours, health and safety, dispute resolution procedures, redundancies or secondments, re-employment
of elderly employees.
Collective agreements can also regulate the relationship between employers and unions. They can require labour-
management consultation before certain decisions are made (for example, concerning redundancies, closures or
business transfers).

Labour-management agreements are designed to exempt employers from criminal penalties under the Labour
Standards Law (LSL) (for example, the obligation to make and file an agreement to have the right to request
overtime) or deal with the special treatment of employees (for example, restrictions on care leave eligibility).
5. What are the main points to consider if an employer wants to unilaterally change the terms and
conditions of employment?
The main points to consider if an employer wants to unilaterally change the terms and conditions of employment
depend on the nature of the changes and the structure of the employment terms (for example, whether they are
contained in a contract or the work rules). Employers and employees can agree to make changes. An agreement
between a labour union and an employer can affect individual agreements without the employee's consent, but this
is unusual. In principle, salary cannot be reduced unilaterally. However, employers generally have a right to make
changes to job descriptions and positions and reassign employees (except for restricted permanent employees).
These rights are often supported by the work rules. Such decisions must consider the employee's circumstances.
If an employer has established work rules, individual employment contracts need not include the employee's
working conditions (that is, those which concern wages, working hours and breaks, holidays and disciplinary
procedures). However, altering the rules is not a simple process. Unless agreed with the employee, an employer
cannot make detrimental changes to the working conditions set out in the employment contract by changing the
work rules (Employment Contract Law). However, changes to an employee's working conditions are permitted if
the employer informs the employee of the changes and the changes are reasonable and take into consideration:
• Any disadvantage to the employee.
• The need for the change.
• The appropriateness of the revised rules.
• The status of any negotiations with labour unions or similar.
• Any other relevant circumstances.
This does not apply to individual contracts, and provisions that the employer and employee have agreed on cannot
be amended by revising the rules.
Minimum Wage and Bonuses

6. Is there a national (or regional) minimum wage? Is it common to reward employees through
contractual or discretionary bonuses?
Minimum Wage
The Minimum Wage Law provides for a minimum wage. The minimum wage refers to the national weighted
average amount per hour. The regional minimum wage applies to all employees in a region regardless of the
industry, and the specific minimum wage applies to workers in specific industries. The highest salaries paid are
in Tokyo, Kanagawa and Osaka. The minimum hourly wage in Tokyo is JPY1,072 (from 1 October 2022). This
works out as a monthly minimum wage of approximately JPY170,000 in Tokyo for a regular full-time employee.
If two or more minimum wages apply to a worker, the highest minimum wage rate applies.
Bonuses
There are no particular restrictions or guidelines governing bonuses. Contractual bonuses (which are performance
based) and discretionary bonuses are both available. However, while a bonus scheme can provide that an individual
is only entitled to a bonus at the discretion of the employer, that discretion must not be exercised in an unreasonable
manner. It is quite common in Japan for employers to pay fixed bonuses during summer and winter (which is
basically deferred salary, rather than a bonus strictly speaking). Specific tax rules apply to directors' bonuses.
Working Time, Holidays and Flexible Working
7. Are there restrictions on working hours, and if so, can an employee opt out? Is there a minimum
paid holiday entitlement? Is there a statutory right for employees to request to work flexibly?
Working Hours
Restrictions on working hours. The statutory working week is 40 hours per week or eight hours per day,
excluding breaks. There are a number of business-related exceptions, under which 44-hour working weeks
are acceptable. Employers must file a labour management agreement (Article 36 agreement) with the Labour
Standards Inspection Office if they wish employees to work over the statutory working hours or on statutory days
off.
Overtime pay. Employees working over the statutory working hours on statutory days off, or late-night hours
(between 10 pm and 5 am), must receive overtime pay. The following enhanced rates apply for overtime work
and for hours worked on statutory holidays:
• Overtime exceeding the statutory working hours: an additional 25% of the normal rate of pay.

• Overtime exceeding the statutory working hours which also exceeds 60 hours in one month: an additional
50% of the normal rate of pay (SMEs will continue to benefit from a moratorium until 1 April 2023).
• Work on statutory days off: an additional 35% of the normal rate of pay.
• Late-night work (between 10.00 pm and 5.00 am) conducted within the statutory working hours: an
additional 25% of the normal rate of pay.
• Late-night work conducted in excess of the statutory working hours: an additional 50% of the normal rate
of pay.
Partly due to tragic events reported in the media relating to "karoshi" (death from overwork) and well-known
companies having faced trial over high-profile karoshi cases, there is a strong interest in the better management
of overtime work shared by all stakeholders.
In January 2017, the Ministry of Health, Labour and Welfare (MHLW) issued Guidelines for Employers to
Appropriately Manage their Employees' Working Hours. These basically follow the 2001 Standards for Employers
to Appropriately Manage their Employees' Working Hours but contain new and noteworthy items, including a
definition of working hours and specific examples (for example, time on standby, time spent on changing clothes
and so on).
Overtime is capped at 45 hours a month and 360 hours a year. If there is a temporary surge, the annual limit can
be increased to 720 hours, subject to a monthly maximum of 80 hours (averaged over a period of two, three, four,
five and six consecutive months) and an absolute maximum of 100 hours a month.
Specific businesses are exempted, including new technologies research and development (R&D). Criminal
penalties may apply in case of breach. These rules apply to Article 36 labour management agreements (a five-year
moratorium applies to certain businesses (such as construction businesses), which will expire on 31 March 2024).
The LSL provisions on working hours, rest days and days off do not apply to employees in managerial positions
(Article 41, item 2, LSL). However, the term "manager" is very narrowly interpreted in this context, and even if an
employer treats an employee as a manager for organisational purposes, the courts may decide otherwise and order
the employer to pay extra wages to that employee regardless of title. For example, in 2008, the Tokyo District
Court ordered McDonald's to pay several million yen in overtime allowance and by way of extra compensation
to a manager at one of its outlets. The court held that employees in a managerial position must be able to wield
significant authority and receive privileged treatment, including higher pay and status.
Special rules applicable to willing high-level professionals have applied since 1 April 2019. This category can be
exempted from overtime allowance, holiday work and late-night work compensation requirements by agreement
subject to certain formalities (labour-management committee resolution, filing with the authorities and individual
consent). To qualify, employees must earn at least JPY10.75 million per annum and be engaged in clearly defined
work requiring specific skills. They must take not less than 104 days off a year and are subject to other measures
to secure their wellbeing and good health, including health checks for those working in excess of certain working
hours.
The working-hours averaging system is another collective scheme, subject to a labour-management agreement
or work rules, under which the employer can ask employees to work more than eight hours a day or 40 hours
a week without overtime pay provided that the average number of prescribed hours does not exceed the weekly
legal standards within a given period. Individual schemes include discretionary working hours, deemed working
hours, working at home and similar systems.

Employers must track the working hours of all their employees by using methods prescribed by ministerial
ordinance and the 2017 Guidelines for Measures to be Taken by Employers to Properly Monitor Working Hours
(for example, employer confirming working hours on the spot or using objective methods such as IC cards or ID
card clock-in/clock-out time or computer log-in/log-out time) (Industrial Safety and Health Law). If an employer
cannot use one of these methods, the employer can confirm and record its employees' starting and finishing
time based on their own reporting (self-reporting method). These Guidelines include measures to ensure proper
monitoring and avoid discrepancies, including among others:
• Explanations to the employees using the method and HR staff.
• Audit/surveys to verify the absence of discrepancies between reported time and actual working hours.
• Guarantees that no undue pressure will be placed on employees to cap their recorded time.
Special restrictions applicable to shift workers. The same working hours and rest breaks rules apply to shift
workers. In a notable case (Silver Heart, Tokyo District Court, 25 November 2020), the court ruled that the
employer did not have absolute discretion in setting its employees' shifts and a decision to significantly reduce an
employee's shifts could be held null and void in the absence of reasonable grounds.
Rest Breaks
Rest breaks during the working day. Employees are entitled to at least a 45-minute break for six hours of
work and a one-hour break for eight hours of work. In practice, one-hour breaks are often provided even if an
employee works less than eight hours. In principle, rest periods must be provided to all employees at the same
time (exceptions can be made through a labour management agreement).
Rest periods between working days. Employers must make efforts to secure a certain interval between the end
of the working day and the beginning of the next working day.
Special provisions for night/shift work. The LSL permits irregular working hours systems. Shifts can be
organised where the working-hours averaging system (see above, Working Hours) unit period is one month or
less, or one year or less. The employer must prepare a shift schedule to be notified to the employees together with
other basic information before the start of the next shift unit period (30 days in advance where the unit period
is one year or shorter).
Holiday Entitlement
Minimum paid holiday entitlement. Employees who have been employed continuously for six months and have
worked at least 80% of all working days are entitled to ten days of paid annual leave. Holiday entitlements increase
over time in proportion to the 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 six-and-a-half years and onwards, the entitlement is 20
days. Employers can be more generous. Employees can take annual paid leave on an hourly basis up to a number
of hours equivalent to five days where a labour-management agreement has been concluded. If an employee is
entitled to at least ten days of paid leave in a year, the employer must designate when five of these days should
be taken unless the employee voluntarily takes or designates a time when to take five days of paid leave before
the employer makes such a designation.

Most Japanese companies grant additional paid leave for weddings, the death of close relatives and when a spouse
has given birth to a child (typically in the work rules).
There is no statutory unpaid holiday entitlement.
Public holidays. Japan has designated 16 national holidays, partly to force employees to take holidays. Employers
do not necessarily have to give a day off to employees on a national holiday, although this is common.
Flexible Working
There is no statutory right to flexible working time or to work from home (telework), but these are arrangements
actively encouraged by the government.
Flexible working time schemes are permissible, provided a labour-management agreement (see Question 4) is
made covering eligible employees, designated working hours, core time and so on (LSL). Start time and finishing
time are determined by the employees. Employers typically designate a core period (and core periods have tended
to shrink during the COVID-19 pandemic). Employers should designate an adjustment period not exceeding three
months, during which the average working hours should not exceed the statutory working hours (eight hours per
day and 40 hours per week) without paying overtime. Flexible working time rules must be prepared (typically as
part of the work rules). The labour-management agreement must be filed with the Labour Standards Inspection
Office, unless the adjustment period does not exceed one month.
Telework is encouraged. Various ministries have been developing a variety of measures to encourage companies
to introduce teleworking into their working styles. The Second Batch of Emergency Measures against COVID-19,
introduced by the Coronavirus Response Taskforce in March 2020, provides that Japan should strongly promote
teleworking and establish this new working-style as a role model. There are no specific legal requirements (the
same rules as for office work apply). Official notices on telework issued by the MHLW clarify that employers
should record employees' working time even when they work from home. The place where employees lead
their daily private lives (that is, home) under the related MHLW notice becomes the workplace. By definition,
it is expected to be a safe place for the employee. There are no mandatory requirements regarding training or
equipment, but the MHLW recommends that employers provide their telework employees with the necessary
guidance based on the Occupational Health Guidelines on Information Device Work at the Office (2019). It is
not unusual for employers to lend/provide equipment in a long-term telework context (for example, a personal
computer). If the employees are using their own equipment, there are certain security risks to be addressed (such as
hacking, viruses, and so on). Where the equipment/computer, in particular, belongs to the employer, the employer
has a right of access (for example, in the case of a data breach/leak or theft investigation), whereas the employee's
consent is required if the employee owns the equipment.
Illness and Injury of Employees

8. What rights do employees have to time off in the case of illness or injury? Are they entitled to
sick pay during this time off? Who pays the sick pay and, if the employer, can it recover any of
the cost from the government?
Entitlement to Paid Time Off
Employees are generally covered by workers' accident insurance in the case of injury, illness, disability or death
resulting from an employment-related cause or commuting. In the case of work-related accidents, insurance
benefits include, among other things:
• Medical compensation benefits.
• Temporary disability compensation benefits (60% of the average wage paid after three days of absence
from work).
• Permanent disability compensation.
• Injury and illness compensation.
• Pension.
In principle, employees absent from work due to non-work-related sickness or injury are not entitled to pay from
their employer. Under national health insurance coverage, employees are entitled to two-thirds of the applicable
standard wage (calculated according to a specific formula) as illness/injury allowance after three days of absence
up to a period of 18 months. If the employer offers any wage during this period, the allowance is reduced
accordingly.
Entitlement to Unpaid Time Off
The employee will be covered by health insurance or workers' accident compensation insurance (see above,
Entitlement to Paid Time Off). If the employee is unable to offer their services due to a physical or mental condition
unrelated to work, the employer is allowed to terminate the employment relationship (the work rules often provide
for a certain period of unpaid time off to allow the employee to recover and resume work). Employees on leave
due to a work-related injury or illness cannot be dismissed during medical treatment and for 30 days after that
treatment. If the period exceeds three years, the employee can be dismissed (set compensation is then payable).
Recovery of Sick Pay from the State
The employer will typically not pay sick pay.
Provisions Concerning COVID-19
Japan rolled out an employment stabilisation programme in response to the COVID-19 pandemic. The programme
was intended to provide financial incentives to employers having entered into a furlough plan with their employees
to maintain employment through employment adjustment subsidies. Eligibility was subject to a number of
conditions (including being registered with the unemployment insurance scheme, a minimum level of suffering
due to the economic downturn, placing its employees on furlough in accordance with the furlough plan, and

paying more than 60% of the employees' average wages). An employer was required to pay a furloughed employee
compensation of at least 60% of the employee's wage (the average daily wage for the last three months) during the
leave of absence, if the employer reduces its business activities due to reasons attributable to the employer (Article
26, Labour Standards Law). The employment adjustment subsidies reimbursed part of the amount an employer
had paid by way of leave compensation, subject to the employer's commitment to continued employment after a
temporary reduction or suspension of business. However, these provisional measures no longer apply.
Rights Created by Continuous Employment
9. Does a period of continuous employment create any statutory rights for employees? If an
employee is transferred to a new entity, does that employee retain their period of continuous
employment? If so, on what type of transfer?
Statutory Rights Created
An employee has a right to paid holidays after six months' employment (see Question 7).
Consequences of a Transfer of Employee
Unless the employee is on secondment, the transfer of an employee generally implies a resignation followed by
employment with a new employer, and the employee does not retain any past length of service (although this may
sometimes happen in a business transfer context) (see Question 18).
Fixed-Term, Part-Time and Agency Workers
10.To what extent are temporary and agency workers entitled to the same rights and benefits
as permanent employees? To what extent are part-time workers entitled to the same rights and
benefits as full-time workers?
Temporary Workers
A limit of three years per position for dispatch workers applies, which can be renewed for another three years,
provided the client company "asks the opinion" of a majority labour union or a representative of the majority of its
employees (Law on Securing the Proper Operation of Worker Dispatching Undertakings and Improved Working
Conditions for Dispatched Workers (Worker Dispatch Law)).

Also, there is a maximum term of three years for dispatched workers within the same division/section, and
calculation of the term starts over if a new dispatch worker comes as a replacement. Dispatch workers who have an
unlimited term employment contract with their dispatch agency are exempt from these limits. If the client company
does not comply with this law, it may be deemed to have hired the dispatch workers directly. The law seeks to
ensure equal treatment between temporary staff and client company employees (if a temporary worker asks their
dispatch agency for equal treatment with regular workers at the client company, the agency's management must
explain to the worker in detail what actions it has taken, including direct hire wage disclosure, and access to the
same training and welfare facilities).
Temporary workers are entitled to health insurance, welfare pension and unemployment insurance depending on
their working hours and length of service.
Agency Workers
See above, Temporary Workers.
Part-Time Workers
For the provisions concerning the duration of employment and conversion into an indefinite-term contract, see
Question 2, Time Periods.
It is generally more difficult to terminate a fixed-term contract during its term. The advantage of such a contract
for the employer is that it avoids the need to negotiate and pay costly severance packages.
The "equal work, equal pay" principle applies between "regular" and "non-regular" employees. 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 (see
Question 2).
Discrimination and Harassment
11. What protection do employees have from discrimination or harassment, and on what grounds?
Protection from Discrimination
The Law on the Comprehensive Promotion of Labour Measures and Stabilization of Employment of Employees
and Enrichment of their Work Lives, etc. (formerly known as the Employment Measures Law) 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. The Labour Standards
Law (LSL) and the Constitution prohibit discrimination based on nationality or ethnic or national origin during

employment and in relation to termination of employment. Disabled individuals should represent a certain
percentage of an employer's workforce (hire or pay) (Law on Employment Promotion etc. of Persons with
Disabilities).
This law prohibits administrative bodies and private businesses from unduly discriminating against people with
disabilities. The Law on Securing Equal Opportunity and Treatment between Men and Women in Employment
(Equal Opportunity Law) and the Constitution prohibit discrimination based on gender in relation to recruitment
and treatment (for example, in relation to assignments, promotions, training, housing loans and fringe benefits) and
termination. Men and women must receive equal pay (LSL). The LSL and the Constitution prohibit discrimination
based on social status, religion or political belief during employment and in relation to termination. No law
expressly prohibits discrimination based on sexual orientation or medical condition. Discrimination on the ground
of trade union membership is unlawful.
The Worker Dispatch Law prohibits a recipient of dispatch services from cancelling a worker's dispatch contract
on the basis of, among other things, a worker's nationality, creed, gender, social status, or involvement in legitimate
labour union activities.
Fixed-term contract employees/part-time employees must be treated no less favourably in respect of their terms
and conditions of employment than comparable permanent/full-time employees.
Protection from Harassment
Employers must provide a safe and proper working environment (Employment Contract Law and the Labour
Safety and Health Law). Sexual harassment and power harassment claims can have severe consequences for
employers. Claims can be made based on:
• Tort.
• Breaches of the Equal Opportunity Law.
• Breaches of the employment contract.
• Workmen's Accident Compensation Law (which can include criminal penalties as well as civil claims).
Most cases are dealt with internally without legal action.
With regard to sexual harassment, the Equal Opportunity Law provides that employees should be able to have
careers while raising children. Employers must ensure that appropriate measures are in place to:
• Deal with sexual harassment allegations in the workplace.
• Ensure employees suffer no disadvantage at work as a result of making allegations of sexual harassment.
• Ensure no harm comes to employees as a result of sexual harassment in the workplace.
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 in 2019) is intended to tackle workplace
harassment and prevent bullying/power harassment in particular. These changes came into force in 2020 for large
companies and in April 2022 for small and medium sized 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 are 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 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 co-operating in an investigation or consultation process) or from treating
them unfavourably.
The Director-General of a Prefectural Labour Bureau can give advice, instructions or recommendations to assist
with the dispute resolution, and employers who fail to comply with a recommendation and a related administrative
notice can be publicly named and shamed. Guidelines issued by the MHLW elaborate on the measures to be taken.
Termination of Employment
12. What rights do employees have when their employment or employment contract is terminated?
Notice Periods
There is a minimum 30-day notice period before an employer can dismiss an employee (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. No notice is required where the employer summarily dismisses the employee for serious misconduct
with the local Labour Standards Inspection Office's prior consent. However, this procedure is cumbersome and
seldom applied in practice.
Employers can only terminate an employment contract for just cause (Employment Contract Law). The dismissal
must be based on objectively reasonable grounds and must be socially acceptable.
The MHLW's 2003 Standards on the Conclusion and Renewal of Fixed-Term Labour Contracts and Termination
of Employment require an employer to:
• Notify employees when they sign a fixed-term employment contract whether the contract will be renewed
and, if so, the criteria for renewal.
• Give at least 30 days' notice if it is going to refuse the renewal of a contract that has already been renewed
at least three times or under which an employee has been employed for at least one year.
• At the employee's request and without delay, to issue a certificate stating the reason for refusing to renew
the contract.

(Contractual market practice is that employees give 30 days' notice when they leave, but it may arguably be as short
as two weeks under the Civil Code and the "standard" 30 days should then be treated as a mutual understanding
rather than a binding obligation if the employee wants to leave earlier.)
Severance Payments
There is no statutory entitlement to severance pay, and in the absence of just cause, a dismissal is invalid. Severance
payments are generally a matter for negotiation and should be distinguished from other payments that may have
to be made on termination (for example, a contractual retirement allowance).
Procedural Requirements for Dismissal
In contrast with 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. It is usually advisable to notify the reasons for the dismissal. However, employers generally
seek to obtain the employee's resignation before doing so.
At the request of the employee, the employer should promptly deliver to the employee a certificate stating the
period of employment, the employee's salary, work type and position, and the reason for the employee's dismissal/
departure.
13. What protection do employees have against dismissal? Are there any specific categories of
protected employees?
Protection Against Dismissal
Grounds for dismissal. Employees in Japan generally have a high degree of legal protection and the standards for
individual dismissal and redundancy are stringent. Employers must be cautious when terminating any employment
relationship and ensure that they comply with the legal and contractual requirements regarding dismissal.
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 the dismissal
(for example, misconduct, incapacity, illegality, redundancy or some other substantial reason). Generally, an
employee can only be dismissed if the dismissal is objectively reasonable and socially acceptable. The misconduct
or breach of law must be serious to meet the standards set by the Japanese courts. Unless the employer's case is
strong, a customary and safer alternative is for the employer to ask the employee to resign. Resignation offers at
the company's request are made on an individual basis and employees need not accept them. Financial incentives
are normally offered to encourage employees to resign. The arrangement is often documented in a separation
agreement which contains details on the severance package, applicable waivers and releases, and applicable
restrictive covenants. An employee's length of service does not, of itself, offer protection against dismissal.
With regard to fixed-term employment contracts, the Employment Contract Law provides that an employer cannot
dismiss an employee until the expiration of the term of the contract, unless there are unavoidable circumstances.

Procedural requirements for dismissal. See Question 12.
Prerequisites to qualify for protection against dismissal. See below, Protected Employees.
Protected Employees
An employee cannot be dismissed while unable to work as a result of the fact that the employee is receiving
treatment for a work-related injury or illness and cannot be dismissed within 30 days from the date that treatment
ceases. Special protection applies to dismissals connected with pregnancy and maternity, parental and family care
leave, labour union membership or activities, and whistleblowing.
Resolution of Disputes Between an Employee and Employer
14. Is there a governmental or independent organisation to which employees can refer complaints
in the event that there is a dispute between the employee and the employer?
Judicial procedures include initiating proceedings before the courts or a labour tribunal. This is sometimes a last
resort option in cases involving wrongful termination or serious harassment.
Consultation
The employee can contact the Counselling Corner set up in Labour Bureaux/Labour Standards Inspection Offices.
Public officials provide consultation services regarding all kinds of issues arising from employment relations, and
employees can present their grievances to clarify and assess their legal position. Employees using such services are
frequently satisfied or relieved merely by understanding the merits or demerits of their case through the counselling
process.
Claims
If an employee using the above services wants to pursue a legal claim, the Labour Bureaux/Labour Standards
Inspection Office can request the employer to appear before it to discuss how to resolve the dispute.
This advisory service is carried out informally and quickly. If the dispute is not resolved through these services,
and if one of the parties so requests, the head of the Regional Employment Bureau can entrust the case to a
conciliation service performed by a three-member panel set up in the bureau, usually composed of practising
lawyers or law professors.
If requested by either party to a dispute concerning employment relations, the panel (or a member of the panel),
assisted by bureau staff, mediates the dispute, ascertains the facts of the case and the allegations of the parties,
confirms their main arguments, co-ordinates and prompts them to consult each other to resolve the dispute and
proposes a settlement.

The service is offered free of charge, and is conducted expeditiously, in most cases, within one hearing session
lasting a few hours (within two months of the request for conciliation). Neither the employer nor the employee is
obliged to accept an amicable settlement offer suggested by the panel under the Individual Employment Disputes
Resolution Promotion Law, and the employee can decide to take the matter to a higher level and initiate legal
proceedings before the labour tribunal or the district court.
Employees can consult an attorney or a labour and social security specialist to seek legal advice, and they can
alternatively contact and join a labour union independent of the employer's organisation. The union can then force
the employer to hold discussions through collective bargaining on the subject matter of the dispute (terms and
conditions of work, termination and so on).
Redundancy/Layoff
15. How are redundancies/layoffs defined, and what rules apply on redundancies/layoffs? Are
there special rules relating to collective redundancies?
Definition of Redundancy/Layoff
The rules described in Question 12 also apply to redundancies. Redundancies are usually seen as a very last resort
option and are therefore subject to strict conditions/criteria (see below).
Procedural Requirements
Streamlining a workforce is often a complicated and costly process. Employers can only make employees
redundant for compelling reasons (for example, where the employer faces a significant economic necessity, or a
reasonable operational necessity, and as a result a reduction in the workforce is unavoidable).
The Supreme Court has established the conditions/criteria that 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
organisation.
• The employer must establish appropriate, objective and rational selection criteria.
• Due process, in particular the employer must provide explanations to the employees concerned.
Where a company is liquidated, there is more flexibility, regardless of the employer's financial circumstances.
However, the conditions above should still not be ignored.

When the above conditions are not met, employers can try alternative approaches (for example, voluntary
resignation at the employer's request), generally against a financial package. Early retirement plans allow
employers to offer financial packages to employees to encourage them to leave.
In one type of plan, employees are offered a financial package to encourage them to resign within a short period
(for example, a couple of weeks). The key to success is to determine a proper package, target employees without
discrimination and get the timing right. This can be a costly process. Packages vary depending on the industry,
and the employee's rank, age and length of service. Compensation figures are published which can be used as
a benchmark. As a simpler and cheaper alternative, individual voluntary resignation (at the employer's request),
generally against a financial package, can be considered where the number of redundancies is limited.
Redundancy/Layoff Pay
Where the Supreme Court conditions for redundancy (see above, Procedural Requirements) are met, employers
must provide the affected employees with a minimum of 30 days' notice (or payment in lieu of notice). There is
no specific statutory provision which makes the payment of compensation mandatory. However, compensation
payments are usually made as part of the process. Further, for employers that fail to meet the Supreme Court
conditions for redundancy, making an incentive payment (which can sometimes involve hefty amounts) is often the
only way that the employer can facilitate the redundancy process and obtain the necessary employee resignations.
Collective Redundancies
If 30 employees or more are to be made redundant at a given workplace within one month, a new employment
support plan must be prepared listing the employees and detailing the measures taken (or to be taken) by the
employer to facilitate job searches. Any comments from the relevant labour unions (or, in the absence of a union, an
employee representative) must be included. The employer must notify the competent public job placement office
(known as "Hello Work") of the proposed redundancies and submit the plan for approval before implementation.
Hello Work should also be notified if a disabled employee, or five or more employees aged 45 or older, are to
be made redundant within a period of one month.
Employee Representation and Consultation
16. Are employees entitled to management representation (such as on the board of directors)
or to be consulted about issues that affect them? What does consultation require? Is employee
consultation or consent required for major transactions (such as acquisitions, disposals or joint
ventures)?
Management Representation
There are at present no general formal requirements for employee participation in Japan (subject to certain
exceptions, such as the adoption of, or changes to, the work rules). Employees are not statutorily entitled to
representation at board level. There is no works council system.

The Labour Union Law (LUL) defines labour unions as organisations or federations of unions that are formed
voluntarily, which are comprised mainly of workers for the main purposes of maintaining and improving working
conditions and raising the economic status of the workers. A labour union is simple to establish. A labour union
has the right to force an employer to enter into collective bargaining on a very broad range of subjects. Mandatory
subjects are those within the employer's control concerning working conditions and other treatment of union
members and the management of collective labour relations. In principle, the employer must negotiate in good
faith, otherwise a refusal to do so may be deemed to be an unfair labour practice prohibited under the LUL.
A labour union can decide to initiate industrial action (right to strike), but this is generally strictly regulated to
prevent acts of violence and so on.
Consultation
Certain obligations may arise with respect to consultation and the provision of information to appropriate
representatives under a collective agreement (if any applies). These obligations can include the:
• Disclosure of information to assist in a transaction.
• Consultation with appropriate representatives in a collective redundancy context.
• Provision of information to appropriate representatives on a business closure or transfer.
A labour union can require an employer to hold a collective bargaining session on any issue, provided that such
issue relates to the union itself or the economic status of the workers who are union members. The employer must
accept and negotiate in good faith with the union. In relation to certain matters, such as the establishment of, or a
change to, the employment rules, an employer must obtain the opinion of the labour union or the representative
of a majority of the employees at the workplace.
On the transfer of a business, to obtain the employees' consent for their own transfer, the employer must
typically provide sufficient information and consult with the employees through town hall meetings or individual
discussion.
Major Transactions
Consultation on a share deal is unusual. In the event of a business transfer where there is no collective agreement
providing for information or consultation with employee representatives, the employer has no obligation to inform
the employees of the proposed transfer (except to the extent that employee transfers (individual consent must be
secured) or redundancies are contemplated). Even if an employer has consultation obligations under a collective
agreement, there is generally no obligation to reach agreement. However, Ministry of Health, Labour and Welfare
guidelines implemented in 2016 provide guidance, which transferor and transferee companies are advised to
follow in dealing with employees in a business transfer, in particular to ensure that they provide sufficient
information on working conditions and economic prospects and obtain the genuine and informed consent of the
employees to be transferred through timely consultations. In the case of a corporate division (kaisha bunkatsu)
(that is, the carve-out of part of a business), the employer must consult with the employees engaged (primarily
or not) in the transferred business individually, and with the labour union that represents the majority of the
employees, or a representative of the majority of the employees (Law on the Succession of Employment Contracts
in a Corporate Division and related guidelines). These guidelines seek to reduce the impact of corporate divisions
on affected employees of the company to be split. The split company must try to secure the understanding and co-
operation of its employees. In particular, it should hold discussions at each place of business with the labour union

representing a majority of employees (or their representative if there is no union) and consult with the employees
to be transferred (whether or not they are engaged in the business).
17. What remedies are available if an employer fails to comply with its consultation duties? Can
employees take action to prevent any proposals going ahead?
Remedies
Where an employer does not hold collective bargaining negotiations in good faith with a labour union, the labour
union can complain to the competent Labour Relations Commission about the employer's breach of duty to
negotiate, and the Commission can direct the employer to resume negotiations. The labour union can also apply
for a provisional injunction or start formal litigation before the courts. Likewise, the court can order the employer
to negotiate.
Employee Action
If the employer fails to consult with the employees before a corporate division, the employees can claim that the
transfer of their employment contract is invalid (see Question 16, Consultation).
Consequences of a Business Transfer
18. Is there any statutory and/or common law protection of employees on a business transfer?
Automatic Transfer of Employees
On a business transfer, employment contracts do not automatically transfer to the transferee. Employees can refuse
to transfer while the transferee can cherry-pick the employees to be hired (although case law protects employees
against an abuse of rights in cases of intra-group business transfers). If either the transferee or an employee refuses
to give consent to the transfer, then the employment relationship between the transferor entity and the employee
will not be succeeded by the transferee (or, rather, a new contract will not be made as happens in many cases, where
the resignation of the transferor's employees is followed by a new employment relationship with the transferee of
the business). However, there is a statutory exception to the absence of automatic transfer in the case of a merger
or corporate division. In a share deal, the employer remains the same and there is generally no change to the terms
and conditions of employment.
Protection Against Dismissal

There is no specific protection against dismissal other than that mentioned above (see above, Automatic Transfer
of Employees).
Harmonisation of Employment Terms
Employees often resign and take up new employment under the terms and conditions offered by the transferee,
so harmonisation is not an issue.
Employer and Parent Company Liability
19. Are there any circumstances in which:
• An employer can be liable for the acts of its employees?
• A parent company can be liable for the acts of a subsidiary company's employees?
Employer Liability
Employers are liable for their employees' actions when the negligence or misconduct is committed within the
scope of employment (Article 715, Civil Code). There are exonerating circumstances (for example, where the
employer can evidence that is has exercised due care in the appointment and supervision of the employee), but
these are not easily recognised by the courts. Vicarious liability can also be used to hold an employer responsible
for acts of sexual harassment or mobbing committed by an employee in the workplace.
Parent Company Liability
A parent company can be vicariously liable under if it acts as a de facto employer of the employee (Article 715,
Civil Code).
Employer Insolvency
20. What rights do employees have on the insolvency of their employer? Is there a state fund which
guarantees repayment of certain employment debts?

Employee Rights on Insolvency
In the case of bankruptcy or other insolvency proceedings, employees have priority rights. For example, in
bankruptcy proceedings, the monthly remuneration of employees corresponding to the last three months before
the commencement of the proceedings is treated as a claim over the estate.
State Guarantee Fund
The state can make payments on behalf of employers where an employer fails to pay salary and retirement
allowances, subject to rates and caps (Wages Payment Security Law).
Health and Safety Obligations
21. What are an employer's obligations regarding the health and safety of its employees?
Employers must provide a safe and proper working environment (Employment Contract Law, Labour Standards
Law and Industrial Safety and Health Law (ISHL)). The main purpose of the ISHL is the prevention of work-
related accidents and the safeguarding of employees' health and safety. Employers must arrange for medical check-
ups for their employees (also see Question 7 on the exemption for high-level professionals). The ISHL lists the
matters that must be considered in these check-ups. Employers must ensure that employees consult with a doctor
when they have been working excessive overtime. Certain specific obligations also kick in when there are 50 or
more employees at the workplace, including the:
• Provision of rest areas.
• Establishment of a health and safety committee.
• Appointment of a health and safety manager and supervisors.
• Designation of a company doctor.
• Provision of stress checks.
Other duties and preventative measures relate to:
• Equipment and machinery.
• Dangerous substances.
• Training.
• Sanitation.

• Emergency measures.
• Temperature checks.
Other laws also supplement the LSHL.
Taxation of Employment Income
22. What is the basis of taxation of employment income for:
• Foreign nationals working in your jurisdiction?
• Nationals of your jurisdiction working abroad?
Foreign Nationals
Individuals are taxed in Japan depending on their residency status (that is, whether they are permanent or non-
permanent residents). Residents are individuals who have had their residence in Japan for one year or more.
Residents are classified as non-permanent or permanent residents:
• Non-permanent (or temporary) residents are non-Japanese residents who have had their residence in Japan
for five years or less within a ten-year period.
• Permanent residents are residents (other than non-permanent residents) who are Japanese nationals or
individuals who have been domiciled or resident in Japan for over five years in the last ten years.
Permanent residents are taxed on their worldwide income, regardless of where it is earned or paid. Non-permanent
residents are taxed on all income except foreign-source income which is not paid in, or remitted to, Japan. Capital
gains arising from the sale of securities acquired on or before 1 April 2017 can be excluded. Non-residents are
taxed on their Japan-source income (salaries, wages, bonuses, certain allowances and so on). Any applicable
double tax treaties will also need to be considered.
Under an exit tax regime targeting wealthy individuals, individual income tax is imposed on unrealised capital
gains on financial assets at the time of their departure from Japan to prevent them from avoiding capital gains tax
in Japan by moving out of Japan and subsequently disposing of their appreciated financial assets.
Nationals Working Abroad
The salary of non-resident nationals working abroad is not taxable in Japan as it is not considered to be Japan-
source income (but any applicable double tax treaty will also need to be considered).

23. What is the rate of taxation on employment income? Are any social security contributions or
similar taxes levied on employers and/or employees?
Rate of Taxation on Employment Income
Income tax is charged at progressive rates, which range from 5% to 45%. Employers are responsible for
withholding the applicable income tax for their employees and making a year-end adjustment for employees who
earn JPY20 million or less per year. Employees earning more than JPY20 million make the relevant year-end
adjustment themselves. Certain payments (which are categorised as special income, such as retirement allowance
and severance pay) are subject to concessionary tax treatment.
Non-residents who earn salary income which is paid for services rendered in Japan that are not subject to
withholding tax in Japan must file a tax return and pay tax at a rate of 20.42% on that salary income.
Social Security Contributions
Employers and employees must make contributions into the following insurance schemes (except that employees
do not have to make contributions to the workers' accident compensation insurance or the child benefit
contributions).
The labour insurances, which comprise:
• Workers' accident compensation insurance (which covers work-related illness and accidents): premiums
are paid by employers only, and are calculated as a percentage of salary. The rates depend on the industry
and vary between 0.25% up to 8.8%, and there is an additional 0.002% levy to fund benefits for asbestos-
induced diseases.
• Unemployment insurance:
• the employer's share is 0.6% of salary; and
• the employee's share is 0.3% of salary).
The social insurances, which comprise:
• Health insurance and nursing care insurance (which cover medical and nursing care expenses). The
percentage depends on the employer's registered prefecture, and the premium rate is around 10% (the
premium is shared equally between employers and employees). Employees aged 40 and above are also
subject to an additional 1.79% premium (which is also borne in equal shares between the employer and
employee). The standard monthly salary is capped at JPY1,390,000.

• Pension (which covers old-age and welfare benefits in the event of death or disability). The employer
and employee both pay this at a rate of around 9.15% of salary for each party (as applied to a standard
monthly remuneration capped at JPY650,000). When a foreign national employee leaves Japan a (very)
partial refund can be applied for against this contribution.
Employers only also pay child benefit contributions (that is, contributions to a social welfare child benefit system
that is independent from the welfare benefits offered to workers), at a rate of around 9.15% (as applied to a standard
monthly remuneration of JPY650,000).
Employers pay all of the above premiums by withholding the employees' portion and paying this, together with
the employer's premiums, to the authorities.
Intellectual Property (IP)
24. If employees create IP rights in the course of their employment, who owns the rights?
Intellectual property created by employees in the course of their employment generally belongs to the employer.
For patents, the right to register the patent belongs to the employer if an agreement, the work rules or any other
contract provides that the employee invention belongs to the employer (in the absence of any such provision, the
right to register a patent belongs to the employee). If the employer has the right to register a patent created by
an employee, the employee inventor is entitled to receive a reasonable remuneration or other economic benefit
for that patent.
Compensation payable to an employee inventor (often nominal compared to the huge profits that can be derived
from the invention) can be a source of contention. It is therefore advisable for employers to establish rules on
employee inventor compensation.
Restraint of Trade
25. Is it possible to restrict an employee's activities during employment and after termination? If so,
in what circumstances can this be done? Must an employer continue to pay the former employee
while they are subject to post-employment restrictive covenants?
Restriction of Activities

Non-competition, non-poaching and confidentiality agreements are generally recognised and enforceable.
Criminal penalties apply to punish the disclosure of trade secrets by employees and officers (Unfair Competition
Prevention Law (UCPL)). The UCPL provides for remedies and fines in cases involving the misappropriation of
trade secrets (that is, technical or business information useful for commercial activities (such as manufacturing or
marketing methods) that is kept secret and that is not publicly known). Amendments to the UCPL have broadened
the scope of the claims and remedies available to claimants and increased the maximum fine that can be levied
(up to ten years' imprisonment and/or fine of up to JPY20 million for individuals, and a fine of up to JPY1 billion
for juristic persons).
Although no express statutory rules govern confidential information, employees are bound by a general duty of
good faith and also have a duty not to disclose the employer's confidential information. However, the extent of
these duties is unclear.
Post-Employment Restrictive Covenants
Non-competition agreements can generally be used to prevent an employee from competing with their employer
both during and after employment. However, as post-termination restrictions can be considered to infringe an
individual's freedom to work, they will generally only be enforceable if:
• They have been expressly agreed.
• They are reasonable in terms of their duration and territorial scope.
• The employer is protecting a legitimate interest (for example, confidential information or trade
connections).
No particular class of employees is targeted or exempted by law. However, in principle, it may be difficult to justify
a non-competition agreement for a menial job or a job with no exposure to trade secrets, proprietary knowledge
or specific know-how. At present, no compensation is formally required to enforce a non-competition agreement,
but post-termination payments can be a factor considered by the courts when determining whether a non-compete
covenant can be validly enforced.
Relocation of Employees
26. Can employers include mobility clauses in employment contracts, or take any other measures,
to ensure that employees are obliged to relocate?
Mobility clauses can be included in the individual employment contract or in the work rules. They are typically
limited to Japan or domestic destinations when expressed generally without any specific local or overseas
expatriation/relocation plan in mind. Work rules can also permit intercompany secondments to generally domestic
affiliates in addition to internal redeployments. Even in the absence of an express contractual term, staff relocation
within Japan or a functional reassignment within the same company is generally within the authority of the
employer, which authority should be exercised reasonably and in good faith. If the employee refuses to transfer, the

employment contract can be terminated. However, there are limitations to the employer's right to order a transfer,
and certain requirements should be satisfied pertaining to business necessity as the need to reassign the employee,
and employee selection (the employee should be able to handle the new job or fit in the new workplace). For
example, the following scenarios can hamper an internal transfer:
• When the employer undertakes to an employee with specific skills and qualification that the employee
will not be hired for a different job.
• Express agreement not to relocate the employee geographically.
• Long-term treatment of an employee in the same job that creates some expectation the employee cannot
transfer.
• Excessive burden on the employee compared with business necessity.
• Childcare/family care: the employer must consider the childcare and family care duties of the employee
when contemplating a transfer.
• Unjustifiable grounds/hidden agenda: when the employer has other intentions than those expressed (such
as forcing the employee to resign) or harassment.
There are very diverse corporate policies regarding relocation costs and benefits, including, for example, the
payment of removal and transfer costs, one-off or continuous relocation allowances, traveling costs (on top of basic
salary), the provision of accommodation (for example, company dormitories), housing allowances or housing
loans.
Proposals for Reform
27. Are there any major proposals to reform employment law in your jurisdiction?
Amendments to the Law Concerning the Stability of Employment of the Elderly, which came into effect in April
2021, require employers whose employees have reached the age of 65 to make efforts (this is essentially voluntary)
to apply certain measures to continue to employ these employees until they turn 70 years of age. These measures
can include:
• Raising the mandatory retirement age to 70.
• Abolishing the employer's mandatory retirement age.
• Introducing a continuous employment system which enables those reaching the employer's mandatory
retirement age to continue to be re-employed until they reach 70 years of age.
• Adopting alternative measures (as agreed on under a labour-management agreement) to allow elderly
employees to engage in social contribution activities (whether in-house or outsourced).

A Bill of law enacted in June 2021 to revise laws that include the Law on Childcare Leave, Caregiver Leave
and Other Measures for the Welfare of Workers Caring for Children or Other Family Members, which is aimed
at promoting participation by men in childrearing and supporting the continued employment of women, gives
fathers more flexibility when taking paternity leave soon after the birth of a child. Under the new scheme (which
commenced in October 2022), fathers can take a total of four weeks off within eight weeks of a child's birth, and
can give shorter notice of their intention to go on leave. Up to 67% of their pre-leave salary is guaranteed through
the payment of employment insurance benefits. In addition, since April 2022, employers are required to both:
• Take measures to facilitate childcare leave (for example, by offering training or through a help desk).
• Disseminate the childcare rules to employees and take measures to confirm their employees' intentions
when employees inform the employer of a pregnancy and/or birth of a child.
Employers employing more than 1,000 employees will also have to disclose certain data on how their employees
take childcare leave as from April 2023.
The Japanese Government is also set to introduce a system allowing companies to pay salaries digitally without
going through bank accounts (which was the contractual alternative to the statutorily prescribed cash remittance).
This is likely to be introduced at some point in 2023. Companies will be able to remit salaries to workers using
smartphone payment apps (smartphones will be used as wallets). This move will make life easier for foreign
workers who can have difficulties opening a bank account in Japan, and will help expand the financial services
market and deregulation, and promote growth.
Contributor Profiles
Shinya Tago, Managing Partner
Iwata Godo
T +81 3 3214 6205
E [email protected]
W www.iwatagodo.com/english/lawyers/
Professional Qualifications. Attorney at Law, admitted in Japan and New York
Areas of Practice. M&A; general corporate/commercial; labour law: HR strategy and organisational
change, including business transfers, redundancies and restructurings; litigation; labour union,
industrial relations and collective bargaining; whistleblower schemes; hiring of employees; health and
safety issues; disciplinary and grievance issues; negotiating departures and settlement agreements;
and employee benefit schemes.
Languages. Japanese, English
Hiroki Fujiwara, Partner

Iwata Godo
T +81 3 3214 6205
E [email protected]
Professional Qualifications. Japan, Attorney at Law
Areas of Practice. HR strategy and organisational change, including business transfers, redundancies
and restructurings; litigation; labour union, industrial relations and collective bargaining;
whistleblower schemes; hiring of employees; health and safety issues; disciplinary and grievance
issues; negotiating departures and settlement agreements; and employee benefit schemes.
Recent Transactions
• Acting for a leading European group in relation to employee transfers, redundancies and
early retirement plans.
• Acting for one of the largest EU-based industrial groups in relation to the structuring of the
international secondment of employees to Japan from a tax and employment standpoint.
• Setting up whistleblower hotlines around the world allowing employees to report to Japanese
parent companies.
Publications. Contributed articles to a number of employment law guides and legal magazines. Co-
authored the "My Number" Q&A Handbook (Social Security and Tax Number System), and Labour
law review: recent court cases (reporting and analysis), labour law case studies (Q&A series).
Landry Guesdon, International Practice Committee
Iwata Godo
T +81-3-3214-6205
E [email protected]
Professional Qualifications. Attorney-at-law, admitted in France and Japan as Gaikokuho Jimu

Bengoshi (French law)
Areas of Practice. M&A; general corporate/commercial; labour law: HR strategy and organisational
change, including business transfers, redundancies and restructurings; whistleblower schemes; hiring
of employees; health and safety issues; disciplinary and grievance issues; negotiating departures and
settlement agreements; and employee benefit schemes.
Recent Transactions. Advising a leading European group in relation to employee transfers,

redundancies and early retirement plans.

Languages. Japanese, English, French, German
Publications. Contributed articles to a number of employment law guides and legal magazines.
Hiroki Kitagawa, Associate
Iwata Godo
T +81-3-3214-6205
E [email protected]
Professional Qualifications. Attorney-at-law, admitted in Japan
Areas of Practice. Labour laws and industrial relations (including all areas of employment law).
Recent Transactions
• Advising a leading European group in Japan on employee transfers in a corporate division

and M&A transaction.
• Advising clients on a wide array of employment matters, including wrongful dismissal,

workers compensation, workplace safety and health matters, employment aspects of mergers,
restructuring of business and outsourcing, and dispatch work (use of temp staff and licensing
of temp staff agencies).
• Advising clients during grievance processes (harassment) and representing them before the
courts and labour tribunals.
Publications. Contributed articles to a number of employment law guides and legal magazines.
END OF DOCUMENT
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Employment and Employee Benefits in Japan: Overview, Practical Law Country Q&A...

Employment and Employee Benefits in Japan: Overview

Country Q&A | Law stated as at 01-Nov-2022 | Japan

A Q&A guide to employment and employee benefits law in Japan.

Scope of Employment Regulation

© 2023 Thomson Reuters. All rights reserved. 1

Taxation of Employment Income

Landry Guesdon, International Practice Committee

Hiroki Kitagawa, Associate

Scope of Employment Regulation

• Foreign nationals working in your jurisdiction?

• Nationals of your jurisdiction working abroad?

Laws Applicable to Foreign Nationals

Laws Applicable to Nationals Working Abroad

The employment relationship can be governed entirely by a foreign law.

© 2023 Thomson Reuters. All rights reserved. 2

• how the worker is paid;

• whether expenses are reimbursed; and

• who provides equipment, tools and supplies?

Entitlement to Statutory Employment Rights

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© 2023 Thomson Reuters. All rights reserved. 4

Restrictions/Prohibitions on Conducting Background Checks

• Do so only within the scope necessary to achieve their business purpose.

(Article 5-4(1), Employment Security Law.)

• Creed or personal beliefs.

• Union membership or activities (unless permitted by law or a collective agreement).

(Guidelines of the Ministry of Health, Labour and Welfare (MHLW).)

Background Checks by Third Parties

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Regulation of the Employment Relationship

4. How is the employment relationship governed and regulated?

Written Employment Contract

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• Any disadvantage to the employee.

• The need for the change.

• The appropriateness of the revised rules.

• The status of any negotiations with labour unions or similar.

• Any other relevant circumstances.

Minimum Wage and Bonuses

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Working Time, Holidays and Flexible Working

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• Explanations to the employees using the method and HR staff.

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There is no statutory unpaid holiday entitlement.

Illness and Injury of Employees

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Entitlement to Paid Time Off

• Medical compensation benefits.

• Permanent disability compensation.

• Injury and illness compensation.

Entitlement to Unpaid Time Off

Recovery of Sick Pay from the State

The employer will typically not pay sick pay.

Provisions Concerning COVID-19

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Rights Created by Continuous Employment

Statutory Rights Created