Doing business in Japan – Part 3

Doing Business in Japan Part 3
Doing Business in Japan Part 3


Laws, contracts and permits

10. What are the primary laws that govern employment relationships?

In general, labor regulations are relevant to all workers in Japan, regardless of the nationality of them or those of their employer. Even if the employment contract specifies a foreign governing law, certain required elements of Japanese law will still be applicable to Japanese workers. Japanese labor regulations on the other hand, do not typically apply to Japanese people working in a foreign country.

The main legislations standardizing employment relationships of workers in Japan are the:

11. Is a written employment contract necessary? If so, what are the terms that must be included? Are any implied terms and/or collective agreements applicable to the employment contract?

A written contract is not necessary, but the employer must always notify the employee in writing of some primary terms of employment, including the:

  • Term of employment.
  • Location of work.
  • Working hours and holidays.
  • Calculation of salary and payment terms.
  • Grounds for dismissal.

Japanese businesses often develop a list of work regulations that indicate the period of employment, and need to do so if there are 10 or more employees per workplace. Any individual employment agreement that falls short of the requirements outlined in the labor regulations will be deemed void. A unilateral change in work rules by the employer that negatively affects employees is void unless the change is made known to the employees and the unfavorable change is deemed to be acceptable under the circumstances.

12. Are work permits and/or residency permits required for foreign employees?

Foreign employees (other than permanent or long-term residents) must be in possession of a valid work visa. Each working visa has a residency status that determines the type of work that can be done by the employee.

Termination and redundancy

13. Do employees have a right to be represented and/or advised by management in business transactions (such as redundancy and disposal)?

Employees do not have access to management. Employees generally do not have a say in mergers and acquisitions or other similar transactions, unless there is a specific provision in the collective bargaining agreement. However, when an employer considers a statutory spin-off of a part of its business to another firm, the employer must first communicate with the affected workers, and certain affected individuals will have the right to decline or seek to be moved.

14. How is the termination of individual employment contracts controlled?

Employees engaged under a permanent employment contract cannot be fired unless there are objective and reasonable grounds to do so (for example, violation of disciplinary rules or significant incompetence). Any other type of termination shall be deemed null and invalid.

Employees engaged on a fixed-term basis cannot be terminated unless there is a sufficient reason to do so. Non-renewal of a fixed-term employment contract may be subject to the same scrutiny as termination of a permanent employment contract if the fixed-term employment has been regularly extended. Employees recruited on a fixed-term basis might request that their job status be converted to permanent after a five-year period.

Furthermore, 30 days’ previous written notice (or substitute compensation) is always required even if the termination is otherwise legitimate.

15. Are mass layoffs and redundancies regulated?

In addition to the basic limits on termination of employment, legal precedents have indicated that four elements must be examined to demonstrate validity in regard to termination based on redundancy:

  • Requirement of personnel reduction.
  • Attempts to avoid redundancy termination.
  • Reasonableness of employee selection process subject to termination.
  • Due process including adequate explanation to and consultation with the affected employees.

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