Employment 2023

Last Updated August 08, 2023


Law and Practice


TMI Associates is one of the largest law firms in Japan, with offices in six locations in Japan and overseas branches in China, South-East Asia, the USA, France and the UK. Its labour and employment team is comprised of 54 lawyers, including 15 partners. The firm advises Japanese and multinational clients in various industries across the entire spectrum of employment-related matters, including litigation, M&A, and negotiation with labour unions. The team collaborates with TMI’s data privacy, intellectual property and criminal law experts, including former judges and public prosecutors, on matters that intersect with these areas, such as trade secret theft and employee misconduct. The team also regularly works with immigration experts within the firm.

Regular Employees

An important distinction in employee status is between (i) indefinite-term, full-time employees (commonly called “regular employees”) and (ii) fixed-term and/or part-time employees (commonly called “non-regular employees”). There have been significant differences between employment conditions of regular employees and those of non-regular employees. Recently, new laws have been enacted to address this situation by prohibiting unreasonably different treatment, and many court cases have ensued.

Exempt Employees

Another important distinction is between exempt and non-exempt employees. Managers and supervisors who (i) have personnel and other management authority, (ii) decide at their own discretion when to start and finish their work, and (iii) receive higher salaries, are generally exempt from increased wages for overtime and holiday work. This requires particular attention, as the scope of employees who are considered exempt in Japan is much narrower than in some other countries and, as a result, employees are often incorrectly classified as exempt.

There are no formal requirements for entering into a written employment contract. An employment contract can be entered into orally. Upon hiring, employees must be given a written notification which states core employment terms such as the employment period, terms of renewal (if applicable), workplace, duties, working hours, days off, holidays, salaries and termination of employment.

Maximum working hours are eight hours per day and 40 hours per week, in principle. A labour management agreement (an agreement with a major labour union or, if such union does not exist, with an employee who represents the majority of the employees) must be entered into and filed with the Labour Standards Inspection Office every year in order to require employees to work beyond the maximum working hours.

Even with the labour management agreement, overtime hours (the hours exceeding the maximum working hours) generally cannot exceed 45 hours per month and 360 hours per year for normal months. For busy months up to six months per year, this cap may be raised to 100 hours per month including holiday work, 720 hours per year not including holiday work, and 80 hours per month including holiday work on average over any period of two to six months.


Employers who would like to have some flexibility may, depending on the nature of their business, adopt one or more of the following:

  • a “flexible working hours system”, under which employees decide their own starting and finishing time, and working hours are calculated on a monthly basis;
  • an “irregular working hours system”, under which the starting and finishing time is determined by the employer, and the daily or weekly working hours can be longer than the maximum working hours so long as the average weekly working hours are 40 hours or less; and
  • a “discretionary working hours system”, under which employees who engage in certain work which requires discretion on how to proceed with the work can decide their own starting and finishing time, and working hours are deemed to be certain hours (eg, normal working hours at the workplace) regardless of the actual working hours.

Minimum Wages and Bonuses

Minimum hourly wages are determined per prefecture (ie, administrative district), in principle. Higher minimum hourly wages apply to certain industries. Prefectural minimum hourly wages are reviewed every year and are in the range of JPY853 to JPY1,072 from October 2022 (JPY1,072 for Tokyo, JPY1,023 for Osaka). A raise in the minimum wages is now under discussion.

There is no statutory obligation to pay bonuses or increase salary. The government does not intervene in the determination of compensation unless the amount is below the minimum hourly wage, determined based on discrimination, or reduced in an illegal manner.

Annual Leave

Employees whose attendance rate is 80% or more are entitled to ten to 20 days of annual paid leave per year depending on years of service. The number of entitled days is prorated if an employee works on a part-time basis.

Employees who meet certain criteria can take maternity leave (for delivery), childcare leave (up until the child reaches two years of age, at a maximum), and family care leave (for a family member requiring care). These leaves can be unpaid.

There is no legal obligation to provide paid sick leave for an illness or injury that is not work-related. When employees need to be absent from work due to such an illness, they commonly use annual paid leave. If they have used up annual paid leave, they may receive health insurance benefits which cover a part of their salary.

Employee Liability

Japanese law prohibits prior agreement on liquidated damages in case of an employee’s breach of an employment agreement. In addition, employers are prohibited from offsetting any claims against an employee with salary payment without the employee’s voluntary consent. It is, therefore, difficult to set forth a claw-back clause in Japan.

In Japan, it is possible for employers to adopt non-competition (or non-compete) clauses to restrict an employee’s activities for a period of time after the employment has ended. The validity of non-compete clauses is determined on a case-by-case basis. They will be considered void as a violation of public policy if they unreasonably restrict the employee’s constitutional right to choose their occupation.

To be enforceable, the non-compete clause must be reasonable in duration, geographic area, and scope of business or activity, and must be necessary to protect the employer’s legitimate business interests. Legitimate business interests may include technological and business secrets and information, protection of transaction with business partners, and avoidance of material damage to business operation. The courts also take into account the position of the employee, including the employee’s knowledge of confidential information and relationship with customers or suppliers, and the compensation awarded to the employee. 

In many cases, courts have sustained a non-compete clause but narrowly interpreted it by limiting its effect to an extent deemed reasonable. Typically, the courts are reluctant to acknowledge that an employee violated a non-compete clause simply by joining a competitor, and require that the employee is engaging in activities that harm the previous employer’s interests.

Since an injunction against competing activities directly interferes with an employee’s freedom of occupation, an injunction will only be granted when and to the extent it is necessary to prevent the employer’s damages. Under the current practice in Japan, the threshold is relatively high, and the courts do not easily grant an injunction based on a non-compete clause.

Freedom of Occupation and Business Competition

It is uncommon for Japanese employers to adopt clauses prohibiting the solicitation of former colleagues. The enforceability of such clauses is therefore not widely discussed. In principle, a balance must be sought between the solicited employee’s freedom of choice of occupation and the legitimate business interest of the employer. A clause prohibiting an employee from hiring a former colleague, even if there was no solicitation and the colleague applied of his or her own volition, is unlikely to be enforceable.

In cases where employers have sought the liability of former employees for soliciting former colleagues based on tort, the courts have generally focused on the nature of solicitation. For example, if the departing employee solicits many of their team members to leave the current employer and join a competitor, the court will likely find that the nature of solicitation is malicious to the current employer, and thus consider the solicitation to be unlawful. Similarly, if the departing employee requests their ex-co-worker to bring the current employer’s proprietary information such as cost information, price list or customer list, it is more likely that the solicitation shall be deemed unlawful.

On the other hand, if the solicitation is made based on a personal relationship on an individual basis without involving any disclosure of confidential information, it is less likely to be judged unlawful.

Clauses prohibiting the solicitation of customers are likely to be considered enforceable, as long as they can be shown to be necessary to protect the employer’s legitimate business interests, and do not unduly interfere with the employee’s freedom of choice of occupation. If the customer voluntarily approaches the ex-employee without solicitation from the ex-employee, the court is unlikely to consider it as a breach of non-solicitation clause.

Information on the Employee and Personal Rights

The Act on the Protection of Personal Information, which sets out rules on the protection of personal information of individuals in general, applies to the employment area as well. 

An employer must:

  • collect personal information properly;
  • publicly announce or inform the employee of the purpose of use of personal information unless it is obvious;
  • process personal information within the scope of purpose of use which has been announced or informed;
  • obtain the employee’s consent when transferring personal information to a third party unless the transfer falls under an exception under the Act;
  • in particular, when transferring personal information to a third party located in a foreign country, obtain the employee’s consent to such overseas transfer after explaining certain matters such as the legislation on the protection of personal information in that country, unless the transfer falls under an exception under the Act;
  • implement safety measures to protect personal information and supervise employees and contractors who handle personal information; and
  • administer the employee’s request to access, correct, add or delete personal information.

In relation to data privacy, it is advisable to build into the work rules a provision that permits the employer to monitor and search employees’ communications and files stored on the employer’s computers and systems and other electronic devices.

Employers should also be mindful of the need to adopt rules on handling health information of employees, which became a legal obligation in 2019.

Foreign nationals with a working resident status are permitted to engage only in the type of work and for the term authorised pursuant to their respective resident status.

The “student” resident status and the “family stay” resident status (for those who reside as a family member of a person with a different residence status) are non-working statuses. However, if a foreign national with such status obtains a permit “to engage in an activity other than that permitted pursuant to the resident status granted”, the foreign national can work up to 28 hours per week. In addition, those with a student resident status can work up to eight hours per day, 40 hours per week during long-term vacations.

On the other hand, foreign nationals with permanent resident status, special permanent resident status, long-term resident status, and spouses or children of a Japanese national or permanent resident do not have any limitations on the type of work or hours of work, other than such limitations that also apply to Japanese nationals.

If an employer causes a foreign national to work in Japan under any of the following circumstances, the foreign worker and the employer may be subject to imprisonment for up to three years and/or a fine of up to JPY3 million:

  • work without a resident status that permits work;
  • engage in work that does not fall within the work permitted under the applicable resident status;
  • work after the expiry of the resident status term; or
  • work in excess of the hours under the permit “to engage in an activity other than that permitted pursuant to the resident status granted”.

Notifying the Local Authority

Employers are required to notify the name, resident status, period of stay, nationality, etc, of a foreign worker to the local Public Employment Security Office (Hello Work, harōwāku) upon the worker’s hiring and termination. Punishment for non-compliance is a fine of up to JPY300,000. The notification requirements do not apply to the hiring or termination of foreign nationals with a special permanent resident, diplomatic or public status.

General Overview

From the viewpoint of preventing the spread of COVID-19, off-site work using information and communication technology (mobile work) has been recommended, and many companies have introduced mobile work. As long as an employee falls under the definition of worker under the Labour Standards Act, labour standards-related laws and regulations such as the Labour Standards Act, the Minimum Wage Act, the Industrial Safety and Health Act, and the Industrial Accident Compensation Insurance Act, apply to them, even when they engage in mobile work. As a result, the fundamental content of this guide is equally valid in the case of mobile work.

Industrial Safety and Health

As mentioned above, the Industrial Safety and Health Act applies even during mobile work, so an employer is required to take measures to ensure the safety and health of their employees. Specifically, the following measures should be taken:

  • establishment of a structure to provide health counselling;
  • training for safety and health when employees are hired or when their work is changed;
  • medical examination and measures based on the results of it;
  • medical interview guidance by a physician for employees who work long hours and measures based on the results of it to prevent health problems caused by overworking;
  • identification of working hours, calculation of overtime and holiday working hours, and provision of information to an industrial physician for the appropriate implementation of medical interview guidance;
  • stress check and measures based on the results of it; and
  • health education and counselling for employees and other measures necessary to maintain and promote their health.

Compensation for Work-Related Accidents by Insurance

As mentioned above, the Labour Standards Act and the Industrial Accident Compensation Insurance Act apply even during mobile work. Therefore, accidents during such work caused by being under the control of an employer are covered by the industrial accident compensation insurance as work-related accidents. On the other hand, those caused by non-work-related causes, such as private actions, are not considered work-related accidents and are not covered by the insurance.

Data Privacy

The content set out at 3. Data Privacy is equally applicable to mobile work. In addition, from the viewpoint of information security, it is desirable not to uniformly judge all operations to be exempted from mobile work, but to consider solutions or to judge each operation individually based on the progress of related technologies, etc. It is also preferable to implement measures using the “Telework Security Guidelines” prepared by the Ministry of Internal Affairs and Communications or to educate employees, so that the employer and the employees do not feel anxious about information security measures.

A system whereby an employer grants a long leave of absence, such as a vacation of one month or more, to their employees who have worked for and contributed to the company for a certain length of time (sabbaticals), is not required by the Japanese law, and is not common.

However, some large companies have introduced “refreshment holidays”, which are similar to sabbaticals. Details, such as requirements for taking the leave, length of the leave and whether or not the employee is paid during the leave, are basically designed by each company with a free hand, since they are not regulated by law in Japan. Some traditional Japanese companies grant one to three weeks of consecutive paid holidays to employees with 10, 20 or 30 years of consecutive service periods.

Free-Address Office

One of the new manifestations of recent work style is an office where employees do not have a fixed seat and are free to choose any available seat according to their work or situation (free-address office). There are no legal requirements under the Japanese law that regulates the free-address office itself. However, regulations imposed with respect to regular offices, such as the Industrial Safety and Health Act, apply equally to the free-address office. Therefore, it should be noted that regulations, such as how large an office per employee must be, also need to be observed in the case of free-address office.

Three Days Off Every Week

Another new manifestation of recent work style is three days off every week. Regarding holidays, the Labour Standards Act imposes the regulation that at least one day off every week or at least four days off throughout a four-week period must be provided. This is a minimum standard, and it is permissible to provide more holidays than this. In Japan, it is general to set two days off every week, but recently a few companies have increased the number of days off to three.

Labour Unions

Labour unions are formed in accordance with the Labour Union Act and have internal rules for the organisation, election of officers and procedures to make decisions.

Traditionally, labour unions are formed in each company (ie, “enterprise unions”). Often, such enterprise unions belong to a higher hierarchy organisation consisting of enterprise unions in the same industry. These enterprise unions, especially if they constitute a majority of employees, have significant bargaining power regarding the employment terms and conditions of employees. Enterprise unions negotiate with employers for an increase of wages and bonuses, typically once a year in March (the “spring labour offensive”). The majority of enterprise unions have union shop agreements which require the employer to terminate non-managerial employees who do not become members of the enterprise union. The rate of unionised employees has dropped over the past few decades: according to a 2022 survey by the Ministry of Health, Labour and Welfare, it is estimated at 16.5%.

In recent years, another type of labour union has become popular. Labour unions which accept local workers of different companies, including managerial-class employees, are called “general unions” and are becoming increasingly active in supporting individual workers. General unions represent individual workers in negotiation with their employers on various matters including dismissal or resignation, change of employment conditions, and other issues in the workplace such as harassment or bullying. 

In principle, employers need to participate in collective bargaining with labour unions, including general unions, when requested. Refusing to engage in collective bargaining without a reasonable ground could constitute an unfair labour practice prohibited under the Labour Union Act.

There are two main types of employee representative bodies in Japan.

The first body is a majority labour union. When an enterprise union constitutes the majority of employees in a workplace, such an enterprise union is authorised to act as an employee representative body for that workplace. Typically, majority labour unions act as parties to labour-management agreements such as an agreement regarding overtime and holiday work hours (the Article 36 Agreement). Also, majority labour unions are entitled to, and required to, submit an opinion to the employer regarding the content of work rules when they are adopted or amended.

If there is no majority labour union in a workplace, an employee representative elected by employees acts as an employee representative body for purposes of executing labour-management agreements and submitting an opinion on work rules. The employee representative must be a non-managerial employee, and must be elected by a majority of the employees in the same workplace by a democratic method such as voting.

Procedural Regulations

Collective bargaining agreements (rodo-kyoyaku) are often entered into between employers and enterprise unions. They must be executed in writing.

Standards regarding employment conditions set forth by a collective bargaining agreement prevail over work rules stipulated by the employer and terms of individual employment agreements. Any employment condition which is inferior to the standards set forth in a collective bargaining agreement is null and void even if such inferior employment condition is set forth in the work rules or individual employment agreements.

In addition to negotiations for executing or amending collective bargaining agreements, labour unions – general unions, in particular – may request employers to engage in collective bargaining to resolve various individual employment matters such as resignation, dismissal or resignation, change of salary or holidays, and trouble in the workplace such as harassment and bullying. Employers may not refuse collective bargaining without reasonable grounds and these are interpreted narrowly.

Consequences of non-compliance

If the employer refuses to engage in collective bargaining without reasonable grounds, the union may apply for relief from unfair labour practice to a regional labour committee, which is an independent administrative body established under the Labour Union Act. The regional labour committee conducts an investigation regarding the unfair labour practice. In many cases, the investigation ends by settlement between the labour union and the employer. If a settlement is not reached, then the regional labour committee issues a decision either to recognise an unfair labour practice and order the employer to attend the negotiation, or reject the union’s petition. The losing party may appeal to the central labour committee or file a lawsuit to challenge the decision.

An employer can dismiss a non-fixed-term employee only if (i) there are objectively reasonable grounds, and (ii) the dismissal is considered to be appropriate in light of social convention. In practice, the employer bears the burden of proof to show that a dismissal has “objectively reasonable grounds” and “is appropriate in light of social convention”. Japanese courts apply a very strict interpretation of this standard, and have found many dismissals to be invalid unless there was a significant reason for the dismissal. Therefore, many employers in Japan try to reach an agreement with the employee to terminate employment, rather than to dismiss the employee, in order to avoid the high risks associated with the dismissal and lengthy and costly disputes.

Grounds for Dismissal

Typical examples of grounds for dismissal are:

  • an employee’s inability to work, or insufficient ability to work, due to illness or injury, or where the employee is performing at a consistently low level in carrying out their duties;
  • an employee has committed a material breach of their employment contract or work rules of the company; and
  • decisions by the management to restructure the company due to the serious financial ill health of the company and there is a need to reduce the workforce as a result of such restructuring (ie, redundancy).


In a redundancy case, Japanese courts have continuously held that the validity of a dismissal will be determined based on a comprehensive analysis of the following four requirements when assessing the situation under the above standard:

  • there must be a business need to reduce the workforce;
  • the employer must make every effort to avoid the dismissal of employees (eg, reduction or suspension of recruitment, transfers, restrictions on overtime, offering voluntary early retirement);
  • the selection criteria to determine which employee is to be dismissed are reasonable; and
  • the appropriateness of the procedure (eg, whether sufficient explanations and discussion opportunities with the labour union or employees were provided).

The courts weigh the balance of necessity and reasonableness of the dismissal against the damages incurred by the affected employee due to the loss of their employment. A case-by-case analysis is necessary for determining whether these criteria are met.

Other standards apply for fixed-term employees. Employers cannot dismiss employees hired under a fixed-term employment during their term without “unavoidable reasons”. This standard is even more strictly interpreted by the courts, compared to the standard for non-fixed-term employees.

Procedures for Dismissal

There are no statutory procedures for lawful dismissal, except for the required notice of 30 days or payment in lieu of such notice, as described in 7.2 Notice Periods. However, as mentioned above, procedures such as providing sufficient explanation and consultation are given importance in considering the validity of a dismissal due to redundancy. Due process is crucial for disciplinary dismissals, as described in 7.3 Dismissal for (Serious) Cause. In addition, in a case where a collective bargaining agreement is entered into between an employer and a labour union regarding the termination of employment, the employer must follow the provisions of such agreement.

Further, from an administrative perspective, an employer must notify the Public Employment Security Office in advance if any of the following situations occurs:

  • when 30 or more employees are expected to leave or to be dismissed within one month;
  • when five or more employees between the ages of 45 and 64 are expected to leave due to the failure to meet the standards of the continuous employment system at retirement age, or due to a cause attributable to the employer, or are expected to be dismissed within one month;
  • when an employee who has a disability is dismissed; or
  • when withdrawing job offers or postponing the hiring date for new graduates or cancelling or downsizing hiring plans for new graduates.

Notice of termination must be given 30 days prior to dismissal, unless the employer’s work rules or the employment agreement stipulates that the employer shall give a longer notice period. However, an employer may provide payment equivalent to the particular employee’s average wage for 30 days in lieu of such notice. The payment should be made when notifying the employee of the dismissal. An employer may also give a combination of notice and payment, in which case the employer will pay for the number of days short of the requisite 30 days (eg, if the employee gives ten days’ notice, the employer must pay an amount equivalent to 20 days of the employee’s average wage).

An employer may dismiss an employee without notice or payment in lieu of notice in the event that the company cannot continue to function due to a natural disaster or another unavoidable cause, or when reasons for dismissal are attributable to the employee. Under these circumstances, the employer must obtain the approval of the administrative office with respect to the reason in question.

In addition, the employer may dismiss, without notice or payment in lieu of notice, employees who are:

  • employed on a daily basis and have not been employed consecutively for more than one month;
  • employed for a fixed period not longer than two months and have not been employed consecutively for longer than that period;
  • employed in seasonal work for a fixed period not longer than four months and have not been employed consecutively for longer than that period; and
  • in a probationary period and have not been employed consecutively for more than 14 days.

Disciplinary Action

Dismissal as a disciplinary action due to an employee’s misconduct or illegal act is classified as “disciplinary dismissal”. This type of dismissal is different from a “regular dismissal”, which is not a sanction but occurs when there is a reason to terminate employment that does not reach the level of a disciplinary dismissal.

As a disciplinary dismissal is a type of disciplinary action, it must follow the procedures and formalities required to conduct disciplinary action. The Labour Standards Act requires employers to state what type of conduct constitutes grounds for disciplinary action and the types of disciplinary action. An employer cannot conduct disciplinary action based on grounds not stipulated in the work rules.

In addition, an employee must be given the opportunity to defend themself against an accusation. This is the minimum procedural requirement. If there are additional procedural requirements set forth in the work rules or a collective bargaining agreement, the employer must follow such procedures to conduct disciplinary action. If the employee violates a material procedural requirement, the disciplinary action may be void as an abuse of the employer’s right to impose discipline.

Even in cases where an employer takes disciplinary action based on the provisions of the work rules, if such disciplinary action lacks an objective, justifiable reason or the disciplinary action is considered to be unreasonable in light of social convention, the action may be deemed null and void as an abuse of rights by the employer.

As a general rule, 30 days’ prior notice or payment in lieu of such notice must also be provided for disciplinary dismissal, except for cases where the chief of the Labour Standards Inspection Office otherwise approves.

Employers may enter into termination agreements to end an employment relationship with an employee based on mutual consent. There are no specific procedures or formalities required under the law to conclude an enforceable termination agreement or to include a release clause in such agreement.

However, a waiver of an employee’s rights may be deemed invalid if such employee’s consent to the waiver was not made under their “free will”. The courts will look into whether there is an objective, rational reason that sufficiently supports the existence of the employee’s free will. Notably, recent court decisions tend to strictly review the “free will” of the employee, especially in cases where the employee waives a significant portion of their rights. Therefore, it is advisable to provide an accurate and detailed explanation of the content of the waived rights before allowing an employee to sign a release.

In addition, if the manner of the solicitation to resign is coercive, or if there is any undue pressure on the employee to resign, it may constitute an illegal act under Japanese law that may result in claims for damages against the employer. Therefore, it is important to avoid actions or words that can be deemed to constitute threats or harassment or that invite misunderstanding, and also to avoid requiring the employee to attend an unreasonable number of termination-related discussions over a protracted period.

Prohibition of Dismissal

An employer may not dismiss the following employees.

  • Employees taking leave for medical treatment with respect to a work-related injury or illness and within 30 days after they return to work from said injury or illness. Only if the period is longer than three years may the employer dismiss the worker by paying compensation of the equivalent of 1,200 days’ average salary of the said employee.
  • Female employees during their prenatal and postnatal leave (ie, a six-week period before childbirth and an eight-week period after childbirth) and within 30 days after the end of such period.

In addition, an employer is prohibited from dismissing an employee for such reasons as:

  • discriminatory reasons based on nationality, creed and social status;
  • being a union member or having engaged in proper union activities;
  • being female, getting married, becoming pregnant, or giving birth;
  • requesting maternity or family care leave or having taken such leave;
  • making a declaration of an unlawful situation to the competent authorities; or
  • disclosing information in the public interest (under certain conditions).

Under Japanese law, an employer may only dismiss an employee if (i) there are objectively reasonable grounds; and (ii) the dismissal is considered to be appropriate in light of social convention. A dismissal that does not satisfy these requirements will be deemed an abuse of right and thus invalid.

In this regard, a wrongful dismissal claim is available where an employee is dismissed without an objectively reasonable ground. The Japanese courts take a very strict view in determining whether there are facts that substantiate the existence of “an objectively reasonable ground”, and many dismissals have been found invalid unless there was a very significant reason for said dismissal.

If the employee prevails in a litigation claiming a wrongful dismissal, the employee can request to be reinstated and receive payment of unpaid wages from the day following the termination, with a delay interest at the rate of 3% per annum.

The prohibition of discrimination in the workplace is governed by several laws which set forth matters relating to discrimination and harassment. Employees are protected against:

  • discrimination with respect to wages, work hours and other working conditions for reasons of nationality, creed or social status (Labour Standards Act);
  • discrimination based on gender (Labour Standards Act and Equal Employment Opportunity Law);
  • unfair treatment because of pregnancy, giving birth, taking child and family care leave, or similar personal circumstances (Equal Employment Opportunity Law and the Child and Family Care Leave Law); and
  • unreasonable discrimination against part-time workers, fixed-term employees, and dispatched workers (Act on Improvement, etc, of Employment Management for Part-Time Workers and Fixed-Term Workers).

There is no statute which explicitly shifts the burden of proof to employers. Therefore, employees who claim that discrimination has taken place bear the burden of proof to substantiate such discrimination.

Any discriminatory act taken by the employer with respect to an employee’s working conditions, transfer, relocation, and termination in violation of any of the above laws will be invalid. The employer may be subject to administrative guidance, administrative orders, and criminal penalties for such act, depending on the applicable law. Further, employers may be liable to compensate for damages incurred by the employee if discriminatory actions constitute a breach of the agreement with the employee or constitute tort.

Employment issues can be disputed through regular civil procedure lawsuits or through labour tribunal proceedings. The digitalisation of these procedures has already been implemented to some degree. For example, parties are allowed to attend certain court procedures or labour tribunal proceedings via telephone or web but these options have been limited.

With regard to regular civil procedure lawsuits, the law amending the Code of Civil Procedure was enacted on 18 May 2022 and promulgated on 25 May 2022 to promote further digitalisation of the civil procedure. The major changes are as follows:

  • complaints can be submitted and received online (the attorneys are obligated to file and receive complaints online);
  • the type of procedures which the parties can attend via the web or by telephone was relaxed and expanded;
  • the requirement to pursue cross-examinations of witnesses via the web was relaxed; and
  • litigation records will be digitalised and the parties will have access to them via the court’s server.

The amendment regarding allowing attendance at certain civil procedures via telephone went into effect as of 1 May 2023. Other amendments will come into force gradually and will fully be in force within four years from the promulgation date (by the year 2026).

To keep in line with the above, the law implementing similar amendments to labour tribunal proceedings was established on 6 June 2023, promulgated on 14 June 2026, and will fully be in force within five years from the promulgation date (by the year 2031).

The labour tribunal procedure (rodo shinpan) introduced in 2006 focuses on the resolution of individual employment disputes and has become highly popular. This procedure aims to resolve disputes between the employer and employee, such as dismissal, demotion, reduction of salary, and overtime payment, in an expeditious manner.

The labour tribunal procedure is conducted by a labour tribunal committee composed of one professional judge and two lay judges. The parties can represent themselves, although in many cases parties retain attorneys. The procedure is generally concluded within three hearings which average 70 to 80 days, while regular lawsuit procedures normally take more than one year.

Since this is a procedure with an emphasis on expeditious resolution, the labour tribunal tends to proactively suggest settlement, and so many labour tribunal cases are resolved by amicable settlement. If parties cannot reach an amicable settlement, the labour tribunal awards a decision; however, if either party is dissatisfied with such decision, then the dissatisfied party/parties can file an objection to have the case determined by the district court in a regular lawsuit.

Class action claims are not available in Japan, whether in labour tribunal or regular lawsuit.

Alternative dispute resolution is possible in employment disputes. The possible procedures are conciliation (assen), mediation (chotei) and arbitration (chusai). Parties are not obliged to engage in any of the alternative dispute resolution procedures before making an official claim in the court.

Examples of Procedure

Conciliation is a procedure where a conciliator acts as an intermediary to have both parties compromise their claims and reach settlement. 

Mediation is a procedure in which a mediation committee presents a settlement proposal after hearing facts from both parties and advises both parties to accept such settlement.

Arbitration is a procedure in which an arbitrator or arbitration committee renders an arbitration award to resolve the case after hearing the facts from both parties. Unlike conciliation and mediation, an arbitration award is binding on both parties.

Pre-dispute arbitration agreements under which employers and employees agree to resolve future employment disputes through arbitration are rendered invalid under the Arbitration Act, in light of the view that there are differences in the bargaining power between the employers and the employees, and thus the employees’ right to submit their claims to court should not be forfeited by such agreements.

A prevailing party to a litigation can demand that the other party bear court costs under the Act Concerning Civil Litigation Costs. However, attorney’s fees are not included in the scope of such court costs. Therefore, in principle, each party bears its own attorney’s fee, and even a prevailing party cannot require the other party to bear the prevailing party’s attorney’s fee.

Where a party files a suit against the other party claiming damages based on tort, there is a possibility that attorney’s fees will be awarded as a part of damages. However, the court generally only awards a fraction of the attorney’s fees even in such a case.

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Trends and Developments


AI-EI Law Firm was established in 2019, mainly by lawyers from Nishimura & Asahi, and it specialises in corporate dispute resolution and labour/employment matters. The name “AI-EI” is derived from the Japanese word “相栄” (pronounced “I-A”), which means collective prosperity. To realise collective prosperity with its clients, the firm takes the unrivalled approach of not only accurately analysing and categorising a large amount of past data (vast experience and knowledge) like “AI” (Artificial Intelligence) but also using the elements of EI (Emotional Intelligence) so that clients’ true needs are properly understood. Thus, clients are guaranteed practical solutions that meet the substance of the dispute – not only from the perspective of “economic rationality” and “efficiency” required in business, but also with the “humanity” and “sensitivity” required when dealing with people who are the subjects and the objects of disputes and labour issues.


While recovering from the COVID-19 pandemic, Japanese employers have been striving to strike a balance between traditional workplace arrangements and telework. Notably, the National Diet of Japan has recently enacted important employment regulations pertaining to harassment and equal pay for equal work. Furthermore, in July 2023, the Supreme Court of Japan issued two landmark judgments relating to discrimination against an LGBTQ individual in the workplace and equal pay for equal work. This guide aims to provide a comprehensive overview of these crucial updates in Japanese employment law by covering various topics including: the regulations and responses to the COVID-19 pandemic; the principle of equal pay for equal work; harassment regulations; issues regarding employee status and independent contractors; non-compete obligations; and the doctrine of free will.

Regulations and Responses to the COVID-19 Pandemic

This section of the guide provides an overview of the general response to the COVID-19 pandemic, the introduction of telework, and the impact on employment redundancies.

General response to the COVID-19 pandemic

After the COVID-19 pandemic began, the Ministry of Health, Labour and Welfare (MHLW) published a Q&A document titled “Q&A on Novel Coronavirus (for Employers)” as an explanatory article for government regulations. Subsequently, the content of the Q&A was updated when COVID-19 was classified as a Class 5 infectious disease, which is the same category as common infectious diseases such as seasonal influenza, on 8 May 2023.

If an employer orders an employee infected with COVID-19 to take leave, they are generally required to pay at least 60% of the average wage as leave allowance (Article 26 of the Labour Standards Act (Act No 49 of 1947)). Previously, government subsidies were provided for leave allowances and other adjustments in employment due to the worsening business environment caused by the impact of the COVID-19 pandemic. However, these special measures ended on 31 March 2023.

COVID-19 and telework

Before the COVID-19 pandemic, telework was not prohibited but was uncommon in the Japanese workplace. However, given the necessity caused by the COVID-19 pandemic, telework has been widely adopted; nevertheless, employers still have discretion in determining the scope and content of the teleworking system.

Therefore, employers may instruct employees to telework or, conversely, to commute to the workplace as necessary. Conversely, employees do not have an inherent right to telework. Nevertheless, since Article 5 of the Labour Contracts Act (Act No 128 of 2007) requires employers to consider ensuring an employee’s life and physical safety, and thus employers are required to some extent to exercise a duty of care regarding infection prevention measures, understandably, how telework is addressed and instructions concerning commuting to the workplace may become issues.

Moreover, based on Article 3, paragraph 5 of the Labour Contracts Act, an employer’s abuse of authority in implementing telework or instructions for commuting to the workplace is prohibited. In other words, to some extent, employers are required to consider the disadvantages to employees due to telework or commuting to the workplace; consequently, failing to do so may potentially be considered an abuse of the employer’s authority. Therefore, where (i) the infection situation has not subsided, (ii) the company orders employees to commute to the workplace without implementing any infection prevention measures, and (iii) the work is suitable for telework, this may be deemed an abuse of the employer’s authority.

Regarding this point, there have been court cases where disputes arose concerning whether it was necessary to allow employees to work from home due to the risk of COVID-19 infection while commuting. At that time (just after the COVID-19 pandemic began), the degree of the possibility or danger of infection while commuting was not necessarily clear; therefore, there was a court decision (Tokyo District Court, Judgment of 28 September 2021, Roudou Hanrei No 1257, p 52, Employee v Robert Walters Japan) that denied the establishment of a violation of the duty of care by the employer for not implementing work from home. Furthermore, in a separate court judgment (Osaka District Court, Judgment of 23 June 2022, Roudou Hanrei No 1282, p 48, Employee v Shinkansen Service & Technology Co, Ltd et al), the court held that the instruction to report to work during the COVID-19 pandemic was not an excessive abuse of discretion in exercising the employer’s authority, as it was based on the necessity of business operations and it did not impose a special burden on employees, even considering the period when COVID-19 was spreading.

COVID-19 and redundancies

In Japan, employment redundancies or dismissals based on the employer’s reasons are assessed for their validity based on four requirements (or elements):

  • necessity of workforce reduction;
  • measures to avoid dismissals;
  • reasonableness of selection criteria for dismissals; and
  • appropriateness of procedures.

(For further practical explanation, see p 437 of Second Tokyo Bar Association Labour Issues Study Committee, Labour Case Handbook, Revised Edition (Labour Development Research Association, 2023).) Notably, the recognition of these requirements or elements by the courts tends to be strict.

In the case of employment redundancies during the COVID-19 pandemic in the food and beverage industry, there has been a court judgment (Tokyo District Court, Judgment of 21 December 2021, Roudou Hanrei No 1266, p 74, Employee v Andmowa Co, Ltd) that denied the validity of dismissals due to the lack of appropriate procedures (the fourth bullet point in the list above) because of the absence of prior explanation and consultation with employees. Moreover, in the case of a taxi company, the court decision (Sendai District Court, Decision of 21 August 2020, Roudou Hanrei No 1236, p 63, Employee v Semba Distribution Co, Ltd (Injunction)) denied the validity of dismissals due to the lack of (considerable) measures to avoid dismissals (the second requirement in the bullet list above), as the company did not utilise the government subsidies for employment adjustments.

In all of the above cases, the existing framework of the judgment itself was not fundamentally changed, and the courts’ judgments and decisions were made within the existing framework while analysing the impact of the COVID-19 pandemic on business continuity.

Equal Pay for Equal Work

Article 9 of the Act on Improvement of Personnel Management and Conversion of Employment Status for Part-Time Workers and Fixed-Term Workers (Act No 76 of 1993) (the “Part-Time and Fixed-Term Employment Act”) prohibits discriminatory treatment concerning basic wages, bonuses, and other benefits for being a part-time or fixed-term worker. Essentially, this provision is considered to establish the Japanese equivalent of the principle of “equal pay for equal work”. Moreover, the amendment of the Part-Time and Fixed-Term Employment Act was implemented for all companies in April 2021 (for a general approach and specific examples, refer to the MHLW, Guidelines for Equal Pay for Equal Work).

However, it is important to note that the Part-Time and Fixed-Term Employment Act primarily governs the relationship between regular employees and part-time or fixed-term workers, and does not address wage disparities among regular employees. Therefore, it seems that the Part-Time and Fixed-Term Employment Act’s regulation mainly governs the gap between employment conditions in different groups, and the Japanese version of the “equal pay for equal work” is not synonymous with the equal pay for equal work regulation in other countries.

Furthermore, Article 9 establishes that discrimination is prohibited for cases where, “considering the practices and other circumstances in the relevant workplace, it is foreseeable that the content and arrangement of duties will be changed within the same range as the changes made to regular employees’ duties until termination of the employment relationship.” This means that justified differences in compensation may still exist based on the nature of duties, their complexity, or the possibility of job rotation.

Moreover, the regulation of age-based employment discrimination, which is often debated abroad, is not as stringent in Japan. However, the Act on Stabilisation of Employment of Elderly Persons (Act No 68 of 1971) obliges companies to provide continued employment until the age of 65 to those who desire it. As a result, most Japanese companies typically set the retirement age at either 60 or 65 in employment contracts; moreover, if the companies set the retirement age at 60, many opt to offer part-time or fixed-term contracts to employees aged 60 to 65 for a few years before their official retirement. In this case, it is common for compensation to be significantly reduced around the time of retirement and transition to a part-time or fixed-time arrangement. It is notable that employees who continue to work under part-time or fixed-term contracts after retirement are still protected by the Part-Time and Fixed-Term Employment Act.

Recently, disputes have arisen over claims of unlawful salary reductions around retirement or discrimination based on a part-time or fixed-term arrangement, based on the fact there is no significant difference in job description before and after retirement. For instance, in the Nagoya High Court, Judgment of 25 March 2022, Roudou Hanrei No 1233, p 5, Employee v Nagoya Automobile School, the High Court indicated that salary reductions below 60% of pre-retirement earnings would be considered an infringement on the Act, given the absence of differences in job description before and after retirement. However, in the recent Supreme Court, Judgment of 20 July 2023, Employee v Nagoya Automobile School, the Court remanded the case to the lower court. In so doing, it stated that the lower court had neither sufficiently considered the nature and purpose of the pre-retirement and post-retirement basic pay and bonuses, nor had it adequately considered the circumstances of labour-management negotiations and the process. Consequently, a definitive conclusion is pending as the case will be retried in the lower court.

Harassment Regulations

In Japan, sexual harassment was initially regulated in the context of workplace harassment, followed by maternity harassment. Subsequently, a type of harassment called power harassment (which is not commonly categorised as a type of workplace harassment in overseas jurisdictions) has also been regulated.

Sexual harassment is defined as the employer’s act of engaging in sexual conduct in the workplace, resulting in the employee experiencing disadvantages in their employment conditions or the employee’s working environment being harmed. Employers are obligated to take preventative measures (Article 11, paragraph 1 of the Act on Equal Opportunity and Treatment between Men and Women in Employment (Act No 113 of 1972) (the “Equal Opportunity Act”)).

Maternity harassment is divided into two categories: (i) harassment carried out as an exercise of personnel authority by employers or others; and (ii) harassment by superiors or colleagues unrelated to personnel matters. Employers are directly prohibited from engaging in the former (Article 11-3, paragraph 2 of the Equal Opportunity Act; Article 25, paragraph 2 of the Act on Childcare Leave, Caregiver Leave, and Other Measures for the Welfare of Workers Caring for Children or Other Family Members (Act No 76 of 1991) (the “Childcare and Family Care Act”)), while the latter is further divided into (i) harassment related to the state of pregnancy, childbirth, or other matters related to pregnancy or childbirth that harm the working environment (harassment related to the state of pregnancy or childbirth, under the Equal Opportunity Act), and (ii) harassment related to the use of systems such as pre- and post-maternity leave or childcare leave that harm the working environment (harassment related to the use of systems, under the Equal Opportunity Act and the Childcare and Family Care Act). Accordingly, preventative measures are mandated, in accordance with Article 11-3, paragraph 1 of the Equal Opportunity Act; and Article 25, paragraph 1 of the Childcare and Family Care Act.

Power harassment is defined as “behaviour in the workplace that is based on a superior-subordinate relationship and exceeds the necessary and reasonable scope of work, resulting in harm to the employee’s working environment.” Employers are obligated to take preventative measures (Article 30-2, paragraph 1 of the Act on Comprehensively Advancing Labour Measures, and Stabilising the Employment of Workers, and Enriching Workers’ Vocational Lives (Act No 132 of 1966)).

Accordingly, the issued MHLW Guidelines exist to address these types of harassment, indicating the direction of preventative measures. Specifically, common elements for each type of harassment include:

  • clarification and dissemination of employer policies;
  • establishment of necessary structures to respond appropriately to employee consultations; and
  • a prompt and appropriate post-incident response.

In the case of maternity harassment, the following are also included:

  • measures to eliminate the causes and background factors of such harassment.

While there is no exact match between the criteria for a tort claim and those for sexual harassment, maternity harassment, and power harassment, many forms of workplace harassment constitute tortious acts; moreover, claims for damages for the consequent mental distress suffered are not uncommon.

In recent years, there has been active discussion regarding the relationship between LGBTQ individuals, sexual harassment, and power harassment. According to the MHLW’s guidelines, sexual harassment can occur regardless of the gender, sexual orientation or gender identity of the victim. It has also been suggested that outing (ie, disclosing an employee’s sexual orientation, gender identity, or related information to other employees without the employee’s consent) can be considered power harassment.

In a case involving a transgender employee in the government (ie, MtF or Male to Female, diagnosed with gender identity disorder who was restricted from using certain women’s toilets in a building because of hypothetical discomfort felt by female employees), the Supreme Court ruled that the treatment, based on considerations overly focusing on other employees without considering the specific circumstances of the disadvantages caused by such treatment, lacked reasonable justification and was illegal (Supreme Court, Judgment of 11 July 2023, Employee v Government (Ministry of Economy, Trade and Industry)).

Issues Regarding Employee Status and Independent Contractors

Recently, the applicability of labour and employment laws to gig workers has been a topic of debate in various countries. In Japan as well, there is discussion about whether gig workers fall under the definition of “employees” to whom labour and employment laws apply. The criteria for determining whether someone falls under the category of “employee” vary depending on the specific laws, with slight differences between the Labour Standards Act, which mainly governs employment conditions, and the Labour Union Act (Act No 174 of 1949), which mainly governs labour unions and labour laws.

First, regarding the definition of “employee” under the Labour Standards Act, the following factors are considered:

  • freedom to accept or decline work;
  • presence or absence of specific instructions and supervision on how to carry out work;
  • degree of time and location restrictions;
  • substitutability of labour;
  • remuneration in relation to the work performed;
  • existence of the nature of business ownerships;
  • exclusivity; and
  • treatment under tax and social insurance laws.

These factors are considered for determining employee status (Ministry of Labour, Labour Standards Act Study Report, The Criteria for Determining “Employee” under the Labour Standards Act, dated 19 December 1985).

Regarding the definition of “employee” under the Labour Union Act, the following factors are considered:

  • incorporation into the organisational structure of the business;
  • unilateral and standardised determination of contract terms;
  • remuneration as consideration for labour;
  • a relationship where the work is performed in response to requests from the employer;
  • labour provided under the broad meaning of supervision and control with certain time and location restrictions; and
  • the significant nature of business ownerships.

These factors are considered for determining employee status under the Labour Union Act (Labour-Management Relations Law Studying Group Report, The Criteria for Determining “Employee” Status under the Labour Union Act, dated 25 July 2011).

In a recent case where Uber Japan Co, Ltd refused to engage in collective bargaining based on the argument that Uber Eats delivery drivers do not fall under the definition of “employee” under the Labour Union Act, the Tokyo Metropolitan Government Labour Relations Commission ruled that delivery drivers should be considered “employees” under the Labour Union Act (Tokyo Metropolitan Government Labour Relations Commission, Order of 4 October 2022, Roudou Hanrei No 1280, p 19, Employee v Uber Japan Co, Ltd).

In any case, if employee status is denied, the employee may not receive protection under labour laws. It should also be noted that recent legislation has been enacted to protect independent contractors, ensuring fair transactions and improving working conditions, through the Act on the Improvement of Transactions with Specified Contractors (Act No 25 of 2023). However, as of the date of this guide (September 2023), the law has not yet been enforced.

Non-compete Obligations

Non-compete obligations are relevant both during employment and after an employee’s departure, particularly in the case of directors and employees. This guide focuses on the issues surrounding employees after their termination of employment.

It should be noted that non-compete obligations during the tenure of directors are explicitly provided for by Article 356, paragraph 1 of the Companies Act (Act No 86 of 2005), and employees are also considered to have such obligations during their employment. In practice, these obligations are often handled as issues of directors’ fiduciary duties (Articles 355 and 330 of the Companies Act; Article 644 of the Civil Code (Act No 89 of 1896), etc) and employees’ duty of loyalty (Article 3, paragraph 4 of the Labour Contracts Act).

Non-compete obligations after an employee’s termination are not automatically generated as part of the employment contract without explicit stipulation; therefore, they generally require inclusion in the employment rules or individual agreements. Furthermore, as they compete with the constitutional right of freedom to choose one’s occupation (Article 22, paragraph 1 of the Constitution of Japan), the validity of agreements on non-compete obligations has been subject to cautious judicial scrutiny.

Since the leading case of Employee v Forsaco Japan Ltd (Nara District Court, Judgment of 23 October 1970, Hanrei - Jihou 624, p 78), it has been recognised that the validity of non-compete obligations should be determined comprehensively considering factors such as the following:

  • employer’s interests;
  • former employee’s previous position;
  • scope of the restrictions; and
  • presence or absence of compensation measures.

However, the above framework of considering these factors for evaluation has not been explicitly adopted in high court judgments (Osaka High Court Decision of 5 October 2006, Roudou Hanrei No 927, p 23, Employee v A Patent Office; Tokyo High Court Judgment of 27 April 2010, Roudou Hanrei No 1005, p 21, Employee v Mita Engineering).

Conversely, recent high court judgments (eg, Intellectual Property High Court, Judgment of 9 October 2019, LEX/DB 25570512, Lock Picking case; Fukuoka High Court, Judgment of 11 November 2020, Roudou Hanrei No 1241, p 70, Employee v Legend) have comprehensively considered these factors, the approach of which is similar to Employee v Forsaco Japan Ltd. However, as mentioned earlier, due to competition with the constitutional right of freedom to choose one’s occupation, the consideration of these factors does not necessarily lead to a more favourable affirmation of the validity of non-compete obligations.

Doctrine of Free Will

Under Japanese law, the principle of freedom of contract (based on the principle of private autonomy) is recognised as a fundamental concept regarding contracts, and individual will is respected in the formation and determination of contract terms. However, some labour and employment laws are coercive by nature, allowing their application even against the parties’ intentions in certain circumstances. There are cases where agreements relating to employment, including their terms and existence, are negated by courts due to the lack of the employee’s free will.

In a recent case involving a reduction in retirement benefits through a change in employment rules, where the employee had signed and sealed a document indicating their agreement, the Supreme Court held that determination of the existence of consent should be based not only on the employee’s act of accepting the change but also on whether sufficient rationale objectively exists based on the employee’s free will, considering the nature and extent of the disadvantages imposed on the employee by the change, the circumstances and manner in which the employee came to perform the act, and the content of information or explanations provided to the employee before the act (Supreme Court, Second Petty Bench, 19 February 2016, Minshū Vol 70, No 2, p 123, Employee v Yamanashi Prefectural Credit Union). The case was subsequently remanded, and consent was denied due to the lack of free will, as necessary and adequate information was not sufficiently provided to the employee before the act (Tokyo High Court, 24 November 2016, Roudou Hanrei No 1153, p 5, Employee v Yamanashi Prefectural Credit Union).

Subsequently, the concept of the doctrine of free will has been invoked in litigation cases; however, the scope of applicability of the doctrine of free will is not necessarily clear at present. Currently, there are existing analyses and discussions in scholarly articles that have elaborately examined past precedents and cases (see Hisashi Ikeda, “The Coerciveness of Labor and Employment Law and Employee Expression of Intention”, Hōritsujihō, No 1186, p 29), implying that the application will not be expanded without limitations.

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Law and Practice


TMI Associates is one of the largest law firms in Japan, with offices in six locations in Japan and overseas branches in China, South-East Asia, the USA, France and the UK. Its labour and employment team is comprised of 54 lawyers, including 15 partners. The firm advises Japanese and multinational clients in various industries across the entire spectrum of employment-related matters, including litigation, M&A, and negotiation with labour unions. The team collaborates with TMI’s data privacy, intellectual property and criminal law experts, including former judges and public prosecutors, on matters that intersect with these areas, such as trade secret theft and employee misconduct. The team also regularly works with immigration experts within the firm.

Trends and Developments


AI-EI Law Firm was established in 2019, mainly by lawyers from Nishimura & Asahi, and it specialises in corporate dispute resolution and labour/employment matters. The name “AI-EI” is derived from the Japanese word “相栄” (pronounced “I-A”), which means collective prosperity. To realise collective prosperity with its clients, the firm takes the unrivalled approach of not only accurately analysing and categorising a large amount of past data (vast experience and knowledge) like “AI” (Artificial Intelligence) but also using the elements of EI (Emotional Intelligence) so that clients’ true needs are properly understood. Thus, clients are guaranteed practical solutions that meet the substance of the dispute – not only from the perspective of “economic rationality” and “efficiency” required in business, but also with the “humanity” and “sensitivity” required when dealing with people who are the subjects and the objects of disputes and labour issues.

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