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 in 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), initial workplace and scope of changes to it, initial duties and scope of changes to them, working hours, days off, holidays, salary 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.

Flexibility

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 or longer (but not exceeding three months) 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 JPY893 to JPY1,113 from October 2023 (JPY1,113 for Tokyo, JPY1,064 for Osaka). A raise in the minimum wage 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), childcare leave upon childbirth (up to four weeks within eight weeks from the childbirth) 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 the case of an employee’s breach of an employment agreement. In addition, employers are prohibited from offsetting any claims against an employee by withholding salary payments 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 they will 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 the solicitation is malicious, and thus consider the solicitation to be unlawful. Similarly, if a departing employee requests an 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.

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:

• working without a resident status that permits work;

• engaging in work that does not fall within the work permitted under the applicable resident status;
• working after the expiry of the resident status term; or

• working in excess of the hours under the permit “to engage in an activity other than that permitted pursuant to the resident status granted”.

It should be noted that the period of imprisonment and the amount of fine scheduled for these violations is set to be increased to up to five years and up to JPY5 million within three years from the promulgation date – ie, by the year 2027.

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 examinations and measures based on their results;
• medical interview guidance by a physician for employees who work long hours and measures based on the results of that interview 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 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.

Improvements in Employment Conditions for Older Workers

A new trend seen in Japan in recent years is the improvement of employment terms for senior employees, which have been introduced to cope with labour shortages due to the country’s low birthrate and increasingly elderly population.

Under Japanese law, companies are legally obliged to select to either:

• raise the mandatory retirement age to 65;
• introduce a system of continued employment until the employees reach the age of 65; or
• abolish the mandatory retirement age as a measure to secure employment for the elderly.

In addition, companies are obliged to “make efforts” to secure employment opportunities for older workers up to the age of 70. Although the violation of this obligation does not immediately lead to sanctions, employers are obliged to make efforts. In recent years, it has been reported in the Japanese media that some large companies, such as Toyota Motor Corporation, have begun rehiring employees over the age of 65 and up to the age of 70 to fulfil this obligation.

The principle of “equal pay for equal work” also applies to post-retirement rehires on a fixed-term basis, therefore, if the working conditions of post-retirement rehires differ from those of regular employees, such differences must not be considered unreasonable in light of the nature of the job, the scope of its change, and other circumstances. In light of this, some companies are improving the employment conditions of post-retirement rehires to get closet to those of regular employees.

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 in 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 2023 survey by the Ministry of Health, Labour and Welfare, it is estimated at 16.3%.

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 body 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 so-called Article 36 Agreement). Also, majority labour unions are entitled, 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 they 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 practices 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 in a 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 to 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 conventions. 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 they 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).

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, employees must be given the opportunity to defend themselves 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.

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 late payment interest charged at the rate of 3% per annum.

The prohibition against 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 proving that discrimination.

Any discriminatory act taken by the employer with respect to an employee’s working conditions, transfer, relocation or 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 an act, depending on the applicable law. Further, employers may be liable to pay compensation for damages incurred by the employee if discriminatory actions constitute a breach of the agreement with the employee or constitute a 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 a 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 through amicable settlement. If parties cannot reach an amicable settlement, the labour tribunal makes a decision; however, if either party is dissatisfied with that 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 a labour tribunal or a 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.