Practice Area Articles
January 16, 2023
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KEY DEVELOPMENTS FOR 2023
Increase in the premium wage rate
Starting in April 2023, small and medium-sized companies will also need to pay an increase in the premium wage rate for overtime work exceeding 60 hours per month.
The 2010 amendment to the Labor Standards Act imposed a 50% wage premium on large companies and 25% on small and medium-sized companies for overtime work exceeding 60 hours per month.
In light of the impact on business, the amendment applied only to large companies, while small and medium-sized companies remained at 25%.
Subsequently, the Work Style Reform Act, which went into effect in April 2019, decided to end the grace period for small businesses. For this reason, starting in April 2023, small and medium-sized companies will also need to pay a 50% wage premium for overtime work exceeding 60 hours per month.
The increase in the premium wage rate to 50% is aimed at discouraging companies from requiring long hours. In particular, small and medium-sized companies, which often work more than 60 hours of overtime per month, need to implement initiatives to reduce long working hours since continuing to work the same way as before will result in higher overtime costs.
Disclosure of rates of male employees taking parental leave
Companies with more than 1,000 full-time employees are required to disclose the percentage of male employees taking parental leave once a year. The disclosure will be mandatory from 1 April 2023.
The purpose is to improve the percentage of male employees who take parental leave by publicizing this information to the public. This information can be disclosed on the corporate website owned by the company or published on the website operated by the Ministry of Health, Labour and Welfare, “Balancing Work Life Support Square.”
Companies need to bear in mind that recommendations may be made for companies that do not properly disclose their utilization of paternity leave. In addition, if the situation does not improve after the recommendation, the name of the company may be disclosed to the general public.
Companies should provide support, and educate employees about the childcare system in order to create a work environment where family life and work balance is achievable regardless of gender. In particular, such effort should go to establishing a system that allows flexible allocation and staffing of tasks, including compliance with the revised law. Although it takes a considerable amount of time and effort to reshape the existing culture, making it easier for employees to take parental leave will improve employees’ satisfaction at work and ultimately the company’s image as a well-balanced workplace.
Delivery workers are classified as workers under the Labor Union Act
The Uber Eats Union, a group of Uber Eats delivery workers, has filed a petition with the Tokyo Labor Relations Commission for unfair labor practices relief after being refused collective bargaining by Uber Eats. On 25 November the Tokyo Labor Relations Commission acknowledged that the refusal constituted an unfair labor practice and ordered Uber Eats to agree to collective bargaining. With the protection of gig workers working on one-off digital platforms like Uber becoming a global issue, Japan was expected to show some adaptation to it.
At issue was whether the delivery workers, who had been treated as sole proprietors, were workers under the Labor Union Act, a lower hurdle than workers under the Labor Standards Act and the Labor Contract Act. Now, being recognized as a worker under the Labor Union Act obliges Uber Eats to negotiate collectively with the union. However, a final settlement could take time, because if Uber Eats disagrees with the order, it could be subject to review by the Central Labor Relations Commission or by court review.
As Japan’s economy continues to move away from traditional lifetime employment to flexible, need-based employment, foreign companies that utilize any form of flexible labor need to take heed.
KEY DEVELOPMENTS FOR 2022
Expansion of employment insurance to elderly workers
From 1 January 2022, the revised Employment Insurance Act will be effective and expand the application of employment insurance to multiple workers aged 65 and over. Under the previous law, those who worked 20 hours or more per week and were expected to be employed for 31 days or more were insured. However, statistics have shown that the number of people aged 65 and above who are in part-time employment and have a second job is rapidly increasing, and these people tended not to be protected by employment insurance. In addition, according to estimates as of 15 September 2021, the number of elderly people aged 65 and over in Japan was 36.4 million out of a total population of 12.52 million. This is the largest number of elderly people in Japan on record.
After this legislative change, persons aged 65 and over who are employed by two or more employers and whose total prescribed weekly working hours are 20 hours or more at two or more establishments will be covered by employment insurance (Multi-job holder system)
In terms of the enrolment process, the employee must make a request to the business operator himself/herself. The business operator is prevented from dismissing or otherwise subjecting the employee to any other disadvantageous treatment on the basis that the worker has made this request.
Changes to family friendly leave
The revised Act on Childcare Leave, Caregiver Leave, and Other Measures for the Welfare of Workers Caring for Children or Other Family Members (Child Care and Family Care Leave Act) is scheduled to come into effect in 2022. From 1 April 2022, employers must provide workers who report their own pregnancy or childbirth (or the pregnancy or childbirth of their spouse) with certain details stipulated by law regarding the childcare leave system, etc., and confirm their intention to take leave.
In addition, as of 1 April 2022, employers must deregulate the requirements for fixed-term workers to take childcare and nursing care leave and as of 1 October 2022, a new system that allows male employees to take leave in the period immediately after the birth of a child, and a system that allows employees to split up their childcare leave into two separate leaves, will come into effect. These changes may necessitate a review of existing employment regulations.
Expansion of whistleblower protections
As a result of a number of business scandals in recent years, the following amendments were made to the Whistleblower Protection Act to help prevent further damage through early correction:
- Firstly, business operators must establish a system to respond appropriately to whistleblowing allegations. This will involve setting up a contact point, investigation process, consideration of corrective measures, etc. The specific details will be determined in associated guidelines.
- Secondly, the conditions for reporting relevant allegations to authorized government and media organizations will be relaxed.
- Finally, to provide greater protection for whistleblowers, certain retirees and executives have been added to the list of protected whistleblowers and certain administrative penalties may be imposed in addition to criminal penalties.
The amendments came into force on 1 June 2022. Companies should take appropriate action to prevent internal fraud and establish an effective whistleblower system in accordance with these new obligations.
KEY DEVELOPMENTS FOR 2021
Equal pay for equal work
In Japan, there has been a debate about "equal pay—equal work," and on 1st April 2020, a new law "Part‑time and Fixed‑term Employment Act" was enacted for big companies. In 2021, the applicable companies of this law has been expanded and as of 1st April 2021, this law is now enacted vis‑à‑vis mid‑small sized companies as well.
In connection with the interpretation of this new law, five high profile Supreme Court judgments came out at the end of 2020 regarding whether temporary employees should be compensated on the same basis as regular employees in connection with (a) retirement allowance, (b) summer/winter bonus, (c) annual paid leave, etc.
The Supreme Court made it clear that in some cases, on a factual basis, temporary employees should be compensated the same as regular employees and furthermore made it clear that mishandling of benefit package for temporary employees may result in an obligation for the employer to pack‑pay those items later with damages.
Labour Law amendments concerning childcare leave and employment of the elderly
Additionally, there were a number of small amendments throughout the law related to labour.
- The Childcare/Nursing Care Leave Act was amended as of 1 January 2021, and employees can now take childcare leave and nursing care leave on an hourly basis. (Prior to this amendment, such leave could only be taken on a daily basis.) Thus, in connection with this amendment, employers are required to change their working rules.
- The Law Concerning Stabilization of Employment of Elderly was amended as of 1 April 2021, and though not mandatory, now the employers need to put reasonable effort into keeping their employees hired until they are over 70. (e.g., pushing back the retirement age to 70).
- The Labour Measures Comprehensive Promotion Act was amended as of 1 April 2021, and now all companies that hire more than 301 employees are required to disclose their ratio of mid‑career recruits. Note that penalties for violating such requirement is not stipulated in this Act
Shift to job‑description based employment
The COVID‑19 induced remote work arrangement prompted a debate on whether the traditional "membership style employment" should stay in place or a new "job‑description based employment" should be more broadly introduced. With large international multi‑national companies, it is becoming more and more prevalent to shift to job‑description model.
Corporate Governance Reform—promoting board diversity
Tokyo Stock Exchange is amending Corporate Governance Rules to reflect ESG based guidelines towards diversity of the workforce, initially directed towards the board of directors' diversity. Activist shareholders are putting more pressure on implementing diversity on the work force (and climate change) among others.
KEY DEVELOPMENTS FOR 2019
Work style return Bill
A package of work‑style reform bills was passed on 29 June 2018. This package of reform bills will amend 36 labor‑related laws. A series of amended labor‑related laws will come into force from 1 April 2019.
The work‑style reform bills introduce three key reforms:
- the government will continue to take the initiative in reforming the Japanese work environment;
- excessively long work hours are no longer permitted; and
- regular, non‑regular, full‑time and part‑time employees will be treated equally.
The second reform will ban all employers from having their employees work more than 360 hours of overtime per year (45 hours per month) unless they fall within a special circumstance category. In such cases, the employee can work up to 720 hours of overtime per year (100 hours per month).
A further category of exemption called the Highly Professional Exemption will be introduced simultaneously. Highly‑Professional Exemption includes employees who are engaged on assignments that require professional skills and who earn at least JPY10 million a year, such as financial dealers and attorneys. The regulation around work hours will not apply to these professional employees.
Another important feature of these reforms is that employers will be required to specify work assignments for each employee and employees who are assigned the same field and scope of work assignments must be treated equally regardless of their employment types.
KEY DEVELOPMENTS FOR 2018
Work Style Reform
2017 was the first full year since the nationwide “Work Style Reform” was declared by Prime Minister Shinzo Abe in an effort to bring about radical changes in work habits of the Japan labor force and address the chronic long hours, rigid employment forms, and wide discrepancies between full-time and non-full-time employees that have historically kept certain segments of the population away from work. Specifically, reforms to introduce a cap on overtime work, flexible work arrangements such as (allowing telecommuting or secondary jobs), re-education initiatives to prevent calcification of class discrepancies are being called for. Serious discussions are being held among the government, business leaders and industry experts and these discussions are expected to culminate in legislative reform in the very near future.
In February of 2017, the Japanese government introduced “Premium Friday,” where on the last Friday of the month; employees are encouraged to leave work at 3pm to boost individual commercial consumption.
In August 2012, amendments to the Labor Contract Act were promulgated that allowed fixed-term employees to convert their form of employment to permanent employment in the event their labor agreement is renewed consecutively for 5 years. This amendment was passed to grant more stability and protection to fixed-term employees and applies to labor agreements since April 1, 2013. Because 2018 marks 5 years since these amendments came into effect, the expected wave of conversions in 2018 has been dubbed the “2018 Problem.” In Japan, there are high legal hurdles to overcome to terminate permanent employees. Companies must start to plan ahead before a wave of fixed term employees seek to convert their contracts.
KEY DEVELOPMENTS FOR 2017
Changes to family-friendly legislation
Amendments to the law dealing with the welfare of workers who look after children or other family members took effect in January 2017 and seek to make the workplace more family friendly. Amendments include an increase in the amount of permitted family leave time; the introduction of overtime waiver rights for employees with family care duties; eased conditions for fixed-term employees to take childcare leave; and the ability to take half a day’s annual leave (instead of a whole day).
Changes to equal opportunities legislation
Companies will be required to have in place procedures and mechanisms to ensure that pregnant women or women who have given birth do not suffer from a detrimental work environment. The Ministry of Health, Labour and Welfare has issued specific guidelines on what companies are expected to carry out to comply with the amended legislation.
Discussion around changes to equal pay laws
Proposals to amend various laws to improve the working conditions of part time employees and promote the policy of “Equal Pay for Equal Work”, including requiring employers to explain the rationale behind differences in treatment and allowing courts to pass judgment on unreasonable differences.
KEY DEVELOPMENTS FOR 2016
Additional protections for disabled workers
Legislation took effect in April 2016 which requires employers to give disabled persons equal opportunities in relation to the recruitment and hiring processes and prohibits unreasonable discrimination on the basis of disability in determining wages, education and training, the use of welfare facilities, and other employment benefits.
Improvement to health and safety laws
- From 1 December 2015, employers with 50 or more employees must arrange for doctors or public health nurses to conduct stress checks on their employees, to identify their level of mental stress.
- From 1 June 2015, employers must take appropriate measures to protect workers from passive smoking.
- From 1 June 2016, businesses which manufacture or handle hazardous chemical substances must carry out an assessment of the potential risk to workers’ health and safety, and use their best efforts to protect workers’ health.