Practice Area Articles
By Toshiyuki Arai and Olga Belosludova
Back to International Employment Law
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.