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Q & A: Corporate Labor Law in Japan

Dismissal

Q : Can I dismiss an employee ?

A: In many cases, you cannot. Rules and regulations on dismissal in Japan are very strict. Some details can be found below.
 

Q: What are the rules regarding dismissal?

A: Article 627 of the Civil Code of Japan and Article 16 of the Labor Contract Law are the primary laws regarding dismissal.
Judges ultimately have great discretion to determine whether a dismissal is valid.
 

Q: What are the types of labor contract termination in Japan?

A: Dismissal, voluntary retirement, resignation, and reaching of mandatory retirement age.
Dismissal is the unilateral termination of a labor contract by an employer.
Voluntary retirement is an agreement between an employer and an employee to terminate a labor contract.
Resignation is the unilateral termination of a labor contract by an employee.
Mandatory retirement age is a specific system in Japan. Most employers in Japan adopt a retirement age system, under which a worker’s employment terminates when he or she reaches a certain age stated in the Rules of Employment. The retirement age must be no younger than 60 under the law – the pension eligibility age.
 

Q: What are the types of dismissal?

A: Ordinary dismissal, disciplinary dismissal and layoff.
Ordinary Dismissal: where an employee breaches his/her labor contract
Disciplinary Dismissal: punitive dismissal for a violation of the rules of employment
Layoff: workforce reduction due to negative business conditions
 

Q: What laws and regulations govern dismissal?

A: As a general rule, 30 days’ prior notice of dismissal or payment in lieu of such notice must be given to employees.
However, notice or payment in lieu thereof (the proviso to Article 20, Section 1 of the Labor Standards Act, Article 21 of the law) is not required in some circumstances, e.g. employment for fewer than 14 days during a probationary period.
In addition, dismissal is prohibited during and within 30 days after medical leave for a work-related injury or illness, and in the event of prenatal/postnatal leave (Article 19, Section 1 of the Labor Standards Act).
 

Q: If I am sued for unfair dismissal, how long will the lawsuit last?

A: The average trial involving a dispute between an employer and an employee lasts 11.8 months (2010 Supreme Court of Japan survey).
Labor tribunal proceedings are generally completed within three months.
* Labor tribunal proceedings are designed to quickly, properly and effectively resolve civil disputes between employees and employers with regard to such issues as whether a labor contract exists and any labor relations matters.
 

Q: What is the potential cost if I lose a case and a dismissal is found to be invalid?

A: If a court determines a dismissal to be invalid, the employer will be liable to pay at least an equivalent to the employee’s wages from the time of the dismissal to the rendering of the judgment. In addition, the employee will be reinstated and may return to work.
Example:
An employee is dismissed on June 1, 2013, and files a wrongful termination suit in December 2013. The court can be expected to render a decision by February, 2015. The employer would have to pay at minimum an amount equivalent to approximately 21 months of the employee’s salary – from June 1, 2013, to February 27, 2015.
 

Q: Can I fire an employee who embezzled funds or stole company property?

A: If you can produce evidence of such acts, dismissal is highly likely to be found valid.
 

Q: Can I fire an employee who is late for work repeatedly?

A: You should record your admonitions of the employee for tardiness. Failure by the employee to improve his/her behavior despite the admonitions would constitute grounds for dismissal.
 

Q: Can I fire an employee who refuses to relocate?

A: In Japan, in the absence of a specific non-relocation agreement in a labor contract, an employer can relocate an employee in general.
Refusal by the employee to comply with a proper relocation order constitutes legitimate grounds for dismissal.
A relocation order may be illegitimate if the employer relocates an employee in the case that: the relocation is not sufficiently necessary, there is a specific agreement not to relocate, or an employee has to care for their family and cannot relocate.
 

Q: Can I fire an employee for disobeying instructions given to him/her in connection with his/her job?

A: This may be possible. If an employee commits a serious breach of instructions given to him her, regardless of the intention, it could constitute sufficient grounds for dismissal.
Generally speaking, an employer cannot dismiss an employee unless the employee repeatedly fails to comply despite instructions and warnings.
The Court carefully examines whether the employer gave the employee a chance to improve.
 

Q: I want an incompetent employee to quit. Can I fire him/her?

A: Incompetence could constitute a valid reason for dismissal, but it’s difficult to justify in many cases.
You have to produce a great deal of evidence that you followed the appropriate procedures.
The main points are below.
1. Providing sufficient educational guidance to the employee.
2. The employee’s competence or skill is very low compared to that of other employees, and the lack of competence or skills was not known at the time the person was hired.
3. The employee does not have the level of competence expected under the contract (in the case of mid-career recruitment).
4. There is no prospect of improvement in the employee’s work attitude or business skills.
It’s difficult to dismiss an employee who works seriously. The employer needs to take such measures as training the employee patiently or relocating him/her.
 

Q: What factors determine whether a layoff is justified?

A:
1. A need to reduce the workforce must exist.
2. The employer must make every effort to avoid a layoff.
3. The proceedings must be appropriate.
4. The target group must be rationally determined.
 
Factor 2 above is the strictest standard.
The court will analyze whether the remuneration paid to senior management and officers has been reduced, whether recruitment has ceased, whether overtime work, holiday work and midnight work has been prohibited, whether early retirement of employees has been solicited, etc.
 

Q: What evidence can be used to support the validity of a dismissal?

A: The court focuses on objective evidence. It’s important that you retain records of the who, what, where, when and how of a dismissal: retain documents such as emails or letters and provide warnings or instructions via written documents. Oral instructions are difficult to prove unless an audio recording is made.
 

Q: We hired a person expected to have specific skills, but we have been disappointed by him/her. Can we dismiss him/her?

A: When a person is hired to perform a specific type of job or position, it is easier to validly dismiss the employee for incompetence.
In the following cases, employers prevailed in validly dismissing employees because concrete evidence was shown that the specific requirements of an employee’s job were clearly explained to him/her and that the employee failed to meet those requirements and failed to improve over a period of time despite efforts to improve the employee’s abilities.
*Ford Japan, Ltd., Tokyo District Court (Feb. 25, 1982), 196 Hanrei-Times 474
The Court emphasized that the plaintiff was specifically hired for the position of Director of the Personnel Department and that the plaintiff had been expected to possess the special skills needed to fulfill said position.
The Court determined the dismissal to be valid because the employee remained incapable of working independently 6 months after being hired, failed to conduct sufficient interviews to enable a personnel reduction, and greatly neglected his duties  and violated workplace rules in other ways.
*Emerson Japan, Ltd., Tokyo District Court (Dec. 15, 1999), 3 Rokeisoku 1759
The court determined the dismissal to be valid because the plaintiff lacked the competence and skill expected of a system engineer, and failed to improve despite being provided with technical instructions, education and training.
*Proudfoot Japan, Co., Ltd., Tokyo District Court (Apr. 26, 2000), 21 Rohan 789
The plaintiff was hired as an “Installation Specialist” (IS) and proved incapable of fulfilling the responsibilities of the position. The employer determined that it would be extremely difficult for the employee to reach the required level and fired him. The court determined the dismissal to be valid.


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