4.8 Resignation and Dismissal
Section 4: Human Resource Management
This section covers Japan’s labor laws and regulations. Topics include recruitment, employment contracts, wages, working hours, work rules, workplace safety, hygiene requirements, resignation and dismissal procedures, and Japan’s social security, health, and pension systems.
4.1 Application of Laws
4.3 Labor Contracts
4.5 Legislation on Working Hours, Breaks, and Days Off
4.6 Work Rules
4.7 Safety and Hygiene
4.8 Resignation and Dismissal
4.9 Japan’s Social Security System
4.8 Resignation and Dismissal
If an employee on a labor contract with no set term of agreement wishes to resign (i.e., the employee wishes to terminate the labor contract by notifying the employer of his/her intention to do so), the employee can do so by providing two weeks' notice. Furthermore, although there is no firm legal precedent, the prevalent doctrine is that even if a company work rules stipulates that employees must give more than two weeks' notice, it is without effect in cases where the rule sets an unreasonable period. On the other hand, employers can only dismiss an employee (i.e., the employer terminates the labor contract by notifying the employee of its intention to do so) after satisfying several criteria.
4.8.1 Approved Grounds for Dismissal
An employer is only allowed to dismiss an employee if there are objectively reasonable grounds for dismissal, and dismissal is deemed to be appropriate in light of socially accepted ideas. Furthermore, all possible grounds for dismissal must be clearly stated in the work rules if the dismissal of an employee is to be valid. In Japan, moreover, termination of an employment contract by the payment of a certain amount of money is not recognized as a matter of course by law (except where an amicable settlement is reached between the parties concerned). As it is exceedingly difficult to judge the validity of dismissal in concrete cases, it is recommended that employers first obtain the advice of a specialist in labor law (such as an attorney or labor and social security attorney).
There is considerable precedent in case law to the effect that it is necessary to meet the following four criteria when making employees redundant as part of company restructuring (i.e., dismissal of employees in order to reduce staff numbers as a result of deteriorating business performance) in order for the redundancies to be deemed reasonable.
The company must prove that its business circumstances are such that redundancies are unavoidable and necessary.
- Effort to avoid redundancy
The company must prove that it has made serious managerial efforts to avoid redundancies such as by re-assigning staff and advertising for voluntary redundancies.
- Reasonable selection
The company must prove that the standards by which it selected those to be made redundant are reasonable, and that redundancies were carried out fairly.
- Reasonable process
The company must prove that it conducted sufficient consultations with workers and labor unions.
In order to help preserve jobs in situations where employees would otherwise have to be made redundant as part of company restructuring, there exists a system of "Employment Adjustment Subsidy," which is paid by the government to companies that temporarily lay off employees instead of making them redundant. The subsidy covers two thirds (one half in the case of large enterprises) of the cost of allowances paid for temporary layoffs, subject to a maximum amount.
4.8.2 Restrictions on Dismissal
Employers cannot dismiss employees in the following situations, and are subject to penalties for infringement.
- While an employee is on leave from work as a result of illness or injury incurred in the course of work, or for 30 days following the completion of such leave.
- While an employee is on maternity leave of six weeks prior to (14 weeks in the case of multiple pregnancy) and eight weeks after the childbirth, or for 30 days following the completion of such leave.
4.8.3 Cases Where Dismissal is Invalid
The following cases of dismissal do not have legal effect:
- Dismissal of a female worker during pregnancy or within one year of giving birth.
- Dismissal due to a worker's having reported an illegal act committed by his/her employer to the relevant authorities.
4.8.4 Dismissal Procedures
If an employer wishes to dismiss an employee, the employer must give the employee at least 30 days' notice. If the employer wishes to dismiss the employee summarily and without notice, the employer must pay the employee 30 days' wages at the time of dismissal (this payment of wages in rule of notice is known as a "notice allowance"). However, in the situations described below, employers may dismiss employees without notice and without paying a notice allowance so long as the employer obtains the approval of the head of the local Labor Standards Inspection Office.
- The company is unable to continue its business as a result of natural disaster or other such unavoidable circumstances.
- The dismissal of the employee is unavoidable and the result of causes attributable to the employee.
- An employee commits an act in the workplace that constitutes a crime under the Penal Code, including theft, embezzlement or causing injury.
- An employee breaches the rules or expected standards of behavior of the workplace, or exerts a negative influence on any other worker.
- An employee makes a false statement in his/her resume that is likely to be a factor in the decision to hire him/her.
- An employee is absent without leave and without due cause for a period of (generally) two weeks or more, and fails to respond to orders to report for work.
- An employee is repeatedly late for work, leaves work early or is absent without leave, and fails to improve his/her punctuality despite repeated warnings.
4.8.5 Dismissal in Practice
In Japan, it is not so usual for legal steps to be taken when an employer wishes to dismiss a worker for some reason. In practice, the employer will explain to the worker the business or job situation in order to persuade him or her to resign, and ultimately the worker will usually be persuaded to resign voluntarily. It is also often common for various conditions to be discussed (such as the topping up of a worker's severance pay) to encourage a worker to agree to resign.
4.8.6 Covenant Not to Compete
In Japan, freedom of choice of occupation is guaranteed by the Constitution. Accordingly, an agreement that prohibits working for a competitor for a certain period after leaving his/her former employer is only valid if the term, geographical scope, professional field concerned, and similar restrictions are reasonable and commensurate compensation is provided. Regarding trade secrets, both the disclosure of former employers' trade secrets by workers and questioning by enterprises of workers about such trade secrets are prohibited by law under the Unfair Competition Prevention Act.
4.8.7 Termination of Office, Resignation and Dismissal of Directors
The office of directors of Kabushiki-Kaisha (joint-stock corporations) terminates upon expiration of their term of office. Moreover, directors may resign at any time at their own discretion. However, if it causes a vacancy in the position, the directors may not be released from their obligations as directors until new directors take office.
Directors might be dismissed upon a resolution of the General Meeting of Shareholders at any time and regardless of the reasons. However, if the company dismisses the directors before the expiration of the term of office without any justifiable reason, the company must indemnify for damage caused by that dismissal.