Employment Agreements in Japan
Mar 16, 2021
Here are some legal principles to respect when it comes to employment agreements in Japan.
1.Working rule is standard
In Japan, we usually apply the working rule, called 就業規則, to the company. A company that has more than 10 employees shall establish the working rules.
Please click the link Jetro provided in the past, which can be out of date because this was drafted in 2017.
Because Jetro, a government organization drafted it, it can be in favor of the workers. Please make sure to consult with specialists working for the company if you intend to create the working rules.
2. Specialists to consult
Normally, we have two types of labor attorneys. First, the company-side attorney, second the worker-side attorney. If you retain the worker-side attorney, the draft will be in favor of the workers which might cause issues later. Please ensure that the rules shall be strict for the workers while the administration can be soft for workers.
You might be confused about the professionals called 社労士, social security agent who prepare the employment insurance, health insurance, and worker’s accident compensation insurance. These persons usually take care of administrative matters while attorneys take care of the labor disputes.
3. Agreement of the employment
(1) the notice of employment or the employment agreement
While you can draft the employment agreements you may want to use the notice of employment (労働条件通知書）. The notice of employment is quite easy for the employer side, so normally the companies provide the notice to candidates. It is recommended to provide the rule to the candidates as well.
On the contrary, we may want to give the employment agreement to the candidates. Especially employers who have less than 10 people and want to show the obligation and right to candidates prefer to use the employment agreement. Companies having more than 10 workers also can conclude the agreement with candidates in the condition that the working rule prevails in the current employment rule if any conflicts between the working rule and the agreement arise.
(2) the strong regulation to protect the workers
Employment agreements in Japan shall be drafted in favor of the employer side because the labor law in nature protects workers well. You will be aware of this protection when you see workers have a conflict with the company. Even if workers arguably conduct some embezzlement, without evidence attorneys cannot protect the company well. Attorneys usually request the company to separate the working place and suspected workers to collect the evidence.
(3) the explanation of each term
(dismissal grounds)
The company cannot dismiss workers at will. The company shall have reasonable ground to dismiss workers, which reason also need to be incorporated in the employment rule or in the employment agreement.
(working hours)
The flexible time system is not so preferable, because workers will interpret that she/he can come any time (in reality, the flexible time system is not what workers consider but the company needs to refrain from any misleading agreements. Employers shall set the working time including the starting point to the finishing point. It is recommended for the company to use the time card regardless of the digital time card or traditional time because without evidence the judge will consider the fact in favor of the workers.
(overtime allowance)
The company may stipulate an overtime allowance but it must show individually the portion of the overtime and working time.
(belongings)
Workers might bring the company laptop to their home. Sometimes the confidential information can be leaked to competitors. We suggested that you consider using a cloud system and track their activities in the record of the cloud system. Earlier detection can soften the damage of the worse-case scenarios.
(term)
The term is quite an important clause because during the term the company will have difficulty terminating the agreement. On the contrary, lifetime employment is also not easy to terminate. Some directors misunderstand the probational period thinking it allows them to terminate the agreement, though even the probational period also does not allow the company to terminate at will. What we usually recommend is before hiring, the company sets a series of tests and trials such as written and verbal tests; culture fit tests, and short-term work experience to evaluate the candidates.
(intellectual properties)
Of course, these properties shall be transferred to the company. If the workers contributed to the invention as well, the company needs to take into consideration the remuneration of the invention.
(confidentiality and non-competition)
To protect the company’s assets, the company needs to set strict confidentiality in addition to the system organization to prevent wrongdoings by employees.
(salary)
Sometimes, we see conflicts about withholding tax and social security expense, so we recommend that the company shall clearly state the portion of the withholding tax and social security expense shall be paid.
4. The difference between independent contractor agreements and employment agreements
We recommend the employment agreement as long as you can control well the candidates while if you cannot control well, the independent contractor agreement is recommended. Of course, there are certain criteria to cause the independent contractor to be an employee under the supervision of the labor law, for example, the elements enabling the said persons to be instructed, ordered. If such criteria are met, then the company might violate the labor law. The facts have an important influence over the content of the agreement, employment agreement, or independent agreement.
5. Recommendation
As we stated above, we recommend you consult with the appropriate attorney to deal with employment agreements in Japan.
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