Japanese Employment Contract – Recommended Dismissal Clauses
May 25, 2018
When hiring Japanese workers as permanent employees, it is vital that the employer includes dismissal clauses in the employment contract if there is no such clause in the Rules of Employment (就業規則).
The most important factor in a dismissal matter is the grounds of dismissal. Such grounds should be clearly understood by both parties and available in writing during the course of employment. Ideally, the grounds should be included in either the Rules of Employment or the Employment Contract.
According to Labor Standards Act, Art. 89, an employer must have Rules of Employment it has more than 10 employees. When our firm acts for the employer in a dismissal matter, the Rules of Employment is the first document we examine if available as it stipulates the most important rules of employment.
For employers that have less than 10 employees, they have discretion as to whether to have Rules of Employment or not. When there is no Rules of Employment, the Employment Contract is the main document to be examined.
Japanese labor law is generally in favor of workers and employers cannot dismiss permanent employees at will. Labor Contract Act, Article 16 stipulates the following:
Article 16 If a dismissal lacks objectively reasonable grounds and is not considered to be appropriate in general societal terms, it is treated as an abuse of rights and is invalid.
Therefore, an employer will face many difficulties when trying to prove reasonable grounds for dismissal when those grounds weren’t first consented upon by the employee.
Although it is not impossible for employers to dismiss truly terrible employees, it is easier for employers to prove that grounds for dismissal have already been agreed upon, on which the judge shall make factual determinations unless the relevant clause is invalid.
Japanese Employment Contract – Recommended Clauses
The following are sample clauses for employers to insert into their employment contract and Rules of Employment to prevent difficulties when dismissal becomes necessary. Please note that dismissal matters should be treated on a case-by-case basis and the following clauses do no eliminate all potential problems.
The company may dismiss the employee if any of the following situations arise
The company consider that work demands are not met due to the physical or psychological problem(s) of the employee.
The company considers the employee is incompetent due to his/her insufficient abilities or insufficient performance.
Work attitude is unsatisfactory despite caution from the company. .
The employee disrespects co-workers and office harmony and has a bad influence over the working performance of other member(s).
There are needs for downsizing the activities or to terminate the employment due to business reasons.
Other reasons the company deems the employee unsuitable.
Employers should be aware that the Labor Standard Act contains several limitations on dismissal.
(Restrictions on the Dismissal of Workers)
Article 19 (1) Employers shall not dismiss a Worker during a period of absence from work for medical treatment with respect to injuries or illnesses suffered in the course of employment, nor within 30 days thereafter, and shall not dismiss any woman during the period of absence from work before and after childbirth in accordance with the provisions of Article 65, nor within 30 days thereafter; provided, however, that this shall not apply in the event that the Employer pays compensation for discontinuance in accordance with Article 81, nor when the continuance of the Business has become impossible due to natural disaster or other unavoidable reasons.
(2) In the event of circumstances under the second sentence of the proviso of the preceding paragraph, the Employer shall obtain the approval of the relevant government agency with respect to the reason in question.
Dismissal of Limited Term Employment
Please note that dismissal of limited term employment is different to dismissal of permanent employment.
Labor Contracts Act states the follow:
(Dismissal, etc. Before Contract Expires)
Article 17 (1) With regard to a fixed-term labor contract, an Employer may not dismiss a Worker until the expiration of the term of such labor contract, unless there are unavoidable circumstances.
(2) With regard to a fixed-term labor contract, an Employer must give consideration to not renewing such labor contract repeatedly as a result of prescribing a term that is shorter than necessary in light of the purpose of employing the Worker based on such labor contract.