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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:



第十六条 解雇は、客観的に合理的な理由を欠き、社会通念上相当であると認められない場合は、その権利を濫用したものとして、無効とする。

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)
第十九条 使用者は、労働者が業務上負傷し、又は疾病にかかり療養のために休業する期間及びその後三十日間並びに産前産後の女性が第六十五条の規定によつて休業する期間及びその後三十日間は、解雇してはならない。ただし、使用者が、第八十一条の規定によつて打切補償を支払う場合又は天災事変その他やむを得ない事由のために事業の継続が不可能となつた場合においては、この限りでない。

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 前項但書後段の場合においては、その事由について行政官庁の認定を受けなければならない。
(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)
第十七条 使用者は、期間の定めのある労働契約(以下この章において「有期労働契約」という。)について、やむを得ない事由がある場合でなければ、その契約期間が満了するまでの間において、労働者を解雇することができない。

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 使用者は、有期労働契約について、その有期労働契約により労働者を使用する目的に照らして、必要以上に短い期間を定めることにより、その有期労働契約を反復して更新することのないよう配慮しなければならない。
(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.

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