International employers - top traps for Japan

Set out below is a high level overview of the top employment traps that an employer might face when dealing with Japanese employment law for the first time.

• Underestimating how difficult it is to dismiss an employee - an employer must have an objective, logical and reasonable reason in order to dismiss an employee, failing which the dismissal will be invalid (such that the employee must be reinstated and paid all unpaid salary from the day after the dismissal with a late fee at 6 per cent per annum). “Objective, logical and reasonable” is interpreted strictly.
• Not understanding the definition of “manager” (and that fact that what matters is what happens in practice) thereby risking not paying somebody who is not, in fact, a manager the overtime and holiday pay to which they are entitled.
• Failing to comply with the numerous filing obligations (of which the two most important would be (1) the “36 agreement” and (2) the filing of work rules) thereby risking unlawfully asking employees to work overtime.
• Not understanding that start and finish times must be precisely recorded (including for managers) using an objective system (unless there are unavoidable reasons why hours cannot be recorded objectively in which case employers must explain to employees, in advance, how to record their working hours precisely and must also avoid setting an upper limit of working hours for the purpose of inhibiting employees from reporting the precise working hours) failing which an employer can be subject to increased costs (for example unpaid wages, additional overtime) as a result of a court accepting the hours put forward by the employee and found liable for damages for sickness due to long working hours.
• Failing to understand the distinction between an employee employed under an employment agreement (with employment protection) and a director whose services are provided under a service agreement thereby risking inadvertently giving a director employment rights (by, for example, including inappropriate contractual wording and giving the director directions in a manner that would apply to employees).