International Employment – Japan – Yoshikazu Abe

All business entities will face unique labour and employment challenges. Labour and employment issues in Japan have also become increasingly complex. In such an environment, it is essential for businesses to receive timely and practical legal guidance.

Anderson Mori & Tomotsune has extensive experience in providing legal services for clients dealing with labour and employment issues. Our team consists of lawyers who specialise in such areas, as well as other specially trained legal professionals, such as qualified immigration specialists (gyosei shoshi), and a qualified labour and social insurance specialist (shakai hoken romushi). Our team prides itself on being able to offer practical, bespoke advice and legal representation for each client.

I am a Partner at Anderson Mori & Tomotsune, engaged principally in the fields of labour and employment law, dispute resolution, as well as general corporate and commercial transactions, with an emphasis on various labour and employment matters. These matters include advising on the establishment and amendment of employee handbooks and other rules and regulations, employment contracts, mandatory and voluntary employee benefit programmes, retirement compensation and pension programmes, as well as social insurance matters, employee immigration matters and matters concerning labour relations, such as collective bargaining sessions with trade unions. As one of our firm’s core practices, I have extensive experience in advising foreign clients on labour and employment laws in Japan, which are significantly different from those in the UK, the US or many other jurisdictions. Clients have benefitted from my advice, as it sheds light on the unique characteristics of Japanese labour and employment laws.

Moreover, I have abundant experience in litigation and other dispute resolution procedures. During the course of my 20-year career, I have represented numerous foreign and domestic clients in court. I am also aware that litigation is not always the best solution for labour or employment disputes. Therefore, I not only assist our clients in dispute resolution, but also proactively advise them on how to resolve disputes in an amicable and cost-efficient manner.

The complexities and challenges that clients face, or may face, in Japan in association with employing their workforce can differ depending on various factors, such as the industries to which the clients belong, the number of employees that the clients employ, and whether or not the employees are unionised.

By way of example, all businesses have unique systems and processes for the payment/calculation of salary, bonuses, retirement allowances and other benefits, and often have difficulties in implementing those unique systems and processes in compliance with Japanese labour and employment laws. We carefully study the specific practices and needs of our clients and, thereafter, give practical advice to allow the clients to adopt, implement, amend and/or abolish the rules, policies and/or contracts necessary for lawfully implementing such systems and processes.

In addition, the laws in Japan concerning retirement allowances and pension programmes are extremely complex, and being able to access professional knowledge and experience on this issue is a must. Our team has a long history of practice in this area, and is able to provide appropriate advice to both domestic and international clients on retirement allowances and pension programmes.

Meanwhile, regardless of the economic environment, dismissals are always an important issue for clients. In Japan, the dismissal of employees is strictly regulated under Japanese labour and employment laws, and dismissals, if handled incorrectly, can result in significant legal liabilities. Consequently, our team provides support for clients on all issues involving the severance/dismissal of employees, including dismissals on disciplinary grounds, dismissals due to incompetence or poor performance, dismissals due to corporate restructuring, or consensual early termination. We are able to assist at all stages, including the initial planning for severance, conducting of investigations, communicating the situation to the target employee(s), negotiating severance packages, taking the necessary procedures for unilateral dismissals, preparing the necessary ancillary documents, such as termination letters, and the drafting of termination-related agreements.

Recently, there has been a wide range of employment law issues that clients have brought to our attention. For example, in addition to the issues mentioned elsewhere, our clients often consult with us as to their employees’ mental health issues. The occurrence of sick leave due to mental illness (which could even lead to suicide) is an unfortunate issue, which businesses in Japan must be prepared for. In this regard, it is important for employers to proactively look out for and address the mental health needs of their employees. As mental illnesses can be challenging to detect, appropriate measures need to be adopted by employers, such as monitoring employees who have taken long periods of sick leave.

Although it is difficult to provide examples of recent case studies due to the highly sensitive and confidential nature of such cases, our team has previously advised both domestic and international clients on how to handle such matters, taking into account the individual requirements of the clients, as well as (where applicable) the affected employees. Our team also works with our clients to implement feasible and suitable measures to ensure a safe and healthy working environment.

In the post COVID-19 era, while more and more employers have required their employees to return to the office, remote or hybrid-working arrangements have become popular among employees. More specifically, there are some companies that have terminated their remote or hybrid-working arrangements, for instance, because they place a high value on face-to-face communications, or employees have not got used to online communications tools. However, there are other companies that benefit from such arrangements, for instance, because their potential employees consider them more attractive than office-based work.

There are multiple legal complexities associated with remote and hybrid work. For example, many companies have faced difficulties in monitoring their employees’ working time in compliance with Japanese employment law, maintaining the confidentiality of their proprietary information and data, maintaining or enhancing the performance of remote or hybrid-working employees, ensuring their employees’ privacy, as well as dealing with harassment that has occurred in remote or hybrid-working environments. To this end, we offer vast experience in providing practical advice to our clients to resolve such issues.

Yes, Japan has recently introduced statutory arrangements related to digital nomads, as discussed further below.

Japanese immigration laws set out the statuses or qualifications that allow foreign nationals to enter and work in Japan (“Status of Residence”), which include certain activities prescribed in the government’s notice (“Designated Activities”). Under Japanese immigration laws, a foreign national who wishes to enter Japan to conduct certain Designated Activities may do so after obtaining the necessary visa. In the past, the Designated Activities did not include those related to digital nomads. However, as of 31 March, 2024, the Japanese government expanded the scope of the Designated Activities to include activities related to digital nomads.

Such expansion of activities was a part of the Japanese government’s efforts to attract more foreign entrepreneurs and investors to Japan. It is expected that promoting the acceptance of digital nomads in Japan will have a positive economic effect through an increase in inbound tourism, and will lead to the promotion of innovation in Japan through exchanges between digital nomads and Japanese nationals.

As a result of said expansion, the following activities are now included as part of the Designated Activities:

(i) Activities that are based on an employment contract with a corporation or any other foreign organisation established in accordance with the laws and regulations of a foreign country, and which involve using information and communication technology in Japan to engage in the business of such an organisation’s office located in a foreign country; or

(ii) Activities (excluding those that cannot be provided or sold without entering Japan) that involve providing services for a fee, or selling goods or other items to persons located in a foreign country using information and communication technology.

One of the key considerations is that, as a general rule, applicants for the digital nomad visa are not permitted to engage in any activities other than those permitted by the government, nor are they permitted to work based on an employment contract or any other contract with a Japanese public or private employer.

Another key consideration is that, in order to be granted the Status of Residence as a digital nomad, applicants are required to meet the following four requirements:

1. The period of stay in Japan with the Designated Activities for digital nomads must not exceed six months within a year (which may not be renewed for any additional period);

2. Applicants must be a national of a country that has entered into a tax treaty with Japan, as well as from a country or region that has short-term stay visa exemption arrangements with Japan (which includes 49 countries and regions);

3. The annual income of applicants must be at least JPY 10 million at the time of application; and

4. Applicants must hold insurance that covers death, injury or illness during their stay in Japan.

Following the legitimisation of the digital nomad visa, our team has provided varied assistance to foreign clients so that their employees can obtain these visas.

Over the past few decades, there has been an increasing trend in the number of incidents related to workplace discrimination and harassment. Any allegation of discrimination or harassment (be it sexual harassment, power harassment and/or maternity harassment) must be taken seriously and handled quickly, since in the event of a dispute, both the individual wrongdoer and the employer company may be held legally responsible. The company’s corporate reputation and general working environment may also suffer significant damage.

Accordingly, our team provides advice and support on all aspects of discrimination and harassment issues, including conducting investigations, certifying and analysing the facts from a legal perspective, as well as reviewing personnel policies. Furthermore, we host seminars for our existing and potential clients – to study and actively prevent discrimination and harassment in the workplace.

In recent years, companies have faced collective bargaining pressure, not only from intra-company trade unions, but also from extra-company trade unions with members who are employees of the companies. An example of the complexities that companies often encounter is their statutory obligation to bargain in good faith with the unions (whether intra-company or extra-company), a failure of which constitutes an unfair labour practice, and may result in time-consuming and costly legal disputes.

Our team proactively supports our clients not only by participating in the collective bargaining sessions with unions, but also by providing advice on how to avoid unfair labour practices. If the relationships between our client companies and the relevant unions are no longer amicable, we are able to advise on appropriate countermeasures and represent our clients in proceedings before prefectural or metropolitan labour relations commissions (or in litigation).

We are a full-service law firm formed by the winning combination of three leading law firms in Japan: Anderson Mori, one of the largest international firms in Japan, which was best known for serving overseas companies doing business in Japan since the early 1950s; Tomotsune & Kimura, particularly well-known for its expertise in international finance transactions; as well as Bingham Sakai Mimura Aizawa, a premier international insolvency, restructuring and crisis-management firm.

Our combined firm provides an extraordinarily powerful value proposition. Housing all of these synergistic practices under one roof – and further increasing our resource scale – we have the capability to: (i) serve a multinational client base; (ii) on in-bound, out-bound and domestic projects; (iii) by providing expert, timely and cost-efficient advice; (iv) across a full range of legal issues; and (v) in the largest, most complex, cross-sector transactions.

We are proud of our long tradition of serving international business and legal communities – and of our reputation as one of the largest full-service law firms in Japan. Today, our combined expertise enables us to deliver comprehensive advice on virtually all legal issues that may arise from a corporate transaction, including not only those related to labour and employment matters, but also those related to M&A, finance, capital markets and restructuring/insolvency, as well as litigation/arbitration. A vast majority of the lawyers at our firm, including myself, are bi-lingual and experienced in communicating, drafting and negotiating across borders and around the globe. This means we welcome the opportunity to work closely with multinational clients and channel our resources towards our shared goal of achieving more together.

We are headquartered in Tokyo, with branch offices in Osaka and Nagoya. Outside Japan, we have offices in Beijing, Shanghai, Singapore, Hanoi, Ho Chi Minh City, Bangkok, London and Brussels. We also have associated firms in Hong Kong and Jakarta, as well as relationships and friendships with multiple other international or local law firms, which provide assistance to our clients if the need arises.

There are several new pieces of legislation that have been, or will be, implemented in relation to employment law. Some examples of such legislation are as follows (and also as mentioned in our response to question 5 above):

1) Amendments to the Labour Standards Act

The Labour Standards Act was amended and enforced in April 2019 to specify the maximum limits of overtime work hours (i.e., as a general rule, up to 45 hours a month and 360 hours a year, but 720 hours a year as exceptions). However, it had provisionally exempted construction workers, automobile drivers and physicians from such limitations for five years. From 1 April, 2024, such exemption expired, and certain maximum limits of overtime work hours now apply to such exempted workers. In general, construction workers are subject to the standard maximum limitations; however, special maximum limitations – which are higher than the standard ones – apply to automobile drivers and physicians.

2) Enactment of the Freelance Act

The Act on Ensuring Proper Transactions Involving Specified Entrusted Business Operators (the “Freelance Act”) was enacted on 28 April, 2023, and will come into force on 1 November, 2024.

The purpose of the Freelance Act is to (i) optimise transactions involving freelancers who are either a sole proprietorship without employing employees, or a one-person corporation, and (ii) improve their working environments. Therefore, the Freelance Act has been separated into two main parts, with the first setting out regulations regarding the optimisation of transactions involving freelancers, and the second setting out regulations regarding the freelancers’ work environments.

3) Amendments to the Acts on Childcare Leave and Family Care Leave, etc.

Amendments to the Act on Childcare Leave, Caregiver Leave & Other Measures for the Welfare of Workers Caring for Children or Other Family Members, and to the Act on Advancement of Measures to Support Raising Next-Generation Children (collectively, the “Amended Childcare Leave Acts”), were enacted on 24 May, 2024. The Amended Childcare Leave Acts provide several amendments to existing laws, such as:

(i) Expansion of measures to realise flexible working styles depending on the ages of the children;

(ii) Expansion of the obligations to disclose the status of use of childcare leave, as well as promotion and strengthening of the measures to support the development of next-generation children; and

(iii) Strengthening of the support systems for balancing work and nursing care responsibilities to prevent employees from leaving employment due to a need to care for family members.

For example, regarding the amendments mentioned in (i) above, if an employee takes care of a preschool child of three years of age or older, the employer will be required to take certain measures to realise a flexible working style. More specifically, from among the following measures, the employer will be required to select at least two: (a) to change the subject employee’s starting time, etc.; (b) to allow the subject employee to telework; (c) to reduce the subject employee’s prescribed working hours; (d) to grant additional leave; and/or (e) to take additional actions to help the employee care for the child while working.

The Amended Childcare Leave Acts will come into effect on 1 April, 2025. However, some amendments (including those mentioned in the preceding paragraph) will come into effect on the date(s) to be specified by a Cabinet Order within one year and six months from the date of promulgation of the Amended Childcare Leave Acts.

4) Amendments to the Employment Insurance Act, etc.

Amendments to the Employment Insurance Act and other related laws (collectively, the “Amended Employment Insurance Acts”) were enacted on 10 May, 2024.

The purpose of the Amended Employment Insurance Acts is to establish a more comprehensive employment safety net that effectively supports diverse work styles.

For example, the Amended Employment Insurance Acts expand the scope of workers who must be enrolled in the public employment insurance programme from those whose predetermined working hours are at least 20 hours per week, to those whose predetermined working hours are at least 10 hours per week.

The Japanese government announced that, based on the statistics on the number of hours worked by workers in 2023, approximately five million workers will be newly insured by the employment insurance programme as a result of the Amended Employment Insurance Acts – making them eligible to receive benefits, such as unemployment benefits and childcare leave benefits.

The Amended Employment Insurance Acts will come into effect on 1 April, 2025. However, several amendments will come into effect on different dates. For example, the expansion of the scope of insured workers as mentioned above will come into effect on 1 October, 2028.