Is an employee dismissal valid? A traditional but very current question in Japan

Tokyo based lawyer and partner at Spring Partners Ms. Yasuko Fukuyama, explains in this article the intricacies of employment law in Japan, in particular rules related to employee dismissal.

In recent years, the shrinking working population in Japan due to the declining birthrate and an ageing population has become an urgent social issue. Japan is working to create a better working environment to utilize its potential work force under the government slogan "Work Style Reform".
In the course of providing various legal advice to foreign clients in Japan, I frequently field their questions regarding employment contracts in Japan, especially the dismissal of employees.

Valid dismissal of employees is quite difficult

In Japan, the company sets forth detailed employment rules, and these rules always stipulate that if an employee violates employment rules, the company may dismiss the employee. However, such dismissal is not always effective.

Under Japan's Labor Contract Law, dismissal is invalid if it "does not have an objectively justifiable reason and is not deemed to be appropriate based upon social convention”. A lack of ability or minor violations of the rules are not sufficient to satisfy this requirement- more material problems or continual violations are required.

In addition, the requirements for dismissal for the purpose of restructuring the company are also very strict. The Japanese Supreme Court has determined that the four requirements for valid dismissal for restructuring are:

(a) the need of dismissal

(b) the fulfillment of obligations to avoid dismissal

(c) the rationality of selection of dismissed employees, and

(d) the appropriateness of dismissal procedures.

In particular, (a) requires that a company is in serious financial crisis and there is a risk to the continuity of the company. For (b) it is required that a company has made every effort to avoid dismissal such as offering early retirement, reduction of executive remuneration, reduction of unnecessary expenses other than personnel expenses, reassignment, or transfer to group companies, etc.

Therefore, the dismissal of an employee requires a careful advance review that considers the various risks and complicated labor court proceedings.

By the way, Japan hosted the Rugby World Cup in 2019 and now we are very excited to host the Olympic and Paralympic Games this summer. Recently, a new national stadium has been completed! I look forward to meeting many people from all over the world coming to Japan!

For more information about employment law in Japan

Please contact English speaking lawyer and partner Ms. Yasuko Fukuyama, at Spring Partners in Toyko.