Lecture 2: Fixed-term labor legislation in Japan (Part 1)

February 22th, 2022 [No. 96-2021]

Professor SHIMADA Yoichi,
Faculty of Law, Waseda University

 

 

 

Fixed-term Labor Contracts in Japan

Lecture 2: Fixed-term labor legislation in Japan (Part 1)

 

3. Characteristics of labor legislation for fixed-term employment in Japan

 Japanese labor legislation for fixed-term employment has, unlike Europe, not limited the use of fixed-term labor contracts (entrance regulating) but have imposed regulations on the nonrenewal of fixed-term labor contracts that are equivalent to those for dismissal. Under such labor legislation, when a fixed-term labor contract is renewed and the total contract term exceeds five (5) years, the applicable fixed-term worker will be granted the right to request conversion to an indefinite-term employment contract. In other words, no limit has been established in the number of contract renewals for fixed-term employment.

 Fixed-term workers are also under the same regulations as part-time workers in terms of the correction of disparities in work conditions compared to regular employees and employment management.

4. Complicated legislation on fixed-term labor contracts

 Japanese labor legislation for fixed-term employment currently consists of multiple laws. Specifically, it consists of the (1) Civil Code, (2) Labor Standards Act, (3) Labor Contracts Act, and (4) Act on Improvement of Employment Management for Part-Time Workers and Fixed-Term Workers (hereinafter called “Part-Time Workers and Fixed-Term Workers Act”). When viewed from the details of the regulations, it can be divided into the following: (1) upper limits on the labor contract period, (2) obligation to clarify work conditions in writing, (3) regulation on employment management, (4) regulation on the termination of contracts, (5) the right to request conversion to an indefinite-term employment contract, and (6) correction of disparities in work conditions between regular and non-regular employees.

 As for the background to the formation of the labor legislation for fixed-term employment, the Civil Code establishes the upper limit of five (5) years for the contract term (Article 626 of the Civil Code), requires justifiable reasons for dismissal during the term of employment (Article 628), and accepted as implicit the renewal of the contract when a worker continued to engage in work after expiration of the contract term (Article 629). The Labor Standards Act enacted in 1947 significantly shortened the upper limit for the term of a labor contract to one (1) year as opposed to five (5) years in the Civil Code (Article 626 of the Civil Code). This regulation was to prohibit the stranding of workers through the fixing of the employment term in order to eliminate the feudal labor practices of prewar Japan. Then, in 2003 when the Labor Standards Act was amended, the upper limit for the employment term was extended to three (3) years, in principle. Then, the Labor Contracts Act enacted in 2007 strictly limited dismissal during the term of the labor contract by requiring justifiable reasons (Article 17, paragraph (1), of the Labor Contracts Act). In the amendment to the Labor Contracts Act in 2012, with regard to a denial of renewal (nonrenewal) of a fixed-term labor contract, a judicially created doctrine was put in statutory form to apply the doctrine of the abuse of the right of dismissal by analogy (Article 19); in addition, the right to request conversion to an indefinite-term employment contract (Article 18) and prohibition of any unreasonable work conditions in comparison to regular employees for the reason of a fixed contract term (Article 20) was introduced. Furthermore, owing to the enactment of the Work Style Reform Law in 2018, the prior Act on Improvement of Employment Management for Part-Time Workers (hereinafter called the “Part-Time Employment Act”) was amended to include fixed-term workers within the scope of application. In addition, Article 20 of the Labor Contracts Act has been integrated into Article 8 of the Part-Time Employment Act because the provisions of those articles had the same intent (Article 8 of the Part-Time Workers and Fixed-Term Workers Act) and the title of the Act has been renamed to the Part-Time Workers and Fixed-Term Workers Act. Because of such amendments, the obligation of documentation of work conditions and the regulation on employment management that were provided in the Part-Time Employment Act have been applied to fixed-term labor contracts; in addition, with regard to fixed-term workers who are equivalent to workers with standard employment statuses, any discriminatory treatment of such fixed-term workers with respect to work conditions has been prohibited compared to those conditions for workers with standard employment statuses (Article 9 of the Part-Time Workers and Fixed-Term Workers Act).

5. Outline of fixed-term labor legislation

(1) Upper limits on labor contract period
 The law provides that fixed-term labor contracts, excepting those providing that the period shall be the period necessary for completion of a specified project, shall not be concluded for a period exceeding three (3) years, in principle, with the exception of five (5) years for (i) workers who have a high level of expertise and (ii) workers aged 60 years or older (Article 14, paragraph (1), of the Labor Standards Act). However, when the contract period exceeds one (1) year, a worker may terminate the contract at any time (Article 137 of the Supplementary Provisions to the Labor Standards Act). Therefore, employers may detain workers up to one (1) year, and in fact, not many labor contracts are concluded with one (1) or more years for the contract period.

(2) Obligation to clarify work conditions in writing
 In Japan, documentation of the labor contract is not mandatory; however, upon conclusion of a labor contract, it is necessary to report any important work conditions (such as the term of the labor contract, existence or nonexistence and standards of renewal in the case of a fixed-term labor contract, place of work, start and end times of work, recess hours, holidays and vacations, existence or nonexistence of overtime work, reasons for resignation, and wages) in writing, whether the contract term is specified or not (Article 15 of the Labor Standards Act). In the case of a fixed-term labor contract, in addition to the above, it is also necessary to provide notification in writing as to the existence or nonexistence of salary increase allowances, retirement/severance allowances, and bonuses, as well as contact information on matters pertaining to improvement of employment management or other issues (Article 6 of the Part-Time Workers and Fixed-Term Workers Act).

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