Support through your toughest HR challenges: A network of 285,000 HR professionals.
Shawn Premer shows how doing the right thing for employees leads to positive business results.
Is your employee handbook keeping up with the changing world of work? With SHRM's Employee Handbook Builder get peace of mind that your handbook is up-to-date.
Build competencies, establish credibility and advance your career—while earning PDCs—at SHRM Seminars in 12 cities across the U.S. this spring.
#SHRM18 will expand your perspective – on your organization, on your career, and on the way you approach HR. Join us in Chicago June 17-20, 2018
Members may download one copy of our sample forms and templates for your personal use within your organization. Please note that all such forms and policies should be reviewed by your legal counsel for compliance with applicable law, and should be modified to suit your organization’s culture, industry, and practices. Neither members nor non-members may reproduce such samples in any other way (e.g., to republish in a book or use for a commercial purpose) without SHRM’s permission. To request permission for specific items, click on the “reuse permissions” button on the page where you find the item.
Japan has a reputation for being a difficult jurisdiction for firing employees. Accordingly, the use of fixed-term employment contracts has been a regular strategy for employers to maintain more discretion in whether to retain or terminate an individual's employment. However, beginning April 1, 2018, employees on a limited-term employment contract lasting more than five years with the same employer will gain the right to change their employment status to an open-ended term. The law provides several limited exceptions that can only be used with government approval. As the approval process takes time, employers that would like to apply for the applicable exemption should plan ahead and begin that process now. Otherwise, they may find that their current fixed-term employees could become open-ended "permanent" employees in Japan.
The law provides that if: (1) the total duration of an employee's employment on a fixed-term contract exceeds five years with the same employer (including after one or more renewals); and (2) the employee applies for employment with an open-ended term prior to the date of expiration of the currently effective fixed-term, the employer must, by operation of law, accept the employee's application for open-ended employment. The new employment with an open-ended term would start the day following the expiration of the then-current fixed term.
How to Count Five Years
This new employee right was introduced in the amendment to the Employment Contract Act, effective April 1, 2013. Employment terms, whether an initial term or extended term, that begin after April 1, 2013, must be counted. For example, if the employee had an initial one-year term that began on June 1, 2012, and then renewed for another year, the period from which to count the five-year eligibility to convert to an open-ended term would begin on June 1, 2013, not on April 1, 2013, because the duration starting on June 1, 2013 is the initial term after the effective date of April 1, 2013. Also, if more than six months lapse between employment terms, the term prior to the blank period does not count; only the term after the period of unemployment would count.
Employment Terms and Conditions After Conversion
The conversion to an open-ended term occurs only when the employee actually applies to the employer for an open-ended term. If the qualified employee applies for the conversion to an open-ended term, the employer must accept the conversion unless the employee falls into one of the exceptions. The employment terms and conditions after conversion to an open-ended term must be the same as they had been for the previous fixed-term employment (other than the duration of the employment). However, the terms can be changed by what is included in the employment contract, labor-management agreement, or Rules of Employment.
The Rules of Employment in Japan are similar to an employee handbook in the U.S. However, the Rules of Employment are unique in that they automatically set the groundwork for the terms or conditions of employment, and are applied automatically to the employee if the Rules of Employment have more beneficial terms than the employment contract. For example, if the employer has benefits or plans available to employees with an open-ended term in the Rules of Employment, the converted employees with an open-ended term will qualify for those benefits even if their individual employment contract does not offer such benefits. Also, converted employees will have the same rights as other open-term employees when it comes to protection from termination, which always requires just cause. To be sure, the threshold for just cause is very high in Japan, and without just cause, the termination is simply invalid.
Certain types of employment are exempted from this law:
These two exceptions are not automatic, and may become effective only after the approval by the local Labor Office. Employers wishing to use these exemptions should apply for approval to the Labor Office as soon as possible. Otherwise, qualified individuals' fixed terms will be automatically converted to an open-ended term on the relevant dates.
Steps Going Forward
To be well prepared for April 1, 2018, employers operating in Japan should:
Trent M. Sutton is an attorney with Littler in Rochester, N.Y. Aki Tanaka is an attorney with Littler in Fairport, N.Y. © 2018 Littler. All rights reserved. Reposted with permission of Lexology.
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Please sign in as a SHRM member before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
HR Education in a City Near You
SHRM’s HR Vendor Directory contains over 3,200 companies