Significant Changes to Japan's Labor Laws Take Effect

​Japan is known as a country that prizes hard work. While there are significant benefits to this work ethic, when taken to the extreme, it can cause significant problems. Media attention to "karoshi"—death caused by overworking—has brought the issue to the forefront.

To address the dangers of overworking, Japan's lawmaking body, the National Diet, passed the Work Style Reform Legislation in 2018. Most of the provisions take effect in April.

Overtime Work Limits

The new law sets limits on overtime hours. This restriction takes effect in April for large employers and in April 2020 for small employers—generally those with 50 employees or fewer. The penalty for exceeding these limits may include criminal sanctions, which can apply not only to the employer, but also to HR professionals.

There are basically two rules regulating overtime worked:

Basic limit rule. Overtime, which is time worked beyond eight hours a day or 40 hours a week, cannot exceed 45 hours a month and 360 hours a year. This is called the basic limit.

Extended limit rule. When there are special circumstances, such as an unexpected volume of customer complaints or a sudden change in product specifications, the employer may extend the basic limit. In this case, the total number of overtime hours and hours worked on statutory holidays cannot exceed 100 hours a month. Employees may not work over the basic limit for more than six months in a year, and they can work no more than 720 hours of extended limit overtime per year.

These rules apply to nonexempt employees in Japan. Importantly, the exempt category in Japan is quite different from that in the United States, and it is generally a much narrower exemption. Managers generally are not paid for overtime but must earn more than 10.75 million yen per year (approximately U.S. $97,223) to be exempt, according to the new law. This is well above the current $23,660 threshold for white-collar exemptions in the U.S.

The new law makes it illegal for employers to misclassify nonexempt employees as exempt and require them to work or let them work long hours without overtime pay.

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Increased Overtime Rate for Small Employers

Small employers previously were exempt from an overtime premium of 1 1/2 times the regular pay rate. As of April 2023, however, they will have to pay that premium if an employee's overtime exceeds 60 hours in a month.

Requirement to Take Annual Leave

The new law requires employees to take at least five days of leave a year if they have more than 10 days of unused leave. This requirement takes effect in April.

Highly Skilled Professional Exemption

The law created an exemption from the overtime limits for highly skilled professionals, effective April 1. To qualify as a highly skilled professional, an employee must occupy a job that meets the following parameters:

• The position must require a high degree of expertise. Such positions might include a developer of a financial instrument, an analyst, a consultant or someone in research and development.
• The job description should clearly identify the scope of work.
• The annual salary must be more than triple the average employee's salary in Japan. Currently, the annual salary for the new exempt status is 10.75 million yen per year (approximately U.S. $97,223 per year).

The employer should create a labor management committee, which must approve the exemption and register it at the labor standards inspection office.

Time-Tracking Requirement for All Employees

Effective April 1, employers must track work hours for all employees, including exempt employees, to prevent overwork.  

Action Items for Employers

Employers with operations in Japan should consider taking the following actions:

• Train HR about the new laws.
• Train employees about how to work efficiently in fewer work hours.
• Conduct an audit to find misclassification risks for exempt employees.
• Implement a new time-tracking system that tracks work hours for all employees, including those who are exempt.
  

Aki Tanaka is an attorney with Littler in Boston and Trent Sutton is an attorney with Littler in Fairport, N.Y.