NO&T Japan Legal Update
With the March, 30, 2023 amendment to the Ordinance for Enforcement of the Labor Standards Act coming into effect on April 1, 2024, employers will have added obligations to notify employees of the terms and conditions of their employment. Specifically, under the amended law, employers will be required to notify their employees of (i) the scope of changes of workplace location (including changing offices and any change from in-person to remote work, or vice versa) and duties and responsibilities, (ii) the existence and details of renewal limits on fixed-term employment contracts, and (iii) the opportunity for conversion from a fixed term employment contract to an indefinite term employment contract and the terms and conditions of employment following such conversion.
Below is a brief overview of the new notification obligations incumbent on employers with respect to employment terms and conditions.
Under the current Labor Standards Act, employers are required to notify employees of certain important terms and conditions of employment at the time of hiring. Specifically, employers must notify employees of the following conditions in writing:
In addition, under the Act on Improvement of Personnel Management and Conversion of Employment Status for Part-Time Workers and Fixed-Term Workers, when hiring part-time employees or fixed term employees, in addition to the conditions indicated above, employers are also required to notify such employees of the following conditions in writing:
Under the current Labor Standards Act, employers are required to notify employees of “workplace location and duties and responsibilities.” This obligation is considered satisfied if employers notify employees of workplace location and duties and responsibilities immediately upon their hiring by the employer. However, against the background of an increasing number of companies adopting various employee systems, such as those limiting workplace locations, duties and responsibilities, and working hours, the amended law will require employers to notify employees in writing upon their hiring of the scope of changes of workplace location and duties and responsibilities (i.e., the range of workplace locations where the employee may work and the scope of duties and responsibilities employee may engage in upon any future transfer).
For example, if an employer hires employees on the condition that their duties and responsibilities will be limited to “sales” and their duties and responsibilities immediately after joining the company is indicated as “sales for corporate customers,“ the employer should state in the column of “details of duties and responsibilities” of the employment contract as follows: “details of duties: (immediately after joining the company) sales for corporate customers; the scope of change of duties and responsibilities: sales.” Conversely, for employees without such limitations in relation to their duties and responsibilities, employers may state in the column “scope of change of duties and responsibilities” of the employment contract as follows: “duties and responsibilities as designated by the company.”
Employers are required to notify employees of the scope of changes of workplace location and duties and responsibilities not only upon entering into employment contracts but also on renewal of fixed term employment contracts.
Under the Labor Contracts Act of Japan, if a fixed-term employment contract with the same employer exceeds five consecutive years, employees under such employment contracts have the option to convert such fixed-term employment contracts to an indefinite term contract upon request by the employee. This rule is the so-called “conversion to an indefinite-term employment contract” rule and was introduced by amendments to the Labor Contracts Act in 2012. However, it has been pointed out that, although 10 years have passed since such amendment, many employees are not aware of the rule, and thus the option is underutilized. In light of this, the amended law requires employers to notify relevant employees at every contract renewal when the opportunity for conversion to an indefinite term employment contract arises (i.e., where a fixed term employment contract has been repeatedly renewed with the same employer and the total period of the employment contract exceeds five consecutive years) (i) that they can request conversion of their fixed-term employment contract to an indefinite employment contract and (ii) of the terms and conditions following such conversion. In relation to (i) above, for example, employers must provide in the renewal employment contract that “during the contract term of this fixed-term employment contract, if you make a request to the company to convert your fixed term employment contract to an indefinite-term employment contract, your employment contract will be converted accordingly from the date following the date of expiration of your fixed-term employment contract.” As regards (ii) above, employers will need to notify relevant employees of the terms and conditions following such conversion by appropriate methods such as attaching an appendix of the terms and conditions following such conversion to the renewal contract.
In relation to the above notification obligation regarding (i) the opportunity for conversion of a fixed-term employment contract to an indefinite-term employment contract and (ii) the terms and conditions following such conversion, employers are subject to an ongoing obligation to notify employees of such matters upon every renewal of a fixed term employment contract once the right for conversion to an indefinite-term employment contract arises.
Fixed-term employment contracts generally end upon the expiration of their contract term. However, under the Labor Contracts Act of Japan, in the following cases employers may be prevented from not renewing such contracts by the so-called “doctrine of restriction of non-renewal on a fixed-term employment contract”: (i) if the fixed-term employment contract has been renewed repeatedly and the non-renewal thereof can be reasonably deemed equivalent to the dismissal of an employee with a non-fixed term employment contract under normal social conventions, and (ii) if the employee with a fixed-term employment contract has a reasonable expectation of renewal upon the expiration of his/her fixed-term employment contract. In addition, as mentioned in (b) above, if the fixed-term employment contract with the same employer exceeds five consecutive years, such employment contract must be converted to an indefinite term employment contract upon request by the employee under the so-called “conversion to an indefinite term employment contract” rule. In light of this, in practice, employers often limit the frequency of renewals of fixed term employment contracts in the fixed-term employment contract itself and/or include a non-renewal clause, providing that the employer will not renew the fixed-term employment contract beyond a particular point.
In view of these circumstances, in order to avert issues arising between employers and employees due to misunderstandings with respect to the existence and details of renewal limits on fixed-term employment contracts, the amended law requires employers to notify the relevant employees of the existence and details of renewal limits on fixed-term employment contracts (i.e., any cap on the number of renewals of a fixed-term employment contract or the total period of the fixed-term employment contract) each time a fixed-term employment contract is entered into or renewed.
Proper notification of the terms and conditions of employment on hiring and/or renewal of an employment contract is a statutory duty for employers, and is critical in preventing any issues from arising due to misunderstandings between employers and employees in relation to the terms and conditions of employment. Employers should review their employment contract templates and practices to ensure that they are in line with the amendments above.
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