A number of amendments to Japan's labour and employment laws recently took effect. Among other things, the amendments concern the monitoring of employee working hours, paid annual leave, the so-called 'highly professional system' and overtime limits. Employers should ensure that their policies and practices comply with the amendments to ensure an easy transition to Japan's new employment framework.
Under Japanese law, employers must – in principle – pay an allowance to employees who work more than eight hours per day or 40 hours per week. As such, from an employer's perspective, it is practical to include an employee's overtime allowance in their base salary where possible. However, for an employee's overtime allowance to be validly included in their base salary, certain requirements must be satisfied. These requirements are a hot topic in Japanese legal practice.
The National Diet recently enacted a bill relating to work style reform, which has amended the Labour Standards Act, the Industrial Safety and Health Act and relevant laws. Most amendments will come into effect on 1 April 2019. The amended Labour Standards Act stipulates that the upper limit for overtime will be, in principle, 45 hours a month and 360 hours a year. However, there are exceptions for certain business sectors.
One of the controversial issues regarding Japan's so-called 'lifetime employment system' is whether and to what extent employers can impose different working conditions (eg, salaries, bonuses and allowances) when they rehire employees who were once non-fixed-term employees as fixed-term employees. The Supreme Court recently handed down a significant decision addressing this issue.
Article 20 of the Labour Contract Act prohibits the imposition of unreasonable employment conditions on fixed-term employees in order to ensure their fair treatment. In light of two recent Supreme Court decisions on this matter, Japanese employers with both fixed-term and permanent employees should carefully review whether differences in the individual employment conditions of each type of employee are not unreasonable.