With the deepening of globalization, when enterprises expand their business in multiple countries, cross-border labor compliance has become one of the most complex and severe challenges. To help enterprises systematically address this issue, we have collaborated with top labor lawyers from over 50 major jurisdictions worldwide (all recommended by Chambers, The Legal 500, or equivalent institutions) to jointly compile a Chinese-English labor & employment compliance guide exceeding 1 million words, and we will continuously update relevant key points.

This article publishes the key points of labor & employment compliance by December 2025 in Japan. 

01 Overview of the Labor Law System

1. Legal System

The Congress enacts bills for statutes. The administrative body engages in administering the statutes. The judicial body interprets the statutes and renders judgments.

2.Resources and Agencies

"Employment law" is the area that governs cases where there is a dispute or a potential dispute between a company and an employee. "Labor law" is the area that governs cases where there is a dispute or a potential dispute between a company and a labor union. The Constitution of Japan authorizes the Congress to enact statutes concerning employment-related matters (the employment law) (Article 27) and in connection with labor-related matters (the labor law) (Article 28).

02 Employment Qualifications and Classification

1. Employment Age

A "mandatory retirement age system" means that employees are deemed to automatically quit the company on a mandatory and compulsory basis, when they reach a certain age designated by the company.

A company is permitted to establish a mandatory retirement age system, and designate a mandatory retirement age which shall be in line with the Old People Employment Security Act.

The minimum employment age is 15 years old, as a rule. In case of child actors, the employer is allowed to use them even though they are younger than 15, as long as the Employment Standards Inspection Office gives permission.

2.Qualifications for Foreign Employers

If a non-Japanese individual tries to establish a new company by herself or himself, then the basic rule is that she or he would have to obtain "Business manager" as the status of residence.

3.Classification of Employment

EOR is illegal. Under the Japanese employment law, there is one very easy-to-understand rule: If Company A has an employee (E), then "only Company A" is in the position to give day-to-day work instructions to E. Company B, which is another entity than Company A, is not allowed to give day-to-day instructions to E.

4.Foreign Workers

There are around 30 statuses (from the viewpoint of working or studying) and 4 statuses (from the viewpoint of the relationship with a Japanese national). The following four methods are commonly used by many non-Japanese companies that are doing business and located in Japan:

• intra-company transferee

• business manager

• engineer/specialist in humanities/international services

• highly-skilled professional

If there is no proper status of residence, then not only the non-Japanese employee but also the employer may be arrested.

03 Recruitment and Employment Contracts

1.Background Examination

Article 5-4 of the Employment Security Act and its Ministry guideline allow an employer to gather personal information on job candidates as long as the personal information is related to the purpose of the business of the employer.

Further, no employer is allowed to gather sensitive information of job candidates, as a rule, unless the information is inextricably intertwined with the purpose of the business of the employer.

2.Contract Types

• Regular permanent employees

• Fixed-term employees

• Part-time employees

• Dispatched workers

3.Probationary Period

No explicit requirement for the length of a probationary period under the Employment Contract Act or the Employment Standards Act.

04 Working Standards

1.Remuneration

Usually include:

• Basic monthly salary

• Bonus

• Severance allowances

2.Statutory Benefits and Social Security

Mandatory insurance includes:

• Workers Accident Compensation Insurance

• Unemployment Insurance

• Health Insurance

• Welfare Pension Insurance

Mandatory allowances are:

• overtime work allowances (125%)

• statutory non-working day work allowance (135%)

• late-night work allowances (25%)

3.Working Hours

The basic rule concerning regular working hours is that the maximum amount shall be 8 hours a day and 40 hours a week.

4.Rest and Leave

Employees are entitled by Article 35 of the Employment Standards Act to take at least one day within a week as a non-working day ("statutory weekly non-working day"). In most Japanese companies, employees are given two days within a week such as Saturdays and Sundays as weekly non-working days.

There are many national holidays in Japan. In most companies, national holidays are not working days, and employees are not internally required to work on these national holidays due to the provisions of the Work Rules. But this is better than the statutory minimum. Deeming national holidays to be non-working days is no more than a commonly seen practice. It is not a statutory requirement.

05 Occupational Health and Special Protection

1.Occupational Health and Security

A company is required to conduct medical check-ups for its employees when they are about to be hired, and at least once a year, thereafter, at the expense of the company.

The Employment Safety & Hygiene Act stipulates the "statutory stress check", with respect to protection of mental health of employees. 

For a workplace of a company with 50 or more employees, the company is required by the Employment Safety & Hygiene Act to designate a medical doctor and arrange for the medical doctor to come to the workplace and inspect the workplace at least once a month.

2.Special Protection

Article 2-4 of the Equal Employment Opportunity Act Enforcement Regulation requires employers to give pregnant women an opportunity to consult with a medical doctor.

06 Personal Information and Privacy

1.General Rules

As a rule, employers shall not transfer the personal information of employees to a third party, without obtaining the consent of the employees.

2.Transnational Transfer

Employers shall obtain consent from each of the employees, as a rule.  The exception is applicable where the information is given to the United Kingdom and those countries that belong to EU.

07 Anti-Discrimination and Anti-Harassment

1.General Rules

Nowadays, Japanese female employees are becoming more vocal on their rights towards the prevention of sexual harassment. Article 11 of the Equal Employment Opportunity Act mentions that an employer is under an obligation to take necessary steps to prevent.

Article 4 of the Employment Standards Act prohibits a company from discriminating against female employees (or even against male employees) with regard to salary payment.

Article 3 of the Employment Standards Act prohibits a company from discriminating against employees because of nationality, creed and inborn social status.

A company is prohibited from discriminating against disabled people regarding any single situation of employment (Articles 34-36 of the Disabled People Employment Inducement Act).

2.Protective Characters

No discrimination based upon：

• Disability

• Gender

• Labor union membership

• Nationality

• Creed

• Inborn social status

08 Internal Policies

1.Applicability

Usually, a document called "Work Rules of Employment" is prepared by employers. They are kind of an employee handbook which codifies basic terms and conditions of employment that are applicable to all employees working at the same workplace.

2.Validity

Before the submission, the employer shall obtain a written opinion from a labor union that has more than one half of employees.

3.Whistleblowing

The Whistleblowers Protection Act stipulates that a company is prohibited from unilaterally terminating or otherwise treating unfavorably those employees, ex-employees, statutory directors who have blown the whistle.

09 Transactions

1.Employment Relationship

An automatic transfer when M&A occurs. No automatic transfer when equity or asset transfer occurs.

2.Compensation

No rules.

10 Termination of Employment

1.Termination Grounds

It is, generally speaking, very difficult for any employer in Japan to unilaterally terminate an employment contract between an employee and the employer against the will of the subject employee.

Thus, the question boils down to the following: what is regarded as "objectively reasonable grounds" and what is considered to be "socially appropriate"?

2.Termination Procedure

Suppose that a company wishes to unilaterally terminate workers because it believes that there are objectively reasonable grounds and social appropriateness. In such a situation, the company will have to either give a 30-day advance notice or to pay the Termination Notification Allowance corresponding to their salary of a 30-day period.

3.Termination Protection

As a rule, employees are protected unless there are "objectively reasonable grounds" or "social appropriateness".  

4.Severance and Compensation

As for unilateral termination, 30-day advance notice or 30-day unilateral termination allowance.

5.Wrongful Termination

If a unilateral termination is conducted by an employer and the court thereafter deems the unilateral termination to be null and void due to lack of either “objectively reasonable grounds” or “social appropriateness” and renders a judgment, then the employer is required to:

• reinstate the employee

• pay the unpaid salary which the employee should have been entitled to had there been no unilateral termination

6.Mass termination and Layoffs

It is even more difficult to substantiate the existence of "objectively reasonable grounds and social appropriateness" when an employee is to be unilaterally terminated due to redundancy.

11 Confidentiality, Non-Compete, and Non-Solicitation

1.Confidentiality

Obligations concerning are very commonly seen. But judicial judges require employers to specify what "confidential" information is.

2.Non-Compete and Non-Solicitation

Non-compete and no solicitation clauses has been considered to be fine, as a rule, as long as the period is limited and the compensation corresponding to the period is sufficient.

12 Work Representation and Trade Unions

1.Work Representation

An employee representative system is very often used. For instance, statutes require employees to have employees choose one individual as an employee representative.

2.Trade Unions

Article 28 of the Constitution of Japan guarantees workers the rights to:

• organize and become united

• request employers to have collective bargaining sessions

• act collectively

Under the Constitution of Japan and the Labor Union Act, workers are always allowed to establish a labor union at any time. If two workers decide to establish a group for the purpose of improvement of the terms and conditions of employment or their economic status, it is called a labor union.

13 Dispute Resolution

1.Procedures & Enforcement

The judicial courts have a jurisdiction over any employment cases. The procedures conducted at the judicial courts are:

• official lawsuits

• preliminary injunction procedures

• Employment Tribunal

The National Government has established a Regional Employment Bureaus in each prefecture. The Regional Employment Bureaus handles employment cases (as opposed to labor cases). 

For unfair labor practices and other types of labor cases (as opposed to employment cases), the judicial courts could, of course, be in charge.

2.Waiver & Enforcement

Employees could not agree to waive statutory or contractual right and entitlement "in advance”. When the employee and the company try to make a settlement, he can waive.

14 Others

1.Latest Development & Trends

The government is trying to focus upon protection of freelancers and outside vendors and suppliers and service-providers. If the counterparty is an individual or a company that has no member other than one individual, then the Freelancers Protection Act, which started to be in force as of November 1, 2024, is applicable for the purpose of protection of the individual or the company.

2.Cultural and Religious Considerations

It is quite difficult for a Chinese individual to try to obtain an appropriate status of residence. Please be aware that some months may be required.

* To avoid ambiguity, this article should not be regarded as legal advice.

Authors

Hideki Thurgood Kanoh is an equity partner at Anderson Mori & Tomotsune, and has led the labour and employment practice since 1995. Hideki Thurgood Kanoh has been practicing in the area of labor and employment and currently devotes his practice exclusively to this area from the viewpoint of employers and companies.

Translator

Jin Dongjie, Master of Laws, associate at Anli Partners. Area of expertise: Labor Law, ESG Compliance, Dispute Resolution.