Employment & Labour Law

2019
Seventh Edition

Contributing Editor:
Charles Wynn-Evans

CONTENTS
PrefaceCharles Wynn-Evans, Dechert LLP

General chapter

Global Overview
Michael J. Sheehan, Ludovic Bergès & Emma T. Chen,
McDermott Will & Emery LLP

1Australia

Joydeep Hor, People + Culture Strategies

8

Belgium

Emmanuel Plasschaert, Evelien Jamaels & Stephanie Michiels,
Crowell & Moring LLP

16

Botswana

Dineo Makati Mpho, Makati Law Consultancy

32

BrazilVilma Toshie Kutomi, Cleber Venditti da Silva & José Daniel Gatti Vergna,
Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados

46

CanadaAndrea York, Alysha Sharma & Jennifer Shamie,
Blake, Cassels & Graydon LLP

57

China

Zoe Zhou & Tina Dong, Wei Tu Law Firm

71

Denmark

Bo Enevold Uhrenfeldt & Louise Horn Aagesen, Skau Reipurth & Partnere

79

Finland

Jani Syrjänen, Borenius Attorneys Ltd

90

FranceLionel Paraire & Anaëlle Donnette-Boissiere, Galion Avocats

98

Germany

Dr. Arno Frings, Michael Bogati & Dr. Benedikt Inhester,
Frings Partners Rechtsanwälte Partnerschaftsgesellschaft mbB

109

Hungary

Dr. Ildikó Rátkai LL.M. & Dr. Ágnes Sipőcz, Rátkai Law Firm

118

India

Anshul Prakash & Kruthi N Murthy, Khaitan & Co

127

Country chapters

Ireland

Mary Brassil & Stephen Holst, McCann FitzGerald

135

Italy

Vittorio De Luca, Roberta Padula & Claudia Cerbone, De Luca & Partners

147

Japan

Masahiro Nakatsukasa & Yusaku Akasaki, Chuo Sogo Law Office, P.C.

154

Malta

Marilyn Grech, EMD Advocates162

MexicoRafael Vallejo Gil, González Calvillo, S.C.

170

Oman

Omar Al Hashmi & Syed Ahmad Faizy, Al Hashmi Law

179

Singapore

Vivien Yui, Jenny Tsin & Chang Qi-Yang, WongPartnership LLP

191

Spain

Enrique Ceca, Cristina Martín del Peso & Sonia Manrique,
Ceca Magán Abogados

201

SwedenCarl-Fredrik Hedenström, Karolin Eklund & Mary Ohrling,
Magnusson Advokatbyrå

206

Switzerland

Vincent Carron & Anne Roux-Fouillet, Schellenberg Wittmer Ltd.

215

ThailandSaroj Jongsaritwang & Sui Lin Teoh, R&T Asia (Thailand) Limited

224

TurkeyHaşmet Ozan Güner & Dilara Doğan Güz, Pehlivan & Güner Law Firm

234

United Arab
Anir Chatterji & Mandeep Kalsi, PwC Legal Middle East LLP
Emirates		

246

United Kingdom Charles Wynn-Evans, Rebecca Turner & Jennifer Hill, Dechert LLP

253

USA

Ned H. Bassen, Margot L. Warhit & Nathan W. Cole,
Hughes Hubbard & Reed LLP

263

JapanMasahiro Nakatsukasa & Yusaku Akasaki
Chuo Sogo Law Office, P.C.
Work-Style Reform Promotion Act
Introduction
Despite certain notable achievements during the five years of Abenomics, ranging from a
JPY47 trillion increase in the nominal GDP and 9% economic growth in Japan’s economy
to across-the-board pay scale hikes, private demand, including personal consumption andcapital investments, remain generally stagnant. Key factors impeding Japan’s economic
growth include a declining population attributable to a decreasing birth rate, differences inworking conditions between full-time and indefinite-term employees (“regular employees”)
and part-time and other fixed-term employees (“non-regular employees”).
On June 29, 2018, the Japanese Diet passed work-style reform legislation (the “Work-Style
Reform Promotion Act”) which has been a high-priority item for Prime Minister Shinzo Abe.
This legislation is actually a package of amendments to eight statutes aimed at realising asociety where all workers can choose from among diverse work options so as to achievea work-life balance. The current laws affected by the Work-Style Reform Promotion Act
include the Labour Standards Act, the Worker Dispatching Act, the Act on Special Measuresfor Improvement of Working Hours Arrangements, the Act on Improvement of Employment
Management for Part-Time Workers, and the Labour Contract Act.
Noteworthy features of the Work-Style Reform Promotion Act include (i) comprehensive
and continuous promotion of work-style reform, (ii) amelioration of work-life balance, and(iii) ensuring fair treatment regardless of form of employment.
Discussion
Comprehensive and continuous promotion of the work-style reform
The overarching principle of the Work-Style Reform Promotion Act is the requirement that
employees be made aware of their job responsibilities, the abilities and experience necessary
for performing their duties as well as other prerequisites. Equally important related principles
are: that efforts must be made to ensure employment stability by fairly evaluating employees’
abilities using methods that reflect, among other things, their job descriptions, abilities andexperience necessary for performing their duties and prerequisites; that employees mustbe treated based on these evaluation results; and that measures to ensure effective andappropriate treatment must be implemented.
In particular, the Work-Style Reform Promotion Act introduces a legal cap on overtime
hours, work-hour restriction exemptions for high-level professionals, and rules based onan “equal work, equal pay” principle to address disparity in working conditions between
regular employees and non-regular employees. Further, employers are required to strive to
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improve working conditions, such as shortening working hours for employees and creating anenvironment in which employees can work in accordance with their motivation and abilities
while maintaining a work-life balance.
Amelioration of work-life balance
The Work-Style Reform Promotion Act contains the following measures to promote theamelioration of employees’ work-life balance:a.

Cap on overtime hours
Currently, an employer can have employees work beyond the statutory working hours if
a specific labour management agreement has been concluded in accordance with Article
36 of the Labour Standards Act (an “Article 36 Agreement”). In principle, and subject
to certain exceptions, the maximum hours of overtime under an Article 36 Agreement
is capped at 45 hours per month and 360 hours per year for each employee (or 42 hours
per month and 320 hours per year in the case of the variable working hours system forwhich the applicable period exceeds three months). In this respect, the Work-Style
Reform Promotion Act provides that any Article 36 Agreement with overtime work in
excess of the limits would be illegal.
The Work-Style Reform Promotion Act creates a new statutory cap on overtime work of
720 hours per year, less than 100 hours per month, and 80 hours per month on averageduring each period of two, three, four, five and six consecutive months. Violations are
subject to imprisonment of up to six months or fines of JPY300,000.
The application of the rules above may be subject to deferment or exemption as discussed
below.
• Automobile driving and construction business: The cap on overtime work will apply
from April 1, 2024, five years after the Work-Style Reform Promotion Act takes
effect on April 1, 2019. The cap on overtime work will be 960 hours per year.
• Doctors: The cap on overtime for doctors will apply from April 1, 2024, five years
after the Work-Style Reform Promotion Act takes effect on April 1, 2019. Details
about the maximum hours will be determined by an Ordinance of the Ministryof Health, Labour and Welfare. The timing of the implementation has not yet
been determined. Concrete regulations, including to reduce working hours, will be
discussed in a forum that allows input from the medical community.
• Sugar manufacturing industry in Kagoshima Prefecture and Okinawa Prefecture:
From April 1, 2024, five years after the Work-Style Reform Promotion Act takes
effect on April 1, 2019, the overtime work limitation of less than 100 hours permonth, and 80 hours per month on average during each period of two, three, four,
five and six consecutive months will no longer be applicable.
• The research and development of new technologies and products is exempt fromthe cap on overtime work. However, health insurance measures to ensure the healthof employees, such as face-to-face guidance by physicians and the provision ofsubstitute leave, will apply.

b. Revision of additional pay for overtime work in excess of 60 hours per month at SMEs
The current moratorium on the premium wage rate (50% or more) for overtime work in
excess of 60 hours per month for SMEs1 will be abolished, and the general rules which
are applied to employers other than SMEs will apply (effective from April 1, 2023).
c.

Amendment of the annual paid leave system
Traditionally, the employer has had no legal obligation to give employees annual paid
leave. However, the Work-Style Reform Promotion Act requires employers to give

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employees who are granted annual paid leave of 10 days or more, at least five days ofannual paid leave each year during the period requested by the employer. However, it
is not necessary to designate the number of days of annual paid leave taken as a resultof the designation of the time of the employee and the planned grant.
d. Revision of the flexible working hours system
Under the conventional flextime system, the settlement period (which is a period during
which average working hours per week must not exceed 50 hours) must be one monthor less. However, it may be up to three months, enabling a more flexible working style.
e.

Establishment of an advanced professional system
When employees with a clear scope of work, such as employees who are in charge of
R&D, finance and consulting, and a certain annual income (at least 10 million yen) areengaged in work that requires a high level of expertise, they are required to take 104 days
off a year without fail, and the provisions on working hours, holidays, late-night extra
wages, etc. are excluded from the application of the provisions, such as the consent of
the employee. In addition, employees may withdraw their consent to exclusion fromthe application of such provisions.

f.

Obligation to understand the status of working hours under the Industrial Safety
and Health Act
In order to ensure the effectiveness of measures to ensure the health of employees,
working hours will be ascertained by methods prescribed by the Ordinance of the
Ministry of Health, Labour and Welfare.

g. Time of implementation
The act will come into force on April 1, 2019. However, the maximum overtime workat SMEs will come into effect on April 1, 2020, and the revision of extra pay by SMEs
will come into effect in April 2023.
Ensuring fair treatment regardless of form of employment (also known as “Equal Pay for
Equal Work”)a.

Establishment of provisions to eliminate unreasonable treatment• Balanced treatment
The Work-Style Reform Promotion Act stipulates that the reasonableness of part-timeand fixed-term employees with respect to regular employees must be determined inlight of (i) the job content (the content of work and the degree of responsibility), (ii)the scope of the job and changes in assignment (otherwise known as the “mechanismof utilisation of human resources”), and (iii) other circumstances, and in light of
the nature and purpose of the treatment of each part-time employee and fixed-term
employee, taking into consideration the circumstances considered appropriate inlight of the nature and purpose of the treatment.
Accordingly, the title of the Part-Time Work Act (the “Act on Improvement, etc. of
Employment Management for Part-Time Workers”) has been revised to the “Act on
Improvement, etc. of Employment Management for Part-Time Workers and Term
Employment Workers”.
As a result, Article 20 of the existing Labour Contract Act2 will be deleted.
•

Equal treatment
With regard to fixed-term employees, it will be obligatory to ensure equal treatmentcompared to regular employees when (i) job descriptions, and (ii) the scope ofchanges to job descriptions and obligations, are the same.

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•

Japan

Dispatched workers
Dispatched workers are required either: (i) to be treated on an equal and balanced
basis with the regular employees of the dispatched employer; or (ii) to be treated inaccordance with a labour management agreement that meets certain requirements(such as being paid equal or higher wages than the average wages of the dispatchedemployers’ employees who perform the same type of work).

b. Strengthening the obligation to explain the treatment of employees
For part-time workers, fixed-term workers, and dispatched workers, explanations about
the details and reasons for differing treatment from regular employees have been madeobligatory.
The current status of implementation of the accountability obligation for the categoryof workers mentioned above is described in the table below.
Accountability obligation when hiring

Accountability obligation after hiring

Part-time workers

Stipulated under the current law

Newly stipulated

Fixed-term workers

Newly stipulated

Newly stipulated

Dispatched workers

Newly stipulated

Newly stipulatedc.

Time of implementation
This will come into force on April 1, 2020, but only applies to SMEs from April 1, 2021.
Supreme Court decisions

Introduction
On June 1, 2018, the Supreme Court handed down two cases: the Hamakyorex case; andthe Nagasawa Transport case. These are the first Supreme Court rulings on the issue of
discrimination between regular employees and non-regular employees. Article 20 of thecurrent Labour Contract Act prohibits treatment deemed unreasonable in light of (a) the
content of duties, (b) the scope of changes in job descriptions and assignments, and (c)other circumstances. The Supreme Court’s view on Article 20 was presented in thesedecisions. These Supreme Court decisions will continue to have significance even after
the implementation of the Work-Style Reform Promotion Act as they will have a material
impact on the interpretation of the various provisions of the this law as well as its practicalimplementation in Japanese companies.
Hamakyorex case
The Hamakyorex case involved different treatment between a full-time employee and acontract employee engaged in a delivery service as a truck driver. The Supreme Court
held that such different treatment violated Article 20 of the Labour Contract Act when suchtreatment arises because of the fixed or indefinite nature of the employment. The Supreme
Court also concluded that different working conditions of a full-time employee and a contract
employee that violate Article 20 are invalid.
The alleged differing treatment involved six allowances: housing allowance; full-timeallowance; no-accident allowance; work allowance; meal allowance; and commutation
allowance. The procedure used by the Supreme Court was to first determine the nature of
the allowances, and then take into account that it was the same in (a), but different in (b), and(c) the unreasonableness of other circumstances in the light of the purpose of the respective
wages. Considering such facts above, the Supreme Court found the employer’s treatment,with the exception of housing allowances, to be unreasonable, because the requirement to
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pay the above allowances other than housing allowance do not differ based on whether theemployee is a full-time employee and a contract employee. On the other hand, the Court
held that it was not unreasonable to pay housing allowance only to full-time employees assuch employees are subject to relocations involving moving house, which may increase theemployee’s housing cost.
Nagasawa Transport caseThis is a case in which the disparity in treatment between regular employees and non-regular
employees who are re-employed on a new contract after their retirement became an issue. In
this regard, the disparity between regular employees and such non-regular employees differedin character from the general problem of non-regular employees, and it was a special casethat takes into account the employment of re-employed employees. Like the Hamakyorex
case, this involved a delivery driver. The Supreme Court held that, although factors (a) (thecontent of duties) and (b) (the scope of changes in job descriptions and assignments) were
the same, the special nature of post-retirement re-employment was taken into account. The
decision procedure is similar to that of the Hamakyorex case. In other words, the court first
determined what the purpose of the wage is and then examined (a) and (b), then (c) the special
nature of post-retirement re-employment in light of the purpose of each wage and whether
the different working conditions are unreasonable.
The distinction between the Hamakyorex case is that post-retirement re-employment
situations are taken into account, and it is concluded that efficiency allowance, job allowance,
bonuses, housing allowances, and family allowances are not unreasonable. On the other
hand, the Court held that, with regard to the allowance for diligence, since (a) the contents ofthe duties are the same, the necessity of full-time service incentives is the same, and it wasdetermined that it was unreasonable not to pay it to non-regular employees.
Practical points
The Supreme Court’s rulings in these cases concern the issue of allowances.
Employers need to reconfirm their intentions for each allowance and verify that they are notevaluated as unreasonable. It is considered possible to reconcile that the work allowanceand the full-time work allowance are unreasonable because the same job contents are
the grounds for unreasonability, and if the job contents differ, they are not unreasonable.
Housing allowances can be explained by relocation with or without relocation. Commutation
allowances should basically be considered in the same manner as permanent employees.
It should be kept in mind that the difference between post-retirement re-employment andpermanent employees is not permissible without limit. If it is desired to make further
differences in the treatment of permanent employees and post-retirement re-employment,
it will be possible to reduce the likelihood that (a) a clear difference in job descriptions,and (b) a clear difference in job descriptions and the scope of changes, will be consideredunreasonable.
Conversion of fixed-term employment agreements to employment agreements
without a fixed term
Gist of the Labour Standard Act’s amended Article 18
Certain amendments in August, 2012 to Japan’s Labour Contract, in particular Article 18,
gave certain employees the right to convert fixed-term employment contracts to employment
contracts without a fixed term, thereby effectively placing such employees on equal footing
and with equal legal protects as “regular full-time employees”.
Prior to the amendment of Article 18, Japan’s Labour Contract Act and other major
employment-related acts were based on the concept that employment agreements should, in
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theory, have no fixed term, and that employment agreements with fixed terms should only
be an exception. Although there is no required minimum length for fixed-term employment,
the maximum length of fixed-term employment cannot, subject to certain exceptions, exceed
three years.
In practice, Japanese companies hire “regular employees” on a full-time basis without afixed term. Typically, these “regular employees” continue to work until reaching the age forretirement as prescribed in the company’s employment rule, usually until the age of 60, after
which companies offer “re-employment” until age 65 on a separate employment arrangement
and with a lower salary. Following the demise of the boom economy in the 1980s and1990s, the vast majority of Japanese companies started exploring the option of fixed-term
employees as a way of containing human resource costs. This trend toward increasing hiring
on a fixed-term basis increased the overall percentage of fixed-term workers in the labour
market which gave rise to the need to provide legal protection for fixed-term workers, hence
an amended Article 18.
Conversion to employment agreement without a fixed term
Section 1, Article 18 essentially gives a fixed-term employee the right to convert his or
her employment into employment without a fixed term if the fixed-term employment withthe same employer has lasted for more than a total of five years. The fixed-term employee
must apply for an employment agreement without a fixed term before the expiration dateof the fixed-term employment contract then in effect. Since the amendment to Article 18
came into effect in 2013, April 1, 2018 was the first date on which conversions thereunderbecame possible.
The new employment agreement without a fixed term will come into effect on the date
immediately following the expiration of the then-in-effect employment agreement witha fixed term, and the work conditions will be the same as those under the employment
agreement with a fixed term, but without the fixed term. In essence, the employer will beobligated to continue their employment until they leave voluntarily or reach retirement age.
How companies responded
Since the conversion right is expected to have a major long-term impact on employers’ humanresources and financial resources, employers should explore legally viable options to handle
conversion applications from employees. This could have a significant long-term effect on
the employer’s human resources policy and/or system.
One avenue initially explored by employers was establishing internal working rules thatessentially contained different terms of employment than those in the employment with afixed term. This option was based on Article 18 that allows employers to vary the employment
conditions applicable to converted employees without fixed terms. If established, theseinternal employment rules would be applicable to employees after conversion. Absent theserules, the employment conditions post-conversion will be the same as those pre-conversion(except for the absence of the fixed term).
Based on the assumption the post-conversion employees may work long-term for theemployee, companies should make rules that allow the employer maximum flexibility
for things such as job description, work locations, etc. This is in contrast to employment
agreements with fixed terms whose work conditions are generally fairly rigid with respect
to the job description, work location, etc. This type of approach offers companies maximum
flexibility necessary for an adaptable management environment. Employers should be sure
to include a retirement age in these rules for converted employees to avoid having too many
employees close to retirement age.
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Due to the potentially negative impact on employers’ practices and finance, some employers
urge employees with fixed term contracts to waive their conversion rights in even sometimes
by including them in the employment contract. Employers should exercise caution sinceadvance waivers are void as a violation of public order and morality.
Employers should also exercise caution with respect to negative consequences for the
exercise of the conversion right in the form of lower wages, etc. Since lowering wages
cannot be done without a reasonable ground, this type of practice would be deemed invalid
and not legally binding on the employees who wish to exercise their conversion right.
Exemptions from the conversion rule
There are three categories that are exempt from this five-year rule of conversion. First is thecategory that includes professors and lecturers involved in research or academic activities
at a university. The second category is for researchers or engineers involved in science andtechnology who are employed at a research and development agency or university, etc. witha fixed term. The third category protects elderly employees who should retire at the age of65, who are often rehired with fixed terms after initial retirement. This continuous hiring
obligation was initially created to ameliorate the public pension fund deficit. A special
law allows employers to avoid conversion rights for this category if the employer files anapplication with the government and receives approval from the Ministry of Health, Labourand Welfare.
***Endnotes
1. Under article 138 of the Labour Standard Act, SMEs means:• Business operators whose amount of stated capital or whose sum of contributions
is not more than 300 million yen (or 50 million yen for business operators whose
main business is retail or service business, or 100 million yen for business operators
whose main business is wholesale business; or• Business operators who continuously employ not more than 300 workers (or 50
workers for business operators whose main business is retail, or 100 workers forbusiness operators whose main business is wholesale or service business).
2. Article 20 of the existing Labour Contract Act states: “If a labour condition of a fixedterm labour contract for a Worker is different from the counterpart labour condition ofanother labour contract without a fixed term for another Worker with the same Employer
due to the existence of a fixed term, it is not to be found unreasonable, considering thecontent of the duties of the Workers and the extent of responsibility accompanying thesaid duties (hereinafter referred to as the “content of duties” in this Article), the extent
of changes in the content of duties and work locations, and other circumstances.”

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Masahiro Nakatsukasa
Tel: +81 6 6365 8111 / Email: nakatsukasa_m@clo.gr.jp
Masahiro Nakatsukasa is a bilingual international attorney admitted in Japan
and New York, with more than 25 years’ experience representing Japaneseand foreign clients in a wide variety of transactions and litigations. He is
well-known as one of the leading counsels in the areas of cross-border M&A
and financial transactions in the Kansai area in Japan (comprised of Osaka,
Kobe, and Kyoto). Mr. Nakatsukasa was selected for inclusion in the 5th to
9th editions of Best Lawyers in Japan in Banking and Finance Law (2014 to2018) and Insolvency and Reorganization Law (2017 and 2018). He served
as a Vice-President of the Osaka Bar Association from 2015 to 2016. Mr.
Nakatsukasa received an LL.B. from Kyoto University in 1994 and an LL.M.
from the Northwestern University School of Law in 2005.
Yusaku Akasaki
Tel: +81 6 6365 8111 / Email: akasaki_y@clo.gr.jp
Mr. Yusaku Akasaki has a broad range of experience working on labour
matters. His experience includes representing a subsidiary of a foreign entity
in the labour tribunal proceedings disputing the validity of unilateral dismissalof an employee, assisting a subsidiary of a foreign entity in the drafting ofwork-related regulations, and advising on the establishment of a Japanesesubsidiary and employment-related matters for a number of foreign companies.
Mr. Akasaki was admitted to practise in Japan in 2008 and joined Chuo Sogo
Law Office in the same year. He graduated from the University of Tokyo(LL.B.) in 2005, Kyoto University (J.D.) in 2007, and the University ofCalifornia, Los Angeles (LL.M.) in 2015. As of 2018, he is also admitted topractise in the state of New York.

Chuo Sogo Law Office, P.C.
Kohda Building 11th Floor, 2-10-2 Nishi-Tenma , Kita-ku, Osaka 530-0047, Japan
Tel: +81 6 6365 8111 / URL: www.clo.jp
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