Guide to
Restructuring a
Cross-Border
WorkforceJapan

Contributor:

JapanShinya Tago, Hiroki Fujiwara, Landry
Guesdon and Hiroki Kitagawa
Iwata Godo
A.Reduction in Workforce
1. Is there a concept of redundancy - based on a shortage ofwork or other economic reasons - as a justified reason todismiss employees in your jurisdiction? If so, how is it
defined?
Employees in Japan generally have a high degree of legal
protection and the standards for redundancy are stringent.
Employers can only make employees redundant for compelling
reasons (for example, where the employer faces significant
economic difficulties and streamlining the workforce becomes
unavoidable). The Tokyo High Court has established specificconditions that need to be met. The employer must: be in apoor financial situation, making the need to act imperative; firstattempt to cut costs and expenses and reassign employees toother positions within the organization; establish appropriate,objective and rational selection criteria; and follow due process,in particular by providing explanations to employees. Where acompany is liquidated, there is more flexibility, regardless ofthe employer's financial circumstances.
2. In brief, what is the required process for making someone
redundant?
Where the Tokyo High Court conditions are met, employers
must provide the affected employees with a minimum of 30
days' notice or payment in lieu. Although no specific statutory
provision makes severance pay mandatory, this is customary tosmooth the process and minimise legal risks.
When these conditions are not met, employers can try
alternative approaches such as obtaining the employee’s
resignation at the employer's request together with a financial
package. For redundancies affecting a large number of
employees, early retirement plans allow employers to offer
financial packages to employees to encourage them to leave. In
one type of plan, employees are offered a financial package toencourage them to resign within a short period (for example, a
couple of weeks). The key to success is to determine a proper
package, target employees without discrimination and get thetiming right. This can be a costly process. Packages varydepending on the industry, and the employees' rank, age andlength of service. Individual resignations at the employer's
request with a financial package are simpler where the numberof redundancies is limited.
3. Does this process change where there is a “collective
redundancy”? If so, what is the employee number thresholdthat triggers a collective redundancy?
The process does not change. However, if 30 employees ormore are to be made redundant at a given workplace within
one month, a re-employment assistance plan must be
prepared, listing the employees and detailing the measurestaken or to be taken by the employer to facilitate job searches.
The employer must notify the competent Employment Service
Center (known as Hello Work) of the proposed redundancies
and submit the plan for approval before implementation.

4. Do employers need to consult with unions or employee
representatives at any stage of the redundancy process? Ifthere is a requirement to consult, does agreement need to bereached with the union/employee representatives at the endof the consultation?
Certain obligations to consult may arise for consultation andthe provision of information to appropriate representatives
under a collective agreement (if any applies). These obligations
can include consultation with appropriate representatives in acollective redundancy context and the provision of information
to appropriate representatives on a business closure ortransfer.
A labour union can require an employer to hold a collective
bargaining session on any issue, provided that the issue relates
to the union itself or the economic status of the workers who
are union members. The employer cannot refuse to bargain
without a proper reason and must negotiate in good faith withthe union. When the employer continuously acts in good faith,
refusal to compromise or a failure to reach an agreement are
not breaches of the duty to bargain in good faith.
5. If agreement is not reached, can the restructure be delayedor prevented? If so, by whom?
See question 4. For a consultation, no agreement has to bereached in principle, but compromising is often necessary andnegotiations with labour unions can still be protracted and therestructuring delayed.
6. What does any required consultation process involve (ie,when should it commence, how long should it last, whatneeds to be covered)? If an employer fails to comply with its
consultation obligations, what remedies are available?
The labour union would typically send a request for collective
bargaining to the employer, setting the place, date, time andagenda (demands or the subject of bargaining) with specifichours for bargaining. Once these points have been agreed
upon, the employer and union representatives meet tonegotiate. The employer must listen to the union and respondwith good-faith counter proposals. For labour disputes, there
are dispute resolution procedures either established by unions
and employers in collective agreements or prescribed by law.
Typical procedures involve conciliation, mediation, fact-finding
and recommendations, and arbitration. However, refusal tobargain collectively without a proper reason (including therefusal to bargain in good faith) is an unfair labour practiceunder the Labour Union Act. In such cases, specific remedial
procedures are handled by administrative bodies called local
Labour Relations Commissions and an administrative review of
their decisions can be petitioned to the Central Labour
Relations Commission. In turn, an appeal may be filed with thecourts under the Administrative Litigation Act to cancel orders
issued by the Commissions.
7. Do employers need to present an economic businessrationale as part of the consultation with unions/employee
representatives? If so, can this be challenged and how wouldsuch a challenge normally be made?
Employers must indicate the basis of their arguments andsubmit the necessary supporting data. In a redundancy context,that would mean showing the efforts made to avoid
redundancies (through transfers, farming out, solicitation ofvoluntary retirement, non-renewal of fixed-term contracts andtemp staff, etc), submitting financial statements and providing
some economic analysis, etc. Counterarguments can be put
forward by the labour unions (who can engage accountants orother experts) to which the employer can respond, and so forth.

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8. Is there a requirement or is it best practice to consult
employees individually (whether or not the employer is also
legally required to collectively consult employees)?
Yes, this is best practice and part of the due process condition,although collective (town hall) meetings can take place
depending on numbers.
9. Are there rules on the selection of individual employees
for redundancy?
As part of the Tokyo High Court conditions, the selection must
be proper and the employer must establish objectively
reasonable standards that should be applied fairly. Criteria can
include job performance, discipline, history of absences andtardiness, and a lower economic impact on younger employees.
10. Are there any specific categories of employees who an
employer is prohibited from making redundant?
An employee cannot be dismissed while unable to work
because they are receiving treatment for a work-related injury
or illness and cannot be dismissed within 30 days of the datethat treatment ceases. Special protection applies to dismissals
connected with pregnancy and maternity, parental and familycare leave, labour union membership or activities, andwhistleblowing.
11. Are there categories of employees with enhanced
protection (eg, union officials, employees on sick leave or
maternity/parental leave, etc)?
See question 10.
12. What payments are employees entitled to when maderedundant? Do these payments need to be made within a
specified period? Are there any other requirements, such as
giving contractual notice, payments into a central fund, etc.
If the Tokyo High Court conditions are met, there is no legal
obligation to pay severance pay, but a voluntary payment
according to a separation agreement is customary. Employers
must provide the affected employees with a minimum of 30
days' notice (or payment in lieu).
13. If employees are entitled to redundancy/severance
payments, are there eligibility criteria and how is thepayment calculated? If this is formula based, please set out
the formula.
Not applicable.
14. Do employers need to notify local/regional/national
government and/or regulators before making redundancies?
If so, by when and what information needs to be provided?
See question 3.
15. Is there any obligation on employers to consider
alternatives to redundancy, including suitable alternative
employment?
Yes, reassignment within the employer’s organisation, farming
out, or transferring to related companies to avoid redundancies
are measures to be considered to meet the Tokyo High Court
conditions.

16. Do employers need to notify local/regional/national
government and/or regulators after making redundancies,eg, immigration department, labour department, pension
authority, inland revenue, social security department? If so,by when and what information needs to be provided?
Employers must report to Hello Work (the Employment Service
Center), whenever a foreign employee ceases to be employed.
Regarding foreign employees covered by the Employment
Insurance System, notification must be made within 10 days ofthe departure date.
For employees enrolled with the following schemes,
withdrawal must be notified within the prescribed number ofdays following the employee’s departure: within five days to
the Japan Pension Service Office for Health Insurance,
Employees’ Pension Insurance and Nursing Care Insurance; andwithin 10 days to Hello Work for Workers' Accident
Compensation Insurance and Employment Insurance.
17. If an employee is not satisfied with the decision to makethem redundant, do they have any potential claims against
the employer? If so, what are they and in what forum should
they be brought, eg, tribunal, arbitration, court? Could aunion or employee representative bring a claim on behalf ofan employee/employees and if so, what claim/s and whereshould they be brought?
The employee will generally seek to invalidate the dismissaland claim compensation or reinstatement. Judicial procedures
including initiating proceedings before the courts or a labour
tribunal are last resort options in cases involving wrongfultermination. Some form of negotiation would typically be
attempted before legal proceedings are commenced.
Employees can consult an attorney or a labour and social
security specialist to seek legal advice, and they canalternatively contact and join a labour union independent of theemployer's organisation (if the employer does not have alabour union). The union can then force the employer to holddiscussions through collective bargaining on the subject of the
dispute.
18. Is it common to use settlement agreements when making
employees redundant?
Yes, this is often recommended to minimise legal risks and it isbest practice. See question 2.
19. In your experience, how long does it normally take tocomplete an individual or collective redundancy process?
Where the conditions are met, the individual redundancy
process can be completed quickly, in a matter of days or weeks.
The employer may often try to convince the employee to resign(at the employer’s request) first. In the case of collective
redundancies, the process can be protracted, especially if theemployer offers a pre-retirement plan as a first stage.
20. Are there any limitations on operating a business for aperiod following a redundancy, like a prohibition on hiring or
priority for re-hire being given to previous employees?
There is no express prohibition or priority, but if the employer
starts re-hiring, paying dividends or increasing wages
immediately or quickly after the redundancies, the economic
rationale behind the redundancies would be undermined. Evenif a settlement agreement were signed, the employee could
argue that they have been deceived and seek to invalidate theagreement and be reinstated.

internationalemploymentlawyer.com/restructuringRestructuring/Re-organisation of the business21. Is employee consultation or consent required for majortransactions (such as business transfer, mergers,
acquisitions, disposals or joint ventures)?
Consultation on a share deal is unusual. If there is a business
transfer where there is no collective agreement providing for
information or consultation with employee representatives, theemployer has no obligation to inform the employees of the
proposed transfer (except to the extent that employee transfers– where individual consent must be secured – or redundancies
are contemplated). Even if an employer has consultation
obligations under a collective agreement, there is generally no
obligation to reach an agreement. Ministry of Health, Labourand Welfare guidelines provide guidance on sharing
information on working conditions and economic prospects toemployees.
In the case of a corporate division (kaisha bunkatsu) (ie, thecarve-out of a business or part of a business), the employer
must consult with the employees engaged (primarily or not) inthe spun-off business individually, and with the labour unionthat represents the majority of employees, or a representativeof the majority of employees (Law on the Succession of
Employment Contracts in a Corporate Division and related
guidelines). The company to be split must try to secure theunderstanding and cooperation of its employees.
22. What are the remedies that are available if an employer
fails to comply with its consultation duties? Can employees
take action to prevent any proposals going ahead?
If there is a labour union and an employer does not holdcollective bargaining negotiations in good faith with the union,
the union can complain to the competent Labour Relations
Commission about the employer's breach of its duty tonegotiate and the Commission can direct the employer toresume negotiations. The labour union can also apply for aprovisional injunction or start formal litigation before the courts.
Likewise, the court can order the employer to negotiate.
If the employer fails to consult with the employees before a
corporate division, the employees can claim that the transfer of
their employment contract is invalid.
23. Is there any statutory protection of employees on abusiness transfer? Are employees automatically transferredwith the business? Are employees protected against
dismissal (before or after the transfer of employment)?
There is no TUPE-style statutory protection of employees in abusiness transfer and they are not automatically transferredwith the business, except – at least for the primarily engaged
workers – in the case of a corporate division (see questions 21
and 24).
24. What is the procedure for a transfer of employment(upon a business transfer or within group companies)?
For an ordinary business transfer, the employees resign and are
newly hired by the transferee of the business (who can dosome cherry-picking). By contrast, in the case of a corporate
division, the dedicated employees (those primarily engaged in
the business to be spun off) are automatically transferred whilesome analysis and negotiation may be needed for nonprimarily engaged workers.

25. Are there any statutory rules on harmonising thetransferring employees’ terms of employment with theexisting employees’ terms of employment?
Only in a corporate division context; in an ordinary business
transfer, new terms can be offered. Since the successor
company assumes the employment contracts of the split
company under the Companies Act based on universal
succession, the working conditions should be maintained asthey are. Any change requires a labour-managementagreement under the Labour Union Act and the Employment
Contract Act. Any change to working conditions before or after
the effective date of the corporate division requires a labourmanagement agreement (an agreement under the Labour
Union Act (collective agreement), unless such change resultsfrom a reasonable change to the work rules (see question 26),
which satisfies certain statutory requirements.

Changing Terms and Conditions

26. Can an employer reduce the hours, pay and/or benefits ofan employee?
Contracts can be supported by work rules, which are specificrules for the workplace. They set out working conditions,
including wages, working hours, holidays and the rules withwhich employees must comply. Employers with 10 or more
employees at a given workplace must adopt work rules. The
main points to consider if an employer wants to unilaterally
change the terms and conditions of employment depend on thenature of the changes and the structure of the employment
terms (for example, whether they are contained in a contract or
the work rules). Employers and employees can agree to makechanges. An agreement between a labour union and an
employer can affect individual agreements without theemployee's consent, but this is rather unusual. In principle,
salaries (and benefits other than variable or discretionary ones)
cannot be reduced unilaterally.
If an employer has established work rules, individual
employment contracts do not need to include all theemployee's working conditions (ie, wages, working hours andbreaks, holidays and disciplinary procedures). However,altering the rules is not a simple process. Unless agreed withthe employee, an employer cannot make detrimental changes
to the working conditions set out in the employment contract
by changing the work rules. Changes can be made to an
employee's working conditions if certain conditions, including
reasonableness, are satisfied. This does not apply to individual
contracts, and provisions that the employer and employee haveagreed on cannot be amended by revising the rules. In cases ofdemotion or a disciplinary sanction, a reduction in salary or
benefits can be considered under the work rules, but thatshould be carefully implemented by the employer and ideallywith the employee's consent.
Under certain circumstances (eg, the covid-19 pandemic), an
employer can place its employees on furlough. The employer isrequired to pay a furloughed employee compensation of atleast 60% of their wage during the leave of absence, if theemployer reduces its business activities due to reasons
attributable to the employer.
27. Can an employer rely on an express contractual provision
to vary an employment term?
Not always, it depends on the term to be amended. Someclauses are nice to have in a contract or work rules, although
not always enforceable (for instance a clause authorising theemployer to unilaterally reduce an employee's salary in case ofreassignment).

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28. Can an employment term be varied by implied conduct?
Where an employee is treated in the same manner repeatedly
and continuously for a long period, that treatment can be
regarded as an implied term of employment.
29. If agreement is required to vary an employment term,
what are the company’s options if employees refuse to agree
to the proposed change?
The employer has the right to establish and maintain enterpriseorder concerning staff, organisation and facilities. Employers
generally have a right to make changes to job descriptions andpositions and reassign employees. If an employee does notagree where an agreement is required, the employee could bereassigned to a different position or the employer could
ultimately ask the employee to resign at the employer's
request in exchange for a package.
30. What are the potential legal consequences if an
employer varies an employment term unilaterally?
If the employer needs the employee’s consent, proceedings canbe initiated before the courts or a labour tribunal but this is
usually a last resort.
The employee can contact the Counselling Corner set up in
Labour Bureaux or Labour Standards Inspection Offices. Public
officials provide consultation services regarding issues arisingfrom employment relations, and employees can present theirgrievances. If an employee using these services wants to pursue
a legal claim, the Labour Bureaux or Labour Standards
Inspection Office can request the employer to appear before it to
discuss how to resolve the dispute. If the dispute is not resolved
and if one of the parties so requests, the case can be subject toconciliation by a three-member panel set up in the bureau,
usually composed of practising lawyers or law professors. If
requested by either party to the dispute, the panel (or a memberof the panel) mediates the dispute, ascertains the facts of thecase and the allegations of the parties, confirms their mainarguments, co-ordinates and prompts them to consult eachother to resolve the dispute and proposes a settlement. Neither
the employer nor the employee is bound to accept an amicablesettlement offer suggested by the panel under the Individual
Employment Disputes Resolution Promotion Law, and theemployee can decide to initiate legal proceedings before thelabour tribunal or the district court.
Employees can consult an attorney or a labour and social
security specialist to seek legal advice, and they canalternatively contact and join a labour union independent (or not)from the employer's organisation. The union can then force theemployer to hold discussions through collective bargaining on
the subject matter of the dispute (terms and conditions of workand so on).

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internationalemploymentlawyer.com/restructuringAuthors:

Shinya Tago
Iwata Godo

Hiroki Fujiwara
Iwata Godo

Shinya Tago, Attorney at Law, admitted in Japan and New York,is Iwata Godo’s managing partner. His areas of practice include
general corporate/commercial; labour law: HR strategy andorganisational change, including business transfers,
redundancies and restructurings; litigation; labour union,industrial relations and collective bargaining; whistleblower
schemes; hiring of employees; health and safety issues;
disciplinary and grievance issues; negotiating departures andsettlement agreements; and employee benefit schemes.

Hiroki Fujiwara, Attorney at Law (Japan) is the partner leading
the employment team at Iwata Godo. His areas of practiceinclude HR strategy and organisational change, business
transfers, redundancies and restructurings; litigation; labour
union, industrial relations and collective bargaining;
whistleblower schemes; hiring of employees; health and safetyissues; disciplinary and grievance issues; negotiating
departures and settlement agreements; and employee benefit
schemes.

Learn more

Learn moreinternationalemploymentlawyer.com/restructuringAuthors:

Landry Guesdon
Iwata Godo

Kitagawa
Iwata Godo

Landry Guesdon, Attorney-at-law, admitted in France andJapan as Registered Foreign Lawyer. His areas of practiceinclude M&A; general corporate/commercial; labour law: HR
strategy and organisational change, including business
transfers, redundancies and restructurings; whistleblower
schemes; hiring of employees; health and safety issues;
disciplinary and grievance issues; negotiating departures andsettlement agreements; and employee benefit schemes. Landryjoined Iwata Godo in 2013 after 25 years with a Magic Circle
firm.

Hiroki Kitagawa, Attorney-at-law (Japan) is an associate in theemployment team. His areas of pactice include labour laws andindustrial relations (including all areas of employment law). He
advises clients on a wide array of employment matters,
including wrongful dismissal, workers compensation,
workplace safety and health matters, employment aspects ofmergers, restructuring of business and outsourcing, anddispatch work.

Learn more

Learn moreinternationalemploymentlawyer.com/restructuring