KOJIMA LAW OFFICES
Labor and Employment Practice Group

Vol. 2 November 2013

Labor & Employment Law Newsletter
Resolving Labor Disputes in Japan
Overview
Given the complexity of labor law in Japan, it is important for foreign companies tounderstand the three basic mechanisms available to resolve labor disputes
between an employee and an employer: standard court litigation, the court-run
labor tribunal, and alternative dispute resolution (“ADR”). Among these, the labor
tribunal has received the bulk of attention in recent years and has become anincreasingly popular choice.
Table 1

Contents

Standard
Court Litigation

Labor Tribunal

ADR･ Labor Relations
Commissions･ Regional Employment
Bureaus, etc.

Resolution
body･ District Court･ Summary Court *･ District Court

Averageduration

13 months **2.5 months

1 monthNumber of
new cases

3,170
3,385

3,586
3,719

6,510
6,074

(2011) ***(2012) ***Advantages
over litigation

Autumn leaves in Kyoto(2011)(2012)･ Greater flexibility inresolving disputes･ Lower cost･ Shorter duration･ Confidential
proceedings(2011) ***(2012) ***･ A wide range of settlement
options can be achieved
through negotiations･ Lower cost･ Shorter duration･ Confidential proceedings･ Participation is entirely
voluntary and either party
may withdraw at any time

Source: May 31, 2013 press release from the Ministry of Health, Labour and Welfare*
Summary Courts have jurisdiction over claims totaling up to 1.4 million Japanese yen.
** Data for trial courts.
*** This figure represents cases handled by Regional Employment Bureaus only.

Together, labor tribunals, traditional litigation, i.e., standard court litigation, and
ADR sponsored by administrative agencies represent the primary ways to resolve
labor disputes in Japan and each is discussed separately below.
Labor Tribunal (rodo-shimpan)
Since its establishment in 2006, thelabor tribunal has handled an everincreasing number of cases, more thanquadrupling from only 877 in 2006 to
3,719 in 2012. As the table above illustrates, labor tribunal cases now
outnumber standard court cases. The
labor tribunal has become a popular
choice due to the perception that it
offers a fast and economical way toresolve labor disputes (see Flowchart 1
below for an overview of the basicstages of the labor tribunal system).

Labor tribunals achieve this efficiency
by limiting proceedings to only three
hearings (additional hearings are
possible only under special circumstances). Because of the limited number ofhearings, it takes an average of about
two-and-a-half months for a labor
tribunal to issue a ruling in simple cases
involving disputes over issues such as
wages or retirement allowance. District
courts have jurisdiction over labor
tribunals.
A labor tribunal consists of a judge andtwo labor tribunal commissioners. The

Resolving Labor Disputes in Japan ....... 1
International Jurisdiction and
Governing Law in Labor Disputes .......... 3
Message from the Labor and
Employment Practice GroupKojima Law Offices have provided legal
services in the area of labor and employment law since its founding in 1984. Our
Labor and Employment Practice Group
represents clients in labor disputes andassists them in structuring and implementing HR policies. We work with bothforeign headquarters and local management to timely and appropriately resolve
employment issues that overseas companies face operating in Japan. As part of ourcontinuing effort to reach out and share ourexpertise with others, the Labor and
Employment Practice Group publishes thisnewsletter to provide a better understanding of this complex area of law, thereby
enabling the reader to make more appropriate employment and labor decisions. We
hope you find the newsletter both interesting and informative and welcome any
feedback you wish to share with us.
Labor and Employment Practice GroupKojima Law Offices
URL: http://www.kojimalaw.jp/en/index.html
Contact: (E-mail) webmaster@kojimalaw.jp(Tel)81-3-3222-1401

commissioners are selected from among
citizens with special knowledge andexperience dealing with labor disputes.
In practice, one of the two commissioners is typically labor friendly (thinklabor union president) while the other ison the management side (e.g., humanLabor & Employment Law Newsletter© Kojima Law Offices 2013

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Labor & Employment Law Newsletter

resource managers). Prior to issuing a ruling, the labor tribunal
usually attempts to mediate thedispute over the course of thethree-hearing proceedings. If
mediation is unsuccessful, thetribunal will generally issue adecision rather than hold additional hearings. Once issued, thedecision becomes binding only ifneither party objects within two
weeks of receipt of the decision.
Once the decision is final, it has
the same binding effect as a court
order (i.e., the prevailing party cancompel the other party to comply
with the decision). Unlike standard
court litigation, labor tribunals arefree to fashion decisions tailored toa given dispute. For instance, an
employee who has been terminated may ask the labor tribunal toreinstate him to his former position,
yet the tribunal may instead simply
order the employer to pay theemployee a certain amount ofmonetary compensation.
Flowchart 1

Vol. 2decision is invalidated and thedispute is automatically transferred to the district court andstarts anew as a standard
litigation case. A party looking forfinality, therefore, should carefully
consider whether going the labor
tribunal route is really the best
choice rather than opting forstandard court litigation from thestart. Although a party’s labor
tribunal petition may serve as acomplaint in the district court,
other items such as documentary
evidence and briefs are treateddifferently and therefore need tobe refiled. In this way, the parties
will need to replicate at the district court level at least some of
the work they performed in thelabor tribunal proceedings.
Lastly, just because labor tribunal
proceedings are quick does notmean that preparing for them issimple or easy. Generally, therespondent has only about 30
days to prepare for the firsthearing after being served withthe complaint. The first hearing isimportant because the tribunal,
after narrowing down the issues
and reviewing the evidence,
typically has a good sense of how
it will rule after the first hearing.
Therefore, it is crucial to present
the strongest possible case at thefirst hearing. Due to the shortturnaround time, it is best to
consult with local counsel immediately after receiving a labor
tribunal complaint.
Standard Court Litigation

According to a 2011 Central
Labor Relations Commission
report, about 80% of labor tribunal cases are resolved throughmediation or the issuance of a
final decision. In the remainingcases, the petitioner either withdraws from the proceedings
entirely, or objects to an unfavorable decision. When a party
objects, the labor tribunal

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Unlike some European countries
that have separate labor courts, inJapan ordinary civil courts handle
labor disputes (see Flowchart 2
below for an overview of the basicstages of trial under the Japanesecourt system). The Tokyo andOsaka District Courts havedivisions that specialize in labor
disputes due to the large number

November 2013of labor cases brought in thosecourts.
Flowchart 2

Filing an Answer
After being served with the complaint, the defendant needs to
respond by filing an answer withthe court (the court typicallyrequires the answer to be filed
within a month or so after serviceof the complaint).
Proceedings to Arrange Issues andEvidence
Proceedings to arrange issues andevidence require both parties topresent their arguments and documentary evidence in detail. It
generally takes a considerable
amount of time to complete thisstage of the proceedings in largepart because each party needs tocome up with appropriate counterarguments to each and every claim
from the opposing side. Accordingly, traditional litigation is usually
far more time consuming thanlabor tribunals or ADR. Courts
often attempt to settle cases after
this step is complete, or after thewitnesses finish testifying.
On average, it takes about 13
months to complete a labor-

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Labor & Employment Law Newsletter

related trial in district court compared to just one month for ADR,
and two-and-a-half months forlabor tribunal cases. However,there are ways to work within theconfines of the court system tospeed up the proceedings. For
example, if the amount in controversy is less than 600,000 JPY, asmall claims action (shogakusosho) is available. This small
claims procedure consists of only
one court hearing and is therefore
relatively efficient and quick.
Summary Courts have jurisdiction
over small claims actions.
In certain cases, an employee may
seek a preliminary injunction (karishobun) to, in essence, maintainthe status quo until the court
issues a final ruling in the case.
Preliminary injunctions are often
used to prohibit an employer fromchanging an employee’s employment status or to require an
employer to continue paying an
employee’s salary.

Vol. 2 November 2013

The losing party at trial may appeal
to a higher court. An appeal must
be in writing and filed with the
district court within two weeks
from the date the judgment isserved.
ADR
Along with labor tribunals, employees often choose ADR to resolve
labor disputes. Typical examplesof ADR in the labor context include
conciliation (assen) conducted by
the Dispute Reconciliation
Commissions, mediation (chotei)
or arbitration (chusai) conductedby Labor Relations Commissions.
Because a petitioner is not required to pay a filing fee to submit
a petition for ADR managed bythese agencies, ADR is often apopular choice among employees
without substantial financial
resources.
The benefits of ADR include a
prompt resolution of disputes andclosed, confidential proceedings.

As with all forms of ADR, participation is completely voluntary. A
respondent is free to withdraw
from ADR proceedings at any timeand can even refuse to appear at
all without suffering any negative
impact on his chances at trial or
before a labor tribunal.
Although Japanese translation isindispensable when foreign documents are submitted to court or to
ADR panels presided over byadministrative agencies such as
Regional Employment Commissions and Labor Relations Commissions, other ADR providers may
forgo Japanese translations entirely.
In the latter case, therefore, a party
may be able to avoid expensive andtime-consuming translation work ifthat party manages to convince thepanel that translations are notneeded in a given case. However, adecision that translations are unnecessary is in no way guaranteed andis solely within the discretion of eachresolution body.

International Jurisdiction and Governing Law in Labor Disputes
Jurisdiction and governing law may seem like dry,academic subjects that belong in a law schoolclassroom or a legal brief. However, these two issues
can have a tremendous impact on how labor disputes
are handled and resolved. Using the following
hypothetical labor case, this article explores some ofthe significant jurisdictional and governing law issues
that may typically arise in international labor disputes.

U.S.-based APEX Corporation entered into an employment
agreement (the “Agreement”) with Emiko, a Japanese citizen
residing in Japan. Under the Agreement, California courts haveexclusive jurisdiction over any dispute involving APEX and
Emiko, and the Agreement is governed by the laws ofCalifornia. Emiko worked at APEX’s Tokyo branch under theterms of the Agreement, but was abruptly terminated withoutcause as APEX was allowed to do under the Agreement.
California law permits this dismissal, but Japanese law doesnot. Emiko has sued APEX in the Tokyo District Court seeking
damages under Japanese law. Can APEX get the casedismissed on the grounds that: (1) California courts haveexclusive jurisdiction over the case; and (2) the Agreement isgoverned by California law?

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International Jurisdiction
The amended Code of Civil Procedure (the“Amended Code”) came into force on April 1, 2012.
One of the significant changes to the Amended Codewas the addition of provisions covering international
jurisdiction. Prior to the amendment, Japanesecourts decided whether they could take jurisdiction ininternational cases based on criteria gleaned fromcase law, in particular two leading JapaneseSupreme Court cases decided in 1981 and 1997
respectively.
With employees generally having less bargaining
power than employers, the Amended Code aims toeven the playing field by making it easier for
employees to bring suit in Japan. Under the
Amended Code, even if an employee has agreed tosubmit to the exclusive jurisdiction of a court outsideof Japan, that employee may nevertheless sue inJapanese court if: (1) the employee provided theLabor & Employment Law Newsletter© Kojima Law Offices 2013

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Labor & Employment Law NewsletterVol. 2 November 2013

employer with labor services in Japan; and (2) the caseinvolves a dispute between an individual employee andan employer, such as a dispute over retirement
allowance, the validity of a dismissal, or failure to pay
overtime (this provision of the Amended Code does not
apply to a dispute between an employer and a labor
union). In the APEX example above, therefore, Emikowould be able to bring suit against APEX in Japanesecourt because Emiko performed her services in Japan.
The new jurisdictional provisions of the Amended Codethat make it easier for an employee to sue in Japanesecourt apply only to agreements made on April 1, 2012or later. Earlier agreements rely on the previous Code ofCivil Procedure, which, as mentioned above, failed toaddress issues of international jurisdiction. As a result,the court determines jurisdictional issues for earlier
agreements based on case law (specifically, a 1975
Supreme Court case). While the Amended Code does
not enforce an exclusive jurisdiction clause in labor
disputes, the 1975 Supreme Court case held that sucha jurisdiction clause is valid unless it is especiallyunreasonable and violates Japanese public policy.
Where, for example, applying an exclusive jurisdiction
clause would unduly favor an employer, or where an
employer pressured an employee to consent to an
exclusive jurisdiction clause without sufficient explanation, a Japanese court may invalidate the clause as a
violation of Japanese public policy.
Would the result be different if APEX and Emiko had
instead entered into an arbitration agreement? The
answer is not clear. The Japanese Arbitration Act
provides that an arbitration agreement does not apply
to an individual labor-related dispute. However, theTokyo District Court ruled in 2011 that the Arbitration
Act does not apply to an arbitration agreement specifying that arbitration be held in Georgia under U.S.
arbitration rules because the Arbitration Act applies
only to arbitration agreements that provide forarbitrations in Japan. Because there are no appellate
decisions regarding the applicability of the Arbitration
Act to arbitration clauses specifying that the arbitration
be held outside of Japan, it remains unclear at thispoint how this issue will be decided in Japan. In our
example, therefore, it is uncertain whether a Japanesecourt could take jurisdiction in Emiko’s case against
APEX if the parties had entered into an arbitrationagreement governed by California law that provides forarbitration in the U.S.
Governing Law
The Act on General Rules for Application of Laws (the“General Act”) sets forth the governing law applicable tocertain international cases. Assuming for the sake of
discussion that the employment agreement between
APEX and Emiko did not specify a governing law, thelaw of the place most closely connected to the labor
contract would apply. The General Act provides that thecountry in which an employee renders his/her services
is presumed to have the closest connection to therelevant employment agreement. In the APEX-Emikocase, therefore, Japanese law would apply if the parties
not had selected a governing law.
In our example, APEX and Emiko agreed that California
law would govern the Agreement. However, the General
Act provides special rules for labor contracts. Specifically, a labor contract will be subject to mandatory
provisions of the law of the place that is most closely
connected to the contract if the employee demonstrates to the employer an intention to have theagreement governed by such mandatory provisions(provisions concerning such things as dismissal,
working hours, overtime and annual paid leave areconsidered “mandatory” under Japanese law).
Therefore, if Emiko notified APEX that the legality of her
dismissal should be adjudicated under Japanese law,
Japanese law would be the governing law in this case,even though the Agreement specified California law.

Labor and Employment Practice Group
PartnerCounselHiromasa Ogawa

Izumi Okada

Hitomi Sakai

Associates
Darcy H. Kishida *Norio Mitsuuchi
Tatsuro Terada
Ayako Shinmura

Hirokazu Amemiya
Minoru Saito
Seizaburo Taira* Mr. Kishida is licensed to practice law in Hawaii, New York and Washington, D.C. andprovided editorial assistance for this newsletter.

The contents of this publication, current at the date of publication, are for reference purposes only. They do not constitute legal advice andshould not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking
any action based on this publication.

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Labor & Employment Law Newsletter© Kojima Law Offices 2013