KOJIMA LAW OFFICES
Labor and Employment Practice Group

Vol. 7 August 2015

Labor & Employment Law Newsletter
Japan Employment / Labor Law Update
Ending the Residency Requirementfor Representative Directors inJapan
Japan’s Ministry of Justice announced on March 16, 2015 that it
would no longer require most Japanese companies to have at least
one of their representative directors
be a resident of Japan.
Prior to this change, virtually all
Japanese subsidiaries of foreigncompanies were required to appointat least one resident of Japan as arepresentative director.
The residency requirement had
been a headache for foreign companies wishing to establish a subsidiary in Japan. In particular, it was
not easy for companies with little
experience doing business in Japanto find a candidate that they could
trust. Because representative directors have broad authority torepresent and bind the company, it
was especially risky to hand thatpower over to someone the company was not familiar with. For thisreason, many foreign companies
have relied on intermediary companies to find suitable candidates whocould meet the residency requirements. For an additional fee, thosecompanies could even make theirown staff members available toserve as temporary representative
directors to satisfy the residency
requirement.
The Japanese government madethis change as part of its recent
push to promote inbound investment. With residency no longer an

1issue, foreign companies will now
be able to establish subsidiaries inJapan without appointing a locally-based representative director. (Itshould be noted that the residency
requirement still applies to certain
business structures such as branch
offices.) With the change, foreigncompanies can now run their Japanese subsidiaries with much more
flexibility than before. Another benefit is the potential to avoid having
to pay an exorbitant amount to secure a resident representative director, who is typically Japaneseand bilingual. As discussed in theJanuary 2015 issue of this newsletter, the pool of qualified bilingual
candidates in Japan isn’t very big,
which means those candidates canoften command higher salaries.
Lastly, by appointing a non-resident,
non-Japanese individual to head its
Japanese subsidiary, a company
may be able to minimize culturaldifferences that sometimes create
misunderstanding and conflict withresident representative directors.
But don’t break out the bubbly justyet. A non-resident still faces certain
hurdles that a resident does not. For
example, the representative director
is required to open a bank accountduring the subsidiary’s incorporation phase to certify payment of theinitial capital. Simple, right? Not fornon-residents. Japanese banks are
generally reluctant to allow nonresidents to open individual accounts. This effectively means that
foreign companies will probably end
up having to rely on a resident
promoter to open the bank accountand certify the initial capital.

Kinkakuji in Kyoto (the Golden Pavilion)

Contents
Ending the Residency Requirementfor Representative Directors in Japan ............. 1
Introduction of the “My Number” ID System ... 2
Bill to eliminate overtime pay forwhite collar workers under discussion............. 2

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 inlabor disputes and assists them in structuringand implementing HR policies. We work withboth foreign headquarters and local management to timely and appropriately resolve employment issues that overseas companies face
operating in Japan. As part of our continuing
effort to reach out and share our expertise withothers, the Labor and Employment PracticeGroup publishes this newsletter to provide a
better understanding of this complex area oflaw, 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 Practice GroupKojima Law Offices
URL: http://www.kojimalaw.jp/en/index.html
Contact: (E-mail) webmaster@kojimalaw.jp(Telephone) 81-3-3222-1401

Labor & Employment Law Newsletter© Kojima Law Offices 2015

Labor & Employment Law Newsletter

Introduction of the “My Number” ID System
Many countries assign their citizens a unique ID number for
purposes of work, taxes, and other government-related functions (think social security numbers in the US). Japan has until
recently declined to adopt such a system, in part due toconcerns over privacy and identity theft. However, this will allchange starting in October, when the Japanese government
will issue what is rather fancifully called a “My Number”.
Like its counterpart in other countries, the My Number system
is designed to manage an individual’s information in connection with social security benefits, taxes and government-provided pension. Under this system, the government
will issue a 12-digit ID number to all Japanese citizens andresident foreigners. This number is required to be included ona variety of tax and social security documents that a company
handles. The system is scheduled to be implemented inJanuary 2016. Employers therefore need to be ready bymaking sure the ID numbers are on all of the required documents for all of their employees, as well as by taking any
necessary measures to otherwise implement the system.

Bill to eliminate overtime pay for white collar workers
under discussion
The Diet is considering passage of a bill that would exclude
employers from having to pay overtime to certain white-collar
workers in fields such as R&D and investing (including fundmanagers). Under current law, with very few exceptions employers must pay overtime to employees who work more thaneight hours per day and 40 hours per week. The bill wouldchange this by dropping the requirement for those employees
whose positions require specific professional knowledge andskills. In addition to standard overtime, the bill also covers
extra pay for working on national holidays and for work performed past 10:00 pm. However, employers will be exempt
from paying overtime under the bill only if they: (i) provide
employees with at least 104 days off per year (includingweekends and holidays); (ii) ensure that employees have acertain amount of break time per day; and/or (iii) limit the total

Vol. 7 August2015

Not surprisingly, most of these measures are rather detailed
and will be handled by a company’s local HR department.
Some of the more notable tasks include verifying the identityof the employees at the time they provide the company with
their ID numbers in order to prevent identity theft or otherimproper use of the numbers. The company can complete
this step by requiring employees to show some form of government-issued ID such as a driver’s license or a passport.
Under the relevant guidelines, employers must also take steps
to ensure that the numbers are kept safe to prevent loss orunintended disclosure. Of particular note, employers must:
(a)
(b)

(c)

Identify a specific person and department that will beresponsible for the employees’ personal information;
Designate a specific part of the company where theemployees’ personal information can be physicallystored in a safe and secure manner; andImplement technical measures to ensure that no confidential information is lost or accidentally disclosed.

amount of time employees are actually in the office.
But there’s a catch for small to mid-sized companies. Theseemployers are currently exempt from having to pay overtime
for work performed in excess of 60-hours per month (150%over the base salary) as well as for work performed after
10:00 pm that exceeds 60-hours per month (175% over thebase salary). If the bill passes, however, this exemption will
likely end in March 2019.
Not surprisingly, labor unions have criticized the proposedexemption. They fear it will encourage longer working hours
and have a detrimental effect on worker health. In particular,
unions worry that the exemption could exacerbate depression
and death from overwork (karoshi ) that have proven to beserious problems in Japan. By contrast, employers welcome
the exemption as a way to be more flexible and efficient intheir personnel and management decisions. We will provide
updates as developments on this issue become available.

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

Labor and Employment Practice GroupPartnerCounsel/Associates

Hiromasa Ogawa

Norio Mitsuuchi
Nozomi Watanabe
Tatsuro Terada

Darcy H. Kishida *Toshihiko Nunokawa
Seizaburo Taira* Mr. Kishida is licensed to practice law in Hawaii, New York and Washington, D.C. and is admitted in Japan as a Registered Foreign Lawyer (gaikokuho jimu bengoshi). He provided editorial assistance for this newsletter.
2Labor & Employment Law Newsletter© Kojima Law Offices 2015