Global Employee Consultations at a glance: Japan | White & Case LLP International Law Firm, Global Law Practice
Global Employee Consultations at a glance: Japan

Global Employee Consultations at a glance: Japan

Welcome to the Japan page of our Global Employee Consultations at a glance series. To learn more, please visit our Global Employee Consultations at a glance page.

 

TABLE OF CONTENTS

Transfer of Business

Collective Redundancies

Individual Redundancies 

 

Transfer of Business

Trigger point

The obligations set out below will be triggered on a transfer of a business or part of a business. Under Japanese law, this will apply on:

(i) a business transfer (Jigyo Jyoto), whereby all or part of the assets and liabilities of a business are transferred to the Transferee by agreement (“Business Transfer”); and

(ii) a company split (Kaisha Bunkatsu), whereby all or part of the assets and liabilities of the business transfer to the Transferee by operation of law (“Company Split”).

In the event of a Business Transfer, the contracts of employment of employees who are assigned to the business transferring will not be automatically transferred to the Transferee, but instead, the employees will need to consent to the transfer of their contracts to, or to enter into new contracts of employment with, the Transferee.

In the event of a Company Split, the contracts of employment of employees who are assigned to the part of the business transferring will be automatically transferred to the Transferee.

Obligations

There are obligations to inform and consult. The nature and extent of these obligations will depend on whether there is a Business Transfer or a Company Split.

Timing

In the case of a Business Transfer, there is no prescribed timing.

In the case of a Company Split, the process could take at least one month. This is because:

(i) notices to the transferring employees must be provided 15 days before the shareholders’ meeting (if the Company Split needs to be resolved at the shareholders’ meeting), or, if a shareholder resolution is not required, within 13 days after the definitive agreement is executed; and

(ii) it is necessary to leave at least 13 days between the date on which employees are notified and the objection deadline date (see “Veto rights” below).

Representatives

In the case of a Business Transfer or a Company Split, any existing Trade Union (or, where there is no existing Trade Union, the person representing the majority of the employees) must be consulted with. The representative employee must not be an employee who is in a managerial position.

In practice, if there are no representatives in place, the employer should allow the employees to elect the representatives.

Information/Notification

The following information and notification obligations apply:

Business Transfer: There is no notification obligation prescribed by law, but, in practice, it is recommended that an employer informs employees and any Trade Unions about the Business Transfer.

Company Split: The Transferor is required to provide the below listed information in writing to: (i) employees primarily engaged in the relevant business; (ii) other employees to be transferred to the Transferee; and (iii) Trade Unions that have executed a CBA with the Transferor:

(i) an overview of the relevant business;

(ii) the name, address and the business details of the Transferor and the Transferee on and after the effective date of the Company Split, and the number of employees that these companies plan to employ on and after the date;

(iii) the effective date of the Company Split; and

(v) matters that will impact the Transferor’s and Transferee’s ability to perform their obligations on and/or after the effective date of the Company Split.

Consultation

Business Transfer:  There is no obligation to consult with employees. However, the guidelines issued by the Ministry of Health, Labor and Welfare recommend that employers inform and consult with the Trade Unions and the relevant employees who are to be transferred about the contemplated transaction.

Company Split: The parties must comply with the following consultation obligations:

(i) The Transferor should consult with the Trade Unions (or, where there is no Trade Union, with the persons representing the majority of the employees) regarding the following matters:

(a) background and reasons for the transaction;

(b) matters relating to any applicable CBA; and

(c) criteria to determine the scope of the employees who are primarily engaged in the transferring business.

(ii) The Transferor and the Trade Unions should reach an agreement regarding the succession of the employer’s obligations in any applicable CBA.

(iii) There is an obligation for the Transferor to consult with: (i) the employees who are mainly engaged in the transferring business ("Primarily Engaged Employee"); and (ii) the employees who are not mainly engaged in the transferring business ("Non-Primarily Engaged Employee") but whose employment contracts are to be assigned to the Transferee on an individual basis. The Transferor will need to explain the following:

(a) an overview of the Transferee;

(b) the prospect of the Transferor and the Transferee being able to continue to perform their obligations following the Company Split; and

(c) criteria to determine the scope of the employees who are primarily engaged in the transferring business.

The Transferor will need to discuss with each employee whether their employment contract is to be transferred, and, if so, their proposed work conditions after the transfer.

There is no obligation for employers to reach an agreement with employees or Trade Unions.

Veto rights

Neither the employees nor employee representatives have any veto rights, and neither can stop a Business Transfer or Company Split from proceeding.

In the event of a Business Transfer, if an employee does not consent to the assignment of his/her employment contract, he/she is entitled to remain in employment with the Transferor under their existing contractual terms.

In the event of a Company Split, if the Transferor:

(i) retains a Primarily Engaged Employee; or

(ii) assigns the employment of a Non-Primarily Engaged Employee to the Transferee,

that employee is entitled to object to the transfer of their employment. The objection will have the following effect:

(i) the Primarily Engaged Employee will be transferred to the Transferee; and

(ii) the Non-Primarily Engaged Employee will remain with the Transferor.

Penalties

Failure to comply with the above in respect of a Company Split may result in the Company Split being nullified.

As there is no mandatory obligation to inform and consult on a Business Transfer, there are no penalties for failing to do so.

Other

The Transferor and/or Transferee must comply with any additional process prescribed in any applicable CBA.

There will be an obligation to consult with Trade Unions if it is necessary to change any CBA.

A Trade Union can also require an employer to hold a collective bargaining session on any issue, including on the assignment of a business or a Company Split.

While there is no mandatory requirement, it is recommended that any documents are provided in Japanese.

Impact of Share Sale

The above process does not generally apply on a Share Sale. On a Share Sale, employees will remain employed by the same entity under the same terms and conditions on completion. Unless significant changes affecting employees are proposed as part of the Share Sale or consultation is required by an applicable CBA, a Share Sale will generally not itself trigger consultation obligations.

Intra-Group Transfers

The same requirements apply in the event of an Intra-Group Transfer.

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Collective Redundancies

Threshold

A collective redundancy process is triggered where an employer proposes to make redundant 30 or more employees within a period of one month.

Obligations

There is an obligation to inform and consult with employees and any Trade Union.

Timing

The employer must inform and consult with the employees and any Trade Union at least one month before the proposed redundancies. The employer must also provide the relevant employees with a minimum of 30 days’ notice of termination (or make a payment in lieu of such notice).

In practice, the actual timeframe will vary on a case-by-case basis, depending on the number of employees affected and the extent of the consultation. It can take up to five months for the employer to conduct a collective redundancy process.

Representatives

The representative employee must not be an employee who is in a managerial position.

The obligation on the employer is to inform and consult with each employee, and not with the representatives. However, if there is a Trade Union in place, the Trade Union will play a role in consulting with the employer.

As explained below, the existing representatives do, however, have the right to provide their opinion when the employer drafts the New Employment Support Plan (“NESP”).

Information/ Notification

There are four information and notification obligations:

(i) Notification to employees: The employer must notify relevant employees of their redundancy by providing a minimum of 30 days’ notice;

(ii) Preparation of the NESP: The employer must prepare a NESP listing the affected employees and detailing the measures to be taken by the employer to facilitate job searches. There is a prescribed format in Japanese for the NESP. The NESP must include (among other things) information such as the number of offices/sites the employer has, the number of employees employed, the reasons for the redundancies and the financial state of the employer, the reasons for submitting the NESP, the scope and period of the redundancy process, the measures to support re-employment and the opinion of any applicable Trade Union;

(iii) Notification to Hello Work: The employer must notify the government’s Employment Service Center (“Hello Work”), of the proposed redundancies and provide Hello Work with the NESP. It will be necessary to obtain Hello Work’s approval to the proposed NESP. This notification should be made no later than one month before the proposed redundancy takes place; and

(iv) Alternative notification to Hello Work: If the employer has not filed the NESP, it must submit a Notification of Large Fluctuations in Employment to Hello Work. This will need to include information as to the proposed redundancy process and timing, schedule of the redundancy, the number of employees affected by the redundancy, the actions taken to help the relevant employees to find new jobs and the number of employees having found new jobs.

Consultation

Employers are required to comply with the following consultation obligations:

(i) Consultation regarding process: The employer must inform and consult with the Trade Union(s) or, if there is no Trade Union, with the employees, about the rationale, timing and means of the collective redundancy at least one month prior to the proposed redundancies.

(ii) Consultation regarding the NESP: If there is a Trade Union, the employer must also consult with it about the NESP. If there is no existing Trade Union in place, the employer must solicit the opinion of a representative of the majority of the employees regarding the NESP. Such consultation must take place prior to the notification of the NESP. There is no specific timing prescribed by law, but, in practice, an employer should aim to consult at least one month prior to the proposed redundancies.

(iii) Consultation at the request of the Trade Union: If the Trade Union raises concerns regarding potential changes to the working conditions of employees and/or other treatment of the employees or Trade Unions, the employer must hold a collective bargaining session and negotiate in good faith with the Trade Union. However, if the issues raised are not related to those matters, the employer can decline the request to negotiate. There is no specific timing prescribed by law, but such collective bargaining will need to take place prior to the notification of the NESP.

Employers have no obligation to reach an agreement with the Trade Union or employees. The employer’s collective bargaining obligation consists primarily of the duty to negotiate in good faith.

Penalties

Failure to comply with the above process could result in a court or labor tribunal finding that the redundancy is invalid and that the employee retains their employee status. The court or labor tribunal could order that the employer pay back wages that should have been paid had the employee not been made redundant. Failure to do so can result in civil and criminal penalties for the employer.

Other

The employer must comply with any additional process prescribed in any applicable CBA.

Generally speaking, the documents which an employer is required to submit to an administration office, such as Hello Work, must be in Japanese. In addition, any foreign language documents that are submitted to the court as evidence must be translated into Japanese.

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Individual Redundancies

Threshold

Where the threshold for a collective redundancy is not met.

Obligations

There is an obligation to inform and consult with employees individually and to notify relevant employees of their redundancy by providing a minimum of 30 days’ notice.

Timing

The employer must inform and consult with the employees and any Trade Union at least one month before the proposed redundancies. The employer must also provide the relevant employees with a minimum of 30 days’ notice of termination (or make a payment in lieu of such notice).

In practice, the actual timeframe will vary on a case-by-case basis, depending on the number of employees affected and the extent of the consultation.

Representatives

There is no requirement for employee representatives to be appointed.

The employer must inform and consult with each employee, and not the representatives. However, if there is a Trade Union in place, the Trade Union will play a role in consulting with the employer.

Information/Notification

There is an obligation to notify the relevant employees by providing a minimum of 30 days’ notice.

Consultation

Employers are required to comply with the following consultation obligations:

(i) Consultation regarding process: The employer must inform and consult with the Trade Union(s) or, if there is no Trade Union, with the employees, about the rationale, timing and means of the collective redundancy at least one month prior to the proposed redundancies.

(ii) Consultation at the request of the Trade Union: If the Trade Union raises concerns regarding potential changes to the working conditions of employees and/or other treatment of the employees or Trade Unions, the employer must hold a collective bargaining session and negotiate in good faith with the Trade Union. However, if the issues raised are not related to those matters, the employer can decline the request to negotiate. There is no specific timing prescribed by law. The only requirement is that an employer conducts a meaningful bargaining session.

Employers have no obligation to reach an agreement with the Trade Union or employees. The employer’s collective-bargaining obligation consists primarily of the duty to negotiate in good faith.

Penalties

Failure to comply with the above process could result in a court or labor tribunal finding that the redundancy is invalid, and that the employee retains their employee status. The court or labor tribunal could order that the employer pay back wages that should have been paid had the employee not been made redundant. Failure to do so can result in civil and criminal penalties for the employer.

Other

The employer must comply with any additional process prescribed in any applicable CBA.

Generally speaking, the documents which an employer is required to submit to an administration office, such as Hello Work, must be in Japanese. In addition, any foreign language documents that are submitted to the court as evidence must be translated into Japanese.

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See also:

Global Employee Consultations at a glance ›

Employment, Compensation & Benefits practice group ›

 

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