JAPAN Law and Practice Contributed by: Raku Raku, Gen Takahashi, Yoshihiro Morisato and Taku Matsumoto, Anderson Mōri & Tomotsune
tion to the LSA, LCA and LUA, the Act on Improve - ment, etc of Employment Management for Part-Time and Fixed-Term Workers requires employers to treat regular workers and non-regular workers in a well- balanced manner (or equally) and prohibits employers from treating them unreasonably differently. It is particularly important when engaging in a Japa - nese business to understand that: • the labour-related laws are protective for employ - ees, especially compared to those of common law jurisdictions; and • labour-related matters may be heavily affected by judicial precedents (which are all written in Japa - nese). Labour unions can be easily organised in Japan. Tra - ditionally, labour unions were predominantly organ - ised by workers from a certain enterprise or business establishment but, recently, labour unions comprised of workers across different enterprises and industries have also become common. The right of collective bargaining is guaranteed by the Constitution and is not uncommon in Japan. Once a labour union initiates collective bargaining, the employer must negotiate with the labour union in good faith and failure to fulfil this obligation could lead to an accusation of unfair labour practices. Among various protections for employees, it is par - ticularly important to note that unilateral dismissal of an employee by an employer is very difficult in Japan. Specifically, a dismissal is invalid if the dismissal is not based on any objectively and socially justifiable cause, as clarified by the judicial precedents. 10.2 Employee Compensation Under the LSA, employers are required to pay wages directly to employees in cash (ie, Japanese yen). The wages must also be paid in full, at least once a month on a certain date. While the wage must be paid in cash, it is becoming common in Japan that employees receive additional benefits from employers or their group companies in other forms, such as stock options or restricted stocks, in most cases as an incentive payment. In
addition, under certain conditions, employees working at an enterprise must be covered by an employees’ pension system, on top of the basic pension provided by the National Pension System. Since employee compensation is a critical part of the labour conditions between an employer and employ - ee, in principle, any reduction or material change in the payment of employee compensation requires the clear informed consent of the relevant employ - ee. In the event that a Japanese enterprise becomes involved in an acquisition, or any transaction involving a change of control (eg, business transfer, share trans - fer or corporate split), the basic principle is that the compensation of the employees belonging to the rel - evant enterprise should be maintained even after such a transaction, in the absence of a clear agreement between the employer and the relevant employees. 10.3 Employment Protection Share Sale Transaction In a share sale transaction, the work conditions for the employees are expected to be maintained after the transaction unless the company and the employees specifically agree to change them. There is no require - ment for the company to consult with the employees prior to the transaction unless any collective agree - ment between the company and a labour union oblig - es it to do so. Acquisition/Asset Sale Transaction Apart from merger, where employment is automati - cally succeeded to by the merging entity, there are two types of acquisition/asset transfer transaction in Japan: business transfer and corporate split. Business Transfer In a business transfer transaction, where the rights and obligations of the transferred business must be individually transferred, only targeted employees who agree to be employed by the buyer’s entity and give their individual consent thereto will be transferred to the buyer’s entity either by way of: (i) simultaneous termination of the employment agreements between the seller and the transferred employees and execu - tion of new employment agreements between these employees and the buyer; or (ii) the buyer’s direct suc - cession of the status of employer under the employ -
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