Avoid wrongful termination in Japan

How Permanent Employees can avoid wrongful dismissal? 

If you are employed for indefinite period, you are deemed as a permanent employee (正社員). Under Japanese labor laws, companies cannot easily dismiss permanent employees.

Even if the company are facing the financial difficulty, legitimacy of dismissal are strictly examined in light of the following factors:

  1. Does the company need to reduce personnel?
  2. Has the company made efforts to avoid dismissal?
  3. Is the selection of the persons to be dismissed fair? and
  4. Have the explanation and discussion with employees been properly done?

If a company is in a critical situation where they will go bankrupt without dismissal, they can lay off some workers. But even in such case, they need to fulfill all of the requirements above. Actually, employers often fail to satisfy one or two of them.

In addition, the Labor Standards Act requires companies to notify the workers at least 30 days in advance of the dismissal, or if they do not give such notice, they must pay dismissal notice allowance which is at least 30 days’ worth of average wages.

What is Retirement Encouragement?

Because it is so difficult for companies to satisfy all of the requirements above, many companies try to encourage your voluntary retirement. This is called retirement encouragement (or 退職勧奨 Taishoku Kanshou).

If your company mentions about termination of your employment, you should ask company for clarification whether it is dismissal or retirement encouragement.

And in the case of retirement encouragement, you can refuse it.

Even after your refusal, your company may continue to encourage your retirement through unfair harassment or detrimental treatment, such as salary cut or job transfer.

If you feel difficult to refuse it by yourself, you should consult with the labor union in your company or lawyers. Also, if you have colleagues who are encouraged to retire, you may collaborate with them.


Can Contract Employees avoid non-renewal of  labor contract. 

If you have a fixed-term labor contract, your employer cannot dismiss you during the term of contract unless there is an “unavoidable circumstances” . “Unreasonable circumstances” are judged more strictly than normal requirements for dismissal as stated above.

In the case of improper dismissal, the company is obliged to pay the wage at least until the expiration of the term of labor contract.

On the contrary, when the term of the labor contract has expired, in principle, companies do not need to renew the contract.


In case of the following situations, companies may be obliged to renew your labor contract:

  1. Your labor contract can be considered substantially equal to permanent contract after repetition of the renewal; or
  2. There is a reasonable ground that you expect your labor contract will be renewed.

It requires very complicated analysis to determine whether your case falls into one of the two situations above. So, it is better to consult with lawyers to ask whether your case falls into the cases above.

Things you should keep in mind

Japan is a country where employees have relatively high level of job security. However, as explained above, the level of protection varies depending on the type of contract.

In addition, because of the difficulty in dismissal, company may seek to encourage voluntary retirement through various illegal or unfair ways.

If you face such situation, please do not hesitate to consult with your colleague, trade union, or lawyers.

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