Employment Guideline (Excerpts)

1. General Remark

[This part aims to point out that there are different standards applied in Japan’s court rulings depending on whether a company’s personnel/labor management is “internal labor-market type” or “external labor-market type.”]

l  With regard to personnel/labor management in typically-Japanese companies, the following features have often been pointed out;

①       New graduates are recruited from schools every year regularly without restrictions on duties or places of employment; and under the principle of lifetime employment, employees are expected to work for relatively longtime and there are expected increases in positions and wages under the personnel- and wage-systems taking into consideration proficiencies and years of experience in the works.

②       Dispatches and (re)shuffles are widely taken into practice.

③       There are uniform conditions of employment under company regulations.

④       During economic recessions, companies adjust employment via such means as reduction/suspension of overtime works, reduction/suspension of new recruitments, suspension of business operations, personnel (re)shuffles and dispatches; and in case companies still have to terminate employments, companies usually ask for self-resignations or early-retirements by increasing retirement moneys via labor-management consultations.

*These are all generalizations and the actual states may differ in individual companies.

l  On the other hand, even in Japan, there are companies adopting the personnel/labor management of “external labor-market type” such as foreign-invested companies or newly-startup companies which are not premised on longtime employment. These companies have often been said to have the following features;

①       In-house or public invitations for vacant positions are widely announced as occasion demands, not necessarily assuming longtime employments of internal human resources.

②       Duties of work are clearly specified in job descriptions, and ranges of (re)shuffles are not wide.

③       Conditions of employment, e.g., wages, are provided in detail for individual employees in accordance with their duties in the labor-contract documents.

④       With regard to employees who were recruited for specific positions, when the positions themselves are abolished, the employees are to be dismissed after the companies processed prearranged procedures, economic compensations and supports for reemployment (hereby mentioned as “retirement-packages”).

*These are all generalizations and the actual states may differ in individual companies.

l  In individual rulings with regard to Japan’s employment rules, the courts have used the value standards (moral conditions) such as objectively-reasonable reasons or socially-recognized appropriateness as grounds for the rulings under the basic principles of faith and honesty or restriction on abuse of rights. The courts in times have made judgments taking into consideration the differences in the personnel/labor management styles between companies adopting the aforementioned personnel/labor management of internal market-type (hereby mentioned as “internal labor-market type companies”) and companies adopting the aforementioned personnel/labor management of external market-type (hereby mentioned as “external labor-market type companies”) as well as other factors.

In particular,

①       With regard to internal-labor market type companies, there are many rulings that the courts did not regard (re)shuffles and dispatches decided by employers as abuse of personnel rights; meanwhile, the courts have often ruled that employers should have given more efforts to avoid dismissals in cases resulted to dismissals.

②       With regard to external-labor market type companies, in cases companies provide retirement-packages, the extent which the courts have requested the employers to avoid dismissals of employees (by utilizing, for example, large-scale (re)shuffles) tends to be smaller.

l  It should be noted that the respective features pointed above with regard to internal labor-market type companies and external labor-market type companies are the only general understanding, and actual states or combinations of the features may differ in individual companies. Also, within a company adopting internal personnel/labor management style as a whole, it may be a case that the same company adopts some personnel/labor management closer to the external labor-market type for some branch or post; so the question is not necessary a choice between the two.
Also, the tendency of individual court rulings mentioned above is just a general understanding, and it is not to deny that the rulings have been decided after thorough considerations on the economic/industrial conditions, state of management of employers and labor management, etc. according to each individual cases. This Guideline, having studied and classified the past rulings, is designed to be equally objective.

2. Individual issues to be mentioned in the particulars

[This part aims to imply advices to companies adopting the external labor-market type personnel/labor management, as the following for example, after examinations of various past court rulings that declared both validity and invalidity of restructuring dismissals.

In order to prevent conflicts in advance

In order to prevent conflicts in advance in companies adopting personnel/labor management of external labor-market type, in case of employees in managing or highly-specialized posts who had been hired for certain amount of rewards as immediate assets and do not need protection as laborers, for example, there are alternatives for the companies to set such provisions as the following in their company regulations or labor contracts and take them into practice.

*Consistency is required between company regulations and labor contracts.

u  That there may be the cases that the companies dismiss employees for reasons that the employees are not necessarily responsible for, for example, personnel restructuring and abolishment of posts due to management reasons or corporate reorganizations.

u  That the companies are prepared to provide appropriate volume of retirement packages in accordance with the positions, achievements, period of employment and other conditions.