Coronavirus-Related Measures Employers In Japan Need To Know

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  • Coronavirus-Related Measures Employers In Japan Need To Know

    By Hiromasa OgawaDarcy Kishida, and Saori Miyanishi

COVID-19 has wreaked havoc on almost every aspect of life almost everywhere, including in Japan. Apart from health, the pandemic has arguably had the biggest impact on the workplace. The more fortunate employees in Japan are able to work remotely. Those less fortunate saw their hours cut and may face layoffs. And the least fortunate have already lost their jobs entirely. The speed, intensity, and unpredictability of the disruption left some employers shell shocked and unsure of what to do. This article discusses measures employers in Japan can or must take to respond to the crisis.


Work Hours

Employers can easily track their employees’ working hours at the office. It is much more difficult to do so when those employees begin working at home. Under the law and relevant guidelines in Japan, employers should track their employees’ remote working hours using a verifiable method such as an online time-keeping system. If for some reason an online system is undesirable or unworkable, employers may have their employees self-report their working hours.

Non-Work Activities During Working Hours

Working at an office generally involves a lunch break or some other form of scheduled break time. However, working from home often requires employees to spend time on activities other than work, including housework, shopping, and childcare chores. If employees engage in these types of non-work activities during their normal working hours, employers can give employees the choice to either make up the time by working outside of their standard working hours, or treat the non-work time as hourly paid leave. For example, an employee who spends an hour taking their child to the doctor at 4:00pm has three choices: (i) forfeit an hour of pay; (ii) take an hour of paid leave (if the labor-management agreement permits); or (iii) start work an hour earlier than usual or work an hour later than usual (assuming the rules of employment allow this option).

Employees’ Health

As with employees elsewhere, employees working remotely in Japan have had to cope with the eroding boundary between work and home. In many cases, this blurred line has resulted in longer working hours that could affect employees’ health. To alleviate this risk, the government’s guidelines encourage employers to refrain from sending work-related e-mails outside of normal work hours, and to block employees from accessing the employer’s computer systems late at night or on the employee’s days off.


Cost of Working Remotely

When employees work at the office, it is clear that the employer will generally provide all equipment, office supplies, and communication technology that the employee needs to do their job. The picture is less clear when employees shift to working from home. Put simply, employers are generally responsible for the cost of their employees working remotely. This includes the cost to purchase any equipment and other items required for their work such as computers, printers, software, and Internet connectivity, as well as less obvious items like the cost of pens and notepads, telephone calls, air conditioning and water. It is unclear what the employer’s responsibility would be if the employee had already been paying for some or all of these things themselves for their own personal use. Employers who prefer that their employees bear these costs would need to include an appropriate provision in the rules of employment. A simpler option is for the employer to pay the employee a fixed “telework allowance” rather than the actual cost of working remotely.

Commuting Allowance

As it has done in many other areas, remote working has complicated what had previously been a rather simple arrangement. In Japan, a particularly significant issue is whether employers should continue paying their employees a commuting allowance if those employees no longer commute to the office.

The rules of employment typically require employers to pay their employees for the cost of commuting to work even though Japanese labor law does not obligate the employer to do so. However, the specific provision in the rules of employment can determine whether or not the employer is required to continue paying the commutation allowance to employees who work from home and no longer come to the office. For instance, rules of employment commonly require the employer to pay the cost of the employee’s commutation pass, which in Japan is available for a certain number of months. Most employers and their employees prefer this option because it is both less expensive and less burdensome than having employees purchase a ticket every time they take the train or bus to work. The downside for the employer under this system is that the employer must keep paying this commutation allowance even if the employee starts working at home and stops coming in to the office. Failure to pay the allowance can present certain legal risks. In order to minimize these risks, the employer must carefully review and analyze their rules of employment (as well as established in-house practices) and ascertain whether they need to revise any of the rules prior to deciding to stop paying the commutation allowance. An appropriate provision of the rules would: (i) require the employer to pay the actual cost of a reasonable commutation route using public transportation (where “reasonable” does not necessarily mean the lowest-cost route, but instead refers to a sensible balance between cost and commute time); and (ii) allow the employer to request their employees to use a commutation pass rather than individual tickets.


Furloughs resulting from COVID-19-related business slowdowns and closures

In general, Employers need to pay employees that they furlough due to COVID-19 at least 60% of their average wages (“furlough pay”). An employer that fails to do so risks a court order requiring them to pay the employee double the amount of the furlough pay, plus a maximum fine of JPY 300,000. In this connection, employers may on a case-by-case basis be able to avoid this requirement by arguing that the furlough was due to an unforeseen “force majeure” event (act of god).

The government is taking measures to reduce the financial burden on employers by providing grants to reimburse employers for paying their employees the required furlough pay. Employers can receive these grants by meeting certain conditions. The current grant system is set to continue until at least December 31, 2020.

Allowance for time off related to COVID-19 infections

To prevent the spread of COVID-19, the government requests that anyone who believes they may be infected contact an appropriate COVID-19-related health center or other qualified institution. If the health center advises the employee to stay home because the employee tests positive for COVID-19, the employer will not be required to provide that employee with any furlough pay. However, if the health center “clears” the employee for work but the employer nevertheless requests that the employee stay home in an abundance of caution, the employee will be considered to be absent from work for reasons attributable to the employer, and the employer will be able to take advantage of the government grant system discussed above.


Wage Reductions

Employers have two main ways to reduce their employees’ pay. The first and less risky option is to reach an agreement with the employees. In the current climate where many employers are struggling, employees may be more open to accepting less pay if the employer needs to save money to survive. However, employers need to make sure the basis for the request is objectively reasonable; simply wishing to boost profits isn’t enough of a reason. Because employees are typically in a weaker bargaining position than the employer, any agreement must be of the employees’ own free will and not in any way coerced.

Second, if the employees reject a pay reduction, the employer may be able to unilaterally revise their rules of employment to provide for less pay but only if the reduction is reasonable. Employers can maximize the chances that the pay reduction will be found reasonable by: (i) ensuring that the pay reductions and the procedures in connection with those reductions are fair and reasonable under the circumstances; and (ii) providing the employees with a full and complete explanation of the contemplated changes to the rules of employment (which are necessary for a pay reduction), as well as ample opportunity for discussions about the pay reduction.

In addition to the requirements described above, employers must also confer with a person representing a majority of the employees, file any revised rules of employment with the relevant labor bureau, and inform the employees of any changes to the rules.

Dismissals: Permanent, Full-Time Employees

In the worst-case scenario, an employer may need to downsize in order to survive the pandemic. Under Japan’s pro-employee legal regime, a dismissal of a permanent, full-time employee must be based on objectively reasonable grounds without offending generally accepted social norms. The traditional formulation of this test is whether:

1. it is critical for the employer’s business that it reduce the size of its workforce;

2. the employer has done everything it can reasonably do to avoid dismissals;

3. the employer’s choice of the employee(s) targeted for dismissal is reasonable; and

4. the employer provided the employee(s) with a full and complete explanation of the contemplated dismissal, as well as ample opportunity for discussion.

Because of the sudden and unexpected blow that many employers have suffered due to COVID-19, employers may find it less difficult than usual to satisfy the four-part test. Specifically, courts may recognize the dire situation that employers now find themselves in, with many employers facing possible bankruptcy. As a result, courts may allow employers more freedom to downsize than in the past.


Dismissals: Fixed-Term Employees

It is extremely difficult to dismiss an employee in the middle of their contract unless the employer has a compelling reason to do so. Even the choice not to renew a fixed-term labor contract at the time it expires can, in some situations, require an employer to have objectively reasonable grounds for the nonrenewal that do not offend generally-accepted social norms. For example, a nonrenewal may be difficult for a contract with substantially similar terms to a permanent, full-time employment contract, or if the fixed-term employee reasonably expects their employment to continue because the employer had repeatedly renewed their contracts in the past.

If you have questions about this topic, please contact any of the authors directly or our firm’s Labor and Employment Practice Group through the contact information available on our firm’s website.


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