Resolving Labor Disputes in Japan

By Hiromasa Ogawa, Darcy Kishida, and Keitaro Shimomura

OVERVIEW

Given the complexity of labor law in Japan, it is important for foreign companies to understand the three basic mechanisms available to resolve labor disputes between an employee and an employer: court-run labor tribunals, standard court litigation, and alternative dispute resolution (“ADR”).

Together, labor tribunals, traditional litigation, i.e., standard court litigation, and ADR sponsored by administrative agencies represent the primary ways that parties resolve labor disputes in Japan. This article discusses each below.

LABOR TRIBUNAL (RODO-SHIMPAN)

The labor tribunal is a popular option due to the perception that it offers a fast and economical way to resolve labor disputes (in some years, it even handles more cases than ordinary labor-related civil litigation). Labor tribunals achieve this efficiency by limiting proceedings to only three hearings per case (additional hearings are possible only under special circumstances). Because of the limited number of hearings, it takes an average of about two-and-a-half months for a labor tribunal to issue a ruling in simple cases involving disputes over issues such as wages or retirement allowances.

A labor tribunal consists of a judge and two labor tribunal commissioners. In practice, one of the two commissioners is typically labor friendly (think labor union presidents) while the other is on the management side (e.g., human resource managers). Prior to issuing a ruling, the labor tribunal usually attempts to mediate the dispute over the course of the three-hearing proceedings. If mediation is unsuccessful, the tribunal will generally issue a decision rather than hold additional hearings. Once issued, the decision becomes binding only if neither party objects within two weeks after receiving the decision. Once final, the decision has the same binding effect as a court order (i.e., the prevailing party can compel the other party to comply with the decision). Unlike standard court litigation, labor tribunals are free to fashion decisions tailored to a given dispute.

According to a 2020 Central Labor Relations Commission report, about 80% of labor tribunal cases are resolved through mediation or the issuance of a final decision. In the remaining cases, the petitioner either withdraws from the proceedings entirely, or objects to an unfavorable decision. When a party objects, the labor tribunal decision is invalidated and the dispute is automatically transferred to the district court and starts anew as a standard litigation case. A party looking for finality, therefore, should carefully consider whether going the labor tribunal route is really the best choice rather than opting for standard court litigation from the start.

Lastly, just because labor tribunal proceedings are quick does not mean that preparing for them is simple or easy. Generally, the respondent has only about 30 days to prepare for the first hearing after being served with the complaint. The first hearing is important because the tribunal, after narrowing down the issues and reviewing the evidence, typically has a good sense of how it will rule after the first hearing. Therefore, it is crucial to present the strongest possible case at the first hearing. Due to the short turnaround time, it is best to consult with local counsel immediately after receiving a labor tribunal complaint.

STANDARD COURT LITIGATION

Standard court litigation generally takes substantially more time than labor tribunal proceedings or ADR (discussed below). In district courts, an average labor-related trial in 2020 lasted nearly 16 months, although this was likely longer than usual due to the COVID-19 pandemic (the average trial was about two months shorter prior to the pandemic).

The losing party at trial may appeal to a higher court. An appeal must be in writing and filed with the district court within two weeks after the date the judgment is served.

ADR

Along with labor tribunals, employees often choose ADR to resolve labor disputes. Typical examples of ADR in the labor context include conciliation (assen) conducted by the Dispute Reconciliation Commissions, mediation (chotei) or arbitration (chusai) conducted by Labor Relations Commissions. Because a petitioner is not required to pay a filing fee to submit a petition for ADR managed by these agencies, ADR is often a popular choice among employees without substantial financial resources.

The benefits of ADR include a prompt resolution of disputes (no more than one to two months, depending on the selected institution) and closed, confidential proceedings.

As with all forms of ADR, participation is completely voluntary. A respondent is free to withdraw from ADR proceedings at any time and can even refuse to appear at all without suffering any negative impact on their chances at trial or before a labor tribunal.

Although Japanese translation is indispensable when submitting foreign-language documents to court or to ADR panels presided over by administrative agencies (such as Regional Employment Commissions and Labor Relations Commissions), other ADR providers may forgo Japanese translations entirely. In the latter case, therefore, a party may be able to avoid expensive and time-consuming translation work if that party manages to convince the panel that translations are not needed in a given case. However, a party cannot count on translations being unnecessary because that decision is solely within the discretion of each resolution body.

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.

KOJIMA LAW OFFICES  | Tokyo | www.kojimalaw.jp