LEGALINK CROSS-BORDER LAYOFFS QUESTIONNAIRE

Article 20 of Labor Standards Act requires the employer to give the employee at least 30 days advance notice or to make payment of the average wage in lieu of such notice.

In addition, Article 16 of Labor Contract Act provides that if termination of an employee lacks objectively reasonable grounds and is not considered to be appropriate in general social terms, it shall be invalid as an abuse of the right.

The same articles of the above laws apply in case of termination by redundancy.  In the past court precedents, generally the courts have considered the following four elements in deciding the existence of reasonable grounds and validity of termination of employment for redundancy in the workforce;

(i) whether reduction of work force is necessary for the continued operation of the company;

(ii) whether the company has made reasonable efforts to avoid termination of employment by cost saving, stop of hiring, transfer of employment, offering a plan for early retirement;

(iii) whether the company has made reasonable choice of the employees to be terminated; and

(iv) whether the company has made negotiations in good faith with the employees about necessity, timing, alternative arrangement, etc. before terminating the employees.

A criminal penalty of imprisonment of not more than 6 months or fine of not more than 300,000 yen may be imposed against a person who has violated the provisions of Article 20 of Labor Standards Act.  In addition, for a violation of Article 20 of Labor Standards Act, the court may award an additional amount equal to the amount payable by the employer under the article.

Further, the court may order reinstatement of the employee and back pay if it has found termination of employment is invalid under Article 16 of Labor Contract Act.