- Hiroaki Takagi, Partner [ Nishimura & Asahi ]Lots of companies face difficulty in keeping business due to the spread of COVID-19, and we have received numerous requests from them for advices on employment law in Japan. The effects of the COVID-19 on the economy and society, however, are expected to continue for a while, as we are still seeing the increasing number of infections after...
Lots of companies face difficulty in keeping business due to the spread of COVID-19, and we have received numerous requests from them for advices on employment law in Japan. The effects of the COVID-19 on the economy and society, however, are expected to continue for a while, as we are still seeing the increasing number of infections after the lift of the state of emergency and the second wave is expected to arrive. In this article, we explain in a Q&A format the issues with the employment laws in Japan that are often questioned by companies having offices in Japan.
Q 1. Can the employer order its employees who are not infected to COVID-19 to take leave and have their salary unpaid in order to prevent spread of infection?
A 1.
(1) Overview of legal schemes with regard to salaries in Japan
When the employees are able to work from home, it is obvious that the employer must pay their salaries. An issue is raised when the employees cannot work from home for some reason (such as they must look after their children).
You have to consider two kinds of payment to the employees in Japan in this context; (i) payment of salaries based on employment agreements and the Civil Code of 1896 (the “Civil Code”) and (ii) “leave allowance,” as required by the Labor Standards Act of 1947 (the “LSA”).
Under the Civil Code, a general principle of “no work, no pay” applies. An employer must pay an employee’s salaries if reasons why the employee is unable to provide labor are “attributable to the employer,” under Article 526-2 of the Civil Code.
On the other hand, Article 26 of the LSA provides that “In the event of an absence from work for reasons attributable to the employer, the employer shall pay an allowance equal to at least 60% of the employee’s average salary to each employee concerned during said period of absence from work.”
“Reasons attributable to the employer” in the LSA are interpreted much more widely than the same word under the Civil Code, and it is understood include any obstacles for management attributable to the employers side, according to the judgment of the Supreme Court of Japan on 17 July of 1987.
(2) With regard to employees who are not infected (i.e. situation where the employer close the office to prevent spread of infection).
(a) Under conditions where no requests to close offices have been made by the government
Even when the government declared state of emergency, the government did not make requests to close offices to employers ― the government only “advised” to do so. From Civil Code perspective, to close offices in order to prevent the spread of infection of COVID-19 is not regarded as “a reason attributable to the employer” under Article 526-2, and therefore, the employer does not have to pay salaries to the employee.
On the other hand, it is regarded as “a reason attributable to the employer” under Article 26 of the LSA, and therefore, an employer much pay an allowance for absence from work, which equals at least 60% of the average salary to an employee.
Please see Q6 below for information of government’s subsidies for leave allowances on the grounds of COVID 19.
(b) Under conditions where the government requests or orders that employers close offices in Japan or Tokyo.
It is possible that the government will request or order that employers close offices in Japan or Tokyo. In this situation, employers do not have to pay salaries or a leave allowance to the employee, because it is not regarded as “reasons attributable to the employer” under both the Civil Code and the LSA.
Q 2. Can the employer order its employees who are infected by COVID-19 or have symptoms of cold to take leave and have their salary unpaid?
A 2. Under the Infectious Diseases Control Act of 1998 (the “IDCA”), Employees who get infected with the Designated Infectious Disease (defined in Item 8 of Article 6 of the IDCA), including those who have not had symptoms, are required to take leave, hospitalize, or stay home. The Japanese government designated COVID-19 as the Designated Infectious Disease by the Cabinet Order issued on 28 January, 2020. In this case, neither salaries nor leave allowance need be paid. The same applies to people in close contact with the infected employees.
The government is also advising people not to go to work if they have any cold-like symptoms. In this case, neither salaries nor leave allowance need be paid, either. The employee may, however, receive personal illness/injury allowances from his/her health insurance from the fourth day of his/her absence (60% of their salary).
The Ministry of Health Labor and Welfare (the “MHLW”) of Japan, however, recommends that employers (i) discuss with representatives of the employees and (ii) make some form of payment, pointing out that an employer has an obligation to strive to improve working conditions for an employee who needs special consideration under Employment law in Japan.
Q 3. What are the legal rights and obligations in respect of the employees who are not able to work from home due to parental/career responsibilities, arising from, for example, closure of schools and child care facilities?
A 3. Absence from work for reasons such as childcare or nursing care will be dealt with to the extent permitted by existing law. named the Act on Childcare Leave, Caregiver Leave, and Other Measures for the Welfare of Workers Caring for Children or Other Family Members of 1993(the “ACL”). When an employee, who need to take care of their children who attend temporarily closed elementary schools, kindergartens and nursery schools etc., applies for paid leave, employers must approve it, and the employer shall not reduce salaries or otherwise treat an employee disadvantageously due to the fact that said employee has taken paid leave.
Further, the government encourages employers to grant such employees special paid leave, rather than only allowing use of annual paid leave. The government provides subsidies to employers that authorize their employees (whether regular or non-regular) to take paid leave (excluding statutory annual paid leave) between 24 January, 2020 and 30 June, 2020, for the full amount of the salaries paid during such holidays (up to 8,330 yen per day). Please see Q6 for more details.
In the event that an employee is unable to leave his or her child at a daycare center, etc., and if the employee is currently on childcare leave, the employee may request postponement of the scheduled end date of childcare leave (up to one year) one time, regardless of the reason. Under the law, employees are required to submit their applications one month in advance, but it is essential that labor and management fully discuss the matter. In addition, those who have returned from childcare leave can apply for additional childcare leave (up to one year).
When a child becomes one year old, or one year and six months old, and the employee wishes to extend their childcare leave, the worker may apply for additional childcare leave of six months from either of the two aforementioned ages (e.g., at one year old, the employee may take childcare leave until the child is one year and six months old, and when the child is one year and six months old, the employee may take childcare leave until the child is two years old).
In both cases above, the employer shall not refuse an application from the employee.
Q 4. Can an employer reduce the hours and salaries of the employees (for example, to 80%)?
A 4. Such measures require careful consideration. The Labor Contracts Act of 2007 does not allow employers to unilaterally lower salaries, which would result in changes disadvantageous to employees, and does not allow such reductions unless an agreement is reached between the employer and its employees. Having said that, it is possible for an employer to change the employees’ working conditions as long as the change is reasonable, and after the employees are made aware of the altered working rules. Transitional and compensatory measures should be established in cases where employees are expected to be economically disadvantaged (e.g., salaries), and care should be taken to ensure that any disadvantages are not limited to a specific group of employees. Although on a case-by-case basis, such measures are often judged illegal.
Therefore, in practice, it is difficult to reduce salaries without the employee’s consent.
Q 5 Can an employer request its employee to use annual paid leave during the employee’s absence due to COVID-19?
A 5. Annual paid leave is an employee right granted under the LSA and it is solely the employee’s discretion when to take annual paid leave. Thus, an employer cannot request or force an employee to use annual paid leave.
Therefore, while it is possible for an employer to discuss the situation with the employees and encourage or advise the use of annual paid leave, an employer may not require or force its employees to take annual paid leave.
Q 6 What kind of subsidies has the Japanese government (including municipal government) offered with regard to COVID-19?
A 6. While many businesses in Japan are now reopening, some businesses are still forced to limit their operations due to COVID-19. As explained above, employers are in most cases required to pay each employee placed on leave an allowance that is 60% or more of their average salary (the “Leave Allowance”), pursuant to Article 26 of the LSA .
As part of the effort to aid businesses affected by COVID-19 and to protect employment, the Japanese government has introduced special measures to expand the eligibility of the Employment Adjustment Subsidy (the “EAS”), which includes support for such Leave Allowances. As of 4 June, 2020, the number of applications for the EAS was 109,127.
- Outline of the Employment Adjustment Subsidy
The EAS is intended to support employers who face business difficulties and have asked its employees to take leave with leave allowances. In principle, the amount of subsidies per day paid to an eligible employer is calculated in the following manner:
Subsidy amount (up to 8,330yen per employee per day) = [Average salary per employee per day]*[Percentage of the Leave Allowance (60% or more)]*[Subsidy Rate]
In order to receive the EAS, the employer is required to meet various criteria; however, in light of the business downturns seen in many sectors due to COVID-19, the Japanese government has introduced special criteria to expand the eligibility of the EAS to those business owners affected by COVID-19.
(2)Special Criteria for eligibility for the Employment Adjustment Subsidy
[Comparison of the “Original” and “Special” Criteria]
| Items | Original | Special |
|---|---|---|
| Eligible Employer | Business operators who are forced to downsize business activities for economic reasons | Business operators affected by COVID-19 (all industries) |
| Production Index Criteria | Decline of 10% or more in production/sales index for the past 3 months compared to previous year | Decline of 5% or more in production/sales index for the past 1 month compared to previous year |
| Employment Insurance Requirement | Applicable only to leave allowances paid to employees who are enrolled in employment insurance, and those who are enrolled in employment insurance for 6 months or longer | Include leave allowances paid to employees who are not enrolled in employment insurance, and no requirement concerning the enrollment period |
| Subsidy Rate for large enterprises | 1/2 of the amount that employers paid as leave allowances | 2/3 of the amount that employers paid as leave allowances. If the applicant does not conduct layoffs, the rate is increased to 3/4 |
| Subsidies for Small and Medium Sized Enterprises (the “SMEs”) | 2/3 of the amount that employers paid as leave allowances | 4/5 of the amount that employers paid as leave allowances. If the applicant does not conduct layoffs, the rate is increased to 9/10. |
| Submission of the Business Suspension Plan | Business suspension plan shall be submitted prior to the suspension of business | Not required to submit business suspension plan for application made on or after 19 May, 2020 |
| Cooling Off Period | One-year cooling off period is required prior to receiving new subsidies | No requirement |
| Limit of period | Maximum number of days of suspension to be covered by the subsidy is 100 days/year, 150 days/3 years | The period from 1 April,2020 to 30 June, 2020 is excluded from the calculation of the number of days described on the left |
As the economical impacts of COVID-19 have been significant, the demand for the EAS is at an unprecedented (high) level. The government is considering introduction of further measures to expand the eligibility for such subsidies and to expedite the relevant procedures for application and payment thereof. It is advisable to check the latest information with Japanese legal counsel.