Japanese employers impose discipline through a ladder of sanctions set out in the work rules. A typical ladder runs from a reprimand, sometimes with a written apology required, through a pay reduction, suspension without pay, demotion, and a recommendation to resign, to disciplinary dismissal at the top. The names and the order vary, but the principle does not: the employer can only use the sanctions, and only for the grounds, that the work rules list.
The Supreme Court set this out in the Fuji Kosan case in 2003. Discipline requires the types and grounds of sanction to be written in the work rules, and the rules must have been made known to employees. Article 15 of the Labour Contract Act then adds a second test, the same structure as for dismissal: a sanction that lacks objectively reasonable grounds, or is not appropriate in general social terms given the nature of the conduct, is an abuse of right and void. Courts look at proportionality, consistency with past cases, the employee's record, and whether they had a chance to explain. Delay matters too. In the Nestle Japan case in 2006, the Supreme Court held invalid a disciplinary sanction imposed years after the incidents it was based on.
Pay reductions have a statutory ceiling. A single reduction may not exceed half a day's average wage, and the total in one pay period may not exceed a tenth of that period's wages. The same conduct cannot be punished twice.
What it means for a foreign employer
- Check the work rules before you act. A global code of conduct listing misconduct is not enough. If the conduct is not a listed ground in the Japanese work rules, the sanction is very hard to defend.
- Use the lower rungs first. Courts expect progression. A reprimand on file is often the evidence that later makes a dismissal defensible.
- Give the employee a hearing. A written record of the employee's explanation, taken before the decision, is standard practice and expected.
- Act promptly but investigate properly. A long gap between learning of the conduct and acting weakens the sanction.
Sources
- Labour Contract Act, Article 15.
- Labour Standards Act, Articles 89 and 91.
- Supreme Court, Fuji Kosan case, 10 October 2003.
- Supreme Court, Nestle Japan case, 6 October 2006.