Japanese law lets an employer dismiss an employee with 30 days' notice or 30 days' pay in lieu. That part looks simple. The difficulty is Article 16 of the Labour Contract Act, which codified decades of case law: a dismissal that lacks objectively reasonable grounds and is not appropriate in general social terms is an abuse of the right to dismiss, and invalid.
Courts apply this strictly. Poor performance usually needs documented warnings, training and a real chance to improve, often over a long period. Redundancy dismissals are judged on four factors: whether the business need is real, what was done to avoid dismissal, whether selection was fair, and whether employees were consulted. Dismissal is also prohibited outright during certain periods, such as leave for a work injury or maternity leave and the 30 days after.
If a dismissal is invalid, it is void. The employee is still employed and is owed pay for the whole period. Most disputes settle, frequently in the labour tribunal system, for a sum that reflects how weak the employer's case was.
What it means for a foreign employer
- There is no at-will employment in Japan. A global performance process that ends in dismissal after 60 days will not hold up.
- Probation does not change this much. Dismissing at the end of a probationary period is somewhat easier, but still needs reasonable grounds.
- Most exits are negotiated. In practice, separations happen by agreement, with a package. Budget for it.
- Hire carefully. Because exits are hard, the cost of a hiring mistake is higher in Japan than almost anywhere else.
- Count what leaves with them. A 15-year employee takes trust, relationships and the memory of why decisions were made, and a badly handled exit can trigger departures among the high performers who valued them. Before any significant exit, ask what you would actually lose. Sometimes keeping a low performer is the better call.
Sources
- Labour Contract Act, Article 16.
- Labour Standards Act, Articles 19 and 20.