Disadvantageous change of terms 不利益変更

Worsening employees' terms, possible only by consent or by a reasonable change to the work rules. Also written furieki henko, furieki henkō, adverse change of working conditions.

Elsewhere an employer that wants to cut a benefit can often give notice and change the contract. In Japan there are three routes, and each is narrow.

The first is individual consent. Article 8 of the Labour Contract Act allows the parties to change terms by agreement. Courts are wary of consent obtained on the employer's terms, however. In the Yamanashi Prefectural Credit Union case in 2016, the Supreme Court held that a signature agreeing to a cut in retirement benefits was not enough. The question is whether, given the size of the disadvantage, the explanation given and how the consent was obtained, there were objectively reasonable grounds to find it was given of the employee's free will.

The second is changing the work rules. Article 9 says an employer cannot worsen terms by changing the work rules without employees' agreement, and Article 10 sets the exception. The change binds employees if it was made known to them and is reasonable, judged on the extent of the disadvantage, the necessity of the change, how appropriate the new terms are, the state of negotiation with the union or employees, and other circumstances. This codifies a line of cases from the Shuhoku Bus case in 1968 through the Daishi Bank case in 1997. Changes to core terms such as pay and retirement benefits need a highly compelling business necessity. In the Michinoku Bank case in 2000, a wage system change that hit older employees hard was held unreasonable as applied to them, despite union agreement, because there were no transitional measures. Terms that employer and employee specifically agreed would not be changed through the work rules cannot be overridden this way.

The third is a collective agreement, which binds union members, as discussed under that entry.

What it means for a foreign employer

Sources

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General information for employers, not legal advice. Thresholds and dates are checked against the sources listed and dated above; confirm anything you act on with a Japanese employment lawyer or a licensed labour and social security attorney.