Article 41 of the Labour Standards Act exempts people "in a position of supervision or management" from the rules on hours, breaks and rest days, and so from overtime pay. Many Japanese companies treat everyone from kacho upwards as exempt. Courts and labour inspectors are much stricter. They look at three things: whether the person is effectively part of management in labour matters, with real authority over hiring, evaluation and how the business runs; whether they control their own working hours; and whether their pay and treatment fit the position.
The landmark case is McDonald's Japan. On 28 January 2008 the Tokyo District Court held that a store manager was not exempt, because his authority stopped at the store and his hours were dictated by staffing gaps, and ordered the company to pay about 7.5 million yen. The phrase "nabakari kanrishoku", a manager in name only, entered everyday language.
The exemption is also narrower than it looks. In the Kotobuki case of 18 December 2009, the Supreme Court held that exempt managers are still owed the late-night premium for work between 10 p.m. and 5 a.m. Annual paid leave applies in full. Since April 2019, employers must keep track of managers' working hours for health purposes.
What it means for a foreign employer
- A manager title does not make someone exempt. A Japan "manager" with no reports, no budget and fixed hours is likely to be owed overtime.
- The exposure is back pay. Wage claims can now go back three years, so a misclassified team can be expensive.
- Promotion into an exempt role can cut pay. Candidates who earn a lot of overtime will compare total cash, not base. See nenshu.
- Track hours anyway. You are required to, and records are your best evidence if exemption is challenged.
Sources
- Labour Standards Act, Articles 37, 41 and 115.
- Tokyo District Court, McDonald's Japan case, 28 January 2008.
- Supreme Court, Kotobuki case, 18 December 2009.
- Industrial Safety and Health Act, Article 66-8-3 (in force April 2019).