Non-renewal of fixed-term contracts 雇止め

Ending a fixed-term contract by not renewing it, which Article 19 of the Labour Contract Act restricts. Also written yatoi-dome, non-renewal, termination at expiry.

A fixed-term contract ends on its end date, and in principle the employer does not have to renew it. Japanese courts have long qualified that. In the Toshiba Yanagicho Factory case in 1974, the Supreme Court held that where short contracts had been renewed so routinely that they were in substance open-ended, refusing renewal had to be judged like a dismissal. In the Hitachi Medico case in 1986 it extended protection, in a weaker form, to employees who had a reasonable expectation of renewal. Article 19 of the Labour Contract Act wrote both rules into statute from 10 August 2012.

The rule works in two steps. First, does the contract fall into either category: renewed repeatedly so it is effectively open-ended, or one where the employee has a reasonable expectation of renewal? Courts look at the nature of the work, how many times and how mechanically the contract was renewed, what was said at hiring, and how other staff were treated. Second, if so, and the employee has asked for renewal, the employer's refusal must have objectively reasonable grounds and be socially appropriate. If it does not, the contract is deemed renewed on the same terms.

Procedural rules sit alongside. Where a contract has been renewed three or more times, or the employee has worked more than a year, the employer must give at least 30 days' notice of non-renewal unless it was made clear at the outset. Since April 2024, any cap on the number of renewals or on total length must be stated in the terms of employment, and introducing or lowering a cap later requires an explanation to the employee in advance.

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.