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Work Style Reform Act
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Work Style Reform Act

Mar 2019
Update 2019/3/20
Practice Areas Labor and Employment

Following the enactment and promulgation of the ″Act on the Arrangement of Related Acts to Promote Work Style Reform″ (the    ″Work Style Reform Act″) on July 6, 2018, major ministerial orders and guidelines specifying the details of the said Act were published. Certain provisions of the Work Style Reform Act will take effect starting April 1, 2019, with the rest of the Act to take effect subsequently.

The Work Style Reform Act aims to change certain aspects of the labor environment, and thereby mandates corresponding revisions to existing laws. The following table summarizes these:

Policy Laws to be revised
Comprehensive and continuous promotion of work style reform
Employment Measures Act
Regulation of long working hours and the realization of varied and flexible work styles
Labor Standards Act
Industrial Safety and Health Act
Act on Special Measures for Improvement of Working Hours Arrangements
Fair treatment regardless of employment status
Part-Time Employment Act (Part-Time/Fixed-Term Employment Act)
Labor Contracts Act
Worker Dispatching Act

This newsletter will mainly discuss matters that employers must address by April 1, 2019 with respect to changes in the Labor Standards Act (the "LSA") and the Industrial Safety and Health Act (the "ISHA").

1  Changes in the Labor Standards Act

1.1  Maximum Limit on Overtime Work

Under the LSA the statutory working hours are set as within eight hours a day and 40 hours a week (Article 32), and statutory holidays must be granted once every week or four times every four weeks (Article 35). However, if an agreement regarding overtime and holiday work (otherwise known as an "Article 36 Labor-Management Agreement") is executed and the Employment Standards Inspection Office is notified thereof, employees may be allowed to work overtime or on statutory holidays pursuant to the Article 36 Labor-Management Agreement. The Ministry of Labor Notification No. 154 dated December 28, 1998 had set a standard for the maximum limit on overtime work permissible under an Article 36 Labor-Management Agreement; however, this is deemed to have no binding force. But now, the current revision to the LSA sets the following maximum limits on overtime hours:

General rule
45 hours a month, 360 hours a year (Article 36, Paragraphs 3 and 4 of the LSA)
Exception (under an Article 36 Labor-Management Agreement)
Less than 100 hours a month (including work on holidays), with an average of 80 hours a month during multiple months (including work on holidays), and up to 720 hours a year (Article 36, Paragraph 6 of the LSA)
Exceptions to the abovementioned maximum limit on monthly overtime work may be applied for up to 6 months (Article 36, Paragraphs 1 and 5 of the LSA)

Any person who violates the above maximum limit on overtime work will be subject to imprisonment of not more than six months or a fine of not more than JPY 300,000 (Article 119, item 1 of the LSA).

Commencement dates of enforcement:

Large enterprises
Upon commencement of an application for a new Article 36 Labor-Management Agreement which only covers the period on or after April 1, 2019
Small and medium-sized enterprises:
Upon commencement of an application for a new Article 36 Labor-Management Agreement which only covers the period on or after April 1, 2020

"Commentary on maximum limit on overtime work regulation"
(in Japanese only)

1.2  Obligation to Ensure a Certain Period of Annual Paid Leave

An employer must ensure that an employee who is eligible to use 10 days or more of annual paid leave actually uses at least five days each year; provided, however, that the following leaves may also be used to satisfy the required minimum of at least five days each year:

  1. (1)The number of annual paid leave days that an employee takes in accordance with a labor-management agreement with either a labor union organized by a majority of the workers at the workplace (where the workplace has an organized labor union) or with a person representing a majority of the workers (where the workplace does not have an organized labor union); and
  2. (2)The number of annual paid leave days that an employee has designated to take himself/herself (Article 39, Paragraph 7 of the LSA).

The obligation to ensure a certain period of annual paid leave should also be clarified under the clause on annual paid leave in the rules of employment (Article 89, item 1 of the LSA). Any person who violates this obligation will be subject to a fine of not more than JPY 300,000 (Article 120, item 1 of the LSA).

"Commentary on ensuring five days a year of annual paid leave"

(in Japanese only)

1.3  Extension of the Upper Limit of the Unit Period in a Flexible Time System

The "Flexible Time System" is a system that (a) allows employees to determine their start and end work times, and (b) under which overtime payment is only made if an employee's average working hours per week for a certain period (the "Unit Period") reaches a certain level. Pursuant to the change directed in the Work Style Reform Act, the upper limit of the Unit Period for the Flexible Time System will be extended from one month to three months (Articles 32-3, 32-3-2 of the LSA).

1.4  White Collar Exemption (″Highly Professional System″)

The ″Highly Professional System″ is a system that exempts employees (the "Exempted Employee/s") who meet certain qualifications from the application of regulations on working hours, holidays, late night work allowance payment, and other related items.

This system will apply to an employee who:

  1. (1)has an annual income of JPY 10.75 million or more;
  2. (2)is assigned a definite scope of work;
  3. (3)has highly vocational skills;
  4. (4)performs duties that have generally low relevance between working time and compensation; and
  5. (5)is in any of the following five business fields: development of financial instruments, financial dealing, analyst operations, consulting, and research and development.

This exemption will be granted if the following requirements are met:

  1. (1)Measures to secure health and welfare are kept, including to ensure the Exempted Employee 104 days off per year;
  2. (2)The consent of the Exempted Employee is obtained; and
  3. (3)A resolution by a majority of the labor-management committee members is made (Article 41-2 of the LSA).

If the office hours of an Exempted Employee reach a certain level (100 hours a month for the portion of working hours exceeding 40 hours a week excluding breaks), the employer must ensure that the Exempted Employee receives face-to-face medical guidance (Article 66-8-4, Paragraph 1 of the ISHA). Any person who violates this rule will be subject to a fine of not more than JPY 500,000 (Article120, item 1 of the ISHA).

1.5  Method to Specify Work Conditions

An Employer must clearly indicate an employee's work conditions in a written document to be personally delivered to him/her. Under the revised Ordinance for Enforcement of the LSA (Article 5, Paragraph 4), an employee can also be notified of his/her work conditions by way of (i) facsimile, (ii) email, or (iii) any other method from which a printed form can be generated, if the employee so requests.

2   Changes in the Industrial Safety and Health Act

The Work Style Reform Act mandates the following changes to the ISHA:

  1. (1)Working hours must be monitored by objective means such as by time-cards or by a record of usage hours on personal computers. The record should be preserved for a period of three years (Article 66-8-3 of the ISHA; Article 52-7-3 of the Ordinance on Industrial Safety and Health).
  2. (2)At workplaces with more than 50 employees where appointment of an industrial physician (also called an occupational health physician) is mandatory, the employer must provide the physician with the information required to duly carry out his/her healthcare-related work (Article 13, Paragraph 4 of the ISHA; Article 14-2 of the Ordinance on Industrial Safety and Health). The employer must also report the content of any employee's healthcare-related recommendations from the industrial physician to a health committee (Article 5, Paragraphs 5 and 6 of the ISHA; Article 14-3 of the Ordinance on Industrial Safety and Health).

3  Our service in the Labor & Employment Practice Area

With our extensive knowledge and expertise on labor and employment areas, we are able to offer professional and practical advice tailored to the specific needs of our domestic and foreign clients regarding various labor and employment issues. We also assist in dispute resolution procedures such as in litigation, provisional attachments, labor tribunal decisions, mediations, or in remedies for unfair labor practices. Labor and employment issues faced by businesses vary widely depending on business sector, scale and environment, and are increasingly becoming complicated and sophisticated in recent years. As a result, it is more crucial for businesses to obtain advice on a timely basis from experienced professionals. Many of our lawyers are specialized in labor and employment areas, and we are fully equipped to offer effective advice and support on a timely basis for a wide range of labor-related issues.

External links:
Ministry of Health, Labour and Welfare: Notice on ″Act on the Arrangement of Related Acts to Promote Work Style Reform″
(in Japanese only)

Act on the Arrangement of Related Acts to Promote Work Style Reform (Comparison Chart)
(in Japanese only)

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