Japanese labor law is very protective of employees’ rights. While it isn’t impossible to fire an employee on a contract without a fixed term (a lifetime employee), it is very difficult.
Employers are only allowed to dismiss lifetime employees with one of the reasons listed in the work rules or employment contract. Furthermore, in general, the company must prove four things before it can fire an employee. First, the company must show that the firing is a result of unavoidable economic necessity. Second, the company has to try to reassign employees to different positions to avoid the need to fire them. Third, the employees to be fired must be selected reasonably and the firings carried out fairly. Finally, the process must be reasonable and the company is expected to consult with workers and labor unions beforehand.
Furthermore, certain employees cannot be dismissed under Japanese law. Employees who are or were recently pregnant cannot be fired and neither can whistleblower employees. Employees who are recovering from an injury sustained at work should not be fired and the company will face a stiff penalty if they are.
In practice, workers are rarely fired in Japan. Instead, the company will negotiate with the worker to have the employee voluntarily retire, possibly with a generous severance package.
If you have any questions about hiring or firing employees for your business in Japan, please contact our office for a legal consultation.