Labor Contract Law Amendment Q&A

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Over the past five years, in preparation for the Labour Contract Revision Law (aka "The Five Year Rule) taking fully effect on April 1st, 2018, the General Union has conducted research via direct meetings with the Ministry of Health, Welfare, and Labour (MHWL), prefectural labour bureaus, meetings with lawyers, and various negotiations with employers in regards to their plans for this law.

Back in November of 2017, we also decided to take questions from members of the public (via Facebook and e-mail) and are now presenting those questions to you with our answers in hope that this will answer many of your questions about this law and how it could affect you.  

Please be aware that - as with any new law - much of how this law will be enforced will be subject to interpretation by the courts, so it is impossible to give black and white answers as to what courts will rule and how companies will act (either in accordance with, or otherwise opposed to, the new laws). 

We can only tell you what we've learned through research and experience, and hope that people will understand that the way things SHOULD be are not always the way things ARE.

In addition, the General Union is conducting a campaign in 2018 to make sure that General Union members in many workplaces are able to take advantage of these changes without suffering consequences or a change of working conditions. 

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01. After an individual has requested conversion from a limited-contract to an unlimited-contract, can the individual demand that their employer immediately honour the request instead of having to wait until the end of the current limited-term contract (i.e. in order to negate future dishonesty)?

Although an employee can raise such a demand with their employer, an employer has no obligation to accept the demand. 

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02. After an individual has requested conversion from a limited-contract to an unlimited-contract, is there a danger that an employer may evade the law by not offering another contract (aka dismissal via non-renewal) once the final limited-term contract expires?

While our research shows that such situations are illegal, the burden of proof falls upon the employee.

You should make this request in writing and addressed to the head of the organisation. 

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03. After an individual has requested conversion from a limited-contract to an unlimited-contract, when does the unlimited contract take effect?

The unlimited-term contract should begin as of the next contract after the application was made.

For example, if a limited-term contract was from April 1st (2018) to March 31st (2019), then the unlimited-term contract would begin as of April 1st (2019).

However, unlike the previous contracts, the unlimited-term contract that would begin on April 1st (2019) would have no “ending” date. 

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04. Are direct hire ALTs covered by the "five-year" conversion rule?

In general, those who are employed by the public sector (i.e. local municipal governments; boards of education) are not covered by the "five year" rule and cannot have their limited-term contracts converted into unlimited-term contracts. 

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05. Are Dispatch Company ALTs eligible for the “five-year” conversion rule?

Unlike direct hire and JET Programme ALTs, Dispatch Company ALTs are private sector employees, and (providing that no employment term limits were set at the start of their employment) are eligible for the “five year” conversion rule.

Furthermore, if you are on an unlimited term contract, the three-year limit for dispatch to any one workplace will not apply to you. 

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06. Are JET Programme ALTs eligible for the "five-year" conversion rule?

ALTs working under the JET Programme are not eligible for the "five year" rule, and may not convert their contracts into unlimited-term contracts. 

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07. Can an employer change a contract to include an age limit of “60 years old” in regards to unlimited-term contract conversion eligibility?

Our research with the Ministry of Health, Welfare, and Labour shows the following:

a. There can be no change to working conditions as a condition of conversion to an unlimited term contract.

b. The addition of a retirement age is not unreasonable, but this should not be made a condition for the new job.

Rather confusing, isn't it? 

What this will mean in reality still needs to be fought out in courts, at the negotiation table, and on the picket lines. 

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08. Can an employer change the salary / working hours upon conversion to an unlimited-term contract?

Legally, an employer can increase the salary, but cannot decrease the salary without justifiable grounds. 

Be aware: some employers are claiming that because no changes can be made, future pay increases are off the table. 

This is not true, especially for union members who through their union can make demands about any working conditions.

In regards to working hours shifts, an employer may justifiably change these things with consent (or, in some cases, without consent due to business needs), but cannot make the changes a condition of conversion to an unlimited term contract.

For example: if, every year, your workplace and days/times changes, this can still occur after you go on to an unlimited term contract. 

This is because yearly changes ARE a normal part of your working conditions. 

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09. Can an employer dismiss an employee (via non-renewal or otherwise) at the end of their fifth one-year contract in order to avoid having to convert an employee's contract to an unlimited term one?

An employer cannot legally dismiss an employee for the sole purpose of evading the law. 

The ability to convert from a limited- to an unlimited-term contract is a legally given right and applies at the time you apply for the unlimited term contract

It is therefore clearly unacceptable to terminate an employment contract for the sole purpose of avoiding contract conversion.

However, in the end, it would still be a point of dispute that would have to be settled either in negotiations or in court. 

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10. Can an employer impose a six-month "cooling period" (i.e. furlough) in order to break the figurative "chain" of continuous employment as a means to disqualify an employee from requesting a conversion from a limited- to an unlimited-term contract?

We are currently dealing with this issue.

One point is clear: a six-month cooling off period must be six consecutive months.

In addition, the purpose of the cooling off should not be to evade the law.

Again, this point will be further expanded upon as the courts begin to deal with the law. 

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11. Can an employer refuse a request for limited- to unlimited-term contract conversion?

If an employee meets the criteria for conversion, an employer cannot legally refuse the conversion request from an employee.

The information which we have from both the labour ministry and a very authoritative lawyer is that an employer has to accept the request. 

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12. Can an employer say that the current job will cease to exist after five years and only offer the unlimited-term contract with lower salary?

The law states that a limited-term contract shall be converted into an unlimited-term contract.

To that end, the conditions of the unlimited-term contract should be identical to those of the previous limited-term contract, otherwise a “conversion” has not been performed.

However, in the cases of those who were hired after April 1st of 2013, and when the contract clearly states that there is a limit of 5 years, this does not violate the law. 

Technically, if the employer is doing this solely to subvert the law in regards to new employees, it might be considered a violation - but it would be very difficult to prove. 

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13. Does converting to an unlimited-term contract make someone a regular employee?

No.

Due to a lack of understanding of the law, there is a belief that converting from a limited-term contract to an unlimited-term contract will make someone a "regular" employee (正社員; seishain) with all the benefits (e.g. bonuses, retirement allowance, etc.) that such employment provides.

This is not the case.

All that an unlimited term contract means is that the arbitrary end date of the contract will be removed. 

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14. Does converting to an unlimited-term contract mean your company has to enroll you in shakai hoken?

Conversion to an unlimited term contract does not have anything to do with enrolment or non-enrolment in shakai hoken or shigaku kyosai. 

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15. Does the five-year conversion law apply to dispatch companies / conversation schools / [other employment]?

The "five year" conversion law applies to any private business entity that employs people on limited-term contracts.

Although much of the recent media focus has been on universities, people working for dispatch companies or conversation schools are all eligible to have their contracts converted if they have five years of continuous employment behind them.

In fact, if you are a dispatched employee, you can continue in your dispatch job for longer than three years once you move to an unlimited term contract. 

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16. How does an employee ask an employer to convert their contract from limited- to unlimited-term?

An employee should ask (preferably in writing) for their employer to convert their contract. 

Some employers have their own prepared forms to make this request and make ask you to use that form. 

While not technically necessary, we suggest using their form, UNLESS there is some dubious information or otherwise questionable condition added.

This form is a version suggested by the Labour Bureau (with our translation added; click for full image):

In theory, that should be all that it takes, as an employer cannot legally refuse such a request. 

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17. If a company enrolls an employee in shakai hoken because of conversion to an unlimited-term contract, is it illegal for the company to reduce the employee's salary in order to make the employee pay for the company's contributions?

It is illegal for a company to reduce an employee's salary for the purpose of having an employee pay for the shakai hoken company's contributions.

There should be no changes to your working conditions due to the conversion to an unlimited term contract. 

However, if they do enrol you in shakai hoken when you convert, the chances are that you should have been enrolled prior to the conversion, since the working conditions are not supposed to change.

(i.e. if the conditions are the same after conversion WITH shakai hoken, the conditions before the conversion should have included shakai hoken also.) 

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18. I have a one-year "non-renewable" contract; am I still eligible for contract conversion?

If a one year contract is marked “non-renewable” and it is then renewed (with the same stipulation in the second contract), it would make it more difficult for an employer to argue at some later date that the contract was non-renewable due to the clause in the contract. 

The longer you are renewed, the stronger your argument for continued employment (and a unlimited term contract in the future) becomes. 

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19. I have worked for a company for five years, but I have signed a new one-year contract each year. Does this count as five years of continuous employment, or does this only count as one-year of employment every year?

Even if each individual contract has only been for a period of one year (i.e. one-year contract one-year contract one-year contract), this is considered to be five years of continuous employment.

The only way to make it non-continuous employment is if there was a break of at least six months between anyone contract. 

Breaks such as one day, three weeks, or two and a half months, do not break the "chain" of continuous employment. 

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20. I work for a dispatch company. However, I have been working at the same board of education for more than five years. Does this mean that I can ask the board of education to directly hire me?

No. 

The "five-year" conversion law means that you will be able to ask the company that you work for to convert your contract from a limited- to an unlimited-term contract. 

A dispatch company ALT works for the dispatch company; they do not work for the board of education. 

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21. Is it legal for an employer to end employment with someone after a legal five-year employment limit, and then immediately re-hire that person for the same position?

No. 

In such a case, as there was a clear indication from the employer that the previous employment term limit would no longer be required (due to the promise of further employment), the sixth year would be considered continuous employment, and the employee would have the right to request conversion to an unlimited-term contract. 

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22. Is it legal for an employer to set an employment term limit in a contract?

It is legal to set an employment term limit for new employees (i.e. those who will be starting their first year of employment).

From the advice we have received, an employer cannot set an employment term limit for current employees as they have an "expectation of renewal". 

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23. Is it legal for an employer to set an employment term limit in a one-year contract?

It is legal for an employer to set an employment term in the first one-year contract. 

This condition would then limit the number of contracts that would follow it.

It becomes more difficult for an employer to set an employment term limit in each subsequent contract as the "expectation of renewal" increases with every renewal.

Even if an individual is working under a "one-year" contract, they are not a "new" employee every year.

The exception here is if there is a substantial amount of time between the end of one contract and the beginning of another (for example, a "six-months on / six months-off" employment arrangement). 

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24. Is it legal for an employer to set an employment term limit in the registered working rules?

It is legal for an employer to set an employment term limit in the registered working rules if the employment term limit in question was present in the rules before the first contract was signed.

Employment term limits can be proactively applied (for future employees), but they cannot be retroactively applied (for current employees). 

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25. Is it legal for an employer to set an employment term limit in the registered working rules but not also include that employment term limit in a contract?

Unfortunately, it is legal for an employer to have a limit in the registered working rules and have that limit apply to future employees even if such a limit is not explicitly stated in an employment contract.

Obviously, this is something of a problem because it would not be unfair to state that the majority of employees – Japanese or not – will never see an employer’s registered working rules, even if they aware of the existence of such documents to begin with.

Therefore, it is quite possible that we will see future situations in which an employer tells an employee that they will no longer be able to work for the company after the fifth year, even though the employee had no prior knowledge of such an employment term limit before that point.

However, a point to remember: it is the employer’s obligation to make working regulations available for workers to see. 

In addition, a worker can only agree to something that they know about. 

We're sure that we'll see such situations arise in court where the worker argues they had not knowledge of the working regulations and the employer arguing that the worker was told. 

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26. Is there a minimum-hour limit in regards to being eligible for the conversion?

There is no minimum-hour limit or requirement. 

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28. If I work for a company for three years, change companies for two years, and then return to my previous company for a further two years, does this count as five-years of continuous employment?

To be eligible for conversion to an unlimited term contract, you must have continuously worked for an employer for five years without breaking the figurative "chain" of employment. 

The break in that employment "chain" is six months or longer. 

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27. My contract has an employment limit of five years. Can I convert to an unlimited-term contract after those five years?

If the employment limit of five years was a condition of employment, and if the understanding between the employer and the employee at the time of the first contract was always that the employment relationship would end after five years, an employee cannot apply to have a limited-term contract converted into an unlimited-term contract.

However, if an employer has given indication that employment will continue after a period of five years has ended (i.e. assurances of a renewal, extension, etc.), the employee could request the conversion if the contract has been previously renewed.

An employer cannot deny the conversion request with the logic that the employment is in five-year "chunks" (i.e. 5 x one-year contracts) and not continuous. 

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28. My employer has stated that our employment relationship will end after the fifth contract. There is no such limitation written in the contract and / or registered work rules. In addition, such a limitation has never been mentioned before. Is this legal?

Even in normal circumstances, an employer cannot legally dismiss an employee via non-renewal without a valid reason for dismissal after the first year of employment (but it is unfortunately rather easy to not renew someone in the first few years of employment)

With that in mind, an employer certainly cannot dismiss an employee via non-renewal simply because they have completed their fifth one-year contract with the company, and cannot invent such limits on a whim. 

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29. My employer has stated that they will not renew my contract after my fifth year of employment. Is this legal?

If such a termination of employment occurs, it will be a violation of the "Termination of Employment Doctrine" stated in Article 19 of the Labor Contract Act, and therefore such a termination will be invalid. 

The difficult thing is that you now face a long fight, in or out of court, to reverse this dismissal. 

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30. What are the benefits to converting to an unlimited-term contract?

The immediate benefit is one of increased job security.

By switching to an unlimited term contract, an employee does not have to worry about annual contract renewals.

More to the point, however, is that unlimited-term contracts essentially prevent a company from dismissing an employee without reason via non-renewal. 

In legal theory, long-term one-year contract workers should always have job protection under the "expectation of renewal", but an unlimited term contract will greatly IMPROVE your rights against an abusive dismissal. 

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31. What are the conditions for converting from a limited-term contract to an unlimited-term contract?

You are eligible for conversion as soon as you begin working your sixth year (with a contract that was signed on or after 1 April 2013).

Please note that if you signed a contract prior to April 1st of 2013, the entirety of that contract cannot be counted towards your six years.

Example: if you signed a contract from March 31st of 2013 to March 30th of 2014, the count for your first year will not begin until March 31st of 2014. 

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32. What are the downsides to converting to an unlimited-term contract?

Objectively speaking, none. 

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33. When is the earliest that an individual can request conversion to an unlimited-term contract?

The earliest that an individual could have requested conversion was April 1st, 2018, which marked the beginning of the sixth year of employment since the law was enacted. 

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34. Will part-time teachers be able to retain the same number of hours / koma / times upon conversion to an unlimited-term contract?

This will depend on the needs of the employer. 

We will likely gain a more concrete understanding of what an employer's "needs" are in future court cases.


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