For many years – too many years – Japanese labour legislation has been a serious headache for foreign companies operating in Japan. If you happen to have a Japanese labour casebook by your side, you will find that the history of lawsuits by labour against management is practically the history of fights between foreign companies and local Japanese employees.
Although many cases have been fought over employee dismissal, cases have also concerned overtime pay and accidents caused by excessive overtime work. As many of the professionals reading this article may already know, current Japanese labour law basically prevents an employer from requiring any employee to work more than eight hours a day or more than 40 hours a week (except in the event labour and management have executed an accord called an Article 36 agreement).
Advanced professional system (APS)
The second Abe administration, supported by business/economic organisations (representing the management side) such as Keidanren and Keizai-doyukai, has been working on this issue. On the premise that a more flexible work environment is suitable for both labour and management, the Diet finally passed legislation permitting companies to implement the advanced professional system (APS), which may prove the saviour for management, freeing it from responsibilities and expenses regarding overtime. The APS, which becomes available from April 1, 2019, is said to be the first step toward realising an internationally top-level employment environment and working style.
The APS is grounded in the notion that certain employees are to be evaluated based not on working time, but on performance. Essentially, it is a system to exempt application of rules regarding working time. These include restrictions on usual working time (normally to eight hours per day), overtime pay (generally required), minimum rest time (usually 45 minutes for employees working six hours), and minimum holidays (usually one day per week). There already exist certain limited systems that lift some of these restrictions, but the APS enables management to be freed from all these restrictions as a whole.
Of course, there is no such thing as a free lunch. This system too has a catch. In order to implement the APS, management must meet several criteria, some of which require negotiations with labour representatives and reporting to the regulatory authority. Let’s look at some of the major criteria.
Implementation of APS
First, in order to implement the APS, each employee subject to the APS must be performing work using highly professional knowledge, and the outcome of such work must usually not be highly related to the amount of time consumed. The Ministry of Health Labour and Welfare (MHLW) is assuming that the APS will be implemented for work such as developing/dealing in financial products, analysis, consulting, and research and development. Moreover, each subject employee must receive an annual salary of at least JPY10,750,000 (still subject to change in accordance with an ordinance of the MHLW). This is a minimum requirement. Thus, if your company has no employees in Japan working under these conditions, the APS would not be relevant (unless, of course, you decide to raise base salaries in order to implement the APS).
Second, the company must for each workplace establish a labour-management committee composed of representatives of both sides. The committee is to approve a resolution that includes such items as the scope of the employees/work subject to the APS and measures to maintain the health and welfare of the subject employees, etc. The resolution must be approved by more than 80% of the votes.
The company must then submit such resolution to the Labour Standards Inspection Office having jurisdiction over the workplace where the APS is being implemented.
Finally, the company must obtain written consent from each employee subject to the APS (in practice, it is best to obtain an unofficial oral/written consent before starting the whole process). The company must be careful not to treat any employee deleteriously because of his/her refusal to become subject to the APS.
After implementation of the APS, the company is free from all the restrictions described above but must pay attention to the health and welfare of the employees. In particular, the company must keep track of the health management time of the subject employees. In the APS, the concept of working time does not exist; instead the term health management time is used to represent the sum of (a) time present in the workplace and (b) working time while outside the workplace. Moreover, the company must allow each employee to take at least 104 days off per year and at least four days off within each four continuous weeks. If an employee subject to the APS falls within certain criteria, an additional medical check-up is also required.
As you have seen, the APS may be a highly convenient system for companies with highly skilled and high-salary employees. However, even if the company may become free from legal responsibility for an employee’s death or illness due to overwork, such possibilities would still pose a high reputational risk that could have disastrous impact on the company. Thus, management must commit itself to rectifying any unfavourable and traditional practices concerning long working hours from the perspectives of productivity improvement and added value enhancement.