Hiring in Japan: Fundamental Rights and Obligations of Employers and Employees Under Japanese Civil Law

Employing personnel is a cornerstone of virtually every business operation. When establishing or managing a workforce in Japan, it's essential to understand the legal framework governing the employer-employee relationship. While a comprehensive body of specific labor laws (such as the Labor Standards Act and the Labor Contract Act) provides extensive and robust protections for employees, often superseding more general provisions, the Japanese Civil Code lays down the foundational principles for "employment contracts" (koyō keiyaku - 雇用契約). This article will outline these fundamental rights and obligations as set out in the Civil Code, while consistently acknowledging the overarching significance and preemptive effect of specialized labor legislation in most modern employment scenarios.

I. The Civil Code Framework for Employment Contracts (Koyō Keiyaku)

A. Definition of an Employment Contract (Civil Code Article 623)

Article 623 of the Japanese Civil Code defines an employment contract as an agreement whereby one party (the employee - rōdōsha) promises to provide labor (i.e., engage in work) for the other party (the employer - shiyōsha), and the employer, in turn, promises to pay remuneration (hōshū, essentially wages or salary) for that labor.

The Civil Code's provisions on employment historically envisioned a more classical model of individual bargaining, often reflecting pre-industrial or early industrial labor relations. They establish the basic quid pro quo: work in exchange for pay.

B. The Shift from Civil Code "Employment" to "Labor Contracts" under Labor Law

It is crucial to understand from the outset that the landscape of employment in Japan has evolved significantly beyond these foundational Civil Code provisions. Due to the recognized inherent imbalance in bargaining power between individual employees and employers, and the societal need to protect workers' rights and ensure decent working conditions, a vast and detailed body of specific labor laws has been developed.

Consequently, most relationships that fit the Civil Code definition of employment are today considered "labor contracts" (rōdō keiyaku) and fall primarily under the purview of these specialized labor statutes. The Labor Contract Act (enacted in 2007, effective 2008, and subsequently amended) now articulates many of the core principles governing individual labor contracts, often codifying or clarifying rules previously developed through extensive case law under the protective spirit of labor legislation.

The direct application of the Civil Code's employment provisions is now largely limited to specific, narrow circumstances. For example, Article 116, Paragraph 2 of the Labor Standards Act exempts businesses employing only cohabiting relatives and domestic workers from most of its provisions. In such cases, the Civil Code rules on employment may apply more fully. Otherwise, the Civil Code provisions often serve as general underlying principles or gap-fillers where specific labor laws are silent.

II. Fundamental Obligations of the Employee under the Civil Code

The Civil Code outlines the core duties of an employee:

A. Duty to Provide Labor

The employee's primary obligation, stemming directly from Article 623, is to perform the agreed-upon work. This labor is to be provided under the general direction and supervision of the employer, although the degree of direction can vary widely depending on the nature of the work.

B. Personal Performance of Labor (Civil Code Article 625, Paragraph 2)

The employment relationship is considered personal in nature. Article 625, Paragraph 2 stipulates that an employee may not have a third party perform their labor in their place without the consent of the employer. This is often referred to as the principle of "self-execution" (jiko shikkō gensoku). If an employee breaches this duty by, for instance, subcontracting their work without permission, the employer may have grounds to terminate the employment contract.

C. Implied Duty of Loyalty/Fidelity

While the Civil Code's employment section does not explicitly detail a broad duty of loyalty in the same way it might for, say, a mandatary (agent), such a duty is generally considered an implicit and fundamental component of the employment relationship. This would include obligations not to act against the employer's legitimate interests, not to disclose confidential information, etc. Specific labor laws, work rules, and individual employment contracts often further define and elaborate upon these duties.

III. Fundamental Obligations of the Employer under the Civil Code (with Labor Law Overlays)

The employer also has core obligations under the Civil Code, though these are heavily supplemented and often made more stringent by labor laws.

A. Duty to Pay Remuneration (Wages) (Civil Code Article 623)

The employer's primary reciprocal obligation is to pay the agreed-upon remuneration for the labor performed by the employee.

• Timing of Wage Payment (Civil Code Article 624):
  • The default rule under Article 624, Paragraph 1 is that remuneration is payable only after the labor has been completed. This embodies a "no work, no pay" principle and implies payment in arrears.
  • If remuneration is fixed by a period (e.g., a monthly salary), it becomes payable after the expiration of that period (Article 624, Paragraph 2).
  • Significant Labor Law Override: It is critical to note that the Labor Standards Act imposes very strict and non-waivable rules regarding wage payment, which take precedence over these Civil Code defaults. These include the "five principles of wage payment" (direct payment to the worker, payment in full, payment in currency, payment at least once a month, and payment on a fixed day).

B. Employer's Duty of Care / Safety Consideration (Anzen Hairyo Gimu)

While the basic Civil Code employment articles are not extensive on this point, a crucial employer obligation—the duty of care or safety consideration (anzen hairyo gimu)—was firmly established through Japanese case law long before its explicit codification in labor statutes. Courts recognized that employers, by virtue of their control over the work environment and the subordinate position of employees, have an ancillary contractual duty to take reasonable measures to protect the life, health, and safety of their employees in the course of employment. Landmark Supreme Court cases, such as the judgment of February 25, 1975 (Minshū Vol. 29, No. 2, p. 143), affirmed this duty. The scope traditionally included appropriately organizing human and material resources to prevent workplace accidents and providing necessary safety education.

This common law duty has now been explicitly codified in Article 5 of the Labor Contract Act, which states: "An employer shall, in relation to an employment contract, give necessary consideration so that its worker can work while ensuring his/her life and physical safety." Furthermore, the Industrial Safety and Health Act lays down extensive and detailed specific occupational health and safety standards.

C. Prohibition on Assignment of Employer's Right to Labor (Civil Code Article 625, Paragraph 1)

Just as the employee must perform personally, the employer cannot assign their right to receive labor from a specific employee to a third party without that employee's consent. This provision protects the personal nature of the employment relationship from the employee's perspective, ensuring they are not unilaterally compelled to work for someone other than their chosen employer.

IV. Issues Regarding Impossibility or Refusal of Labor Provision and Wages

Complexities arise when an employee is unable to provide labor or an employer is unable to accept it.

A. Impossibility Attributable to the Employee

If an employee is unable to work due to reasons attributable to themselves (e.g., an unexcused absence, culpable misconduct leading to inability to work), this constitutes a breach of the employee's primary obligation. The employer may have grounds for disciplinary action, a claim for damages (if any are proven), and under the "no work, no pay" principle, wages for the period of non-performance are generally not due.

B. Impossibility or Refusal Attributable to the Employer (Civil Code Article 536, Paragraph 2 - Risk Allocation)

If an employee is ready and willing to work but is prevented from doing so due to a cause attributable to the employer (e.g., a wrongful dismissal, failure to provide necessary materials or a safe working environment making work impossible, an unlawful lockout), the employee generally does not lose their right to claim remuneration for that period. In such cases, the employer bears the risk of the interruption. The Supreme Court judgment of July 17, 1987 (Minshū Vol. 41, No. 5, p. 1283), often referred to as the "Northwest Airlines case," delved into the interpretation of "cause attributable to the employer" in the context of Article 26 of the Labor Standards Act (requiring leave allowance) and its relationship with Civil Code Article 536, Paragraph 2.

C. Impossibility Due to Causes Attributable to Neither Party (Civil Code Article 536, Paragraph 1)

If the provision of labor becomes impossible due to a cause not attributable to either the employer or the employee (e.g., a natural disaster destroying the workplace, a widespread epidemic forcing a shutdown by government order), then, under the general risk allocation rule of Civil Code Article 536, Paragraph 1, the employee generally loses their right to remuneration for that period. The employer's corresponding obligation to pay wages is also extinguished. In such force majeure events, both parties typically bear their own losses arising from the non-performance.

• Important Labor Law Override (Labor Standards Act Article 26 - Leave Allowance): A crucial protection for employees in this context is Article 26 of the Labor Standards Act. It stipulates that in the event of an absence from work for reasons attributable to the employer, the employer must pay an allowance equal to at least 60% of the worker's average wage during such period of absence. The term "reasons attributable to the employer" under LSA Article 26 has been interpreted by courts more broadly than "fault" under the Civil Code and can include business disruptions that are within the employer's sphere of management, even if not directly their fault. This often provides a financial safety net for employees where the stricter Civil Code rule might otherwise leave them unpaid.

V. Duration and Termination of Employment under the Civil Code (Heavily Modified by Labor Law)

The Civil Code contains provisions regarding the duration and termination of employment contracts, but these are among the areas most significantly impacted and overridden by labor protection laws.

A. Fixed-Term Employment

1. Historical Civil Code Rule (Article 626): This article, which allowed either party to terminate an employment contract with an extremely long fixed term (over five years) after five years had elapsed, is largely obsolete. Modern labor law, specifically Article 14 of the Labor Standards Act, imposes much stricter limits on the maximum duration of fixed-term employment contracts (generally three years, with exceptions up to five years for certain specialized roles or projects).
2. Termination for "Unavoidable Reason" (Civil Code Article 628): If an employment contract is for a fixed term, the Civil Code states that neither party can terminate it before the expiry of the term unless there is an "unavoidable reason" (yamu o enai jiyū). If such a compelling reason exists, either party may terminate the contract immediately. If the unavoidable reason was caused by the fault of one party, that party is liable for damages to the other.
   • Labor Contract Act Article 17, Paragraph 1: This provision specifically addresses employer dismissals under fixed-term contracts, reiterating that an employer may not dismiss a worker until the expiration of the term of said labor contract, unless there are "unavoidable grounds." This effectively sets a very high bar for employers wishing to prematurely end a fixed-term contract.

B. Indefinite-Term Employment

1. Civil Code Rule (Article 627, Paragraph 1): For employment contracts with no fixed term, Article 627, Paragraph 1 of the Civil Code allows either party to give notice of termination at any time. The employment then legally terminates after two weeks have passed from the day of such notice.
2. Labor Law Overrides for Employer's Termination (Dismissal): This is where labor law protections are most pronounced and crucial:
   • Notice Period (Labor Standards Act Article 20): An employer wishing to dismiss an employee must generally provide at least 30 days' advance notice or pay 30 days' wages in lieu of notice (PILON). Certain exceptions apply (e.g., dismissal for reasons attributable to the employee and approved by the Labor Standards Inspection Office, or cessation of business due to natural disaster).
   • Restrictions on Grounds for Dismissal / Doctrine of Abusive Dismissal (Kaiko-ken Ran'yō no Hōri): This is arguably the most significant protection for employees in Japan. Even if the employer complies with the notice requirements, a dismissal is void if it lacks objectively reasonable grounds and is not considered socially appropriate (i.e., it constitutes an abuse of the employer's right to dismiss). This doctrine, meticulously developed through decades of case law (with the Supreme Court judgment of April 25, 1975, Minshū Vol. 29, No. 4, p. 456 – the "Nihon Shokuen Seizō Jiken" or Japan Salt Manufacturing Company case – being a landmark articulation), is now explicitly codified in Article 16 of the Labor Contract Act. This provides extremely strong protection against unfair or arbitrary dismissal for employees covered by labor contracts.

C. Effect of Termination (Civil Code Article 630 applying Article 620)

When an employment contract is terminated, whether by notice, expiry of term, or for cause, the termination generally has only prospective effect. This means it ends the obligations of both parties from the point of termination onwards, but it does not retroactively undo the employment relationship or performances already rendered.

VI. Conclusion

The Japanese Civil Code provides a foundational, albeit now largely residual, framework for employment contracts, outlining the basic reciprocal obligations of providing labor in exchange for remuneration. However, it is imperative to recognize that for the overwhelming majority of employment relationships in contemporary Japan, this Civil Code structure is heavily overlaid, supplemented, and often superseded by a comprehensive and robust body of specific labor laws, including the Labor Standards Act and the Labor Contract Act.

These specialized labor laws are designed with the primary objective of protecting employees, addressing the inherent imbalance of power in the employer-employee dynamic. They impose much stricter and more detailed conditions on employers regarding crucial aspects such as wages, working hours, workplace safety, and, most significantly, the conditions and procedures for terminating employment. While the Civil Code's principles of employment remain relevant for understanding the fundamental nature of the work-for-pay agreement and for filling gaps in situations not explicitly covered by overriding labor statutes, any practical analysis or handling of employment matters in Japan must give primary and detailed consideration to the specific requirements and protections afforded by the dedicated labor legislation.