MARKET FAQ

Between posting a job and signing an employment contract, you must make legally required disclosures at three stages: when the job is first posted, whenever the advertised conditions change, and when the employment contract is signed. The required items are not identical at each stage, so the same checklist cannot be used throughout. Japanese labor law governs more than what happens after you hire someone. The moment you post a job in Japan, you have entered the recruitment stage. What the law requires here is meiji (明示), an affirmative duty to tell applicants in advance every item the law specifies. There are eleven items. The other two stages have separate disclosure requirements. If a condition changes along the way, you must tell the applicant already in your recruitment process, and you must update the job posting itself. On the day you sign, you disclose again in writing, and the items on that list are not the same as the ones on the job posting.

In Taiwan the habit is to post first and see who comes, give the salary as a range, and settle the details during the interview process. Japan reverses that order: the job posting itself is a disclosure with legal force. The guidelines go further and state that an employer must not casually change or delete what was first disclosed, and must not add conditions that never appeared in the original posting. The Taiwanese habit of posting first and thinking later becomes a costly procedural mess when you recruit in Japan. The other end is the day the employment contract is signed. Japanese law sets an explicit penalty for the disclosure duty at that point. Missing an item is punishable by a fine of up to 300,000 yen. The safest approach is to keep the employment conditions consistent across the job posting, the change disclosure and the employment contract. Disclose again whenever something changes, and on the day of signing, check once more that every required item has been included.

1. Before the job goes up, put these eleven items into the posting: (1) The content of the work, including the scope of any future change to it (2) The contract period (3) The criteria for renewing a fixed-term contract, including any cap on total contract length or number of renewals (4) The probationary period (5) The place of work, including the scope of any future change to it (6) Start and finish times, whether work beyond prescribed working hours is required, break periods and days off (7) The amount of wages (8) Whether Health Insurance, Employees' Pension Insurance, Industrial Accident Compensation Insurance and Employment Insurance apply (9) The name of the prospective employer (10) Whether the person is to be hired as a dispatched worker (11) Measures to prevent passive smoking at the place of work Do not treat the posting as final once it goes live. If any of these conditions changes, tell the applicant already in your recruitment process, individually and before the contract is signed, and give them time to consider the revised conditions. Update the posting itself as well. 2. On the day you sign with your new employee, provide the required information again in writing. The written terms must cover the job duties, contract period, place of work, start and finish times, break periods, days off, and wages, together with leave and shift arrangements, the criteria for renewing a fixed-term contract, and termination of employment, including grounds for dismissal. Insurance coverage, the employer's name, dispatched-worker status and passive smoking measures are required at the job-posting stage but do not need to be repeated at this stage. 3. If you recruit through an employment placement agency, first confirm that it holds a license issued by the Minister of Health, Labour and Welfare. In Japan, providing fee-charging employment placement services requires a license. When you sign the agency contract, negotiate three things: when the fee is triggered, how the fee is calculated, and what share is refunded if the person leaves soon after joining. These are negotiable in Japan, and you do not have to accept the agency's proposed terms as they stand.

If the employee's place of work is in Japan, the Japanese courts will generally have jurisdiction. This is also the case if you have no Japanese entity. Whether you have established a company in Japan is not the deciding factor. There are five routes for resolving a labor dispute in Japan: negotiating directly with the other party, seeking advice, guidance or conciliation from an administrative agency, labor tribunal proceedings (rōdō shinpan, 労働審判), ordinary civil litigation, and collective bargaining. Labor tribunal proceedings are the quickest of these routes, concluding by the end of the third session and taking approximately three months. If either party files an objection to the labor tribunal decision within two weeks, however, the case automatically shifts to litigation.

In Japan, whether the Japanese courts have jurisdiction over an employment dispute turns on where the employee works, not on where your company is registered. Even if you have no Japanese entity, an employee working in Tokyo can generally bring an action before a Japanese court. If no place of work has been specified, the court looks to the location of the place of business that hired the employee. A governing-law clause in an employment contract therefore does not guarantee that the contract will be handled solely under the chosen law in Japan. Taiwanese companies often include a clause stating, "This contract is governed by the laws of the Republic of China," on the assumption that this excludes Japanese employment law. Whether it does is not for the company alone to decide. If the employee notifies you that they wish to invoke certain provisions of the law of the place of work that cannot be excluded by contract, those provisions will apply. The employee need not give this notice when signing the contract and may do so later. Even a single employee may join an external union (a community union) and request collective bargaining. If the company refuses without justifiable grounds, the refusal may constitute an unfair labor practice, so care is required.

1. Before having anyone work in Japan, understand the jurisdictional framework. If the employee's place of work is in Japan, the Japanese courts will generally have jurisdiction, and Japanese law will generally apply. Whether you have a Japanese entity does not change this. 2. When including a governing-law clause in an employment contract, do not treat it as a shield. If the contract does not specify a governing law, the law of the place where the work is to be performed is presumed to be the law of the place most closely connected with the contract. Where that place is Japan, that means Japanese law. Even if the contract specifies a governing law, assume that provisions of Japanese employment law that cannot be excluded may still be invoked, and structure your terms on working hours, dismissal, wages and other conditions accordingly. 3. If a dispute arises, decide with local counsel which route to pursue and what position to take. Do so before the other side files an application or petition.

Case: An employee filed a petition for labor tribunal proceedings against the Japanese entity of a foreign-owned company. Labor tribunal cases often end this way: rather than incur the substantial cost and time involved in litigation, the company pays a settlement amount early in the proceedings and the employee leaves. This case took a different course. The claim had no basis, and the company's position was that it would not make a payment but would allow the claimant to return to work. The parties had no common ground, and conciliation did not result in a settlement.

A: First, determine whether you have a Japanese entity. If you do, direct employment is the cleanest route. If not, each of the other three routes involves trade-offs. Whether the arrangement complies with the law ultimately depends on how you manage the working relationship. 1. Direct employment is the cleanest route. However, without a Japanese entity, your Taiwanese company would need to handle Japanese social insurance, tax, and employment administration across borders, which tends to be difficult and costly.2. Independent contracting is the easiest option to put in place, but whether it is safe depends entirely on how the arrangement is operated in practice.3. Worker dispatch requires a lawful structure, including the license held by the dispatching company, a worker-dispatch agreement, and proper operation in practice. For an early-stage foreign startup, this can represent a heavy operational burden.4. Under an employer-of-record arrangement, a local company serves as the nominal employer and hires the person on your behalf. This can be a practical option before you establish a Japanese entity, provided that labor-management responsibilities are assigned to the correct party.

In Japan, whether a working relationship is treated as employment depends not on the label used in the contract but on how the person is managed day to day. Under an independent-contractor arrangement, for example, if you give daily instructions and manage attendance, the relationship is likely to be treated as disguised contracting (gisō itaku, 偽装委託), which is independent contracting in name but employment in substance. The same issue arises with an EOR: if your Taiwanese company directly instructs the person and the arrangement is operated without the required license, it may conflict with the Worker Dispatching Act and the Employment Security Act. After evaluating these options, many foreign startups ultimately choose to establish a Japanese entity, even when they need only one or two people.

1. First, confirm whether you have a Japanese entity. If you do, direct employment is the cleanest route. If not, estimate the practical difficulty and cost of having your Taiwanese company handle Japanese social insurance, tax, and employment administration itself. Then decide whether to establish a Japanese entity first. 2. If you choose independent contracting, meet all four of the following conditions: pay based on deliverables, do not impose fixed working hours, allow the work to be performed by a substitute, and ensure that the contractor remains independent in how the work is performed. Conversely, once you start giving daily instructions and managing attendance, the relationship is likely to be treated as employment in Japan. 3. If you choose an EOR, place attendance management, leave administration, and workplace discipline under the EOR's control. Do not have your Taiwanese company directly instruct the person. This is the single essential safeguard for making the EOR route safe. Without it, the EOR becomes a risk rather than a solution.

A: Not necessarily. What Japanese labor law looks at here is not the words "independent contractor" on the cover of the contract. It is whether the person's labor is in fact used by you and whether they receive wages from you, in other words whether a relationship of subordinate use (shiyō jūzoku kankei, 使用従属関係) has formed between the two of you. Where it has, the Labor Standards Act and the Labor Contracts Act apply to that person, whatever the contract is called. The three features you describe point in different directions. 1. Requiring the person to attend a weekly online meeting points toward employment. 2. Assigning their tasks also points toward employment, and the more specific your instructions, the more strongly it does so. 3. Paying a fixed monthly fee, calculated without reference to hours worked, points the other way. Other factors matter as well, but the three features you describe are not on their own enough to say that the person is an employee under the Labor Standards Act.

When Japanese courts examine these cases, they work from the factors set out in a December 1985 report of the Labor Standards Act Study Group. Those factors come down to two questions: how far the person is under your control in doing the work, and how closely the way they are paid resembles a salary. If the person is found to be an employee, you as the employer face the risk of two kinds of payment. 1. Two years of back social insurance contributions may be collected, covering employment insurance, health insurance, employees' pension insurance and the like. 2. The person may claim unpaid wages, including overtime premiums, on the basis that they were an employee. There is one more point to note if a dispute does arise. It is generally understood that the facts showing the person is an independent business operator rather than an employee are for the company to set out. And in practice, a company that argues only that the contract is titled a contract for work or a mandate has been criticized by judges.

1. Check your current arrangement against five questions. (1) Can the person turn down work you offer? (2) Have you specified their start and finish times and where they work? (3) Can they have someone else perform the work, or use an assistant? (4) How specific are your instructions on how the work is carried out? (5) How closely does the way you calculate and pay them resemble a salary, for example hourly pay, deductions for absence, or overtime premiums? The less freedom there is in (1), (2) and (3), the more specific (4) is, and the closer (5) comes to a salary, the more the arrangement points toward employment. 2. If the party you engage is a sole proprietor with no employees, or a company with a single officer, the Freelance Act (furīransu-hō, フリーランス法) applies. Set out the terms of the engagement in writing, or in an electronic record that can be retained, which includes messages on social media and chat tools. Pay within a period as short as possible and no later than 60 days from the day you receive the deliverable, and fix a payment date. State that date as a date. "Payment on [month] [day]" and "closing on the [day] of each month, payment on the [day] of the following month" are acceptable. "By [month] [day]" and "within [number] days" are not. If you do not fix a payment date, the day you actually receive the deliverable becomes the payment date. 3. Build the record from the design stage. If a dispute reaches court, what you will need to show is not the title on the contract but the concrete facts that establish the other party as an independent business operator.

A company engaged a person working independently under an independent contractor agreement and worked with them for some time. The person later claimed that they were in substance an employee of the company, and the dispute went to court. At that stage, it is the company that has to set out the facts showing that the person is an independent business operator. In practice, a company that says only that the contract is titled an independent contractor agreement has been criticized by judges. (This example is a fictional scenario. Its legal framework is based on the practical case provided by the reviewing lawyer.)

A: There is room to do so, but the bar is very high. Once a company has made an offer, the candidate has accepted it, and the start date has not yet arrived, Japan treats that arrangement as a named status: an accepted job offer (saiyō naitei, 採用内定), or a naitei for short. Withdrawing a naitei for an economic reason such as a failed funding round, or declining to confirm the hire at the end of a probationary period, is not legally impossible, but it is difficult. Withdrawal of a naitei is subject to restrictions similar to those applicable to dismissal. Where the reason is economic, the standard applied is the one for a redundancy (seiri kaiko, 整理解雇), meaning a dismissal a company makes because of its own business difficulties, and that standard is stricter still. The non-compete and the confidentiality undertakings you sign on joining do not hold up to the same degree. A non-compete is constrained by the freedom to choose one's occupation under the Constitution of Japan, and it is more likely to be upheld only where it stays within a necessary and reasonable scope. A confidentiality undertaking is, as a general matter, more likely to be upheld than a non-compete. Even so, if the definition or the scope of what counts as a secret is drawn too widely, the risk that it is held invalid or read narrowly goes up.

Why is withdrawing a naitei controlled this tightly? Under Japanese law, a naitei is in many cases treated as an employment contract with a deferred start date and a reserved right of termination. Once the offer has gone out and the person has accepted it, the contract already exists. Only the first day of work is still ahead, and the company has kept a right to end the contract in defined circumstances. Because the contract already exists, ending it is subject to restrictions comparable to those governing dismissal. There is a further distinction in the non-compete you sign on joining that is easy to miss. A restriction that applies while the person is still employed and one that applies after they leave are not reviewed with the same intensity. A post-employment non-compete restricts the constitutionally protected freedom to choose one's occupation heavily, and the courts review whether it is valid by a far stricter standard than the one they apply to a restriction during employment.

1. To withdraw a naitei for an economic reason, both of the following conditions must be met. (1) The deterioration in the company's business is severe enough that the assumptions underlying the hiring plan have fallen away and maintaining employment has become difficult. (2) Before reaching the point of withdrawal, you have exhausted the other steps open to you. Those steps include reviewing the form and the terms of employment, considering a transfer or a change of role, cutting fixed costs, and postponing the start date. 2. When you draft a non-compete, check four things. (1) The need for the restriction. (2) The scope of the restriction. (3) The period of the restriction. (4) Whether the employee is given compensation, meaning money or benefits provided in return for the restriction. Check a post-employment non-compete separately, because it is reviewed against a stricter standard. 3. When you draft a confidentiality undertaking, do not define a secret, or set its scope, too widely.

Case: A startup gave a new hire a contract setting out the employment relationship between the two of them. The contract stated a period, but it did not say what that period was for. The two sides later fell into a dispute over it. Did the period mean that the whole contract ran only to that date, or did the contract have no end date at all, with the period serving only as a probationary period? There is a decision on this point. Where it is unclear which of the two was intended, and where the purpose of the period was to assess the person's suitability for the work, it is read as a probationary period inside a contract with no end date. (This case is a constructed scenario. Its legal framework follows the practical example provided by the reviewing lawyers.)