The spread of the novel coronavirus is likely to increase cases of employment termination for fixed-term workers, such as part-timers or contract employees. In some cases, contract termination could trigger trouble between the company and the employee. To help companies and workers avoid such risks, the government has set legal rules on hiring fixed-term employees, as well as renewing or terminating their contracts. This article covers important points about terminating contracts with fixed-term employees.
1. Rules on dismissal during the contract period
The Labor Contract Act prohibits companies from dismissing employees during the contract period, unless there are unavoidable reasons. If a fixed-term worker is made redundant, the legitimacy of the dismissal will be examined more strictly than in the case where a regular employee with indefinite term is fired. The aim of this measure is to make it more difficult to dismiss fixed-term workers during their contract period and encourage employers to retain such workers until their contracts expire.
2. Clear indication of labor conditions in the contract
In signing a fixed-term employment contract, the company is required to clearly indicate the contract term and conditions for renewing the contract. This also applies to renewed contracts.
Following are examples of how the conditions need to be stated.
[About contract renewal]
- This contract will be renewed automatically.
- This contract may be renewed.
- This contract will not be renewed.
[About renewal conditions]
- The decision will be made by the amount of work at the time of contract expiration.
- The decision will be made by the employee’s work capacity.
- The decision will be made by the employee’s performance and work attitude.
- The decision will be made according to the company’s business conditions.
- The decision will be made according to the progress of assigned tasks.
3. Procedure for terminating employment
If a company desires to terminate the employment of a fixed-term worker, whose contract has been renewed before, the company must notify the employee at least 30 days prior to the contract expiration (“the termination notice”).This notification is required if the employee falls under any of the following conditions:
- The employee’s fixed-term contract has been renewed for at least three times.
- The employee’s contract term is no longer than one year and the contract has been renewed before, i.e., the employee has been working under the fixed-term contract for more than one year.
- The employee’s contract term is more than one year.
- If the existing contract states that the employment will terminate upon the contract’s expiration, the termination notice is not required.
If requested by a fixed-term worker who has received a termination notice, the company must provide a certificate of the reason for the employment termination without delay (“clarification of the reason for employment termination”). The company must provide such certificate as requested, even if the worker has already been dismissed. Please note that “expiration of the contract” must not be used as a reason for such certificate. The company must provide other reasons for terminating a contract.
To avoid trouble, please check these requirements before hiring fixed-term employees and renewing or terminating their employment contracts.
[Reference links]
Ministry of Health, Labour and Welfare
“Rules on terminating labor contract” (Japanese only)
https://www.mhlw.go.jp/seisakunitsuite/bunya/koyou_roudou/roudouseisaku/chushoukigyou/keiyakushuryo_rule.html
“To secure appropriate labor conditions for part-time workers”
*This article is based on laws and regulations as of the writing.
