Contracts and agreements in Japanese companies
Contracts and agreements are the essence of any business, and understanding how they work in Japan is critical to you and any business that your company will work with in Japan. Similar to many countries in the world, employment contracts under Japanese law are formed when there is an offer and acceptance. However, the validity of employment contracts can become muddled, especially in cases where business matters and financial risk are involved. This article will cover the fundamental principles of employment contracts and agreements in Japanese companies.
Offer and Acceptance | The foundation of a contract/agreement
Under Article 526 (1) of the Civil Code, A contract between persons at a distance shall be formed upon dispatch of the notice of acceptance. This essentially means that a contract can be formed in cases where the two parties are far away (by distance) from each other, even if the acceptance is considerably delayed in reaching the offeror. Therefore, as an offeror of a contract (e.g. employer), it is important to set a period for acceptance of the offer (i.e. a formal job offer to a prospective candidate) to avoid a contract being formed well after the offer was made.
Oral contracts | Are they valid?
Oral employment contracts are valid, as long as there is an “offer” by one party, and an “acceptance” by the other. That having been said, contracts that are based purely on an oral agreement can often be hard to prove in court unless put into writing and signed by both parties. Therefore, it’s always recommended to create a written employment contract, especially in important cases for obvious reasons.
Employment contracts in Japan
Employment contracts in Japan-based companies must clearly state (in writing) the period of the contract, the workplace, job duties, hours of work (beginning and end time), how wages are calculated, days off, and explain the procedures for overtime work as well as dismissal.
As employees must read the contract prior to signing (= accepting), you must make sure to translate the contract into a language that the employee comprehends, i.e., translate an English contract into Japanese and vice-versa.
We recommend checking out our in-depth article on contracts and benefits for employees in Japan by clicking here.
Foreign contracts in Japan — do Japanese labor laws apply?
In general, contracts in Japan can include almost anything, barring any items/clauses that go against public policy. Suppose that you have a foreign company and wish to draft an employment contract in Japan according to the laws of your own country. This is entirely possible to do in Japan; however, Japan’s protective employment laws (i.e. the Labor Standards Law) will still apply to employees in Japan. Therefore, Japanese labor laws will usually take precedence over any governing law that is specified in a foreign employment contract in Japan. This is in order to deter employers from creating unfair employment contracts for employees.
This page is intended to be used for informational purposes only and should not be a substitute for obtaining professional legal advice.