Foreign Companies and Unfair Dismissal

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Foreign companies in Japan are subject to Japanese labor laws

For employees of foreign companies (外資系企業 or "gaishikei kigyo"), even those that have entered the Japanese market, there is a perception that if results are inadequate, you will be told that "you are fired" on the spot, with no choice but to leave the company premises immediately.

Some employees may think that this is inevitable considering the usually higer salaries paid to employees of foreign companies.

This is not necessarily the case.

As per Article 16 of the Labor Contracts Act (労働契約法 or "rodo keiyaku ho"), which also applies to foreign companies in Japan, "If a dismissal lacks objectively reasonable grounds and is not considered to be appropriate in general societal terms, it will be treated as an abuse of the right to terminate employment, and is invalid".

PIP (performance improvement programs) at foreign companies

What is a PIP?

A PIP is a "performance improvement program"(業績改善プログラム or "gyoseki kaizen puroguramu") or "performance improvement plan"(業績改善計画 or "gyoseki kaizen keikaku") and refers to a program where employees with poor results that need to improve their business performance are selected to participate in a program with the goal of improving their performance.

A period of several months or so is fixed, and by deciding on work goals, attending interviews, and submitting reports, the employee will be expected to improve their performance during this period.

At first glance, this may seem like a generous education program offered by employers to employees.

However, in recent years, there have been increased cases of unfair dimissal (不当解雇 or "futo kaiko") involving PIPs.

Employees subject to these improper PIPs will often be set abstract and difficult to achieve work goals and then dimissed when they inevitably cannot meet these goals.

Employers using PIPs in this way will often have internal employment rules stating that employees whose ability to peform their duties is extremely inadequate without prospects for improvement may be dismissed.

The employer will use the failed PIP to assert the validity of dismissing the employee under these rules.

These improper PIPs are used by companies to create a trail to prove they have done everything possible to maintain the employment of the employee.

However, even in cases where a company has dimissed an employee for failing to achieve his or her PIP assigned goals, this does not necessarily mean that there was justification to dismiss the employee for lack of ability.

Whether or not a dismissal was unfair or invalid will depend on whether there were objectively reasonable grounds for the dismissal, and whether the dismissal would be considered appropriate in general societal terms.

This would involve considering whether the goals set in the PIP are achievable compared to ordinary employees, and whether failing to achieve the PIP goals in fact justifies dimissal.

Court invalidation of foreign company dismissal (case example)

One real life case example involved an employee who was hired as a reporter for a major financial news agency headquarted in the US.

After failing to achieve assigned goals over several rounds of PIPs, the employee was ordered to not come into work, and was then subsequently dimissed.

The court rejected the grounds for dismissal asserted by the employer, and ruled that the dismissal was invalid for lack of objectively reasonable grounds.

As can be seen from this case, when a dismissal is contested, foreign companies are judged by the same criteria as domestic Japanese companies.

In other words, an employee cannot be dismissed without objectively reasonable grounds for doing so.

This remains the case even when a PIP is used, as has been explained.

Retaining an attorney for unfair dismissal and encouraged resignation issues at foreign companies

If you have been:

  • Selected for a PIP
  • Dismissed because of your PIP results
  • Subjected to attempts to force you to resign; or
  • Suddenly dismissed

If you are unsatisfied with how you are being treated, please contact an attorney for assistance as soon as possible, even if you work for a foreign company.

The labor law attorneys at Verybest have a wealth of experience in resolving unfair dismissal and encouraged resignation matters.

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