FAQs RELATED TO PROBATIONARY PERIODS IN JAPAN
How does a probationary period in Japan affect the right to terminate?
The purpose of probationary periods is to determine if an employee has the competency level to capably perform the job. It does not lower the ease of termination, and certainly does not create an “at will” or similar relationship. To justify termination during a probationary period, the employer must demonstrate that either (1) the employee is not competent for the position, or (2) the employee misrepresented competency levels or backgrounds prior to being hired. Competency is not equivalent to poor performance, as it is based solely on skill levels and capabilities, not on actual performance. Therefore, employers must be careful not to overextend their understanding of how dismissals work during probation.
Termination of probationary periods must be both reasonable and justifiable, and they must also be aligned with generally accepted norms. These usually occur when: (1) the employee misrepresented abilities or skills in the pre-offer stage or (2) factors that could not be tested prior to the offer demonstrate after hiring that the employee does not have the basic competencies to perform the essential functions of the job. Poor performance alone is not sufficient.
Put another way, the Japan cases hold that the employer has the burden of proof to show that during the probationary period, the employer found objectively quantifiable reasons demonstrating it would be improper to employ the worker continuously (which, as noted above, is interpreted in most cases to mean the employee is unfit for the position or made false representations), and the employer must prove that it could not know these reasons before beginning employment. This last element is interpreted as meaning that the employer could not have known or discovered the reasons before starting employment. Therefore, simply discovering the reasons after employment is not enough if those reasons could have been discovered with due diligence prior to starting employment.
Rules of Employment generally state that termination during at the end of probation may occur if the employee is “judged unsuitable,” which could be based on health, attendance, performance, or falsified background. Note that “performance” here relates to competency and suitability only. The Rules usually provide that normal discharge procedures, including 30 days advance notice or pay in lieu, will be provided (with certain limited exceptions).
How do probationary periods work in Japan?
Most companies in Japan typically hves probationary periods of 3 months, and they have the option of being extended (usually in 3 month intervals). A probationary period may not in any case exceed one year by law (Labor Standard Laws, Art. 14), but in most cases probation periods beyond 6 months will be ruled void as unreasonable—since an employer should know within that time period whether the employee has the requisite competencies. Renewing the probationary period also increases the difficulty of justifying dismissal on a probationary period basis, as competency for the work should be measurable prior to extension in most cases.
Legally, the probationary period is considered a labor contract in which the employer’s right of cancellation is reserved. The right of cancellation, as mentioned above, is based exclusively on competency levels.
Should I extend the employee’s probation period?
Usually, the answer to this is that it will not help a position of terminating the employee to extend probation. Such terminations, as described above, must be based on competency. They will not be upheld if the employer terminates the contract based on poor performance or discipline. Such terminations must meet generally accepted norms (and according to the registered Rules of Employment), which are the same as for employees who are not on probation. If there is some intervening event (e.g., sickness) that interferes with the ability to test the capability of the employee, then extension of the probationary period may be warranted.
Probationary periods may not be extended in any case where the right and reasons for such extensions are not set forth in the Rules of Employment or employment contract.
In Japanese courts, justifiable reason to extend probationary periods is generally limited to (1) giving the employee a final chance to prove competency notwithstanding the fact that performance thus far has shown the employee is unfit for the position, or (2) a legitimate need to have more time to review competency due to unexpected intervening circumstances.
What risks accompany improper use of probationary periods?
Employers are held to an “abuse of right” standard. For example, employers who use the probationary periods to circumvent termination laws or who through due diligence should have known the competency level of the employee may be found to have abused that right, thus nullifying the termination and subjecting the company to damages (and in rare cases, tort claims).
For termination cases, employers must have strong justifiable reasons and must ensure they are following social norms. In most cases, this means that, in addition to other standards, the employee must be given a final chance to prove the employee is fit for the position in spite of the evidence showing otherwise. Employers must still follow the registered Rules of Employment at all times, and probationary periods must not provide lower benefits or rights than in the Rules of Employment.
Another risk is that the uncertainty accompanying extension of probationary periods provides for a poor employee experience, and in most cases provides no benefit to the employer. The probationary period can be very stressful for employees.
A disaffected or aggrieved employee may take actions for reinstatement or damages. These may include, for example, joining a union, hiring legal representation, seeking a preliminary injunction for reinstatement (which typically lasts for 2-3 years until the end of litigation), or filing claims with administrative agencies. The agencies may sometimes, if they find a potential policy or ongoing violation with practices such as abusing the probationary period, begin an auditing process exceeding the scope of the individual employee.
Can employees with Fixed Term Contracts have probationary periods?
Yes. The probationary period (obviously shorter than the duration of the fixed term) can be included in a fixed term arrangement. Generally, the same rules apply as for those with fixed term contracts, and details should be included in the contracts to the extent they are not in the applicable Rules of Employment.
However, it is not permissible for a company to dismiss a fixed-term employees during the employment term without unavoidable reasons. In other words, it is more difficult for a company to dismiss a fixed-term employee during the term of employment than to dismiss a permanent employee. Therefore, even if the company includes probationary period in a fixed-term employment agreement, it is quite difficult to terminate a fixed-term employment agreement upon the end of the probationary period.
What are additional considerations with respect to probationary periods in Japan?
If termination is proper, the mandatory 30 days notice, or payment in lieu of notice, is still required, regardless of the end date of the probationary period. (Labor Standards Law, Art. 21.) (This applies if the employee has worked at least 14 days.) This notice may be up to the last date of probation so long as whatever remainder of the 30 day notice is paid out so that the employee is not an employee of record beyond the last day of probation. The typical process is immediate termination along with 30 days’ pay.
In cases of uncertainty as to the competency of the employee, a discussion with the employee may be helpful to discuss whether the best course is for the employee to leave (perhaps with a modest severance package) or probationary period to be extended.
A frequent concern is that if probation is not extended, Amazon will be giving up essential rights to termination. The truth is that all the same rules apply as to any employee not on probation, with the simple exception of fitness for the job discussed above. Most probation cases are resolved through the same methods used for non-probationary employees.
Assuming there is no unlawful intent to circumvent laws, discriminate or retaliate, a common method of resolving these issues is a negotiation with the employee, and for the employee to leave with an agreed-upon severance package and signed release that thereby eliminates liability concerns.