On July 6 2018, the 196th ordinary session of the Diet passed the Work Style Reform Act (Act) into law. The Act, which amends the Labour Standards Act (LSA) and other laws and regulations concerning working hours and annual paid leave, is intended to ensure that employees do not work long hours and enjoy a diverse work-life balance that suits their individual circumstances.
The first of the Act's provisions that require enterprises to take practical steps will come into effect on April 1 2019.
Details of the amendments to the LSA
Cap on overtime
The Act imposes three levels of restrictions on the overtime hours of an employee:
- Firstly, under the amended LSA, an employee's overtime hours must not, in principle, exceed 45 hours per month and 360 hours per year unless temporary, special circumstances arise. An employee's overtime hours can only exceed the abovementioned limits if there is an agreement between the employee and management that sets forth the temporary, special circumstances where additional overtime may be required. Furthermore, an employee's additional overtime hours may not exceed 100 hours per month and 720 hours per year.
- Secondly, in addition to these limits, an employee's average monthly overtime hours for any two to six-month period must not exceed 80 hours.
- Lastly, the basic limit of 45 hours per month must not be exceeded more than six times in a year.
Employers' obligation to allow employees to take five days annual paid leave
Employers will be obliged to let employees who have been granted at least ten days annual paid leave to actually take five of those days leave. For such employees, employers will be obliged to designate the period of such leave after hearing the employees' wishes on when they would like to take their leave.
Exemption for senior professionals
A new system will be established to exclude workers with advanced expertise and high annual incomes from the scope of application of the regulations on working hours and premium wage rates if certain conditions are met.
Particularly in the case of enterprises that hire workers in Japan, revisions to the relevant work rules and agreements, taking into consideration the cap on overtime working hours and the employer's obligation to grant annual paid leave may be important. If a company violates any of the provisions concerning the cap on overtime hours and the requirement to ensure that employees take at least five days of their paid leave entitlement, the company will likely be fined, and, through press reports, its reputation could be damaged. Accordingly, such enterprises should check their work rules and agreements concluded with workers, and act on the above legal amendments as soon as possible.
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