Need to fire in Japan?! Regulations you need to know.

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The most difficult aspect of the EOR experience in Japan. Do your research so you know what the guard rails are and how to push back on advice you are given.

This is the question that comes up in almost every conversation with an overseas company hiring in Japan for the first time. The short answer is yes, but Japanese law does not treat dismissal as a matter of employer discretion the way many other jurisdictions do. There is a specific legal test that governs every dismissal, a separate set of periods where dismissal is flatly prohibited regardless of cause, a distinct test for redundancy-driven dismissals, and a different set of rules again for fixed-term contracts, which matters a great deal for EOR arrangements, since most EOR-hired employees in Japan are on fixed-term contracts.

This article lays out the actual statutes and doctrines involved, in the order they’d apply, so you have something concrete to check against what a local lawyer or provider tells you. It closes with what this means for how an employment contract should actually be written.

1. The core rule: dismissal without objectively reasonable grounds is void

Every dismissal in Japan, regardless of the reason, is measured against a single statutory test:

解雇は、客観的に合理的な理由を欠き、社会通念上相当であると認められない場合は、その権利を濫用したものとして、無効とする。 労働契約法第16条

A dismissal that lacks objectively reasonable grounds and is not recognized as appropriate under general societal norms is treated as an abuse of the right to dismiss, and is void.

(Labor Contract Act, Article 16)

This is the single most important sentence in Japanese employment law for a foreign employer to understand. It means a dismissal is not evaluated on whether the employer followed its own internal policy, or whether the contract technically allowed it. It is evaluated by a court, after the fact, against an objective standard of reasonableness. There is no concept of at-will employment in Japan. Two things have to both be true: there has to be an objectively reasonable reason (poor performance, misconduct, redundancy, etc., each with its own body of case law on what counts as sufficient), and the dismissal itself has to be a socially appropriate response to that reason, meaning courts routinely ask whether less severe alternatives (a warning, a transfer, a performance improvement period) were available and were tried first.

Everything below is either a procedural requirement layered on top of this test, a specific category where the test gets replaced with an even harder standard, or a period where dismissal is prohibited outright regardless of how strong the underlying reason is.

2. The mandatory notice period, or payment in lieu

Separately from whether a dismissal is substantively justified, there is a hard procedural requirement:

使用者は、労働者を解雇しようとする場合においては、少なくとも三十日前にその予告をしなければならない。三十日前に予告をしない使用者は、三十日分以上の平均賃金を支払わなければならない。 労働基準法第20条第1項

An employer intending to dismiss a worker must give at least 30 days’ advance notice. An employer that does not give 30 days’ notice must pay an amount equal to at least 30 days’ average wages.

(Labor Standards Act, Article 20, Paragraph 1)

The two can be blended: each day of notice actually given reduces the required payment by one day’s worth. There’s a narrow exception for cases of natural disaster or other unavoidable circumstances making continued business impossible, or for dismissal for cause where the Labor Standards Inspection Office has approved a waiver, but neither applies to an ordinary performance or redundancy dismissal.

3. Periods where dismissal is prohibited outright, regardless of cause

Even where Section 1’s reasonableness test would otherwise be satisfied, Japanese law flatly bars dismissal during certain windows.

Medical leave and maternity leave, plus 30 days after:

使用者は、労働者が業務上負傷し、又は疾病にかかり療養のために休業する期間及びその後三十日間並びに産前産後の女性が第六十五条の規定によつて休業する期間及びその後三十日間は、解雇してはならない。 労働基準法第19条第1項

An employer must not dismiss a worker during the period the worker is on leave for treatment of an injury or illness suffered in the course of work, and for 30 days thereafter, nor during the period a woman is on leave before and after childbirth under Article 65, and for 30 days thereafter.

(Labor Standards Act, Article 19, Paragraph 1)

Pregnancy and childbirth specifically, with the burden of proof placed on the employer:

事業主は、女性労働者が婚姻し、妊娠し、又は出産したことを退職理由として予定する定めをしてはならない。 事業主は、女性労働者が婚姻したことを理由として、解雇してはならない。 妊娠中の女性労働者及び出産後一年を経過しない女性労働者に対してなされた解雇は、無効とする。ただし、事業主が当該解雇が前項に規定する事由を理由とする解雇でないことを証明したときは、この限りでない。 男女雇用機会均等法第9条第1項、第2項、第4項

An employer must not provide in advance that marriage, pregnancy, or childbirth will be grounds for a female worker’s retirement. An employer must not dismiss a female worker because she has married. A dismissal of a woman during pregnancy or within one year of childbirth is void, unless the employer proves the dismissal was not for a reason connected to pregnancy or childbirth.

(Act on Securing Equal Opportunity and Treatment between Men and Women in Employment, Article 9, Paragraphs 1, 2, and 4)

That last clause reverses the usual burden of proof. Normally a dismissed worker has to show the dismissal was unlawful; here, if a dismissal happens to fall within pregnancy or the year following childbirth, the employer has to affirmatively prove it wasn’t related.

Union activity:

労働者が労働組合の組合員であること、労働組合に加入し、若しくはこれを結成しようとしたこと若しくは労働組合の正当な行為をしたことの故をもつて、その労働者を解雇し、その他これに対して不利益な取扱いをすること 労働組合法第7条第1号

Dismissing, or otherwise disadvantaging, a worker because the worker is a union member, joined or tried to form a union, or engaged in legitimate union activity.

(Labor Union Act, Article 7, Item 1)

This is defined as an unfair labor practice, separately enforceable through the Labor Relations Commission regardless of whether the dismissal would otherwise pass the Article 16 test.

4. Redundancy dismissals get a stricter, four-part test

Dismissing someone because their role is being eliminated is treated as its own category, with its own test, not created by a single statute, but by case law applying Article 16 to this specific fact pattern. The leading case is the Tokyo High Court’s decision in the Toyo Sanso case, arising from a company shutting down an unprofitable division and dismissing its entire staff:

東洋酸素事件 東京高等裁判所 昭和54年10月29日判決（労働判例330号71頁）

Toyo Sanso Case, Tokyo High Court, judgment of October 29, 1979 (Rodo Hanrei, No. 330, p. 71).

That decision, and the case law that has built on it since, is generally summarized as four factors courts weigh together:

  1. 人員削減の必要性 (business necessity for reducing headcount): genuine necessity, generally requiring concrete financial data, not just a general concern about the future.
  2. 解雇回避努力義務 (duty to attempt alternatives first): evidence the employer tried real alternatives, such as voluntary retirement programs, executive pay cuts, transfers to other roles, or temporary furlough, before reaching for dismissal.
  3. 被解雇者選定の合理性 (reasonable selection criteria): objective, defensible criteria for who specifically gets let go, not left to a manager’s subjective judgment.
  4. 手続の相当性 (adequate process): a genuine consultation process with the affected employees and, where one exists, the union or employee representative, aimed at securing understanding rather than just informing people after the fact.

These aren’t weighted as a strict checklist requiring each to be perfectly satisfied, but a redundancy dismissal that’s weak on more than one of them rarely survives a challenge. Two contrasting real outcomes illustrate how factor 2 actually gets applied: in one case, a taxi company eliminating its radio-dispatch division successfully dismissed a worker who held no driving license and therefore couldn’t be reassigned to any of the company’s driving roles, with no office positions available either. The dismissal was upheld because reassignment was genuinely impossible. In another case, an overseas consulting firm eliminating a department lost, because the court found reassignment and cost-cutting alternatives had been available and simply weren’t tried.

5. “The project is finished” is not, by itself, a valid reason

This is the single most common point of friction between what an overseas client expects and what Japanese law actually allows, and it deserves its own section. A company that hired someone for a specific project, on an ordinary indefinite-term employment contract, often assumes that once the project ends, so does the obligation to keep paying them, the same way a contractor engagement would wind down elsewhere. That assumption is wrong under Japanese law unless the contract was built correctly from the start.

For an indefinite-term employee, “the project ended” is not a standalone ground for dismissal. It gets folded into the redundancy test in Section 4 above: specifically factor 2, the duty to attempt alternatives first. A court asks whether the company had other work the person could reasonably have been moved to before letting them go. For a company of any real size, with other clients, other projects, or other departments, the answer is very often yes, which is exactly why the consulting-firm example above lost: the project ending wasn’t the problem, failing to look for a next assignment was.

There is a lawful way to structure genuinely project-bound work, but it has to be built into the contract from day one, not applied retroactively once the project winds down. Labor Standards Act Article 14 carves out project-completion contracts from the normal three-year cap on fixed-term agreements:

労働契約は、期間の定めのないものを除き、一定の事業の完了に必要な期間を定めるもののほかは、三年（次の各号のいずれかに該当する労働契約にあつては、五年）を超える期間について締結してはならない。 労働基準法第14条第1項

A labor contract, other than one with no fixed term, must not be concluded for a period exceeding three years (five years for contracts falling under the following items), except for one that sets the period necessary to complete a specific undertaking.

(Labor Standards Act, Article 14, Paragraph 1)

That exception only applies where the underlying project is objectively identifiable as a finite undertaking with its own natural end point. The classic example is construction, where a contract runs for the duration of a specific build. It has to be drafted as a fixed-term contract tied to that undertaking’s completion, not as an indefinite hire the company privately intends to end when the work runs out. And even a properly drafted project contract isn’t automatically safe from the 雇止め non-renewal doctrine in Section 6 below if the same person keeps getting re-engaged for successive projects. At that point the pattern of renewal can create the same reasonable expectation of continuation that applies to any other fixed-term role.

Practical takeaway: if a role is genuinely tied to a specific piece of work with a real end date, say so in the contract from the start, tied to that undertaking’s completion. If it’s an ordinary indefinite hire, plan for the possibility that the project ends before the employment relationship legally can, and budget for either a genuine reassignment effort or a negotiated exit, not an assumption that the project’s end date is also the employment’s end date.

What “reassignment effort” actually requires from a staffing company

A small staffing company with one construction project manager and no other departments isn’t held to the same standard as a large conglomerate with dozens of business lines to shuffle someone into. The law explicitly scales this down:

配転や出向などを行うことのできない小規模事業者については、そうした配転措置等による解雇回避の努力を行う余地がないことは考慮されます。

For small businesses that have no capacity for reassignment or secondment, the fact that there is no room to pursue dismissal-avoidance efforts through those specific measures is taken into account.

For a staffing or EOR company specifically, “internal opportunity” doesn’t mean an office job at headquarters. It means the next placement, and where the worker is on a licensed dispatch arrangement, there’s a codified duty built for exactly this:

派遣元事業主は、（中略）特定有期雇用派遣労働者等に対し、雇用安定措置を講じなければならない。 労働者派遣法第30条第2項

A dispatching employer must take employment stability measures for a specified fixed-term dispatch worker [meeting the relevant service-length conditions].

(Worker Dispatch Act, Article 30, Paragraph 2)

The measures are: (1) asking the current client to hire the worker directly, (2) providing a new dispatch assignment, (3) employing the worker itself on an indefinite-term basis, or (4) other steps genuinely contributing to stable continued employment, such as paid training. Nothing in this requires canvassing the open market. The obligation is to check what the company’s own current client relationships can offer, not to run an unlimited external search. What matters, for this framework and for the general redundancy test alike, is that some real, documented measure was actually taken and can be shown afterward, not just asserted. A process that leaves no record that an effort was made is a much weaker position to defend than one that does.

How this plays out differently under secondment

Where the worker is on a genuine in-service secondment (在籍型出向) rather than licensed dispatch, ending a specific placement isn’t a dismissal event at all in the first instance.

The worker’s employment with the sending company, the staffing or EOR firm, never stopped. It ran in parallel with the receiving company’s employment for the length of the secondment. When the secondment period or purpose ends, the worker simply reverts to the sending company, the same way they would return from any period of leave. There’s no redundancy analysis to satisfy at that moment, because nobody’s employment actually ended.

The worker’s job back isn’t conditional, it’s just the fact of who hired them first

If the arrangement is a genuine in-service secondment, this part isn’t really in question. The worker was hired by the sending company first, so reverting to that company when the placement ends is just the continuation of an employment relationship that never stopped, not some outcome that depends on circumstances lining up.

“Genuine” here means the arrangement actually satisfies everything covered in “What Is Secondment? A Japan EOR Term, Explained.”: the dual employment relationship, one of the four recognized purposes, no margin on the arrangement, and so on.

What genuineness actually protects against

The real question genuineness answers isn’t whether the worker has somewhere to go. It’s whether the sending company’s own business model holds up.

Where a secondment is really a repeat, fee-based placement business run for unrelated clients, it risks being unlicensed labor supply in substance. That’s a regulatory exposure for the sending company itself, separate from and unrelated to whether any individual worker has a job to revert to.

Reverting to the sending company only defers the question

It doesn’t make the question disappear. If the sending company genuinely has no further placement to offer and eventually needs to end the person’s employment outright, that decision is an ordinary dismissal of its own direct employee, evaluated under Article 16 and, if framed as a redundancy, the same four-factor test from Section 4.

Licensed dispatch has a named statute spelling out the search obligation. Secondment doesn’t have an equivalent provision, but the same substantive question, whether the company genuinely looked for other work before ending the relationship, resurfaces under ordinary case law the moment that termination decision actually gets made.

6. Fixed-term contracts don’t avoid this: they have their own version of it

This is the section that matters most for EOR arrangements specifically, because a large share of EOR-hired employees in Japan are on fixed-term contracts, and there’s a common misconception that a fixed-term contract simply expires with no dismissal analysis required at all. That’s only true if the contract genuinely, predictably ends on schedule with no pattern of renewal.

The non-renewal doctrine (雇止め):

当該有期労働契約が過去に反復して更新されたことがあるものであつて、その雇止めをすることが、期間の定めのない労働契約を締結している労働者を解雇することと社会通念上同視できると認められること、又は当該労働者において当該有期労働契約の契約期間の満了時に当該有期労働契約が更新されるものと期待することについて合理的な理由があるものであると認められること 労働契約法第19条

Where a fixed-term contract has been repeatedly renewed in the past, such that non-renewal can, under general societal norms, be equated to the dismissal of a worker under an indefinite-term contract, or where the worker has a reasonable basis for expecting the contract to be renewed at the end of its term, [the same reasonableness test as regular dismissal applies to a decision not to renew].

(Labor Contract Act, Article 19)

In plain terms: if you’ve renewed someone’s fixed-term contract several times, or given them any reason to believe it would keep renewing, declining to renew it is legally treated the same as a dismissal, subject to the same Article 16 analysis. The contract being fixed-term doesn’t exempt it once a renewal pattern exists.

The 5-year conversion rule:

同一の使用者との間で締結された二以上の有期労働契約（契約期間の始期が到来していないものを除く。）の契約期間を通算した期間（（略）「通算契約期間」という。）が五年を超える労働者が、当該使用者に対し、現に締結している有期労働契約の契約期間が満了する日までの間に、当該満了する日の翌日から労務が提供される期間の定めのない労働契約の締結の申込みをしたときは、使用者は当該申込みを承諾したものとみなす。 労働契約法第18条第1項

Where a worker’s combined term of two or more fixed-term contracts with the same employer exceeds five years, and the worker applies, before the current contract’s expiration, to convert to an indefinite-term contract effective the day after that expiration, the employer is deemed to have accepted the application.

(Labor Contract Act, Article 18, Paragraph 1)

Once someone has worked five cumulative years on renewed fixed-term contracts, they get the right to convert to an indefinite-term contract just by asking. The employer’s acceptance is automatic by operation of law. This is a hard deadline worth tracking for any EOR client planning to keep the same person in place for years.

7. Probation is a lower bar, not a free pass

Foreign employers often assume a probation period functions like an at-will trial. Japan’s leading case on this, the Mitsubishi Resin decision (三菱樹脂事件, Supreme Court, December 12, 1973), holds that a probationary employee is already under a labor contract, just one with a reserved right of cancellation (解約権留保付労働契約), and that reserved right can only be exercised where facts come to light during probation that couldn’t reasonably have been known at hiring, and where continued employment is, under the same “objectively reasonable and socially appropriate” standard as any other dismissal, no longer justified in light of those facts. The bar is lower than an ordinary dismissal, but it is a bar, not an absence of one. Rejecting someone at the end of probation still needs a specific, documented reason that wasn’t available at the hiring decision.

8. The paperwork: what has to be written down, and what a worker can demand to see

Work rules aren’t optional boilerplate. The law requires them to spell out dismissal grounds specifically:

退職に関する事項（解雇の事由を含む。） 労働基準法第89条第3号

Matters concerning retirement (including grounds for dismissal) [must be included among the required contents of work rules].

(Labor Standards Act, Article 89, Item 3)

An employer relying on a dismissal ground that isn’t actually listed in its work rules starts from a weaker position, since the work rules are typically the first place a court looks to check whether the stated reason was even a recognized basis for dismissal at that company.

Separately, a dismissed worker can demand documentation, and the employer is legally required to provide it:

労働者が退職の場合において、使用期間、業務の種類、その事業における地位、賃金又は退職の事由（退職の事由が解雇の場合にあつては、その理由を含む。）について証明書を請求した場合においては、使用者は、遅滞なくこれを交付しなければならない。 労働基準法第22条第1項

Where a worker, upon leaving employment, requests a certificate covering length of service, type of work, position, wages, or the reason for leaving (including, where the reason is dismissal, the specific grounds for it), the employer must issue it without delay.

(Labor Standards Act, Article 22, Paragraph 1)

This certificate becomes the operative document in most dismissal disputes. Whatever reason the employer states there is generally the reason it’s held to going forward.

9. What this means for how the contract should actually be written

None of this means dismissal is impossible in Japan. It means the contract, the work rules, and the employer’s documented conduct all need to be built to support a dismissal decision before the decision is ever made, not scrambled together after the fact. A few things that actually make a difference in practice:

List dismissal grounds specifically, not generically. A work rules clause that only says something like “for other significant reasons” gives a court nothing to evaluate against. Grounds tied to specific, observable conduct or performance standards hold up far better.

Consider a role- or scope-limited contract for specialist hires. Japanese courts generally expect an employer to consider reassigning an underperforming employee to a different role before dismissing them, a duty that’s much harder to satisfy for a large, multi-department employer than for a company with one narrowly defined position. A contract that explicitly limits the employee to a specific role, skill set, or work location (職種限定, 勤務地限定) narrows that expectation, because there’s no other role to reasonably reassign them to. This is a real, commonly used drafting approach for specialist and foreign-hire positions specifically.

Document performance issues as they happen, not when you’re ready to act. Courts consistently look for a paper trail: specific, dated feedback, a genuine improvement opportunity, and a clear record that the employee understood what was expected and fell short anyway. A dismissal that arrives with no prior documentation is one of the most common reasons these cases are lost.

Handle fixed-term renewals deliberately. If a role is genuinely intended to be temporary, avoid conduct that signals otherwise: repeated automatic renewals, verbal assurances about the future, or treating the position as effectively permanent. If it isn’t intended to be temporary, plan for the five-year conversion point rather than being surprised by it.

Consider a negotiated exit before a unilateral one. A mutual separation agreement (合意退職), typically with a severance payment in exchange for a signed waiver of claims, avoids the Article 16 analysis entirely, because it isn’t a dismissal, it’s a resignation the employee agreed to. This is the most common way dismissal risk actually gets resolved in Japan in practice, and it’s worth structuring as the first option rather than the fallback. Any solicitation toward this route has to stop well short of coercion (退職強要), which can itself become a harassment claim, so the manner of the conversation matters as much as the offer.

This article quotes the Labor Contract Act (労働契約法), the Labor Standards Act (労働基準法), the Act on Securing Equal Opportunity and Treatment between Men and Women in Employment (男女雇用機会均等法), and the Labor Union Act (労働組合法) directly, along with the Supreme Court’s Mitsubishi Resin decision. It is provided for general informational purposes, is not legal advice, and is not directed at any specific company or arrangement. Companies evaluating a specific dismissal or contract structure in Japan should consult qualified Japanese employment counsel regarding their specific facts.

Sources