Abuse of the Right to Dismiss Employees

Plain-language explanation

Article 16 of the Labor Contract Act codifies Japan's "abuse of the right to dismiss" doctrine. Employers technically have the right to dismiss employees, but a dismissal will be declared invalid if it lacks an "objectively reasonable reason" and is not "socially acceptable" (i.e., proportionate and fair under the circumstances). Firing someone simply because a manager personally dislikes them, or over a single minor mistake, generally won't satisfy this standard — both an objective justification and a reasonable degree of severity are required.

This article is the legal foundation for why dismissing regular (seishain) employees in Japan is notoriously difficult compared to many other countries. Courts have developed extensive case law applying this standard to situations like poor performance, attendance problems, and business-driven layoffs (seiri-kaiko). For layoffs specifically, courts additionally weigh factors such as the genuine necessity for workforce reduction, efforts to avoid dismissal (redeployment, voluntary retirement offers), fairness in selecting who is let go, and adequate consultation with affected employees.

For business owners, the practical takeaway is that dismissal decisions must be well-documented and gradual: keep records of performance reviews, warnings, and improvement opportunities given to the employee before termination. Skipping straight to firing without objective evidence and a fair process creates serious legal exposure — including the dismissal being ruled void, back-pay obligations, and orders to reinstate the employee.

日本語での解説

Common scenarios

• ▸Terminating a full-time employee for alleged poor performance without prior warnings or improvement plans
• ▸Conducting layoffs (seiri-kaiko) due to business downturn and needing to justify selection criteria
• ▸Dismissing an employee for repeated absenteeism or misconduct and needing documentation to defend the decision
• ▸Restructuring a department and deciding which employees to let go versus reassign
• ▸An employee filing a wrongful termination claim seeking reinstatement and back pay