Explanation of Foreign Labor Policies and Related Regulations in Japanese Labor Law

In Japan’s labor market, the presence of foreign talent is becoming increasingly prominent year by year. For companies to achieve sustainable growth, leveraging a diverse workforce is becoming an essential management strategy. However, when employing foreign talent, it is crucial to understand the unique legal framework that differs from employing Japanese nationals. This legal framework consists of two main layers.

Firstly, there is the “Immigration Control and Refugee Recognition Act” (hereinafter referred to as the “Immigration Act”), which governs the eligibility of foreign nationals to engage in work activities in Japan. This act serves as the ‘gateway’ law that determines what types of activities allow foreign nationals to work and earn compensation in Japan.

Secondly, once an employment contract is established, there are Japanese labor laws such as the “Labor Standards Act” and the “Labor Contract Act” that regulate working conditions and the workplace environment. These laws are the ‘internal’ rules that apply equally to all workers in Japan, regardless of nationality.

This article systematically explains these legal systems that corporate executives and legal affairs personnel face when considering the employment of foreign talent. Specifically, it details the requirements for the residence status of “Skilled Labor, Humanities/International Services,” which plays a central role in the employment of professional talent, and the structure and legal obligations of the “Technical Intern Training Program,” which has functioned as a substantial workforce while aiming for international contribution. Furthermore, it confirms the fundamental principle that Japanese labor laws apply comprehensively to foreign talent employed under these systems and clarifies the practical risks and responsibilities that companies should be aware of through actual case law.

The Legal Framework Supporting Foreign Labor Policy in Japan

In Japan, whether a foreign national can engage in remunerated activities, or employment, is exclusively determined by the type of ‘residence status’ they hold. This principle is a fundamental rule established by the Japanese Immigration Control and Refugee Recognition Act. When considering the recruitment of foreign talent, companies must first understand this residence status system.  

Residence statuses are broadly classified into two categories. One is based on the individual’s status or position, such as ‘permanent resident’ or ‘spouse of a Japanese national,’ etc. Foreign nationals with these statuses are not restricted in their employment activities and can work in any occupation just like Japanese citizens. The other category is for residence statuses granted for the purpose of engaging in specific activities. For example, ‘professor,’ ‘medical,’ and ‘business management’ fall into this category, and many foreign nationals working in professional and technical fields in Japan are employed under these types of residence statuses. With these statuses, employment is only permitted within the scope of the approved activities.  

Under this system, companies are legally obligated to verify the residence status of foreign candidates for employment. Specifically, at the time of hiring, companies must request the presentation of a ‘residence card,’ check whether the status allows for employment, and whether the activities permitted by the status match the job duties the company intends to assign. Companies also have the obligation to report the employment status of foreign nationals (at the time of hiring and separation). If a company employs a foreign national who is not permitted to work, or if it has them engage in activities beyond the scope defined by their residence status, the company may be charged with the crime of promoting illegal employment, regardless of intent or negligence. This carries severe penalties and represents a significant compliance risk, even if the company did not intend to violate the law.  

It is important to note that the legal regulations concerning the employment of foreign nationals have a dual structure. The Immigration Control Act serves as the primary gateway to determine whether there is a ‘right’ to work in Japan. Once this gateway is passed and an employment contract is concluded between a company and a foreign national with a valid residence status, the full spectrum of Japanese labor laws then applies to the ‘conditions’ of the labor contract. Even if all requirements under the Immigration Control Act are met, labor conditions that violate the Japanese Labor Standards Act are not permitted. Conversely, no matter how generous the labor conditions may be, employing someone without the appropriate residence status is illegal. Therefore, companies are required to establish a dual compliance system that addresses both the Immigration Control Act and labor laws.

Specialist and Technical Fields of Residence Status: Requirements for “Engineer/Specialist in Humanities/International Services” in Japan

When employing foreign professionals with specialized knowledge or technical skills who have at least a bachelor’s degree, the most commonly used residence status in Japan is “Engineer/Specialist in Humanities/International Services.” This residence status encompasses three categories: natural sciences fields such as physical and engineering sciences (Engineer), humanities fields such as law and economics (Specialist in Humanities), and fields requiring thought and sensitivity based on foreign cultures (International Services). To obtain this residence status, one must meet the stringent requirements set forth by the Immigration Control and Refugee Recognition Act and its related ministerial ordinances.

First and foremost, the most critical requirement is a close connection between the job duties and the individual’s educational background or work experience. For example, a typical case would be someone who majored in information engineering at university working as a system engineer, or someone who graduated from the economics department working in marketing analysis. If this connection cannot be objectively proven, the application will not be approved. Even if the educational requirements are not met, it is possible to satisfy this requirement through work experience: over 10 years for the “Engineer” or “Specialist in Humanities” fields, and over 3 years for the “International Services” field. Proving this “connection” is not merely a procedural task of submitting documents. It involves constructing a compelling “narrative” that explains, in concrete and logical terms, why the foreign national’s specific expertise and experience are essential for the job, akin to a legal argumentation process. A generic job description is insufficient, and strategic job design with the residence status application in mind is required from the recruitment stage.

Secondly, as this residence status is for engaging in specialized work, activities considered “unskilled labor” are not permitted. If the job duties are deemed to be routine tasks that do not require specialized knowledge or analytical thinking, the residence status will not be granted.

Thirdly, there are requirements regarding compensation. The amount of remuneration received by the employed foreign national must be equal to or greater than that of a Japanese employee engaged in equivalent work. This is an important provision to prevent the exploitation of foreign nationals as cheap labor and to maintain a fair labor market.

Finally, the stability and continuity of the employer’s business are also subject to scrutiny. It is assessed whether the company has a solid business foundation to employ foreign nationals and continue to pay stable wages, and whether there are rational business reasons for needing such personnel, as confirmed through financial statements and other documents.

The Structure of the Technical Intern Training Program and Legal Obligations of Companies in Japan

The Technical Intern Training Program in Japan allows Japanese companies to accept foreign nationals from developing regions as technical interns and transfer practical skills, techniques, and knowledge through On-the-Job Training (OJT), with the aim of contributing to the economic development of the interns’ home countries by fostering human resources. This program is regulated by a special law called the “Act on Proper Technical Intern Training and Protection of Technical Intern Trainees” (hereinafter referred to as the “Technical Intern Training Act”).  

Under the Technical Intern Training Act, the Organization for Technical Intern Training (OTIT), an authorized corporation, has been established to supervise the proper operation of the system. Companies (implementing entities) that accept technical interns must create a detailed “Technical Intern Training Plan” for each intern and obtain approval from OTIT. This plan must concretely specify the skills to be acquired, the duration, and the treatment, and OTIT rigorously reviews whether the plan conforms to the standards of the law.  

Companies as implementing entities have many legal obligations under the Technical Intern Training Act. Particularly important are the provisions related to the protection of the human rights of technical interns. For example, it is explicitly prohibited to confiscate the interns’ passports or residence cards, to force them to save money, or to enter into contracts that stipulate penalties for breach of contract.  

Although they are called “interns” in the system, technical interns enter into employment contracts with the accepting companies and engage in work as employees. Therefore, except for the training period after entering the country, it is essential to understand that Japanese labor-related laws such as the Labor Standards Act, Minimum Wage Act, and Industrial Safety and Health Act are fully applicable.  

The Technical Intern Training Program is currently at a major turning point. The Japanese government has decided to abolish the Technical Intern Training Program and establish a new “Cultivation and Employment System.” The implementation period is set within three years from the announcement in June 2024 (Gregorian calendar year), but the exact date is still undecided. The most significant feature of the new system is the clear shift in its purpose from “international contribution” to “cultivation and securing of human resources” in Japan’s industrial sectors. This will change the framework to formally position foreign nationals as part of the workforce and support long-term career development through planned cultivation. Below is a summary of the main differences between the two systems.  

This system change suggests that for companies, strategic human resource planning to cultivate foreign talent from a long-term perspective and integrate them into the organization is becoming more important than ever.

Japanese Labor Laws Applicable Regardless of Nationality

One of the most fundamental principles that employers must adhere to when hiring foreign workers is that, upon the establishment of an employment relationship, Japanese labor laws apply equally to all workers, regardless of nationality. This is an unwavering rule established by Japanese law and court decisions.

At the core of this principle is Article 3 of the Japanese Labor Standards Act, which states, “An employer shall not engage in discriminatory treatment of workers concerning wages, working hours, or other working conditions on the basis of nationality, creed, or social status.” This means that it is explicitly prohibited by law to set lower wages for foreign workers than for Japanese employees or to apply unfavorable working hours and holiday systems based on their foreign nationality. Naturally, the minimum wage set by each prefecture in Japan also applies to foreign workers. Additionally, when work exceeds the statutory working hours, payment of increased wages is required, just as it is for Japanese workers.

Regarding dismissal, foreign workers are also robustly protected under the Japanese Labor Contract Act. Article 16 of the Japanese Labor Contract Act stipulates that “A dismissal shall be deemed abusive and invalid if it lacks objectively reasonable grounds and is not considered appropriate in accordance with societal norms.” Known as the “abuse of the right to dismiss” principle, this important principle legally supports the Japanese employment practice that employees cannot be dismissed solely for the convenience of the employer. This principle is fully applicable to foreign workers, and strict requirements are demanded for dismissal.

Furthermore, the Japanese Industrial Safety and Health Act, which ensures the safety and health of workers, naturally applies to foreign workers as well. Companies have the obligation to provide a safe working environment for foreign workers. In particular, when conducting safety and health education and training, it is required to be done in a language and method understandable to the workers. For example, consideration such as using illustrations or materials in their native language is necessary.

The Japanese Ministry of Health, Labour and Welfare has published “Guidelines for Proper Management of Employment of Foreign Workers” to complement adherence to these laws. These guidelines specifically indicate the measures that employers should take at each stage from recruitment to dismissal. For example, they recommend the clear presentation of appropriate working conditions, support for living, and the establishment of a grievance and consultation system. While these guidelines do not have direct penalties, they function as a form of “soft law.” That is, in the event of a dispute related to labor issues, the court will consider the employer’s “appropriateness” and “sincerity” in its response, and the adherence to these guidelines becomes an important factor in the judgment. Therefore, from a risk management perspective, it is extremely important to establish an employment management system in accordance with these guidelines.

Practical Considerations from Japanese Case Law

Understanding not only the letter of the law but also how it is interpreted and applied in actual disputes is essential for corporate risk management. Japanese case law concerning the employment of foreign workers suggests specific legal risks that companies may face.

Firstly, there is the judgment on the “worker status” of technical intern trainees. The Amakusa Chinese Technical Intern Trainees Case (Kumamoto District Court, January 29, 2010 (2010)) serves as an important precedent. In this case, the court clearly determined that regardless of being officially labeled as “trainees” or “interns,” if their actual role involves providing labor under the supervision of a company and receiving compensation for it, they qualify as “workers” under the Japanese Labor Standards Act. As a result, the company was ordered to pay unpaid wages based on the Minimum Wage Act and additional wages for overtime work. This ruling demonstrates the judiciary’s strict stance that companies cannot evade their obligations under labor law by using the guise of “training” or “internship.” Managers must recognize that technical intern trainees are workers and are fully protected under labor law, and must ensure proper labor management practices are in place.

Secondly, there is the judgment on the validity of dismissing foreign workers. As mentioned earlier, Article 16 of the Japanese Labor Contract Act invalidates dismissals without objectively reasonable and socially acceptable reasons. This requirement of “social acceptability” tends to be scrutinized more carefully when it comes to the dismissal of foreign workers. This is because for foreigners residing in Japan with a visa for work purposes, dismissal can lead to the loss not just of their job but also of their legal basis for staying in Japan—a potentially very serious consequence. Considering this severe outcome, courts rigorously review whether a company has exhausted all efforts to avoid dismissal, such as providing opportunities for training, considering reassignment (where possible within the scope of the residence status), and implementing gradual guidance or warnings before resorting to the ultimate measure of dismissal. For instance, in cases where dismissal due to insufficient Japanese language skills is contested, factors such as the level of ability expected at the time of hiring and whether support for improving skills was provided after joining the company are comprehensively considered. Companies must be fully aware of the risk that a hasty dismissal may be deemed legally invalid and must take extremely cautious measures based on objective evidence.

Conclusion

As outlined in this article, the employment of foreign talent in Japan is strictly managed by a dual legal framework consisting of the Immigration Control Act as the “entry” regulation and labor laws that apply regardless of nationality as the “internal” discipline. For companies to properly operate this complex system and secure and utilize excellent foreign talent, it is essential to accurately understand the requirements for residency status and to fully comply with Japanese labor laws throughout the entire process from hiring to resignation. Particularly, as court precedents indicate, simplistic interpretations or formalistic responses can lead to serious legal disputes and reputational risks.

Monolith Law Office has a wealth of experience in dealing with the themes covered in this article for numerous clients within Japan. Our firm boasts attorneys well-versed in the Japanese legal system, as well as several English-speaking lawyers with foreign legal qualifications, providing unique insights to bridge the gap between complex Japanese regulations and the needs of global companies. We offer comprehensive support for your company’s utilization of foreign talent from a legal perspective, including devising strategies for obtaining residency status, drafting employment contracts in compliance with Japanese labor laws, advising on daily labor management, and responding to disputes should they arise.