－Revised Labor Standards Act –　Annual Leave

With regards to the changes to the Labor Law regarding paid annual leave, if you are to summarise it would be, for those workers who are granted 10 days or more of paid annual leave, it is now a requirement for the Employer to ensure that the worker takes at least five (5) days of their annual leave and the timing can be determined.

These five (5) days can be a combination of 1) Leave taken at the Worker’s request, 2) Planned Leave as per a Labor Management Agreement or 3) Annual Leave as stipulated by the Employer. As a consequence, the Employer needs to understand each Worker’s annual leave balance, and ensure that in any one (1) year all Workers take the required five (5) days. As it is extremely difficult to manage this if the monitoring is left to the last minute, we advise that Human Resources (hereinafter “HR”) monitor this and twice a year, at the six (6) and nine (9) month mark, confirm each worker’s vacation balance and notify both the worker and their Manager and remind them of the need to take their annual leave.

With regards to managing this change to the law there are a number of points that need attention:

1. When workers submit requests to take their annual leave, both half day leave and hourly leave are acceptable, however when considering the need to take five (5) days, time taken through the hourly leave system are not acceptable. Hence it is important to remove this leave from the calculation.

Note: Workers who are caring for children and actively utilizing the hourly leave opportunity have complained about this interpretation to the Department of Health Welfare and Labor.

1. With regards to the five (5) days being taken from the annual leave carried over from the previous year, or from the leave that has been granted this year, it does not matter. However, when thinking practically the time would be taken from the carried over days first.
2. When a Worker reports to work on an Employer designated leave day, the Employer cannot exercise their rights with regards to the Leave, and hence a day of leave cannot be recorded. This is confusingly the opposite of when there is a Labor Management Agreement in place that should an Employee report to work on a Planned Leave day, the day will still be counted as leave, and not as having been worked. Why these two would be different is difficult to understand!
3. The Department of Health Welfare and Labor will not agree to allow Employers to designate more than five (5) days of annual leave.
4. For those Employees returning from Childcare Leave such that it can be assumed that due to their return date, actually taking the five (5) days of annual leave can be assumed to be difficult (i.e. there are 5 or less working days left), and hence they can be exempt from this requirement. However, the Department of Health Welfare and Labor has (unbelievably!!!!) said in their guidelines that should there be six (6) working days left then the Employee should take their five (5) days of leave. However, there are no guidelines around when an Employee resigns during the year or has been on Leave of Absence and hence until such a case arises it will be difficult to enforce.
5. When the Employer determines the timing, Article 24-6-1 of the Labor Standards Act requires the Employee to seek the Worker’s input, and Article 24-6-2 requires the Employer to try to respect the input of the Worker.
6. How these five (5) days relate to Other Paid Special Leaves provided by Employers. The interpretation of the new clause is that Special Paid Leaves already introduced by Employers should not be included in the calculation. In addition, discontinuing current Other Special Paid Leaves and including them in Annual Leave balances which can be carried over to the follow year is not in keeping with the intention of the law and hence such changes would be considered disadvantageous and as such care needs to be given to such changes. However, rolling Other Paid Special Leaves into increased Annual Leave entitlements and then with a Labor Management Agreement planning Leave would be an acceptable compromise.

Given that including Annual Leave Entitlements in the Rules of Employment is an absolute requirement and hence with this change to the law updates to the Rules of Employment is necessary.

Examples for Updates to the Rules of Employment:

[Employees who have been granted more than 10 days of annual leave, for the one (1) year from the grant date, the Company in consultation with the Employee, but respecting their opinion, can designate the time when they should take a maximum of five (5) days of annual leave. ] should be added to the Rules of Employment.

In addition, for Companies that grant Employees prorated annual leave according to their start date need in addition to the above wording the following language [Employees who join during the year for their first and second year only can total their annual leave allocations as per the following formula and during the fulfillment period must take their designated annual leave.

Fulfillment Period ÷１２ｘ５days  Designed number of annual leave days to be taken with periods of less than one (1) day to be rounded up to whole days] should be added to the Rules of Employment.

In addition to this the Company must now maintain an annual leave management records  , and this data must be kept for three (3) years. According to explanatory sessions within Tokyo by the Labor Standards Offices, so long as the data includes the timing, number of days of leave taken, the fulfillment period, when leave was granted at an individual employee level this data can be maintained electronically including on magnetic discs or tape or in optical files. Most companies now have internal time and attendance tracking systems in place and hence utilizing these systems should be sufficient.

Lastly, failure by Companies to Comply with the Law can be subject to a fine of 300,000yen per employee, and hence HR should ensure management understands this penalty is part of implementing this new revision.

Thank you.