– Revised Labor Standards Act / Revised Industrial Safety Act – 36 Kyotei Administration Part 2 (Special Provisions)

The previous PMP newsletter covered the changes to the administration of 36 Kyotei. In this newsletter, we will focus on “36 Kyotei with Special Provisions, coming into effect April 1, 2019” (hereinafter referred to as “36 Kyotei-SP”)

It is believed that approximately 40% of all companies in Japan and over 60% of large corporations already have special provisions inserted in their 36 Kyotei, which allow them to request employees to work overtime beyond the legal cap of 45 hours per month / 360 hours per year where there are legitimate business reasons to do so. The revised Labor Standards Act specifies critical changes that companies should be aware of when they create a 36 Kyotei –SP from April 1.

1. What qualifies as “legitimate business reasons”?

Until March 31 2019, “legitimate business reasons” were deemed exceptional cases where companies unexpectedly required employees to work overtime on a temporary basis. Effective April 1, “Legitimate business reasons” will be defined as a situation where “there is a significant increase in work volume that would have been difficult to predict in the normal course of business operations, requiring employees to work beyond the legal caps on overtime hours. (Revised Labor Standards Act Article 36-5).

(PMP note: Legal caps on overtime hours are either 45 hours per month or 360 hours per year. Employees working under the annual-variable-working-hours system shall be excluded from the provision).

In December 2018, the Ministry of Health, Labor and Welfare issued leaflets covering the legal caps on overtime. In the leaflets, they emphasized the following examples as what could be deemed as “legitimate business reasons”: (1) increase in work volume during the budget, financial year-end process or bonus seasons, (2) tight schedules to complete work by due dates, (3) large volume of complaint handlings, or (4) mechanical breakdowns requiring immediate attention. These examples were part of the original guideline that the Ministry of Health, Labor and Welfare released on October 22 2003 (Official Notice Number 1022003).

Please note that the examples above do not cover every business situation that leads to a sudden and unexpected increase in work volume.

In the Q&A issued by the Ministry of Health, Labor and Welfare on December 28 2018 (Official Notice Number 1228-15), they clearly state that “a sudden and unexpected increase in work volume” is just one example of what could be considered a legitimate business reason. Companies and employees’ representative should as best as they can discuss and compile a list of possible “legitimate business reasons” that could occur in their respective business environment prior to finalizing their own 36 Kyotei-SP.

1. Monthly and Yearly Legal Caps on Overtime Hours:

The revised Labor Standards Act stipulates that the annual cap on excessive working hours for a company with a 36 Kyotei-SP should be 720 hours. This legal cap of 720 hours is purely for overtime performed on normal working days, and excludes hours worked on legal holidays (Revised Labor Standards Act Article 36-5). Companies should not confuse this guideline with the separate regulation (as stated in the following paragraph) where the average of working hours in any month (and consecutive months) should not exceed 80 hours per month / 960 hours per annum including hours worked on legal holidays.

In addition to the legal cap of 720 hours in the preceding paragraph, the total hours of overtime performed on workdays and legal holidays per month should be less than 100 hours. (Revised Labor Standards Act Article 36-5). Additionally, companies will only be allowed to request employees to exceed the legal cap a maximum of six times in a year. (This “maximum of six times” is part of existing regulations).

A 36 Kyotei-SP will require companies to ensure the average monthly overtime hours (including working on legal holidays) does not to exceed the average of 80 hours for the period between any 2 and 6 months. (Revised Labor Standards Act Article 36-6). Similar to a template for the new 36 Kyotei agreement, the new template for the 36 Kyotei-SP has checkbox columns to assist companies in confirming they are compliant with the new regulations. Any 36 Kyotei-SP that fails to have all the checkbox columns ticked prior to submission will be regarded invalid.

Please note that companies violating the new regulation of legal caps will be deemed to be in violation of Article 36-6 of the Labor Standards Act. (Violation of Article 36-5 that defines the legal cap of 720 hours per year will be a separate violation to Article 32 of the Labor Standards Act). Any company that fails to comply with the legal cap regulation will be penalized in accordance with Article 119-1 of the revised Labor Standards Act.

Many companies may have already been using a labor management system to monitor employees’ working hours for compliance with provisions stated in their 36 Kyotei. Effective April 1, labor management systems should capture overtime performed on legal holidays in calculating employees’ working hours per month. These systems should exclude overtime-performed on legal holidays when calculating the total working hours for per year.

1. Health and Wellbeing Management

The revised Labor Standards Act defines that setting up internal measurement to promote employees’ health and wellbeing is subject to finalizing the 36 Kyotei-SP. Effective April 1, companies should implement one of the following measurements for employees who fall under the special provisions. In the internal guideline, companies will be required to further define the actual procedures that they follow when they take actions for eligible employees. They should keep all the records of actions taken for a period of three years:

1. Provide doctor consultation to employees whose working hours exceed provisions stated in a company’s 36 Kyotei-SP;
2. Restrict the number of working midnight. (Under the Industrial Safety Act, companies should provide separate medical checkups for employees working midnight for 4 times or more in a month);
3. Introduce an efficient “intermission” or “interval” between the end of work on one day and a starting time on the next day to provide employees enough time to rest without supervision;
4. Provide employees with substitute or additional holidays based on their working hours or health condition;
5. Provide employees with additional medical checkups based on their working hours or health condition;
6. Encourage employees to take annual paid leave that includes consecutive annual paid leave;
7. Set up a point of contact for employees to discuss physical and mental health issues;
8. Monitor employees’ working attitudes, health condition, and provide them job/role transfer if necessary;
9. Obtain company doctor’s advice on employee’s health or wellbeing, or provide them with company doctor’s heath guidance or interview.

FYI – the measurements from ④ to ⑨ stated above are health measurements for employees working under the discretionary working-hours system defined in the Labor Standards Act.

Effective Date of the revised 36 Kyotei:

The revised Labor Standards Act will come into effect April 1, 2019. However, companies that have a current 36 Kyotei valid until a date beyond April 1 2019 will have these agreements grandfathered until the end of their current term. PMP encourages all companies to check the end date of their current 36 Kyotei and ensure that they reflect the legal changes to new 36 Kyotei created after April 1 2019.

Companies falling into any one of the categories listed in the table below will be required to comply with the changes to the 36 Kyotei from April 1 2020in accordance with the revised Labor Standards Act that comes into effect April 1 2019.

Business Type	Size of Capital		Number of Regular Employees
Retail Business	JPY50 million or less	OR	50 or less
Service Industry	JPY50 million or less	OR	100 or less
Wholesale Business	JPY 100 million or less	OR	100 or less
Others	JPY 300 million or less	OR	300 or less

Thank you.