Severance package negotiations in Japan: working with a lawyer

1. When employees ask us to negotiate an exit

Situations we handle

We negotiate the terms of departure for employees in the following situations:

• the company has asked you to resign, or has proposed that you leave by agreement
• you have been dismissed or given notice of dismissal
• your employer has ended, or told you it will end, your employment during or at the end of a probationary period
• your fixed-term contract has not been renewed, or you have been told that it will not be
• you are reaching, or have reached, the mandatory retirement age and are not being re-employed

You can instruct us before or after the company makes an offer, and before or after your employment ends. Negotiating the terms of re-employment after the mandatory retirement age is a different kind of matter and is not covered in this article; it is among the matters listed under What we advise on.

If your goal is to negotiate departure terms

You do not have to be seeking to keep your job, or to return to it, in order to instruct us. Negotiating the terms of your departure — the amount, the end date and the other terms — can itself be the purpose of the engagement.

That purpose is separate from the question of what you have already said or signed. At the start, we ask whether you have told the company that you will leave, submitted a resignation or signed any document, because the answer affects where the negotiation starts. If you have not yet accepted departure terms or submitted a resignation, contact us before doing so.

If you have already signed an agreement or submitted a resignation

If you have already signed a separation agreement or submitted a resignation, we can still advise you and, depending on what we find, we may also act for you in renegotiating the terms.

We review the document, how and when it was signed or submitted, and the communications with the company before and after, including the company's response. Unless laws and regulations provide otherwise, a contract can be formed without a written document (Civil Code, Art. 522), so an agreement may have been reached through emails or conversations even where nothing was signed.

We first distinguish a unilateral notice of resignation from a proposal, or an agreement, to end employment by mutual consent; not every resignation requires the employer's acceptance. Whether what you submitted can still be withdrawn, and whether there are grounds to challenge the legal effect of what you signed or submitted, are separate questions. The answers depend on that distinction, on when the relevant communications reached the other party, on whether and when any required acceptance took effect, and on the circumstances in which the notice or agreement was made. Timing can affect your options, so contact us promptly for an assessment.

2. Preparing for negotiations: documents, issues and priorities

What we review first

Whether or not an offer has been made, we review the available employment contract, applicable work rules and recent pay records alongside the company's explanation. The documents to have ready for an initial consultation are listed under What to have ready.

Where the company has made an offer, we also review the offer letter or draft separation agreement, what amounts are included and how the company calculated them, the proposed end date, the reason the company has given, the reply deadline and any conditions attached to the offer — for example, a statement that the offer lapses on a certain date or may be withdrawn. We check what the deadline is based on and what the document says will happen when it passes. Where there is no offer yet, we review what the company has said or written about ending your employment.

Assessing the issues

The situations listed in section 1 raise different legal questions. For example, we consider the rules on dismissal (Labour Contract Act, Art. 16) and, where the statutory conditions are met, on non-renewal of a fixed-term contract (Art. 19). An employer that sets a mandatory retirement age below 65 must adopt one of the statutory measures for securing employment up to age 65 (Act on Stabilization of Employment of Elderly Persons, Art. 9(1)). We identify which rules apply to your situation and which facts and documents matter under them.

We then assess the available evidence and each side's arguments in light of the legal issues that could arise in labor tribunal proceedings or litigation, and use that assessment to develop the negotiating approach — even where you do not intend to start proceedings. Mr. Hara and Mr. Idenawa, who heard employment cases as judges, take part in this assessment in the matters they handle, and join the review of other matters where needed.

Your priorities and the negotiating approach

The terms that matter differ from person to person: the amount, the end date, the stated reason for leaving, the treatment of bonuses, unused paid leave and equity compensation, employment references, or how quickly the matter is settled. In a meeting with you, we discuss what you want to achieve, the order of priority and which terms you are willing to compromise on. We then confirm the agreed approach with you in writing (for example, by email) before negotiations begin. For how to assess the terms of an offer, see How to assess a severance offer.

If relevant: equity compensation, headquarters approval, secondment

Some matters need additional checks before the approach is set. If you hold RSUs, stock options or similar awards, we ask for the plan documents and award agreements, which are often separate from your employment contract. If the company says that any change needs approval from an overseas headquarters, we ask who decides and how long approval is expected to take, and take that into account in the timetable. If you were seconded to Japan, or from Japan, we check which employment relationships and contracts are involved, and what the proposed departure would end.

3. During negotiations: who does what

The lawyers in charge

Each matter is handled by more than one lawyer. Before you instruct us, we tell you which lawyers are expected to handle your matter. The lawyers who handle these matters are introduced under Our lawyers.

Contact with the employer

Once the approach has been agreed with you, the lawyers handling your matter normally notify the other side in writing and by email that we act for you. From then on, we conduct the negotiations with the company on your behalf.

Reporting to you, and what you decide

We report to you each time there is an exchange with the company, and we send you the letters, emails and drafts received from the company unaltered. Before we send any proposal or reply to the company, we confirm its content with you. We carry out the negotiations; you decide what to propose, what to accept and whether to agree to the final terms.

While you are still employed

If you are still working for the company during the negotiations, day-to-day communication about your work normally remains between you and the company. We ask the company to direct communications about the terms of your departure through us. If the company contacts you directly about those terms or asks you to attend a meeting about them, let us know.

Negotiations alone do not excuse an absence. Whether you need to attend work depends on your employment terms, any instruction from the company to stay away from work and the rules on leave; an absence without a valid basis may be relied on by the employer as a ground for disciplinary action or dismissal. We advise you individually on questions such as attendance and taking paid leave during this period.

4. Reaching agreement: signature, payment and next steps

Checking the final draft and signing

When the terms are settled, the final draft of the separation agreement is prepared. We compare the draft with the agreed terms, explain any differences to you and raise any necessary corrections with the other side. You sign only after you have confirmed the final version. If the company sends a document to you directly for signature, send it to us before signing. For the clauses commonly found in a separation agreement and what to check in each, see What to check in a severance agreement.

Payment and other agreed steps

We check that the agreement states the amount, the payment date and method, and the other steps that each side has agreed to take. After signing, we check whether payment has been made as agreed. If payment is not made as agreed, following up with the company is part of the same engagement.

5. If no agreement is reached

Reviewing what remains and choosing the next step

If the negotiations do not produce an agreement, we review with you what the company has and has not accepted, which issues remain, and what you now want. The options are usually to continue negotiating, to end the negotiations, or to consider proceedings. The choice is yours; we explain what each option would involve.

Considering labor tribunal proceedings or litigation

Labor tribunal proceedings are a court procedure for civil disputes between an individual employee and an employer arising from the employment relationship. A panel of one judge and two members with expertise in labor relations examines the dispute and attempts conciliation where settlement appears possible. If the dispute is not settled, the panel issues a labor tribunal decision, unless it ends the labor tribunal proceedings without one because it considers that procedure unsuitable for resolving the dispute promptly and appropriately. In principle, the examination is completed within three hearing sessions (Labour Tribunal Act, Arts. 1, 7, 8, 15(2), 20 and 24(1)). Ordinary litigation is another route. Court proceedings are conducted in Japanese (Court Act, Art. 74).

Moving to proceedings is a separate engagement. If you wish to pursue proceedings, we discuss whether we can act and, if so, agree the scope of that engagement with you.

6. Frequently asked questions

When and how will you contact my employer or its lawyer?

After the negotiating approach has been agreed with you, the lawyers handling your matter normally send the other side a notice, in writing and by email, that we act for you. We do not contact the company before you have instructed us.

What if the deadline to reply to my employer is only a few days away?

You can still consult us. At the initial consultation, we tell you whether we can act and what can be done before the deadline. Depending on the case, we may ask the company for more time to respond to its proposal. Do not assume that the deadline has changed merely because an extension has been requested. Enter the deadline in the inquiry form so that we can take it into account from the start.

Could the company withdraw or change its offer if I negotiate?

It depends on the offer and on how you respond. Under the Civil Code, an offer that sets a period for acceptance cannot be withdrawn unless the offeror reserved the right to withdraw, and it lapses if the offeror does not receive notice of acceptance within that period (Art. 523); a reply that accepts subject to conditions or other changes is treated as a rejection of the offer together with a new offer (Art. 528). Whether these rules apply, and with what effect, depends on whether the proposal is an offer capable of acceptance, how it was communicated, any deadline or reserved right to withdraw, and the wording and context of your response. Asking whether different terms are possible is not necessarily a rejection or a conditional acceptance, but how the request is worded matters. Before negotiating, we check what is on offer, until when and on what conditions. Depending on the offer and the circumstances, we also explain to you how asking for different terms could affect it.

How long do negotiations take?

There is no standard period. The time depends on the number of issues, how far apart the two sides are, whether changes need approval from an overseas headquarters, any deadline or end date already set, and how quickly each side responds.

I have already signed a separation agreement or submitted a resignation. What do you check?

We check the points described in section 1: the document itself, and how and when it came to be signed or submitted. We assess separately whether a notice or proposal can still be withdrawn and whether there are grounds to challenge the legal effect of a notice or agreement. The available options depend on its legal nature, the circumstances and the timing of the relevant communications. We can advise you in this situation and, depending on what we find, may also act for you in renegotiating the terms.

Terminology used in this article

• severance package — the payments and other terms proposed or agreed in connection with the end of your employment
• separation agreement — a written agreement between you and the employer recording agreed terms relating to the end of your employment
• reinstatement — being restored to employment with the same employer after a dismissal or other disputed termination
• mandatory retirement age (teinen) — the age at which an employee is due to retire under the employer's rules
• equity compensation — RSUs, stock options and similar awards, often granted under a plan of the parent company
• secondment — an assignment to work for another organization; the employment arrangements need to be checked in each case

Related articles

• Arranging an initial consultation, and who handles these matters: Employment lawyers in Tokyo for English-speaking employees
• Assessing an offer and the clauses of a separation agreement: Severance pay in Japan

Instructing us to negotiate
We represent employees of foreign-capital (gaishikei), multinational and Japanese companies in negotiations over severance packages and the other terms of departure. Tell us what has happened, what the company has proposed and any deadline.

Free initial 30-minute consultation in English and fees

References

• Labour Contract Act, Arts. 16 and 19
• Civil Code, Arts. 522, 523 and 528
• Act on Stabilization of Employment of Elderly Persons, Art. 9(1)
• Labour Tribunal Act, Arts. 1, 7, 8, 15(2), 20 and 24(1); Court Act, Art. 74

This article is general information, not legal advice on your situation. It describes how we generally handle these matters; the scope of our work in your matter is the scope agreed with you in writing. Laws and procedures are as at the time of writing and may change. We do not handle applications, changes or notifications concerning status of residence; if you wish, we can refer you to a specialist who handles immigration matters.

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This article is provided for general informational purposes only and does not constitute legal advice on any specific matter. Please consult us regarding your specific situation. The content is based on the laws and regulations in effect as of the date of the last update.