Employee Rights When an Undertaking is Transferred in Japan

1. Employees’ Rights

There are two situations the law addresses for maintaining employment in a merger/ acquisition situation. One is transfer of employees in a “company split” under the Companies Act and another is “transfer of employees” under the Civil Code for individual cases of transfer, or as part of a larger business transfer when transfer of employee(s) is part of the deal.

The Companies Act establishes that in a company split employees who predominantly work in the business which is the target of the split have a right to be included in the transfer and can object to be included if the employer had not included him/ her in the list. Employees who do not predominantly work in the business that is the target of the split can object and stay at the current employer if they are included by their employer in the list of employees to be transferred.

In a business transfer, all of the relevant parties (transferor and transferee of the business, relevant employee) need to agree to transfer the employee if it requires the employee to transfer to a different entity.

There is no direct change to the employment relationship in cases of merger or share transfer.

2. Requirements for Predecessor and Successor Parties

In a company split, merger, and share transfer, the takeover party is obligated to respect all of the rights and obligations of the employer that the party, which had been taken over, had with the employees.

In a business transfer, the requirements will depend on the agreement – the takeover party may agree to reestablish the employment relationship with each employee anew, or agree to succeed certain rights/ obligations of the former employer and be bound to the rights/ obligations per such an agreement.

For more information, please contact L&E Global.
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