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Japan Declares State of Emergency – What Does It Mean for Employers?

April 14, 2020

Shortly after the announcement that the 2020 Summer Olympics would be delayed until Summer 2021, the Japanese government on April 7 announced a state of emergency for Tokyo and six prefectures (Kanagawa, Saitama, Chiba, Osaka, Hyogo, and Fukuoka) in light of the coronavirus (COVID-19) pandemic. This LawFlash answers key questions about employers’ obligations to their employees during the state of emergency and provides an overview of the government subsidies currently available.

Based on the state of emergency, the local governments of Tokyo, Kanagawa, and Saitama announced that they will issue a request to close certain types of facilities (e.g., bars and other entertainment facilities, schools, athletic facilities, theaters, convention or exhibition facilities, hotels, department stores, and shopping malls).[1]

NO CURRENT LOCKDOWN OR STAY-AT-HOME ORDERS

The national and local governments have stopped short of issuing any lockdown or stay-at-home orders. Public transportation continues to operate, but the public is encouraged not to gather in crowds and to refrain from non-essential travel. Rather, the Basic Policies for Novel Coronavirus Disease Control (Basic Policies), which were updated on April 7, call for people in Japan to exercise restraint and remain at home to assist in the prevention and control of the pandemic.

Most public events are voluntarily canceled, the number of companies implementing work-from-home programs is increasing, and many stores and restaurants are voluntarily closed or closing earlier than usual.

Further, because schools remain closed, employees with school-aged children are likely to want or need to work from home.

Over the weekend of April 11 and 12, the government reiterated that businesses that operate in an office environment should be employing telework measures. To the extent that businesses require people present in the office, the number of people should be reduced by 70%.

KEY QUESTIONS FOR EMPLOYERS

Should companies close their offices in Japan?

Notably, the Basic Policies do not require employers to close, and the encouragement that people not go outside does not extend to going to work. As noted above, however, the government has strongly urged employers to move to teleworking whenever feasible and to the extent an office presence is necessary, to reduce the numbers in the office by at least 70%.

Employees who continue to report to the office are encouraged to avoid public transportation during their commute in favor of other methods of transportation (e.g., bicycle). Employers are also encouraged to stagger employees’ working hours to reduce public congestion during commute times.

What is the employer’s duty to an employee who has contracted COVID-19?

The Japanese government has deemed COVID-19 to be a “designated infectious disease” (shitei kansen shou) under the Act on the Prevention of Infectious Diseases and Medical Care for Patients of Infectious Diseases (Infectious Diseases Act).

Because the Infectious Diseases Act applies, an employer may not prohibit an employee who has contracted COVID-19 from working pursuant to the Industrial Safety and Health Act. However, as an employer has a duty to ensure that its workplace is safe for its employees, an employer may ask an infected employee not to report to the office for a reasonable period (e.g., at least 14 days) from the onset of symptoms or from testing positive for COVID-19.

Moreover, companies should be aware of the local government announcements and restrictions, as the local government can restrict COVID-19-infected individuals from working pursuant to the Infectious Diseases Act. The Ministry of Health, Labour and Welfare (MHLW) has issued a Q&A (Japanese language only) for employers’ reference on the COVID-19-related workplace requirements.

What are the employer’s salary payment obligations if the workplace is closed?

It is important to note that COVID-19 alone does not equate to force majeure and allow companies to stop paying employees if they close their offices.

Rather, the basis for the closure or the employees’ failure to report to the workplace or failure to perform work will determine the employer’s salary payment obligations, as illustrated below.

1. If an employee is working from home or taking paid leave:

If employees have been asked to work from home, employers have an obligation to pay all of the employees’ salary. The regular rules on keeping track of hours worked and paying overtime payments continue to apply, so employers should come up with reasonable measures to track the hours worked.

Also, employees may choose to take their paid leave and not attend at the office. Such employees would also be entitled to receive all of their normal salary during this period of leave. Please note that employers are unable to order employees to take their paid leave at the employers’ discretion.

2. If the employer decides to close the office or ask employees not to attend work, and there is no government mandate:

 If the employer closes the office voluntarily and/or directs some or all of the employees not to report to or perform any work, the employer is required to pay a special “absence allowance” (kyugyo teate) that is at least 60% of the employees’ normal wages. The actual calculation should be made based on a formula set out under the Labor Standards Act.

3. If an employee is prevented from working due to a government mandate or an employee is unable to perform work:

Absent non-statutory contractual agreements that employers may have in place to provide paid sick leave, the employer is not required to pay the absence allowance or any other salary payment, if the employee is subject to a government order restricting the employee’s ability to work, such as in the case when the government restricts an asymptomatic employee infected with COVID-19 from working.

Likewise, if an employee is medically unable to perform work because of illness (including COVID-19), the employer is not responsible for any salary. In both these situations, the employee may be entitled to an injury/illness allowance, which is approximately two-thirds of the employee’s salary, subject to a cap from health insurance, if the employee is enrolled in the health insurance plan and satisfies the applicable requirements under the plan.

What are the employer’s salary payment obligations if the workplace is not closed but the employee is suspected of having COVID-19?

Until an employee is diagnosed with COVID-19 by a medical doctor and is subject to a governmental order restricting him or her from work, the employer is required to pay the employee the special absence allowance if the employer restricts the employee from performing work for the company while the employee is able to work.

In the case of an employee who is sick and exhibiting symptoms of an illness and could not provide services, as set out in No. 3 above, the employer is not obligated to pay any salary. Japanese law does not provide for sick leave for employees. Therefore, it is up to the terms and conditions of the employee’s employment contract with the employer and/or the employer’s internal policy and work rules regarding whether the employee can get paid as usual during the quarantine period.

What if an employee who exhibits symptoms refuses to stay at home when directed by the employer?

If an employee refuses to stay home when sick or refuses the employer's self-quarantine requirement, the employer would still need to pay the absence allowance, unless the employee is subject to a government order prohibiting work.

What are the employer’s salary payment obligations with respect to other COVID-19-related absences?

These four scenarios outline the rules in this area:

1. Employee has to care for a close family member due to the closure of a school or care facility:

There are no special provisions for employees who are caregivers. If the employee cannot work from home or perform services in another alternative manner for the company, the employer is not required to pay the absence allowance. However, the employee may take paid leave in accordance with the employer's work rules.

2. Employee has to care for a close family member who is subject to a government-required quarantine and has or likely has COVID-19:

There are no special provisions for employees who are caregivers. If the employee cannot work from home or perform services in another alternative manner for the company, the employer is not required to pay the absence allowance. However, the employee may take paid leave in accordance with the employer's work rules.

3. Employee cannot work because of measures taken by the government or outside the employer’s control, including the shutdown of public transportation or closure of the building in which the workplace is located:

If the employee cannot work from home or perform services in another alternative manner for the company, and the employer asks the employee not to attend work, the employer is required to pay the absence allowance. However, if it is deemed that the employee’s inability to work is caused by a force majeure event, the employer would not need to pay any compensation for the suspension of work. Various factors should be taken into consideration to determine whether the situation is viewed as a force majeure event or not. It should be noted that there are no plans to shut down the public transportation system at this point.

4. Employee is in a foreign country/city and unable to return to the home/work country due to travel restrictions or other measures and cannot return to the normal place of work:

If the employee is in a foreign country/city for business reasons, it may be deemed that the business trip has been extended, and the employer would need to pay normal salary for the extended period.

If the employee is in a foreign country/city for personal reasons, the employer would not need to pay wages or compensation for the employee’s absence under these circumstances.

What are the employer’s obligations if an employee has not visited a high-risk area, is not sick or suspected of having COVID-19, or was subject to a 14-day quarantine period that has passed, and the employee refuses to report to the workplace?

Unless the employee takes paid leave in accordance with the employer’s work rules, the employer is not required to pay wages or compensation for the absence.

Can an employer direct employees to take paid leave instead of relying on an absence allowance?

Employees may opt to take their paid leave in compliance with the employer’s work rules or the employment agreement, but employers in Japan may not direct their employees to take paid leave in lieu of receiving an absence allowance. That said, employees may opt to take their paid leave if presented with the choice of the two options.

If business slows down considerably, can an employer direct employees to work reduced hours for reduced pay? Is unpaid leave an option?

In case of a slowdown in the employer’s business, and subject to the employer’s work rules and/or the individual employment contracts, the employer could reach an agreement with each employee individually to reduce his/her salary based on reduced hours or for a period of unpaid leave, but the agreement should be truly voluntary.

Given the economic impact of COVID-19, has the government relaxed the restrictions for conducting layoffs?

No, the government has not relaxed the restrictions for initiating redundancies.

JAPANESE GOVERNMENT SUBSIDY PROGRAM

Subsidy for Employment Adjustment. According to recent government announcements, companies that implement a stand-down due to COVID-19 may apply for a subsidy in an amount equal to a certain percentage of the absence allowance payable by the company.

The detailed requirements, which have been repeatedly amended in the past few weeks, should be re-confirmed with the employer’s local governmental office (the labor bureau or employment security office (Hello Work)).

We understand that the major requirements and limitations for the subsidy (which have been implemented) are as follows:

  • The revenue (or the other appropriate performance indicator) drops by more than 5% for the preceding month compared to the same period last year due to COVID-19.
  • The total number of stand-down days for the relevant employees is 1/30 (in case of a large company) or 1/40 (in case of a small or mid-sized company) or more of the total prescribed working days of all the employees at the same office.
  • The stand-down occurs (1) for an entire day or a half day or (2) for one hour or longer for all the employees of the relevant office (e.g., the stand-down must occur at the same time for all employees in the same section in the same workplace, or for all employees engaging in the same type of work in the case of No. 2 above).
  • The amount of the subsidy is two-thirds in the case of a large company or four-fifths in the case of a small or mid-sized company; or, if no termination or similar events are implemented, three-fourths for a large company and nine-tenths for a small or mid-sized company, of the allowance for absence, and capped at 8,330 Japanese yen per day per employee and for the period of April-June 2020 plus 100 days for a year (and 150 days for three years).
  • The plan for the stand-down must be (1) agreed upon in writing with the employee representative who should be elected from among at least a majority of all of the employees (or the union, if any) at the relevant workplace in advance; and (2) filed with the government (before or after the stand-down). We recommend consulting with the local governmental office in advance regarding any proposed plan, as the requirements are subject to revision.

Notably, the timing for the payment of the subsidy to employers is unclear, while the MHLW announced that the government will try to pay the subsidy within one month from the application.

Subsidy in Response to School Closures. If the employer allows fully paid leave (other than statutory paid leave) to an employee who needs to care for his or her child (1) whose school (basically, kindergarten, elementary school or similar facilities) is closed or (2) who is (or is suspected to be) infected by COVID-19, then the employer may receive a governmental subsidy for such paid wages (up to 8,330 yen per day per employee) until June 30, 2020 (kyuka shutoku shien).

The situation is fluid and rapidly changing, and this LawFlash provides insight based on the relevant government announcements issued through the afternoon of April 12, 2020.

Coronavirus COVID-19 Task Force

For our clients, we have formed a multidisciplinary Coronavirus COVID-19 Task Force to help guide you through the broad scope of legal issues brought on by this public health challenge. We also have launched a resource page to help keep you on top of developments as they unfold. If you would like to receive a daily digest of all new updates to the page, please subscribe now to receive our COVID-19 alerts.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Tokyo
Carol Tsuchida
Mitsuyoshi Saito

Beijing/Shanghai
K. Lesli Ligorner


[1] Under the relevant statute, the government may not impose any penalty against noncompliance with such requests, other than the publication of any person who fails to comply.