Japan Business Law: Who will be penalized for violating the Labor Standards Act?

The Labor Standards Act is a law to protect workers. Detailed rules for employment of employees are stipulated – such as working hours and wages, as well as the working environment.

In recent years, due to the progress of work style reform, business owners are strongly required to run the company based on the Labor Standards Law.

When violating the Labor Standards Act, guidance and corrective recommendations will be delivered by the Labor Standards Inspection Office.

So, what exactly happens when the Labor Standards Law is violated?

It is the duty of business owners to comply with the Labor Standards Law

The Labor Standards Law is a law that applies not only to regular employees but to all employees who have an employment relationship, regardless of the type of employment, such as part-time employees, contract employees, and dispatch employees.

For example, non-payment of wages or paying below the minimum wage are prohibited. There are also rules regarding working hours, post-partum childcare leave, and notice of dismissal.

In short, the purpose of this law is to protect workers in all aspects of work, and business owners are obliged to comply.

There are various penalties for violating the Labor Standards Law. However, because the Labor Standards Law itself is so diverse, many people do not know what will happen if they violate the law and how much penalty they will receive.

Investigations by the Labor Standards Inspection Office cannot be refused.

First, if a company violates the Labor Standards Law in any way, the Labor Standards Inspection Office will investigate whether the violation actually occurred.

The Labor Standards Inspection Office is a local organization of the Ministry of Health, Labor and Welfare, which is governed by prefectural labor bureaus, and currently has 321 offices and four branch offices nationwide.

The Labor Standards Inspection Office is an organization that ensures companies to comply with labor-related laws, such as the Labor Standards Law, the Minimum Wage Law, and the Industrial Accident Compensation Insurance Act. They supervise and provide guidance to companies, investigate causes of work-related accidents, and take measures to prevent recurrence.

In principle, there is no prior notice for the investigation, however the date of the investigation may be announced by telephone in case there is a possibility that the subject may be absent, or it is necessary to prepare account books and documents in advance. In some cases, the notice date of the survey is announced. Moreover, there are cases where a written request for appearance is sent and the business owner then goes to the Labor Standards Inspection Office to be investigated.

Investigations by the inspector of Labor Standards Inspection Office cannot be refused.

If there is a refusal to cooperate with the investigation or a false report is made during the investigation, the investigation documents may be sent to the Public Prosecutors Office.

In most cases, the inspector will respond alone, identify his/her self, and request a meeting with the business owner or responsible person.

The business owner must honestly respond accordingly to the inspector’s hearing.

Neglecting to report after guidance may lead to reinvestigation

If the investigation finds any violations of the law or points to be improved, the business owner will receive corrective recommendation and guidance.

In the event of a violation, a corrective recommendation letter stating the details of the violation and the deadline of correction will be issued. A guidance letter will be issued if there is no violation but improvements are needed.

These documents will be provided on the day of investigation at the Labor Standards Inspection Office. If an investigation is conducted at the company, then these documents will either be received by going to the Inspection Office or via post at a later date.

If guidance is issued, it is necessary to improve the matters pointed out and report the status of improvement to the Labor Standards Inspection Office.

Failure to report may result in a reinvestigation.

Likewise, if a corrective recommendation is issued, any violations must be corrected and compiled in a report and then submitted to the Labor Standards Inspection Office.

If the report is not submitted, reinvestigation will be conducted. In malicious cases when correction is not conducted even after receiving repeated recommendations, criminal proceedings may be commenced and the case may be sent to the Public Prosecutors Office.

In this case, there is a risk that not only business owners but also managers such as store managers, department managers, and directors who substantially direct and supervise employees at the company will be punished as “employer”.

In addition, the company itself is subject to penalties and may be fined.

Penalties are different according to the nature of the violation, they are “imprisonment for 1 year to less than 10 years or a fine of 200,000 to 3 million yen”, “imprisonment of 1 year or less or a fine of 500,000 yen or less”, “imprisonment for 6 months or less or fine of 300,000 yen or less” and “fine of 300,000 yen or less”.

In fact, most companies take the recommendation from the Labor Standards Inspection Office and make corrections, so not many companies receive penalties.

According to the Labor Standards Inspection Annual Report released by the Ministry of Health, Labor and Welfare, the number of inspections by the Labor Standards Inspection Office in 2016 (including regular inspections (planned), declaratory inspections (conducted by declarations from workers, etc.), and re-inspections) totaled 169,623.

Some of these cases included unintentionally violated cases.

It is highly recommended that managers check the compliance with the Labor Standard Act through discussing with your team members.

※ The contents of this article are based on laws and information as of December 2019.