Can an employer dismiss an employee during or at the end of a probationary period in Japan?

Question

阿部国際法律事務所 · Accepted Answer

Refusing confirmation during probation is a dismissal and needs objectively reasonable grounds. After 14 days of work, 30 days' notice or pay in lieu is also required.

An employer in Japan cannot freely dismiss an employee, or refuse to confirm them in the job, just because they are still on probation. A probationary period is usually treated as an employment contract with a reserved right of termination, and that right can be exercised only where there are objectively reasonable grounds and the dismissal is socially acceptable (Supreme Court Grand Bench, 12 December 1973, Mitsubishi Jushi case). Even so, the courts accept a somewhat wider range of grounds than for an ordinary dismissal after confirmation. If the employee has worked for more than 14 days, the employer must also give 30 days' notice or pay at least 30 days' average wages in lieu of notice (Labour Standards Act, Arts. 20 and 21).

When this becomes an issue

- An employee two months into the job keeps arriving late and ignoring instructions, and the team says they cannot be confirmed.
- A mid-career hire recruited as a future manager turns out to have far less experience than they claimed at interview.
- The probationary period is about to end, the evaluation is still unclear, and you want to extend it.
- A former employee who was not confirmed has sent a letter saying the dismissal is invalid.

1. What a probationary period means in law

A probationary period is time after hiring to assess whether the employee is suitable. The Supreme Court has held that where the contract allows the employer to terminate if the employee is found unsuitable during probation, it is an employment contract with a reserved right of termination (Supreme Court Grand Bench, 12 December 1973, Mitsubishi Jushi case).

The employment contract therefore already exists during probation. Refusing to confirm the employee is not a refusal to hire. It is termination of an existing contract, in other words a dismissal.

The judgment held that the reserved right may be exercised only where, in light of the purpose of reserving it, there are objectively reasonable grounds and the termination is socially acceptable. It also said that this cannot be treated in exactly the same way as an ordinary dismissal, and that a wider freedom to dismiss should be recognised.

2. Grounds more likely to be accepted

According to the Mitsubishi Jushi judgment, the right may be exercised where the employer learns, through checks after the hiring decision or from the employee's conduct during probation, of facts it could not have known or been expected to know at the outset, and it is objectively reasonable to decide that continuing the employment is not appropriate.

Grounds that typically come up in practice include:

- Conduct: repeated unexplained absences or lateness that do not improve after warnings.
- Ability: performance well below what the job requires, with little prospect of improvement despite guidance.
- Background: the employee falsified important career details that affected the hiring decision.

On any of these grounds, a single mistake or performance slightly below expectations is unlikely to be enough. Records showing the guidance and warnings given, and the opportunities to improve, carry a lot of weight.

3. Procedures that still apply during probation

The procedural rules of the Labour Standards Act apply to dismissals during probation.

- Notice: the notice rule (Art. 20) does not apply to an employee on trial, but it does apply once they have been employed continuously for more than 14 days (Art. 21, item 4). From day 15 onwards, the employer must give 30 days' notice or pay at least 30 days' average wages (Art. 20(1)). The notice period can be shortened by one day for each day of average wages paid (Art. 20(2)).
- Statement of reasons: if the employee asks, the employer must promptly issue a certificate stating the reason for dismissal (Art. 22(1) and (2)).
- Restrictions on dismissal: in principle, an employer may not dismiss an employee while they are on leave for treatment of a work-related injury or illness, or on maternity leave before and after childbirth, or for 30 days afterwards (Art. 19(1)).
- Pregnancy and childbirth: dismissal or other unfavourable treatment of a female employee because of pregnancy, childbirth and related matters is prohibited (Equal Employment Opportunity Act, Art. 9(3)). A dismissal during pregnancy or within one year after childbirth is void unless the employer proves it was not for those reasons (Art. 9(4)).

An employer that regularly employs 10 or more workers must set out matters relating to termination of employment, including grounds for dismissal, in its work rules and file them with the Labour Standards Inspection Office (Labour Standards Act, Art. 89, item 3). The length of probation and the grounds for not confirming an employee should also be stated clearly in the work rules.

4. Length and extension of probation

No statutory provision sets the length of a probationary period. However, a period longer than needed to assess suitability leaves the employee's status uncertain and may be challenged as contrary to public policy (Civil Code, Art. 90).

Extending probation presupposes a basis for extension in the work rules or the employment contract, and a reasonable reason and length. Extensions without a basis, or repeated extensions, are a common source of disputes. If you extend, give the reason and the new end date in writing.

5. Hiring on a fixed-term contract instead

Some companies hire on, say, a one-year fixed-term contract for trial purposes and let it expire. The Supreme Court has held, however, that where a period is set to evaluate the worker's suitability, it should be treated as a probationary period rather than the term of the contract, unless there are special circumstances such as a clear agreement that the contract ends automatically on expiry (Supreme Court Third Petty Bench, 5 June 1990, Kobe Koryo Gakuen case).

Even if the contract is labelled fixed-term, if it operates as probation, ending it may be assessed as a refusal to confirm, that is a dismissal, rather than simple expiry.

6. Points for employers

- State the length of probation and the criteria for confirmation in writing at the time of hiring.
- Decide the evaluation criteria for the probationary period and keep records of meetings and guidance.
- Raise problems early and specifically, and give the employee a chance to improve.
- Once you decide not to confirm, check whether notice or payment in lieu is required.
- Gather material that explains the reasons, such as guidance records and work output.

7. New graduates versus mid-career hires

For new graduates, the prospect of developing with guidance tends to matter more than their ability on day one. To conclude after a short time that they lack ability, you need to show specifically what guidance was given and that they still did not improve.

Mid-career hires, especially those recruited for particular experience or a particular role, are different. If the experience and ability required at hiring were set out in writing, the gap between those and actual performance becomes relevant. Make the expected role clear in the job posting, interview notes and written terms of employment.

8. How to communicate a decision not to confirm

Following a clear process when you decide not to confirm an employee helps prevent disputes.

First, review the guidance records and evaluations and check that you can explain the reasons with facts. Next, meet the employee, explain the reasons specifically and hear their side. Then check whether notice or payment in lieu is required and hand over a written notice.

You may also seek an agreed resignation by recommending that the employee leave. However, pressing repeatedly and forcefully after the employee has refused may lead to a dispute over whether their resignation was valid.

Steps you can take now

- Check that your work rules state the length of probation, whether it can be extended, and the grounds for not confirming an employee.
- Check that the employment contract or written terms of employment include the probationary period.
- Put the guidance and warnings given to the employee, with dates, in chronological order.
- Count whether more than 14 days have passed since the start date, to decide whether notice is required.
- Check that the employee is not on leave for a work-related injury, on maternity leave, or pregnant.
- Set out, based on facts, the reasons you could write in a certificate of reasons for dismissal if asked.

When to consult a lawyer

- The reasons for not confirming rest only on a judgement of ability or suitability, with few concrete records.
- You are considering extending probation, but your work rules say nothing about extension.
- The employee is pregnant or off work with a work-related injury.
- An employee who was not confirmed has sent a formal letter by content-certified mail or through a lawyer.
- You have received an application for labour tribunal proceedings or a lawsuit.

Frequently asked questions

Q. Can we let someone go during probation without giving reasons?
No. Refusing confirmation during probation is a dismissal and requires objectively reasonable grounds and social acceptability (Supreme Court, 12 December 1973). If the employee asks, you must also issue a certificate stating the reason (Labour Standards Act, Art. 22).

Q. Do we need to pay in lieu of notice to dismiss someone one week into the job?
If they are on trial and have not been employed continuously for more than 14 days, the notice rule does not apply (Labour Standards Act, Art. 21, item 4). Even without notice, the grounds for dismissal must still be reasonable and socially acceptable.

Q. Can we extend probation?
Extension presupposes a basis in the work rules or employment contract, and a reasonable reason and length. If you extend, we recommend telling the employee the reason and the new end date in writing.

Q. If we make probation a fixed-term contract, can we simply let it expire?
The Supreme Court has held that where a period is set to assess suitability, it is treated as a probationary period unless there are special circumstances such as a clear agreement (Supreme Court, 5 June 1990, Kobe Koryo Gakuen case). The label alone does not guarantee that the contract ends on expiry.

Q. Can we recommend that the employee resign before refusing confirmation?
Recommending resignation is possible in itself. However, pressing repeatedly and forcefully after the employee has refused may lead to a dispute over whether the resignation was valid. Keep a record of the number and length of meetings and what was said.

Q.Can an employer dismiss an employee during or at the end of a probationary period in Japan?

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