Corporate law

Considerations when rehiring an employee after their mandatory retirement age
- A reconsideration following the Supreme Court’s decision in the Nagasawa Unyu case

By Hirotaka Nakura


Since my August 2015 column “Considerations when rehiring an employee after mandatory retirement age“, there has been a lot of movement in the debate regarding the equal treatment of indefinite-term and fixed-term contract employees. As well as an accumulation of court judgments concerning Article 20 of the Labour Contracts Act, the government published a draft guideline on equal pay for equal work in December 2016 and has introduced the “Work Style Reform Bill” to the national Diet.

Meanwhile, on 1st June 2018, the Supreme Court delivered its judgment in the Nagasawa Unyu case, which was a dispute regarding the difference in the amount of pay received by indefinite-term contract employees and those employees who were re-hired on fixed term contracts after having reached the company’s mandatory retirement age. In its decision, the court ruled on certain aspects of the labour conditions of employees who are re-hired after reaching mandatory retirement age.

Article 20 of the Labour Contracts Act

As the Nagasawa Unyu case centred around whether differences in pay between re-hired contract employees and indefinite-term contract employees violated Article 20 of the Labour Standards Act, I would first like to look at the details of that article.

Article 20 of the Labour Contracts Act (Underlining and numbering added by author)
If the labour conditions of an employee who has signed a fixed-term labour contract differ from the labour conditions of another employee who has signed an indefinite-term labour contract with the same employer, and those differences arise due to the existence of the fixed term, then such differences shall not be unreasonable, in consideration of:(1) the content of the employees’ duties and the extent of the responsibility accompanying such duties,

(2) the scope of allowable change to the content of duties and work location, and

(3) other circumstances.

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