Illegally long working hours and deaths from overwork are now a social problem in Japan. In response to this, on 20 January 2017, the Ministry of Health, Labour and Welfare (the ‘MHLW’) established ‘Guidelines for Measures to Be Taken by Employers to Properly Monitor Working Hours’ (Labour Standards Bureau Notification 0120 No. 3 dated 20 January 2017; the ‘Guidelines’). The Guidelines were established as part of the ‘Zero Deaths from Overwork’ emergency plan developed on 26 December 2016, by the Task Force for Reduction of Long Working Hours, which was set up by the MHLW. They are based on and replace the ‘Standards for Measures to Be Taken by Employers to Properly Monitor Working Hours’ (Labour Standards Bureau Notification No. 339 dated 6 April 2001; the ‘Old Standards’), which required employers to properly monitor their employees’ working hours. The Guidelines aim to reinforce efforts to correct illegally long working hours. Given the recent trend towards tightening regulations relating to long working hours, companies are now required to monitor and control their employees’ working hours more strictly in line with the Guidelines.

An outline of the Guidelines’ key points with references to changes from the Old Standards is set out below.

1. Interpretation of Working Hours

The Guidelines include a new paragraph entitled ‘Interpretation of Working Hours’. In this paragraph, the term ‘working hours’ is defined as the hours during which employees are directed and managed by their employer, including those hours when employees engage in work following the express or implied instructions of their employer. This definition is consistent with the interpretation adopted in various judicial precedents (such as the Mitsubishi Heavy Industries Nagasaki Shipyard Case; Supreme Court Judgment of 9 March 2000, Minshu Vol. 54, No. 3, p.801).

To further clarify what constitutes working hours, this paragraph provides the following three examples:

• Any time that employees spend in the workplace at the instruction of their employer preparing for their assigned work (such as changing into the clothes which employees are obliged to wear) or engaging in work-related activities after work (such as clean-up);
• Any time when employees are not permitted to leave work and are ‘on call’ and required to engage in work immediately if so instructed by their employer (so-called ‘waiting time’);
• Any time spent participating in mandatory work-related training, education or learning subjects deemed necessary for work by the employer.

In addition to these illustrative examples, the Guidelines state that any other time when employees are objectively considered to be working under the direction and management of their employer must be treated as working hours.

2. Measures to Be Taken by Employers to Properly Monitor Working Hours

Basic methods to confirm and record starting and finishing time

The Old Standards specified two basic methods to confirm and record an employee’s starting and finishing time. They were:

• on-the-spot confirmation by the employer; or
• confirmation based on objective records such as timecards and IC cards.

These two methods are also specified in the Guidelines. However, the Guidelines provided an additional example of the objective records described in the second bullet point above by adding the phrase ‘time records of computer usage’.

Measures to be taken when confirming and recording starting and finishing time through self-reporting

Under the Old Standards, if an employer could not implement either of the methods described above, then that employer could confirm and record its employees’ starting and finishing time based on the employees’ own reporting of their hours (‘self-reporting method’). The Guidelines are consistent with the Old Standards in this respect. However, the Guidelines recognise that discrepancies can easily arise between an employee’s self-reported working hours and his/her actual working hours.

Accordingly, to ensure that employers which have adopted a self-reporting method monitor employees’ working hours properly, the Guidelines require such employers to take the following measures.

• Employers must explain to the employees subject to the self-reporting method the necessity for accurately recording and properly reporting their actual working hours in accordance with the Guidelines and other matters.
• Employers must explain to personnel who are responsible for managing employees’ working hours (‘manager(s)’) the measures to be taken under the Guidelines, including the proper operation of the self-reporting method.
• Employers must, as necessary, conduct a survey on the self-reporting method in order to confirm that self-reported working hours correspond to actual working hours, and correct any discrepancies. In particular, if the employer has data that shows the time spent by employees in the workplace (such as a record of each employee’s entrance and exit or computer usage time), and if that data shows a major discrepancy between the self-reported working hours and the employee’s actual time spent in the workplace, the employer must conduct a survey on the actual working hours and correct the working hours as necessary.
• If employees are required to explain the reasons for any time spent in the workplace beyond their self-reported working hours, employers must confirm that the explanation given is accurate. Even when the employee explains that he or she spent the time in question resting or engaging in voluntary training, education, learning or the like, such time must be treated as working hours if it is found that such time was actually spent performing work as instructed by the employer or otherwise directed or managed by the employer.
• Employers must refrain from taking measures to prevent employees from properly reporting their own actual working hours, such as setting an upper limit on the hours of overtime work that the employees can report and prohibiting them from reporting working hours beyond such an upper limit. Furthermore, even if there is an agreement under Article 36 of the Labour Standards Act (a so-called ‘36 Agreement’), the employer must confirm that the time records have not been customarily prepared to appear as if the employees were not working more than the maximum overtime hours permitted under the 36 Agreement when, in fact, they were.

Although, in common with the Guidelines, the Old Standards required employers to properly monitor working hours if they adopted a self-reporting method, the Guidelines strengthen these measures. The Guidelines do so by, among other things, stipulating that sufficient explanation to be provided to managers (as described above) and requiring that surveys of the actual working hours be conducted and that the working hours be revised to reflect the results of such surveys.

Proper preparation of a salary payment record

The Guidelines also include another new paragraph entitled ‘Proper Preparation of a Salary Payment Record’. In this paragraph, the Guidelines require employers to input certain information in salary payment records pursuant to Article 108 of the Labour Standards Act (‘LSA’) and Article 54 of the Ordinance for Enforcement of the LSA. Such information includes, among other things, each employee’s working days and hours as well as his or her hours of overtime work, late-night work and holiday work, if any.

Additionally, the Guidelines provide that, if the employer fails to input the requisite information in the salary payment record or intentionally inputs false information (such as incorrect working hours), a fine of up to JPY 300,000 will be imposed on the employer pursuant to Article 120 of the LSA.

This paragraph merely explains the laws and regulations that have existed since before the establishment of the Guidelines.

Retention of written records of working hours

As under the Old Standards, the Guidelines require employers to retain written records of working hours for three years pursuant to Article 109 of the LSA. Furthermore, while the Old Standards did not specify the written records to be retained, the Guidelines refer to ‘attendance records’ and ‘timecards’ as examples of the written records to be retained, in addition to the ‘roster of employees’ and ‘salary payment records’ set out in Article 109 of the LSA. Although it is not stated in the Guidelines, a breach of Article 109 of the LSA may subject an employer to a fine of up to JPY 300,000 (Article 120, Item 1 of the LSA).

Utilisation of labour-management consultative mechanisms

In addition to the above, in common with the Old Standards, the Guidelines require employers to comprehend the actual circumstances concerning their management of working hours, examine problems related to this management, and create solutions for any problems through the use of labour-management consultative mechanisms (such as a committee to improve the arrangement of working hours), as necessary.