In Japan, workplace investigations can quickly become a test of legal compliance, employee relations and reputational risk management. Employers are not expected to investigate every workplace issue. However, complaints involving harassment, whistleblowing or suspected misconduct can quickly trigger important legal and practical obligations. The challenge is to establish the facts while protecting privacy, maintaining confidentiality, observing due process and avoiding retaliatory or unfair treatment.
Not every workplace issue will require a formal investigation. However, where an employer becomes aware of suspected misconduct, the legal and practical position can change quickly. The starting point is to consider the nature of the allegation, who is involved, and whether the matter could expose the business to legal, financial or reputational risk.
There is no general statutory duty under Japanese law to investigate every suspected instance of misconduct. That said, company directors owe a duty of loyalty and a duty of care of a good manager to establish, maintain and operate internal control systems appropriate for the company’s size. As part of these duties, they are statutorily obligated to report misconduct. If signs of misconduct are ignored and high-risk business activities are allowed to continue without investigation, that may amount to a breach of those duties. Therefore, where employers, in particular their directors, notice signs of misconduct, they should investigate to ascertain the facts. If an employee is suspected of misconduct, such as embezzlement, information leakage or resume fraud, an investigation to accurately establish the facts is also essential from a due process perspective before disciplinary action is taken.
The position is different for employees. They are not subject to the same statutory reporting duties as directors, but they may still be required to report suspected misconduct where the employer’s Rules of Employment contain specific reporting obligations, or under the implied duty of good faith in their employment contracts. That does not mean every minor issue must be reported. Whether a reporting duty exists depends on the employee’s position and the potential impact of the misconduct. For example, failing to report suspected misconduct directly related to the employee’s own duties, or misconduct that could cause severe damage to the company, may amount to a breach of the duty of good faith.
Timing is important. Japanese law does not prescribe an exact deadline for starting an investigation, but government guidelines on harassment require employers to confirm the facts “promptly and accurately”. In practice, employers should take initial steps and commence the investigation immediately, typically within a few days of becoming aware of the conduct.
Fairness and confidentiality are central. Investigations must be conducted neutrally, with care taken not to infringe the privacy or reputation of those involved. Personal information obtained during an investigation must be handled within the scope of the employer’s pre-notified purposes of use. If the employer needs to collect “personal information requiring special care”, such as medical history or criminal records, explicit consent is generally required. Information obtained during the investigation must be managed securely and never disclosed to unauthorised third parties.
Employees may also have to cooperate. Where the Rules of Employment require participation in investigations, employees may be required to comply. Even without an express provision, courts generally recognise an implied duty to cooperate with investigations in accordance with reasonable employer directives. Where the employee is suspected of misconduct, however, the employer must keep the investigation within reasonable and socially accepted limits. It must not coerce confessions or subject employees to excessive control or restraint.
Due process remains critical. Employers do not have to disclose every piece of evidence gathered during an investigation. However, before imposing disciplinary action, the employer must tell the employee the specific facts forming the grounds for discipline and give the employee a fair opportunity to respond. If disciplinary action is imposed without a sufficient opportunity to be heard, a court may later find the action invalid for lack of due process.
Japan’s Whistleblower Protection Act provides a statutory framework for protected reports. It covers reports of criminal acts or statutory violations subject to administrative fines under approximately 500 designated laws. Purely internal rule violations or ethical breaches are not strictly protected by the Act itself, although many employers proactively include those matters within their internal whistleblowing policies as a best practice.
Employers with 301 or more regular employees must establish internal whistleblowing systems, including reporting channels and investigation frameworks, and must designate specific personnel to handle whistleblowing responses. Employers with 300 or fewer employees are subject to a best-efforts obligation. Anonymous reporting is permitted and should be accommodated. Designated whistleblowing personnel, including former personnel, are legally bound by strict confidentiality and must not disclose information that could identify the whistleblower without justifiable grounds.
The Act also gives whistleblowers strong protection against retaliation. Dismissal on the grounds of whistleblowing, or disadvantageous treatment such as demotion or pay cuts, is strictly prohibited.
From 1 December 2026, employers will face significantly increased risk when taking disciplinary action against, or dismissing, whistleblowers. Under the amended law, individuals and corporations that dismiss or discipline an employee for whistleblowing could face criminal penalties. Any dismissal or disciplinary action taken within one year of the report, or within one year of the employer becoming aware of the report, will be legally presumed to have been taken because of the whistleblowing. The burden of proof will then shift to the employer.
Performance management needs the same level of care. Terminating an employee in Japan simply for underperformance is extremely challenging because of the doctrine of abuse of the right to dismiss, codified in Article 16 of the Labour Contract Act. A dismissal that lacks objectively reasonable grounds or is not considered appropriate in general societal terms is invalid. Employers must therefore follow a rigorous process before considering termination.
That process should be well documented. Best practice involves objectively recording poor performance, ensuring the employee is clearly aware of their shortcomings, and providing guidance, training, coaching and opportunities to improve. Courts expect employers to allow ample time for improvement, which may last several months to over a year depending on the circumstances.
Dismissal should remain a last resort. Even where an employee is demonstrably unsuited to their current role and shows little prospect of improvement, the employer must first explore measures to avoid termination, such as transferring or reassigning the employee to a different department or role that might better suit their capabilities. Only when those measures have been exhausted, and no or little improvement is seen, may the employer move towards termination. Even then, the standard practice is first to propose a mutual separation. Unilateral ordinary dismissal should be used only as an absolute last resort.
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