Introduction

On March 30, 2023, the "Ministerial Ordinance Partially Amending the Ordinance for Enforcement of the Labor Standards Act and the Act on Special Measures for Improvement of Working Hours Arrangements" (Ordinance of the Ministry of Health, Labor and Welfare No. 39 of 2023; "Amended Ministerial Ordinance") and "Notice Partially Amending the Guidelines to Ensure Appropriate Working Conditions for Workers Engaged in the Work Specified in Article 38- 4, Paragraph 1, Item 1 of the Labor Standards Act Pursuant to the Same Article and Paragraph and the Work Designated by the Minister of Health, Labor and Welfare Pursuant to Article 24-2- 2, Paragraph 2, Item 6 of the Ordinance for Enforcement of the Labor Standards Act" (Notice of the Ministry of Health, Labor and Welfare No. 115 of 2023; "Amended Notice", and collectively with the Amended Ministerial Ordinance, "Amendment") were announced. By this Amendment, the changes to the rules for the discretionary working hour system included in the Ordinance for Enforcement of the Labor Standards Act (Ordinance of the Ministry of Health and Welfare No. 23 of 1947; the amended ordinance shall be hereinafter referred to as "Amended Labor Standards Ordinance"), "Work Designated by the Minister of Health, Labor and Welfare Pursuant to Article 24-2-2, Paragraph 2, Item 6 of the Ordinance for Enforcement of the Labor Standards Act" (Notice of the Ministry of Labor No. 7 of 1997; "Notice of Covered Work") and "Guidelines to Ensure Appropriate Working Conditions for Workers Engaged in the Work Specified in Article 38-4, Paragraph 1, Item 1 of the Labor Standards Act Pursuant to the Same Article and Paragraph" (Notice of the Ministry of Labor No. 149 of 1999; the amended guidelines shall be hereinafter referred to as "Amended Guidelines") will come into effect as of April 1, 2024. This Amendment requires new procedures to be taken for introducing and continuing the discretionary working hour system. In addition, in relation to this Amendment, the "Enforcement of the Ministerial Ordinance Partially Amending the Ordinance for Enforcement of the Labor Standards Act and the Act on Special Measures for Improvement of Working Hours Arrangements (Discretionary Working Hour System, etc.)" providing for the interpretation guidelines for the amended laws (Announcement of the Director-General of the Labor Standards Bureau of the Ministry of Health, Labor and Welfare 0802 No. 7 of August 2, 2023; "Enforcement Announcement") and "Q&A on the Discretionary Working Hour System concerning the 2023 Revisions of the Ordinance for Enforcement of the Labor Standards Act" by the Labor Standards Bureau of the Ministry of Health, Labor and Welfare ("Q&A") were published 1 2 . The following is the commentary on the Amendment taking these documents into account.

I. Basic Matters concerning the Discretionary Working Hour System

Before explaining the Amendment, we will provide an overview of some basic matters concerning the discretionary working hour system.

1. Types and Covered Work of the Discretionary Working Hour System

The discretionary working hour system is one of the systems that offer flexible working arrangements under the Labor Standards Act ("LSA"). It is a system in which working hours are calculated based on the hours determined by a labor-management agreement or by a resolution of a labor-management committee, rather than actual working hours, when the nature of work requires that the method of its performance be left largely to the discretion of the employees. There are two types of discretionary working hour systems: the discretionary working hour system for professional work and discretionary working hour system for planning work.

The discretionary working hour system for professional work is a system that is applicable to forms of work set out under laws such as those forms that, owing to the nature of the work, the means and methods in which it is carried out, and the allocation of time needed for the work, are to be left largely to the discretion of the employees who are engaged in such work (Article 38-3 of the LSA, Article 24-2-2, Paragraph 2 of the Amended Labor Standards Ordinance, and the Notice of Covered Work).

On the other hand, the discretionary working hour system for planning work is a system that is applicable to work in the planning, drafting, researching, and analyzing of matters relating to business operations for which the nature of the work is such that, in order for it to be carried out properly, the methods in which it is carried out needs to be left largely to the discretion of the employees (Article 38-4 of the LSA). Unlike the discretionary working hour system for professional work, the scope of this second type of system is not clearly defined, but procedures and requirements are stricter than those applied to the discretionary working hour system for professional work in order to prevent an unlimited expansion of eligible persons.

2. Introduction Procedures

The procedures for introducing the discretionary working hour system vary for each type3.

(1) Discretionary Working Hour System for Professional Work

In order to apply the discretionary working hour system for professional work to employees, the employer is required to stipulate certain matters in a labor-management agreement with a labor union organized by a majority of employees in the workplace or, if no such labor union exists, with a person representing a majority of such employees and to submit the same to the competent labor standards inspection office (Article 38-3, Paragraphs 1 and 2, and Article 38-2, Paragraph 3 of the LSA). As stated below, the Amendment provides for additional matters to be stipulated in a labor-management agreement (please see II 1. (2)).

(2) Discretionary Working Hour System for Planning Work

On the other hand, in order to apply the discretionary working hour system for planning work to employees, the employer is required to establish a labor-management committee consisting of representatives of the employer and those of employees at the workplace, and certain matters must be decided by a resolution passed by a four-fifths majority or more of the labor-management committee members (Article 38-4, Paragraph 1 of the LSA). The employer is also required to submit the said resolution to the competent labor standards inspection office (the same Paragraph).

3. Effects

For both types of the professional work and planning work, if an employee engages in the covered work in compliance with the requirements established by law, the employee is deemed to have worked the number of hours determined by a labor-management agreement or by a resolution of a labor-management committee, regardless of actual working hours (Article 38-3, Paragraph 1, and Article 38-4, Paragraph 1 of the LSA). However, since the application of the regulations on breaks (Article 34 of the LSA), days off (Article 35 of the LSA), overtime work, work on holidays, and late-night work (which means work between 10 p.m. and 5 a.m.; Articles 36 and 37 of the LSA) is not exempted, if the deemed working hours exceed the statutory working hours (eight (8) hours per day or 40 hours per week (Article 32 of the LSA)), the employer is required to conclude an "agreement on overtime work and work on holidays" (which is commonly called a "36 Agreement"). In addition, in the case of overtime work, holiday work, and late-night work, premium wages must be paid for the hours of such work (Article 37, Paragraphs 1 and 4 of the LSA).

It should be noted that neither a labor-management agreement nor a resolution of the labormanagement committee as mentioned above may contain an automatic renewal clause. It is recommended that the effective term of a labor-management agreement or a labor-management committee's resolution should not exceed three (3) years (Q&A 8-3).

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Footnotes

1. https://www.mhlw.go.jp/content/001164350.pdf (Only available in Japanese)

2. A supplementary version of the Q&A was published in November 2023. This newsletter provides explanations based on the supplementary version.

3. The forms of notification of agreement and of notification of resolution referred to in this section are available on the website of the Ministry of Health, Labor and Welfare (https://www.mhlw.go.jp/stf/seisakunitsuite/bunya/koyou_roudou/roudoukijun/roudouzikan/sairyo.html) (Only available in Japanese).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.