Layoffs at a Japan Subsidiary: Where the Exit Process Breaks

When a foreign company cuts jobs in Japan, the process rarely breaks at the first meeting. It breaks at the second one, after the employee has said "I don't intend to resign." What the company does next is what a Japanese court will end up reading.

The request from HQ usually arrives as a spreadsheet: a headcount number per country and a deadline. Turning Japan's number into steps that hold up under Japanese law is mostly a question of order.

Why cuts in Japan usually take the form of an agreement

Most employers in Japan reduce headcount through resignation requests and exit packages, because a dismissal is hard to defend. Article 16 of the Labor Contract Act says a dismissal is void as an abuse of right if it lacks objectively reasonable grounds and is not appropriate in general social terms.

For redundancy dismissals, courts weigh four factors. The Ministry of Health, Labour and Welfare (MHLW) lists them as the business need to reduce staff, real effort to avoid dismissal (transfers, a voluntary program), a fair way of choosing who goes, and proper explanation with good-faith consultation. A global decision from HQ speaks to the first factor. The Japan entity has to build the rest itself.

Starting with staff on probation doesn't help much (rejecting someone after probation counts as dismissal). For the total bill, see what it costs to let someone go in Japan. This post is about the sequence, and the step where it usually fails.

What is a resignation request, legally?

A resignation request (taishoku kansho, 退職勧奨) is the company offering to end the contract by agreement. The employee is free to accept or not. If they decline, the contract simply continues. MHLW's labor Q&A describes it in exactly these terms.

Asking is lawful. It becomes unlawful when the pressure is heavy enough that the employee can no longer decide freely, which Japanese practice calls a forced resignation (taishoku kyoyo).

This is where the HQ script collides with Japan. "Your role has been eliminated and today is your last day" is routine in some countries. In Japan it can make the offer look like it was never really an offer. It also sounds oddly polite once translated into Japanese, so HQ rarely notices.

What happens after "no" decides the case

The leading case is the Shimonoseki Commercial High School decision of the Supreme Court of Japan (July 10, 1980). A teacher said clearly he would not resign. The employer kept calling him into long sessions over a short period, and the court held that unlawful. MHLW's case summary puts it at about 11 sessions in three months, with damages of 50,000 yen. A more recent example is the Hitachi case (Yokohama District Court, March 24, 2020), where requests repeated persistently after a clear refusal were also found unlawful.

On the other side sits the IBM Japan case (Tokyo District Court, December 28, 2011). Meetings continued after employees resisted. The company had also offered a generous exit package with outplacement support. On those facts the court found the process within socially acceptable limits and dismissed the employees' claims.

Courts split on what the employer did after the employee said no

Three Japanese court cases on resignation requests: the employer's conduct after the employee refused, and the result (MHLW case summary and others)

Requests found unlawful

1. 1980Shimonoseki Commercial High School (Supreme Court)About 11 long sessions in three months after a clear refusal. Unlawful, 50,000 yen in damages
2. 2011IBM Japan (Tokyo District Court)Meetings continued after resistance, with a generous exit package and outplacement. Claims dismissed
3. 2020Hitachi (Yokohama District Court)Requests repeated persistently after a clear refusal. Unlawful

Repeating the same pitch loses. If you keep talking, change the offer.

Each ruling turned on its own facts, and no court has set a maximum number of meetings. The lesson for an employer is still fairly clear. A meeting after a refusal is defensible when it brings a new offer or new information. Repeating the same explanation builds a record that works against you.

So decide before the first meeting. How many meetings at most, how long each one runs, who attends, and how notes are kept. When the employee says no, that day's meeting ends. The next one happens only when there is something new to put on the table. Brief every manager who runs these meetings on the Japanese cases, and brief any visiting HQ executive twice.

The line on the papers that employees read first

In the agreement, the employee will look first at the severance amount and at how the reason for leaving is worded. The second one decides their unemployment benefit. As of October 2026, per Hello Work:

Someone who leaves after accepting a resignation request is normally a "specified qualified recipient", the company-initiated category. Applying to a long-standing early retirement program does not count. Payments start after a 7-day wait with no restriction, and the benefit duration can reach 330 days depending on age and years insured. An ordinary leaver gets 150 days at most.

A personal resignation adds a restriction period on top of the wait. MHLW cut it to one month in principle for separations from April 1, 2025. It is three months for someone who has resigned without good reason and qualified for benefits two or more times in the past five years, and reskilling training taken from April 2025 lifts it.

If the exit came from your request and the agreement says "for personal reasons", expect the pen to stop. The employee can also dispute the reason with Hello Work later. I can't think of a case where that line helps the company, so write what actually happened.

I couldn't find a reliable statistic for severance levels; quotes in months of pay vary a lot by tenure, age, role and the company's situation. Since the IBM Japan court weighed the support on offer, design money and outplacement as one package. It reads better in a negotiation, and in a courtroom.

A PIP is a poor substitute for an exit plan

Some companies use a performance improvement plan as the first step toward a resignation request or a dismissal. HR people know this. A completed PIP still doesn't make a dismissal valid. In a ruling of April 24, 2013 on a dismissal for poor performance, the Tokyo High Court asked whether the employer had pushed for improvement, given a real chance to improve, and whether more coaching could still work. It found the dismissal invalid, according to MHLW's labor law training material.

The PIP file is evidence for both sides. Reachable goals and documented support make it a record of good faith. Goals nobody could hit make it the opposite. A PIP shortened to fit a headcount deadline is the version I would least want a judge to read.

Let them take the agreement home

Handing over an agreement at the end of the meeting with a same-day deadline is a bad trade. Under Article 96 of the Civil Code, a declaration made under duress can in some cases be rescinded, and the pressure to sign that day becomes part of the story. An agreement the employee has read for a few days is a sturdier one.

When drafting, check the last day and what happens until then (garden leave or using up paid leave), the severance amount and payment date, the stated reason for leaving, and the reach of the release clause. If a line saying no other claims exist seems to wipe out unpaid overtime or a bonus, the employee will come back after seeing a lawyer. Unvested equity is a decision best made when it is granted, as I argued in giving equity to Japan staff.

For foreign staff, visa status and company housing are often tied to the job. Settle them before agreeing a date, or the signature stalls at the last step.

If it reaches the labor tribunal

If there is no agreement and the employee files, the realistic venue is the labor tribunal (rodo shinpan). The courts aim to finish within three hearings, and cases closed between 2006 and 2024 took 82.6 days on average. Most settle through mediation. As I wrote in what Japan's labor tribunal cases show, roughly half involve dismissal. Many end with a settlement payment and an agreed exit.

How many cases get this far depends a lot, I think, on whether the Japan HR team can tell HQ "that process won't hold up here." Some Japan entities have nobody in that role.

The first thing Japan sends back to HQ might be a calendar instead of an answer on the number. How many meetings, how many days apart, how long the employee keeps the agreement before signing. Settle that first and the second meeting is much less likely to be where it all breaks.

---