Reader JA asks if it’s legal for an employer to demand compensation if an employee quits their job partway through their contract.
“What about if someone wants to quit their job and break their contract early (say, midway through) but the contract says that if the person doesn’t give 30 days notice then ‘the contract shall be terminated only if he pays in a lump sum, the amount equal to the wages for the remaining term of his contract within 30 days from the day of the termination’? Is this legal?”
According to Article 16 of the Labor Standards Act, “An employer shall not make a contract which fixes in advance either a sum payable to the employer for breach of contract or an amount of compensation for damages.”
However, this isn’t always as clear-cut as it would seem.
“The Labor (Standards) Law bans ‘predetermined compensation.’ In this case, therefore, the employee can quit the job with two weeks’ notice and does not need to pay the ‘lump sum,’ ” said attorney Mitsuhiro Nagata of Yoyogi Uehara Law Office.
“However, if the job contract had a fixed period of service (i.e., it is not open-ended), it’s not quite that simple. The Civil Code says, ‘Even where a period for the service has been fixed by the parties, either party may, if any unavoidable cause exists, immediately terminate the contract; however, if such cause has arisen by the fault of one of the parties, such party is liable for compensation for damages to the other party’ (Article 628).
“In such a case, the employee would not be able to quit the job except in unavoidable circumstances. However, since the above job contract admits that employment can be terminated with 30 days’ notice, the employee can quit early (with a month’s notice).
“Even in this case, however, the job contract should be partially invalid because the Labor Law bans ‘predetermined compensation.’ In some cases, though, the employee might be liable for compensation for damages to the other party. I, therefore, would advise the above employee to quit the job with 30 days’ notice.”
Katsumasa Minagawa, an attorney at Minagawa Ebisu Law Office, agreed that the above contract would likely be considered illegal according to Article 22.1 of the Constitution, which says, “Every person shall have freedom to choose and change his residence and to choose his occupation to the extent that it does not interfere with the public welfare.”
Mr. Minagawa added that if a worker does not give 30 days’ notice and if they in some way cause damage to the employer, it’s possible they might be considered liable.
Thanks to David Thompson for his research assistance. Ashley Thompson writes unique how-tos about living in Japan online at www.survivingnjapan.com. Send all your questions to firstname.lastname@example.org.