Overview

For M&A transactions in Japan, typical key issues for employment and labour are:

• which employees are transferred;
• whether the buyer needs to keep the same terms and conditions for the transferred employees; and
• post-merger integration.

We shall additionally touch on issues typically observed in HR due diligence for M&A transactions in Japan.

Key statutes

Japan is a civil law jurisdiction similar to continental European countries like Germany and France, and the law is based on statutes. The primary statutes applicable for employment and labour issues are the Labour Standards Act (LSA), which provides regulations for the protection of employees, such as minimum working hours,² the Labour Contracts Act (LCA),³ which provides rules for entering into and terminating employment contracts, and the Labour Union Act (LUA), which provides rules for union affairs.⁴ The Companies Act⁵ is the general statute that provides the rules for corporate governance, including various M&A transactions; however, the Companies Act provides almost no rules for employment and labour issues related to M&A. Additionally, a specific statute for employment and labour issues exists for a company split, as described later in this chapter.

Types of transactions – basic principle

The basic principle of the assumption of employment contracts in an M&A under Japanese law is that if the M&A transaction involves a ‘comprehensive assignment’ of the seller’s rights and...

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