Case in which a settlement was reached in a lawsuit by a former employee of a foreign company demanding confirmation of the invalidity of his dismissal

Outline of the case

In a case in which an employee of a foreign-affiliated company filed a lawsuit against the company demanding confirmation of the invalidity of his dismissal, we represented the company (our client) in pursuing the lawsuit and reached a settlement by paying a settlement amount equivalent to about three months of his previous average monthly salary. The case was resolved quickly and without much burden to the company, and was judged to be a favorable settlement.

Governing Law

In many cases, foreign-affiliated companies have employment contracts written in English and clearly stipulate in the employment contract that the governing law is the law of a particular state in the U.S. (e.g., the law of the State of New York). Since the laws of many states in the U.S., such as New York, do not have provisions restricting dismissals as in Japan, the validity of the dismissal itself will no longer be disputed if New York State law is applied. Therefore, from the company’s standpoint, it would like the laws of the U.S. states to be applied based on the contract. However, under the General Rules for the Application of Laws, while the parties may choose the governing law by agreement (Article 7 of the General Rules), if the worker indicates to the employer that a specific mandatory provision in the law of the place most closely related to the labor contract in question should be applied, that mandatory provision will also be applied (Article 12, Paragraph 1 of the General Rules Law). When labor issue is applied in Japan, Japanese law is considered to be the law of the place most closely related to the labor contract (Article 12, paragraph 2 of the General Principal Law), in this case, the Japanese labor law is applied even if there is an agreement that the law of a particular state in the U.S. is the governing law. In this case, we have decided to quit disputing the governing law and focus our arguments on the validity of the dismissal based on Japanese labor law.

Jurisdiction

In the English employment contract, the parties agreed to submit to the exclusive jurisdiction of the courts of the State of New York. Therefore, as long as the terms of the employment contract apply, the plaintiff’s (the employee’s) lawsuit will be dismissed for breach of jurisdiction, and the plaintiff will have to file a new lawsuit in a New York court. Therefore, whether or not the jurisdiction of the Japanese court is recognized is an extremely important factor in determining whether or not a Japanese court has jurisdiction over the case. The law says that if the place of provision of labor services is in Japan, the action may be filed in a Japanese court (Article 3-4, Paragraph 2 of the Code of Civil Procedure). In this case, there was a clear agreement in the employment contract regarding the exclusive jurisdiction of the courts of the State of New York, but we did not dare to argue about the breach of jurisdiction, based on our judgment that it would be difficult to dispute the jurisdiction of Japan where the Japanese employee was actually engaged in labor. As for the acquisition of jurisdiction, in addition to the agreed jurisdiction, there is also a counterclaim jurisdiction. If the company pleads without making a claim of dismissal due to the difference in jurisdiction (defense of counterclaim), the jurisdiction will arise due to the counterclaim jurisdiction. If there is a possibility of a jurisdictional dispute, the company as a defendant must make a preliminary allegation of jurisdictional dispute before admitting or denying the plaintiff’s allegations.

When a foreign parent company contracts directly

In this case, the Japanese company of the foreign company was the counterparty to the employment contract. If the U.S. company is a party to the employment contract and has no subsidiary in Japan, the question is whether the U.S. company can be sued in a Japanese court. In conclusion, since the Japanese legal system protects workers, the Japanese jurisdiction will be recognized by applying the Civil Procedure Law. When suing an American company in a Japanese court, service of process must be made by consular service conducted through the Japanese Embassy (Japanese Consulate) in the United States.

Translation of English contracts

If there is an employment contract in the case where the validity of termination is to be judged, said employment contract is an important piece of evidence. The plaintiff must submit that evidence to the court, but since the Japanese court will not accept the evidence in English as it is, it is necessary to translate it into Japanese and attach a certificate of translation. The proof of translation is sufficient if a Japanese lawyer places a document at the end of the translation confirming that it is a genuine translation and affixes his/her seal. The obligation to translate lies with the plaintiff. However, if the contract is long and the translation is burdensome, an abridged translation will often be treated as sufficient. This point should be confirmed with the court. However, as an attorney, it is preferable to translate the entire contract as much as possible, even if an abstract translation is sufficient, because without understanding the contract as a whole, it is possible to overlook provisions that are favorable or unfavorable to the client.

Validity of termination of employment

Article 16 of the Labor Contract Law stipulates that “a dismissal shall be invalid as an abuse of rights if it lacks objectively reasonable grounds and is not considered reasonable under socially accepted conventions. Therefore, the grounds for judgment are (1) whether or not the dismissal is objectively reasonable and (2) whether or not it is reasonable under socially accepted norms. In addition, even in the case of disciplinary dismissal, Article 15 of the Labor Contract Law stipulates that the dismissal is to be judged under almost the same conditions. We conducted a hearing with the representative of the Japanese corporation (an American) and prepared a written statement in English and Japanese. We were also able to provide the court with a statement of the plaintiff’s extremely poor skills in software development despite the fact that it is an IT company, as well as a number of disruptive acts of cooperation within the company, which were compiled into a statement through testimony from a number of employees. All of the statements were interviewed by the relevant parties and then written by our firm, which required a considerable amount of effort in the preparation of the statements.

Settlement

The court approached the parties to settle the case, and both parties submitted settlement offers for the court to adjust. In this case, the judge strongly recommended settlement to the representatives of both sides (trial for recommendation of settlement). Since the plaintiff and defendant confer separately with the judge on the settlement date, we do not know what the judge said to the plaintiff’s counsel, but we suspect that the detailed factual explanation of the problems with the plaintiff’s job performance may have helped the plaintiff to be persuaded by the judge.