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The Labor Contract Act stipulates that “workers and employers may change the working conditions, listed in the employment contract, by mutual agreement.” In a lawsuit where the illegality of a transfer order was contested in the case of an agreement between labor and management regarding job duty limitations, the Second Petty Bench of the Supreme Court (Presiding Judge Koichi Kusano) on April 26 overturned the second instance ruling, which did not recognize the order as illegal, and remanded the case to the Osaka High Court for further deliberation.

That said, many companies in Japan have  rules of employment that state, “The company may order an employee to change the place of work and the duties to be performed when necessary for business purposes. In such cases, the employee may not refuse without just cause. ” As long as they set forth reasonable working conditions in the rules of employment, the working conditions between management and workers are governed by the rules of employment. Also, the recognized legal norm is the establishment of a factual custom that the working conditions between a management entity and its workers are governed by its rules of employment.

In Japan, rules of employment allow companies to unilaterally determine reassignment, but in recent years, there has been a growing trend toward allowing diversity in work styles, and one such trend is the defined-duty employment contract. In this case, the Supreme Court of Japan held that while there are rules of employment that allow employers discretionary authority for reassignment, there is a case in which an employment contract with defined job duties was concluded for a specific employee.

In light of this, the Supreme Court’s decision is a landmark case in Japan.

The worker in question had an employment contract with the Shiga Prefecture Social Welfare Council, which specified their job as technical work related to the modification and production of welfare equipment and the development of technology. The worker had an 18-year record of employment in this technical position. However, the number of business contracts for the modification and production of welfare equipment has significantly decreased since 2013. By 2019, when the transfer to general affairs was ordered, the council had decided to discontinue this work. The transfer was intended to avoid dismissal and was deemed necessary for business reasons. Both the Kyoto District Court in the first instance and the Osaka High Court in the second instance had judged that the transfer order was not illegal or invalid.

What will now be very interesting to follow is if the employer dismisses this worker because of a job-limited employment contract, given the work is no longer being performed, how will the judiciary make a decision in Japan, where dismissal is extremely unusual? I am very interested in this point.