Subject: 36 Agreement

It is an infringement of the Labour Standards Law for a company to have its employees work overtime without a 36 Agreement. To our surprise, a number of companies do not seem to know that the 36 Agreement exists. This report serves to explain about the 36 Agreement.

1. Overview

The Labour Standards Law stipulates that an employer shall not have employees work more than the statutory working hours (8 hours per day, 40 hours per week), and, therefore it is prohibited to have employees work in excess of the statutory working hours. This is a principle of the Labour Standards Law. If a company wants to have its employees work overtime (zangyo) or on days-off, the company has to conclude a "labour-management agreement on working overtime and on days-off" (commonly known as the "36 Agreement"), and notify the Labour Standards Inspection Office. It is not compulsory for a business establishment employing less than ten regular employees to prepare and notify rules of employment, though a business establishment having only one employee shall be obligated to prepare and provide notification for a 36 Agreement.

When a company wants to prepare a 36 Agreement, the following conditions shall be met:

1.      A limit on work hours exceeding the statutory working hours shall be set and stipulated in the 36 Agreement.

2.      The work hours allowed to extend pursuant to preceding Item 1 shall be set within the limit stipulated in the notice of "The standards for the limits on extension of work hours set forth in Clause 1, Article 36 of the Labour Standards Law" issued by the Ministry of Health, Labour and Welfare. The foregoing standards in the notice issued by the Ministry of Health, Labour and Welfare (generally called the "standards for the limits on overtime" and hereinafter referred to as the "standards for the limits") provide that the upper limits of overtime shall be "360 hours per year and 45 hours per month".

Some companies may have to ask their employees to work overtime in excess of the "standards for the limits" in busy seasons, on account of their corporate structures or employee work systems. In such "special circumstances", overtime work in excess of the "standards for the limits" will be allowed by stipulating the details in the related 36 Agreements. The 36 Agreement exceptionally stipulating overtime in excess of the "standards for the limits" due to special circumstances is called a "36 Agreement with Special Terms."

2. Summary

1.      Principle of the Labour Standards Law

It is not allowed to have employees work in excess of the statutory working hours (8 hours a day, 40 hours a week).

2.      Ordinary 36 Agreement

It is allowed to have employees work in excess of the statutory working hours mentioned in the preceding Item 1 by stipulating such in a 36 Agreement within the limit of the "standards for the limits" (360 hours per year, 45 hours per month).

3      36 Agreement with Special Terms

In the case of "special circumstances", overtime in excess of the "standards for the limits" mentioned in the preceding Item 2 will be allowed. This is called "special terms."

4      Amendment effective from April 1, 2004 and related instruction, etc.

By the amendment effective from April 1, 2004, the "special circumstances" mentioned in the preceding Item 3 are limited to "temporary circumstances." "Temporary circumstances" refer to circumstances requiring employees to work overtime temporarily or abruptly, and shall not exceed a half of a year (Instruction No. 1022003 issued by the Director-General of the Labour Standards Bureau).

3. Points to Note

1.      An ordinary 36 Agreement has to stipulate specific reasons for overtime, etc. while the amendment made in April 2004 has limited the overtime in excess of the "standards for the limits" to special circumstances (temporary circumstances). Therefore, it is not allowed for the "reasons for making an ordinary 36 Agreement" to be identical to the "special circumstances for a 36 Agreement with Special Terms."

2.      The "temporary circumstances that require employees to work overtime temporarily or abruptly, and shall not exceed a half of a year", the requisite for a 36 Agreement with Special Terms, has been stipulated to avoid chronic overwork, and the period of overtime based on a 36 Agreement with Special Terms shall be limited to six months within a 12-month period.

Unexpectedly, the 36 Agreement is not well known, even though it plays a critical role in labour management. When you establish a company and employ workers, please prepare and submit a 36 Agreement along with a "Tekiyo Jigyo Houkoku (notification of applicable business entity)" to the Labour Standards Inspection Office.