A General Strategy for Termination of Problem Employees
Peter M. Nadler, Gaikoku Jimu Bengoshi**
Our firm’s Japanese lawyers handle Japanese labor matters for both employers and employees. We are often asked by overseas companies how they can get rid of poor performing employees at their Japanese subsidiaires. Here’s a quick primer.
Our usual advice is to use a “pincer” type strategy which contemplates obtaining evidence that would most likely support a termination for cause but not firing the employee. Rather, the evidence is used as leverage to obtain a voluntary severance by agreement. Once the employer is armed with sufficient good evidence that could support termination for cause, the employee can be confronted with a choice: be fired or sign a voluntary separation agreement which can be sweetened with incentives like severance pay, promises to give references, etc.
A voluntary separation is beneficial to the employer because a negotiated settlement saves management time and legal expenses and because it releases the company from liability from an employee’s claims.
The amount of severance pay varies by company and there is of course no requirement governing it. A rough rule of thumb is one month for each year of service. However in our experience most foreign capitalized companies pay higher amounts of severance.
Evidence that could support a termination for cause include repeated poor performance reviews, failure of a performance improvement plan, egregious violations of the work rules like sexual misconduct, fraud or serious undisclosed conflicts of interest issues.