Japan Legal Update | Vol. 40

Labor & Employment

Supreme Court Decides Whether a Fixed Overtime Allowance is Considered Statutory Overtime Wages

On July 19, 2018, in a case in which the parties litigated whether payment of a so-called fixed overtime allowance is considered payment of overtime wages as prescribed in Article 37 of the Labor Standards Act, Japan's Supreme Court (First Petty Bench) affirmed that a fixed overtime allowance is considered statutory overtime wages. The Court's reasoning was: (i) in light of the description in the employment contract and the explanation that the employer gave to the employee, the fixed allowance was positioned as compensation for overtime work, etc. in the employer's wage structure; and (ii) the amount of the fixed allowance paid to the employee was not divorced from the employee's actual overtime work.