Can a fixed-term contract be freely non-renewed?

What the Law Says

Japanese labor law restricts arbitrary non-renewal of fixed-term employment contracts, especially where continued employment is reasonably expected by the worker.

Under the Labor Contracts Act, an employer may not refuse to renew a fixed-term contract without 'objectively reasonable grounds' if the employee has a reasonable expectation of renewal — for example, due to repeated renewals, long service, or consistent work patterns.

If a fixed-term contract is renewed four times or more, or if the total duration reaches five years, the employee may request conversion to an indefinite-term contract. After ten years of continuous service under fixed-term contracts, conversion becomes mandatory upon request.

The Act also prohibits dismissal or non-renewal that violates the principle of good faith — meaning employers must consider factors like length of service, reason for non-renewal, and consistency with past practice.

Statutory Text

Where a fixed-term labor contract has been repeatedly renewed, or where the period of employment under the fixed-term labor contract has become long, and where other circumstances make it reasonable for the worker to expect renewal of the contract, the employer's refusal to renew the contract shall be deemed to be an abuse of right if it lacks objectively reasonable grounds and is recognized as being contrary to the principle of good faith.

— Labor Contracts Act, s. 19 — Non-renewal of Fixed-term Labor Contracts

Statutory Text

Where a worker requests the employer to conclude a labor contract without a fixed term, the employer shall, if the worker has been employed continuously for a period of 10 years or more, conclude such a labor contract.

— Labor Contracts Act, s. 18 — Conversion to Indefinite-term Contract

What to Do

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