A major shift in freelance worker protections took place in Japan with the implementation of the country’s first-ever law aimed at protecting freelancers and independent contractors.

The landmark law, which came into effect in November 2024, represents a major regulatory shift for businesses engaging with freelance talent and independent contractors in Japan. Program managers need to understand the new rules to ensure compliance across the supply chain, avoid potential disputes and maintain ethical business practices when working with these professionals.

The Freelance Act primarily focuses on direct business-to-freelancer relationships, but buyers of services through staffing firms should also remain aware of these regulatory changes, particularly if they engage with freelancers or independent contractors in any way.

Freelance appears to be growing in popularity as a form of work across Japan. The Freelance Association Japan, a Tokyo-based organization that represents freelancers, told The Japan Times that its membership grew to 16,855 in February 2024 from 2,604 in September 2019. Meanwhile addition, a 2022 employment status survey conducted by the Ministry of Internal Affairs and Communication found that Japan had 2.57 million freelancers. The survey is conducted every five years.

The Freelance Act officially came into effect on Nov. 1, 2024. Breaches of the act can lead to government warnings, orders for corrective action and the publication of the offences. Repeat offenders or those failing to comply face fines of up to JPY 500,000 (approximately US$3,200).

Whom Does it Impact?

The Freelance Act covers both freelancers and businesses that contract with freelancers.

According to SIA’s Asia Pacific Legal Update Q3 2024 by Fiona Coombe, SIA’s director of legal and regulatory research, the Freelance Act applies to any “business consignment” by a consignor to a “specified consignee,” i.e., freelancer. A business consignment covers business-to-business arrangements for the manufacture or processing of goods or information-based products and the provision of services.

Freelancers are defined as individuals or companies with no employees (except a legal representative) who are hired to complete work. Companies are defined as businesses or individuals that hire freelancers. They can be either companies or individuals with employees, referred to as specified entrusting business operators.

It is important to note that the act clarifies that the term “employee” does not include a person employed temporarily for short hours or a short term.

Company Requirements

Through the legislation, Japan aims to optimize transactions between freelancers and companies and improve the work environment for freelancers, enabling them to provide their services more reliably as independent businesses. To that end, the act sets out several key requirements for companies engaging with freelancers in the country:

Contract documentation. Companies that engage with freelancers must clearly state the contract details and pay details to freelancers within 60 days after the completion of the work or delivery of the product. This must be indicated in writing.

Recruitment information. When providing recruitment information by advertisement, the company engaging the freelancer must not make false representations and must keep the information accurate and up to date.

Work-life balance. Companies that engage with the freelancer for six or more months must accommodate requests from freelancers to allow them to perform contracted work for an extended period while considering their need to balance work with childcare, family care and other responsibilities.

Harassment. Companies that engage with freelancers are required to establish measures for freelancers to seek consultation on issues such as harassment.

Contract termination. For freelancers who work six or more months, if the company decides to terminate a contract for ongoing business before its expiration, they must, in principle, provide the freelancer with at least 30 days’ notice.

Furthermore, the Freelance Act specifies that for any business consignment that lasts longer than one month, the following acts are prohibited:

• Refusing to accept completed work tied to the freelancer without valid reasons.
• Reducing payment to the freelancer without a valid reason.
• Returning delivered work or goods to the freelancer without cause.
• Setting unreasonably low pay compared to standard rates.
• Forcing freelancers to buy goods or services without valid grounds.

Additionally, businesses must not unfairly harm freelancers by demanding money, services or other benefits, requiring changes to the content of their work, or causing them to redo work without valid reasons.

CW program managers should understand these rules and ensure that if they are involved with companies that engage with freelancers in Japan or manage independent contractors, they should evaluate that they have proper processes in place and that the engaged freelancers are aware of the law.

Managers should also ensure that contracts meet the new legal requirements, especially if the freelancers/independent contractors are part of their contingent workforce strategy. Managers should also ensure contracts are established to avoid the risks of having undocumented agreements.

While the Freelance Act focuses on the relationship between the company and the freelancer, contingent workforce program managers and staffing professionals should ensure they understand the rules, maintain compliance and uphold the required rules for freelancers.