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Employers in Indonesia were previously afforded the right to include in their employment contracts, company regulations or collective labor agreements a provision giving the employer the right to terminate an employee having a marital bond and/or a blood relationship with another employee in the same company.
It is understandable that employers might want to enforce such a provision, given the potential conflict of interest issues, especially if employees in the above circumstances hold strategic positions in the company (i.e., a director or finance manager), as well as the potential collusion and nepotism issues.
This right was regulated under Article 153(1)(f) of Law No. 13 of 2003 regarding Manpower (the “Manpower Law”), which prohibited an employer to terminate an employee having a marital bond and/or a blood relationship with another employee in the same company, 'unless the employment contract, company regulation or collective labor agreement has regulated otherwise'.
The Constitutional Court recently weighed in on this issue and came down on the side of employees. Constitutional Court Decision No. 13/PUU-XV/2017, dated 14th December, 2017, stipulates that Article 153(1)(f) of the Manpower Law contradicts the 1945 Constitution. The court reasoned that the right of employees of the same company to marry each other or to have a blood relationship did not impede any moral norms, religious values, security or public order in a democratic society, and that no rights or freedoms of others would be hampered by such marital bonds or blood relationships within a company.
The Constitutional Court also reasoned that one had to consider the imbalance of power between the contracting parties to an agreement (i.e., employment contract, company regulation or collective labor agreement) regulating such a prohibition. In this case, the employee is in a significantly weaker position as the party who needs employment. Given this imbalance of power, and the inclusion of the phrase “has regulated” in Article 153(1)(f) of the Manpower Law, the court found that the freedom of contract principle required for an agreement between contracting parties (in this case, employer and employee) to be valid was not fully met.
Based on the above considerations, the Constitutional Court adjudicated that the phrase “unless the employment contract, company regulation or collective labor agreement has regulated otherwise” contradicts the 1945 Constitution and that such phrase does not have binding legal force. Thus, Article 153(1)(f) of the Manpower Law now reads in its entirety: “An employer shall be prohibited to conduct a termination of the employment relationship due to the employee having a blood relationship and/or a marital bond with another employee in the same company.”
It remains to be seen what the impact of this Constitutional Court decision will be for employers, in particular for banks and state-owned enterprises, which are known to commonly include the above prohibitions in their agreements with employees.
SSEK - 11th January 2018
Capital: Jakarta
Population: 259 million (2016)
Currency: Indonesian Rupiah
Nominal GDP: $936 billion USD (IMF, 2016)
GDP Per Capita: $3,620 USD at Current Prices (IMF, 2016)
GDP Growth: 5.0% (2016)
External Debt: 36.80% of GDP (BI, Q2 2016)
Ease of Doing Business: 91/190 (WB, 2017)
Corruption Index: 90/176 (TI, 2016)
Constitutional Court Decision No. 13/PUU-XV/2017 (Indonesian)
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