Indonesia: Supreme Court Plenary Meeting Issues Policies That Weaken Rights of Fixed-Term Employees

The Indonesian Supreme Court (Mahkamah Agung) held a plenary meeting from November 1–3, 2018 in Bandung, in West Java province, and have made a number of new policies applicable to employment law.

The results of this meeting were issued under Circular of the Supreme Court No. 3 of 2018 dated November 16, 2018, regarding Guidelines for the Role of Indonesian Courts (SEMA 2018).

In the section on Labor Court proceedings, SEMA 2018 sets out the following new policies:

1. Employees’ right to payment of wage during the termination process (upah proses)

Fixed-term employees are only entitled to be paid out their contract term and can be legally discharged at the end of the fixed-term contract or earlier if allowed for by the terms of the contract. By contrast, a permanent employee must be discharged by court order, subject to certain exceptions, and is entitled to pay during the termination process and severance pay.

Under certain circumstances, fixed-term employees can be converted to permanent ones, including where the employer has not followed applicable regulations on fixed-term employment contracts.

In response to a number of fixed-term employees bringing dubious claims that they were in fact permanent employees to obtain greater job protection, a fixed-term employee making such a claim will no longer benefit from being treated as if he or she was a permanent employee unless and until a court rules in his or her favor. This means the employee will not be entitled to payment of wages during the termination process or payment of a severance payment upon termination (as permanent employees are entitled to) simply by bringing a claim.

Presumably, the Labor Court could find that a claim by a fixed-term employee that he or she is in fact a permanent employee is valid and then order the payment of these additional sums, but the Supreme Court rule is still favorable to employers in that it clarifies that they do not have to pay fixed-term employees additional sums unless ordered by the Labor Court to do so.

2. Legal action for industrial relations disputes

Decisions of the Industrial Relations Dispute Court in disputes concerning rights and termination of employment can be appealed as a final legal resort to the Supreme Court, but there is no additional right of judicial review (peninjauan kembali) for industrial relations disputes.

Supreme Court guidelines are not part of the Indonesian hierarchy of laws and regulations since the Supreme Court is a court and does not write legislation. However, SEMA 2018 indicates the opinion of the Supreme Court that judicial reviews in industrial relations disputes are not allowed, and it is likely that this view will be followed by the Indonesian Labor Court.

Written by Jonathan M. Streifer and Indrawan Dwi Yuriutomo of SSEK and Roger James of Ogletree Deakins

© 2019 SSEK and Ogletree, Deakins, Nash, Smoak and Stewart, P.C.