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Posted date : Oct 31, 2010

Termination of Employment Relationship in Indonesia

  

Recently the problem of the termination of employment relationship is frightening many of the employments in Indonesia. This phenomenon is caused by a severe global economic crisis that occurred at this time causing many companies to consider retrenchment, including reduction the number of the employments. This has caused the rising number of unemployment in Indonesia. This condition should be avoided so all the parties, both entrepeneur and workers do not have more in suffer.

 

Principally, labor matters in Indonesia are regulated in the following laws:

1 .Law Number 13 of 2003 concerning Manpower;

2. Law Number 2 of 2004 concerning Industrial Labor Relationship Dispute Settlements.

 

1.  Definition of Termination of Employment Relationship

 

Article 1 point 25 of Law Number 13 of 2003 concerning manpower stipulate that the definition of termination of employment relationship is termination of employment relationship because of a certain thing that results in the coming of an end of the rights and obligations of the worker/ labourer and the entrepreneur.

 

It is noted that the provisions concerning termination of employment under this act shall cover termination of employment that happens in a business undertaking which is a legal entity or not, a business undertaking owned by an individual, by a partnership or by a legal entity, either owned by the private sector or by the State, as well as social undertakings and other undertakings which have administrators/officials and employ people by paying them wages or other forms of remuneration.

 

2.  Causes for Termination of Employment Relationship

 

A. Terminated by the Entrepreneur

1.   Based on Article 158 of  Law Number 13 of 2003:

The entrepreneur may terminate the employment of a worker/labourer because the worker/ labourer has committed the following grave wrongdoings:

a)  Stolen or smuggled goods and/or money that belong to the enterprise;

b)  Given false or falsified information that causes the enterprise to incur losses;

c)  Drunk, drunken intoxicating alcoholic drinks, consumed and or distributed narcotics, psychotropic substances and other addictive substances in the working environment;

d)  Committed immorality/indecency or gambled in the working environment;

e)  Sttacked, battered, threatened, or intimidated his or her co-workers or the entrepreneur in the working environment.

f)   Persuaded his or her co-workers or the entrepreneur to do something that against laws and regulations.

g)  Carelessly or intentionally destroyed or let the property of the entrepreneur exposed to danger, which caused the enterprise to incur losses;

h)  Intentionally or carelessly let his or her co-workers or the entrepreneur exposed to danger in the workplace;

i.    Unveiled or leaked the enterprise’s secrets, which is supposed to keep secret unless otherwise required by the State; or

i)    Committed other wrongdoings within the working environment, which call for imprisonment for 5 (five) years or more.

 

2.  Based on Article 160 (3) of  Law Number 13 of 2003:

      The entrepreneur may terminate the employment of the worker/labourer who after the passing of 6 (six) months are unable to perform his or her work as worker/labourer because of the legal process associated with the legal proceedings, if the worker/labourer is detained by the authorities because he or she is alleged to have committed a crime and this happens not because of the complaint filed by the entrepreneur.

 

3.   Based on Article 161 of  Law Number 13 of 2003:

      The entrepreneur may terminate the employment if the worker/labourer violates the provisions that are specified under work agreement, the company regulations, or the collective labour agreement, after the entrepreneur precedes it with the issuance of the first, second and third warning letters consecutively.

 

4.   Based on Article 163 (1) (2) of  Law Number 13 of 2003:

1.    The entrepreneur may terminate the employment of his or her workers/labourers in the event of change in the status of the enterprise, merger, fusion, or change in the ownership of the enterprise and the workers/labourers are not willing to continue their employment.

2.    The entrepreneur may terminate the employment of his or her workers/labourers in the event of change in the status of the enterprise, merger, fusion, or change in the ownership of the enterprise and the entrepreneur is not willing to accept the workers/labourers to work in the new enterprise.

 

5.  Based on Article 164 (1) (3) of  Law Number 13 of 2003:

1.  The entrepreneur may terminate the employment of workers/labourers because the enterprise has to be closed down due to continual losses for 2 (two) years consecutively or force majeure.

2.  The entrepreneur may terminate the employment of its workers/labourers because the enterprise has to be closed down and the closing down of the enterprise is caused neither by continual losses for 2 (two) years consecutively nor force majeure but because of rationalization.

 

6.   Based on Article 165 of  Law Number 13 of 2003:

The entrepreneur may terminate the employment of the enterprise’s workers/labourers because the enterprise goes bankrupt.

 

7.    Based on Article 167 of  Law Number 13 of 2003:

       The entrepreneur may terminate the employment of its workers/labourers 

       because they enter pension age.

 

8.    Based on Article 168 of  Law Number 13 of 2003:

The entrepreneur may terminate the employment of a worker/labourer if the worker/labourer has been absent from work for 5 (five) workdays or more consecutively without submitting to the entrepreneur a written explanation supplemented with valid evidence and the entrepreneur has properly summoned him or her twice in writing, by qualify the worker/labourer as resigning.

 

B. Terminated by the Worker

Based on Article 169 of  Law Number 13 of 2003:

A worker/ labourer may make an official request to the institute for the settlement of industrial relation disputes to terminate his/her employment relationship with his/ her entrepreneur if:

a.    The entrepreneur has battered, rudely humiliated or intimidated the worker/ labourer;

b.    The entrepreneur has persuaded and/or ordered the worker/ labourer to commit acts that run against statutory laws and regulations; or

c.    The entrepreneur has not paid wages at a prescribed time for three months consecutively or more;

d.    The entrepreneur has not performed obligations promised to workers/ labourers;

e.    The entrepreneur orders the worker/ labourer to perform work outside of that which has been agreed upon by the worker/ labourer to undertake;

f.     The entrepreneur has ordered the worker/ labourer to carry out work that puts the worker/labourer’s life, safety, health and or morality in jeopardy, of which the worker/ labourer is notmade aware or informed at the time the worker/ labourer’s employment agreement was made.

 

3.  Disputes of Termination of Employment Relationship Settlement

 

The entrepreneur, the worker and or the trade/labour union, and the government must make all efforts to prevent termination of employment. The termination of employment must be negotiated between the entrepreneur and the trade/labour union to which the affected worker/labourer belongs as member, or between the entrepreneur and the worker/labourer to be dismissed if the worker/labourer is not a union member. If the negotiation failed, the entrepreneur may only terminate the employment of the worker/labourer after receiving a decision from the institution for the settlement of industrial relations disputes.

 

Based on Law Number 2 of 2004 concerning Industrial Relations Dispute Settlement, disputes of termination of employment relationship is a dispute arising from the lack of convergence of opinions regarding the termination of employment as conducted by one of the parties.

 

4.   Procedures Settlement on Termination of Employment Relationship Dispute

 

1.   Bipartite Bargaining;

Based on Law no 2 of 2004 concerning Industrial Relations Dispute Settlement, Industrial relations disputes are required to be resolved first through bipartite bargaining in deliberation to reach consensus. Every bargaining must be evidenced by a minutes signed by the parties.

If the bargaining reach an agreement, then a Collective Agreement is drawn up and signed by the parties. The Collective Agreement  is required to be registered by the parties to the Industrial Relations Court at the local District Court where the parties conducted the Collective Agreement.

If  the bipartite bargaining failed, one or both of the parties can file their dispute to the local authorized manpower offices, and attaching proof that efforts to resolve the dispute through bipartite bargaining have been conducted. The local authorized manpower offices is required to offer to both parties a Collective Agreement to select a settlement through conciliation or arbitration.

If the parties do not select settlement through conciliation or arbitration within 7 (seven) working days, then the authorized manpower offices will transfer settlement of the dispute to a mediator.

Settlement of disputes through bipartite mechanism must be settled at the latest within 30 (thirty) working days from the commencement of negotiations. In the event that within a time frame of 30 (thirty) days, one party refuses to continue negotiations or there had been bargaining which did not result in agreement, then the bipartite meetings will be considered to have failed.

 

2.    Tripartite Bargaining,

 a.  Mediation;

Settlement of a dispute through mediation is carried out by a mediator. Mediator must make effort to reconcile the parties.

If an agreement through mediation is reached, then a Collective Agreement shall be drawn up and signed by the parties and witnessed by the mediator. Collective agreement is required to be registered at the Industrial Relations Court in the District Court within the jurisdiction where the parties conducting the Collective Agreement, in order to obtain a registration deed.

If no agreement is reached through mediation, then :

a.    The mediator will issue a written recommendation;

b.    At the latest within 10 (ten) working days, written recommendation must be conveyed to both parties;

c.    The parties should have provided a written answer to the mediator with the contents indicating whether they accept or reject the written recommendation at the latest within 10 (ten) working days after receiving the written recommendation;

1.    Any party not providing an opinion will be considered to have rejected the written recommendation;

2.    If the parties accepting the written recommendation, at the latest within 3 (three) working days of the written recommendation being agreed upon, the mediator must have completed work in assisting the parties to draw up a Collective Agreement and register at the Industrial Relations Court in the District Court within the jurisdiction where the parties conducted their Collective Agreement in order to obtain a registration deed.

 

The mediator must complete his duties at the latest within 30 (thirty) working days from the time the transfer of responsibility for settlement of the dispute is received.

 

b.   Conciliation;

Settlement of a dispute through conciliation is conducted by a conciliator. Settlement by a conciliator is conducted after the parties submit a request for settlement in a written to a conciliator appointed and agreed by the parties.

If an agreement through conciliation is reached, then a Collective Agreement shall be drawn up and signed by the parties and witnessed by the conciliator. Collective agreement is required to be registered at the Industrial Relations Court in the District Court within the jurisdiction where the parties conducting the Collective Agreement, in order to obtain a registration deed.

If no agreement is reached through conciliation, then:

1.  The conciliator will issue a written recommendation;

2.  at the latest within 10 (ten) working days after the first conciliation session was held, must be conveyed to both parties;

3.  the parties should have provided a written answer to the conciliator with the contents indicating whether they accept or reject the written recommendation at the latest within 10 (ten) working days after receiving the written recommendation;

4.  If the parties accepting the written recommendation, at the latest within 3 (three) working days of the written recommendation being agreed upon, the conciliator must have completed work in assisting the parties to draw up a Collective Agreement and register at the Industrial Relations Court in the District Court within the jurisdiction where the parties conducted their Collective Agreement in order to obtain a registration deed.

 

In the case of the written recommendation being rejected by one or both of the parties, then one or both parties may continue to settle the dispute to the Industrial Relations Court in the local District Court

The conciliator must complete his duties at the latest within 30 (thirty) working days from the time the transfer of responsibility for settlement of the dispute is received.

 

c.   Industrial Relation Court.

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