Indonesia’s Constitutional Court has issued a game-changing decision amending provisions of Law No. 13 of 2003 on Manpower as amended by the Job Creation Law (the “Manpower Law”), most crucially rendering that any termination of employment requires a legal and binding court decision.

 

The Constitutional Court on October 31, 2024, issued Decision No. 168/PUU-XXI/2023 regarding the review of Law No. 6 of 2023 on the Stipulation of Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation into Law (the “Job Creation Law”) against the 1945 Constitution of the Republic of Indonesia (“MK Decision No. 168”).

 

This case was filed by the Labor Party (Partai Buruh), the labor federations Federasi Serikat Pekerja Metal Indonesia, Konfederasi Serikat Pekerja Seluruh Indonesia, Konfederasi Persatuan Buruh Indonesia, and Konfederasi Serikat Pekerja Indonesia, an employee of PT Lawe Adya Prima and an employee of PT Indonesia Polymer Compound. It was accepted by the Constitutional Court on January 3, 2024.

    

It should be noted that due to the changes resulting from MK Decision No. 168, under Article 151 paragraph 4 of the Manpower Law, employment termination requires a court decision that is legally binding. Further, it can be interpreted that under Article 157A paragraph 3 of the Manpower Law, employees shall continue to work and receive wages until there is a court decision on their termination that is legally binding.

 

In theory, termination of employment takes 140 days from the bipartite meeting process, the mediation hearing with the local manpower office and the Labor Court process to the Supreme Court decision. However, in practice it can take one to two years to receive a legally binding court decision if the case is appealed to the Supreme Court level.

 

The amendments to the Manpower Law following the Constitutional Court's ruling in MK Decision No. 168 are set to have a substantial impact on Indonesia’s labor and employment landscape, both legally and practically. Companies will need to pay close attention to these amendments when managing their employees and handling related matters.

 

It will be interesting to observe how these changes are implemented and how they affect current and future practices and cases. (4 November 2024)

 

 

For more information, please contact:

 

Syahdan Z. Aziz, Partner

[email protected]

 

 

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