Member Article

I. Introduction

It has been over 4 years since the Constitutional Court’s ruling on 26 October 2004 which declared that Article 158 and other relevant articles of the Manpower Law in relation to serious misconduct were against the Indonesia Constitution and therefore were not legally binding. The legal effect of the ruling was that an employer cannot immediately terminate an employee for serious misconduct. Instead an employer must report the act to the police and then follow the criminal proceedings under the Indonesian Criminal Procedure Law. Only upon receiving a criminal judgment of the district court that the employee is guilty (and if the decision is not appealed by the employee) can the employer terminate the employee.

Following the Constitutional Court’s decision, the Ministry of Manpower (“MOM”) issued 2 circular letters stating amongst other things:

a.  an employer can terminate an employee for “Urgent Reason” under Article 1603(o) of the Indonesian Civil Code (“ICC”) (which specifies the types of employee’s actions which result in termination of employment by an employer for Urgent Reasons) without having to report the serious misconduct to the police etc; and
b.  the employer must follow the approval of termination procedure set out under Law No. 2 of 2004 regarding Settlement of Industrial Relations Disputes (“Law 2/2004”), namely, bipartite, mediation, court proceedings, etc.

There has been a lot of arguments and various interpretations from the judges of the Industrial Relations Court (“IR Court”), mediators, jurists and practitioners on the present legal situation, in particular, it is currently unclear whether an employer:
a.  is able to immediately terminate an employee for serious misconduct under Article 158 (and other relevant articles) of the Manpower Law; or
b.  must terminate an employee for Urgent Reasons under Article 1603(o) of the ICC; or
c.  must report the act to the police and then follow the criminal proceedings under the Indonesian Criminal Procedure Law.

II. Types of Serious Misconduct

Article 158 of the Manpower Law provides the following types of serious misconduct:

a.  deception, theft or embezzlement of money and/or goods belonging to the company;
b.  giving false information or information which has been falsified so that it harms the company;
c.  drunkenness, drinking liquor, using and/or distributing narcotics, psychotropic drugs, or other addictive substances in the workplace environment;
d.  gambling or immoral acts in the workplace environment;
e.  attacking, maltreating, menacing, or intimidating the employer or coworkers in the workplace environment;
f.  persuading the employer or coworkers to commit acts contrary to the laws and regulations;
g.  carelessly or intentionally destroying or leaving property of the company in a state of danger and thereby causing a loss to the company;
h.  carelessly or intentionally placing or leaving the employer or a coworker in a state of danger in the workplace;
i.  disclosing the company’s secret which ought to be kept confidential, except for the interests of the state; or
j.  committing other criminal acts in the company premises liable to a sentence of 5 years or more.

As previously explained, Article 1603(o) of the ICC also details types of actions which allow the employer to terminate its employment relationship with the employee. Article 1603(o) of the ICC regulates “Urgent Reasons” in the sense of the foregoing article will in the view of the employer consist of such acts or characteristics or behavior of the employee, that it cannot reasonably be demanded by the employer to continue such employment relationship.

Urgent reasons as such may be considered existing in the cases where the employee:

a. upon concluding the employment agreement has deceived the employer by presenting false or counterfeit certificates or has intentionally given the employer false information on the manner in which his former job had ended;
b.  shows himself to be extremely unable or unfit to carry out the work that he has agreed to do;
c.  in spite of all warnings, indulges in drunkenness, opium abuse or other debauchery;
d.  commits theft, fraud, cheating or other misdemeanor, thus being unworthy of his employer’s trust;
e.  molests the employer, his relatives or inmates, or maltreats, grossly insults or seriously threatens his co-employees;
f.  tempts or endeavors to tempt the employer or his relatives or co-workers into acts in violation of the law or moral standards;
g.  intentionally or in spite of warnings recklessly causes damage to employer’s property or exposes it to serious danger; if he intentionally or in spite of warnings recklessly exposes himself or others to serious danger;
h.  discloses details regarding his employer’s household or businesses, which he should have kept secret; if the employee persistently refuses to comply with reasonable orders or duties, given to him by or in name of the employer;
i.  in another manner grossly neglects duties which he is obliged to undertake;
j.  if through intent or recklessness, he becomes unable to carry out the duties as conditioned.

III. Enforcement and Recent Developments

Notwithstanding the various views on the enforcement of the serious misconduct provision, recently, judges at the Supreme Court generally have 2 opinions in this regard:

a.  the majority of the judges believes that Article 158 and other relevant articles with respect to the serious misconduct are not legally binding. However, the employer can still terminate its employee relationship (without giving any warning letters but the employer cannot unilaterally terminate the employment relationship) based on serious misconduct as long as this is supported by the company regulation, collective labour agreement or employment agreement. In other words, types of serious misconduct should be specified in these documents so that they legally bind the employer and employees. The procedures for the termination of employment should comply with Law 2/2004. The company regulation, collective labour agreement or employment agreement constitutes a legal basis for the employer and employees to perform their rights and obligations. These documents may contain the types of serious misconduct which are stated in Article 158 of the Manpower Law.

b.  the minority of the judges also believes that Article 158 and other relevant articles are not legally binding. However, the employer should give a first and final warning letter to the employee who has committed a serious misconduct before terminating the relevant employee. Upon the issuance of and non-compliance with the final warning letter, the employer may proceed with the termination of employment under Law 2/2004. They also believe that types of serious misconduct should be regulated in a company regulation, collective labour agreement or employment agreement as a legal basis for termination of employment.

From the above, it appears that the employer does not have to bring criminal charges against an employee who has committed a serious misconduct and therefore, the criminal proceedings under the Indonesian Criminal Procedure Law do not need to be followed. Due to the absence of any law or regulation regarding this matter and the resulting legal uncertainties, the judges should themselves find a legal basis to examine manpower disputes which involve termination of employment due to a serious misconduct.

Despite the opinions from the Supreme Court judges, the attitude of the judges at the IR Court level on the enforcement of the serious misconduct provision is still somewhat unclear. The IR Court is the first level institution authorized to examine manpower disputes which have been mediated unsuccessfully at the MOM level, while the Supreme Court is the final level institution which examines manpower disputes following the IR Court’s ruling.

Having reviewed some decisions issued by judges at the IR Court level, we believe there to be 3 principal views on the enforcement of termination for serious misconduct, namely:

(i)  some judges believe that the Constitutional Court’s ruling should be followed, meaning that the employer and the employee should wait for criminal proceedings under the Indonesian Criminal Procedure Law prior to the employer terminating the relevant employee regardless of any serious misconduct provisions stated in a company regulation, collective labour agreement or employment agreement. Their reason is that these documents should not contradict the Manpower Law, otherwise they should be null and void. They use Article 124 of the Manpower Law which states that a collective labour agreement should not violate prevailing laws and regulations and they argue that this is also applicable to a company regulation and employment agreement;
 
(ii)   some judges follow the view of the Supreme Court judges as detailed in point a. above; and

(iii)  some judges agree with the view of the Supreme Court judges as detailed in point b. above.

IV. Conclusion

Whilst it is true to say that there is still no certainty on termination of employment for serious misconduct nor on the enforcement of the serious misconduct provisions, it does appear that from listening to the stated views of judges at both the IR Court and the Supreme Court level, there is scope for employers to terminate the employment of persons who are involved in serious misconduct. These views have at least given ‘guidance’ to employers to undertake relevant measures to certainly increase the chances that the termination action will be enforceable, particularly with regard to the preparation and drafting of company regulations, collective labour agreements and employment contracts. 

Until there is further certainty emanating from laws and regulations, it is important for employers to now review their employment documents and company regulations/collective labour agreements, as well such other documents such as codes of conduct or ethical policies. Improving and updating those documents will significantly assist employers not only in employee termination actions but also in a number of other important areas relating to employment issues.

 

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