Introduction

Before the Constitutional Court issued Court Ruling 13/PUU-XV/2017 on 14 December 2017, employers in Indonesia could include an article in their employment agreements, company regulations or collective labour agreements which allowed them to terminate employees for having a marital or blood relationship with another employee in the same company. This was supported by Article 153(1)(f) of the Manpower Law (13/2003), which states that an employer cannot terminate an employee because they have blood or matrimonial links to another employee in the same company "unless it is stated in the employment agreement, Company Regulation or Collective Labour Agreement".

From an employers' perspective, it might seem reasonable to include such a clause in an employment agreement in order to avoid the risk of:

  • a conflict of interest;
  • collusion;
  • nepotism; or
  • an abuse of power.

This risk could be especially high if the employee's position means that they make decisions, as this could lead them to make biased decisions that favour their spouse or another employee with whom they have a blood link.

Facts

In January 2017, eight individual claimants who were current or former employees of Indonesia's state electricity company filed a suit in the Constitutional Court contending that the Article 153(1)(f) exception contravened their constitutional rights under Article 28B of the Constitution 1945. Under Article 28B of the Constitution, "every person shall have the right to establish a family and to procreate under a lawful marriage." Further, Article 28D(2) of the Constitution states that "everyone has the right to work and to receive fair and proper remuneration and treatment in employment".

The claimants argued that marriage is a religious duty and that a relationship built on mutual love is hard to resist and out of the parties' control. They also argued that if a couple decided not to marry because they feared termination of their employment contracts, they may opt to co-habit out of wedlock, a practice that contravenes Indonesian values and norms. A restriction on the right to establish a family or work is therefore unnecessary if the individuals uphold good ethics and morals in their work.

The claimants further asserted that corruption, collusion and nepotism depend on the mentality of the individuals concerned and do not inevitably occur where there are blood or marital links between employees. Arguably, allowing married employees to work in the same company would benefit the employer, as it would have to bear the medical costs of only one employee (as a wife's medical costs are included in those of her husband). Ultimately, the claimants asked that the wording "unless it is stipulated in the employment agreement, Company Regulations or Collective Labour Agreement" be removed from the Manpower Law in order to protect their constitutional rights under Articles 28B(1) and 28D(2) of the Constitution.

Decision

The Constitutional Court sided with the claimants, granting all of their claims. In its ruling, the court reasoned that the right of employees of the same company to have a blood relationship or marry each other does not contravene:

  • any religious values or moral norms; or
  • the security or public order of a democratic society.

In addition, the rights and freedom of other individuals are not affected by blood or marital links between employees of the same company. The court also raised the issue of the power imbalance in agreements between employers and employees (eg, employment agreements, company regulations and collective labour agreements) which impose this prohibition. In the case at hand, the employees were in a much weaker position as the parties needing employment.

The court further ruled that the wording "is stipulated" in Article 153 1(f) of the Manpower Law, in addition to the power imbalance between the contracting parties, meant that one of the elements of the freedom of contract principle provided for in the Civil Code had not been fully complied with.

As the Constitutional Court ruled that the wording "unless it is stipulated in the employment agreement, Company Regulations or Collective Labour Agreement" was contrary to the Constitution, the wording therefore no longer had binding force. Given the ruling, Article 153(1)(f) of the Manpower Law should now read "employers are prohibited from conducting a termination of the employment relationship with employees that have a blood and/or matrimonial link with another employee in the same company".

Comment

In order to avoid misunderstandings, employers may wish to review their employment contracts, company regulations or collective labour agreements and, where applicable, adjust them to comply with the Constitutional Court ruling. It appears that requiring the disclosure of marital or blood relationships is still acceptable and employers will likely be able to employ compliance and governance protections to reduce any of the risks perceived to arise from employing, or continuing to employ, spouses or blood relatives of existing employees.

For further information on this topic please contact Lia Alizia or Ghaliva Nadira Sjarif at Makarim & Taira S by telephone (+62 21 252 1272) or email (lia.alizia@makarim.com or ghaliva.sjarif@makarim.com). The Makarim & Taira S website can be accessed at www.makarim.com.

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