In late 2023, the Indonesian Supreme Court, in Decision No. 3549 K/Pdt/2023, granted an appeal filed by a company in the elevator industry against a former employee. The decision has attracted much attention as a notable development in the enforceability of non-competition clauses in employment agreements and their treatment as a breach of contract under Article 1243 of the Indonesian Civil Code.
The former employee had worked for the company for 10 years before resigning. Their employment agreement contained a 12-month non-competition clause prohibiting the employee from working for a competing business following termination of employment. Despite this restriction, the employee immediately joined a competitor after their resignation.
The court of first instance declined to declare the employee’s actions as a breach of contract. In its 2022 ruling, the district court held that the company’s claim conflicted with human rights law, specifically the employee’s right to work.
However, on appeal, the Supreme Court reached a different conclusion. It held that the employee was obliged to comply with the non-competition provisions set out in the employment agreement and company regulations (work rules). The Supreme Court concluded that the employee had acted in bad faith by disregarding those obligations, constituting a breach of contract.
It is important to note that this case was pursued through the general civil courts, rather than the labor court. The Supreme Court concluded that it was fair and appropriate to award the company 100 million Rupiah in damages. The employee subsequently sought a judicial review, which was ultimately rejected in late 2024.
