The saga following the controversial Omnibus Law continues as the Constitutional Court issued its decision on the case concerning judicial review over the labor law regulations under the Omnibus Law. The Constitutional Court, through its decision on 31 October 2024, amends the following matters concerning labor regulations in the Omnibus Law, among others (i) utilization of expatriates, (ii) definite employment agreement, (iii) outsourcing, (iv) wages, (v) termination of employment, (vi) severance pay, and (vii) preference right during the suspension of payment/bankruptcy proceedings. This publication will summarize the key matters as regulated in the decision.
- Utilization of Expatriates
The Constitutional Court emphasizes that employers need to prioritize the utilization of Indonesian employees.
- Definite Employment Agreement
The Constitutional Court affirms that the maximum period of a definite employment agreement that is based on the completion of a certain project (not based on a certain period), including the extension of such agreement, is five years.
- Outsourcing
The Constitutional Court states that the declaration concerning outsourcing must be decided by the Minister of Manpower, instead of the government, by considering the types and fields of outsourcing work that are regulated in the outsourcing agreement.
- Wages
The Constitutional Court makes several amendments concerning wages, among others:
- adding a new interpretation to Article 88 paragraph (1) of Article 81 letter 27 of Omnibus Law’s attachment in which it should be read as including income that meets a living standard, which is the amount of income or revenue received by employees from their work so that they can meet their and their families living needs in a reasonable manner, including food, clothing, housing, education, health, recreation and retirement fund,
- stating that the government must include the regional wage council in determining policy concerning wages,
- reaffirming that the governor must decide on sectoral wages in provincial areas,
- stating that in deciding wage structures and scales, the employers must also consider classification, positions, length of service, education, and competency of the employees.
- Termination of Employment
The Constitutional Court states that termination of employment must first be negotiated through deliberation to reach a consensus between the employers and the employees/labor unions. If such negotiation fails to reach a consensus, then the termination can only be carried out after obtaining a final and binding decision from the industrial relations courts.
- Severance Pay
The Constitutional Court states that the regulations concerning severance pay calculations as stated in Article 156 paragraph (2) in Article 81 letters 47 of Omnibus Law should be regarded as the minimum requirement.
- Preference Right during the suspension of payment/bankruptcy proceedings
The Constitutional Court affirms that during suspension of payment/bankruptcy proceedings, the rights of the employees are higher than the other unsecured creditors (including preferred creditors).
Commentary
Based on the decisions of the Constitutional Courts, we can assume that the Constitutional Courts intend to give more protection to the employees from the regulation that has been regulated under the Omnibus Law. The decisions are more favorable to the employees compared to the existing regulations under the Omnibus Law. In addition, in one of its considerations, the Constitutional Courts also states that the regulations concerning labor ideally should be separated from the Omnibus Law to avoid confusion for the employees. Therefore, it urges lawmakers to issue a new labor law.
For Further Information, Please Contact:
MetaLAW, Legal Consultant, Jakarta, Indonesia
general@metalaw.id
1 Undang-undang No. 6 Tahun 2023 tentang Penetapan Peraturan Pemerintah Pengganti Undang-undang No. 2 Tahun 2022 tentang Cipta Kerja Menjadi Undang-Undang
