INDONESIA Trends and Developments Contributed by: Nico Angelo Putra Mooduto, Mahareksha Singh Dillon, Talitha Amanda Ekadhani and Bagas Ananta, SSEK Law Firm
not possess the legal authority of the Language Law and is not a legally binding statute. Never- theless, Supreme Court circular letters are hon- oured by judges. Indonesian Constitutional Court’s Decision on Employment Termination and Labour Regulations On 31 October 2024, the Indonesian Constitu- tional Court issued a landmark decision, prom- ulgating Constitutional Court Decision No 168/ PUU-XXI/2023 (“MK Decision No 168”), which amends significant components of Law No 13 of 2003 on Manpower as amended by the Job Creation Law (the “Manpower Law”). This rul- ing brought about modifications in the country’s labour law. The landmark decision follows a series of chal- lenges brought by the Labour Party ( Partai Buruh ) and prominent labour unions, who argued that existing laws did not adequately protect work- ers’ rights. The subsequent changes will have wide-ranging effects on employment practices, labour dispute mechanisms, and the economic environment for businesses and workers alike in Indonesia. MK Decision No 168 introduced amendments to various articles within the Manpower Law, affecting employment termination procedures; fixed-term employment; foreign worker regu- lations; wage policies; and dispute resolution mechanisms. Some of the key changes introduced by MK Decision No 168 are as follows. Mandatory court decision for employment termination One of the most notable amendments brought about by MK Decision No 168 is to Article 151(4)
of the Manpower Law, which mandates that the termination of employment requires a legally binding court decision. Termination disputes could previously be resolved through bipartite negotiations, and employers had the authority to dismiss employees under certain conditions without judicial intervention. The new provision mandates that if bipartite negotiations fail, the case must be escalated to the Industrial Rela- tions Court. This change establishes a significant legal safe- guard for employees, ensuring that termination is subject to due process and judicial scrutiny. Under this provision, employees are allowed to continue working and receiving wages until a court decision is issued. The judicial process, however, can be lengthy, taking an estimated 140 days from the bipar- tite meeting to mediation hearings and poten- tially extending to one or two years if the case is appealed to the Supreme Court. This extended timeframe for resolution could represent chal- lenges for both employers and employees. Nev- ertheless, the legal framework aims to ensure fairness and provide a structured path for employees to seek justice. In light of this, this process empowers employ- ees by providing them with legal recourse against unjust dismissal. However, this may be disadvantageous for employers as employees may face challenges in obtaining timely resolu- tions for their cases. Regulations on fixed-term employment and foreign workers MK Decision No 168 also revises regulations regarding fixed-term employment contracts and foreign worker employment. Article 56(3) of the Manpower Law now sets a maximum duration
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