Client Newsflash

Statute of Limitation to Claim Payment under Manpower Law

The Constitutional Court has added yet another complication to employer-employee relations in Indonesia. In Decision No. 100/PUU-X/2012 dated September 19, 2013 (the “Decision”), the Court revoked Article 96 of the Manpower Law (Law No. 13 of 2003) on the basis that it was inconsistent with the Constitution. Article 96 provided that claims with respect to payments arising from employment must be made no later than two years from the date the right to payment arose.

The Constitutional Court held that Article 96 of the Manpower Law contradicts Article 28D of the Constitution, which provides that every person is entitled to employment, to receive compensation, and to be treated fairly and reasonably in matters of employment. The Court held that such rights cannot be taken away by any person or by any law or regulation, and Article 96 was deemed to take away the rights of employees.

The petition for revocation of Article 96 was submitted by a former employee of a security company. Accordingly, it is ostensible that the petition was driven by that individual’s (or a group of individuals’) specific need, rather than the interests of employees in general under the Constitution. In our view, the Court failed to take this into account. According to the Decision, the petitioner was still in the process of resolving his dispute with the employer. We think the Court should have rejected the petition and directed the petitioner to continue pursuing his rights under the Manpower Law.

The Court also failed to consider the arguments presented by the Indonesian Parliament and the Association of Indonesian Entrepreneurs (APINDO), both of whom argued that for legal certainty it was reasonable to have a statute of limitation on claims for payment. Statutes of limitation for employment related claims are found in Government Regulation No. 8 of 1981 and in the Indonesian Civil Code. The Court did not address either of those statutes of limitation in its Decision.

It is interesting to note that one of the nine judges on the panel dissented from the Decision. The dissenting judge expressly agreed that there needs to be a statute of limitation in the Manpower Law and stated that removing Article 96 will create uncertainty for employers. Unfortunately, the dissenting opinion has no legal force.

A major problem that arises is whether the Decision applies retroactively, i.e., whether it allows current or former employees to claim damages based on events that occurred more than two years prior to the issuance of the Decision. Again, the Court failed to address this, and if the Decision does apply retroactively, the number of potential claims is almost limitless.

The Decision raises particular concern for employers when employment ends. The employer will need to ensure that departing employees waive their right to future claims, because the employer can no longer rely on Article 96 to protect them over the long term. We are reviewing the Decision further, and, in spite of the problems presented, we can continue assisting employers in ensuring that their rights and interests arepreserved when dealing with termination of employment (especially termination that took place before the Decision was issued).

September 25, 2013

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