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Labor Disputes in Indonesia: Procedural Overview

Labor disputes in Indonesia are called industrial relation disputes in Law Number 2 of 2004 on Industrial Relations Disputes Settlement (Dispute Resolution Law). A labor dispute in Indonesia can be considered a difference in opinion between a company and its employees or the labor units representing the employees. Labor disputes can be about disagreement on rights in employment agreement, company regulations, etc, termination conflicts and conflicts between labor unions within one company. In the column of this week we discuss the general procedural overview of labor disputes between the company and employees/labor unions.

Bipartite Labor Dispute Resolution

The first step in labor dispute resolution is bipartite negotiation between the company and the employees (or labor union). Basically the Dispute Resolution Law sets a time limit of 30 days to bipartite negotiation, however this time limit may be extended in case both parties agreed upon such extension. The bipartite negotiations can result in two outcomes:

1. The parties reach an agreement. In such case the parties draft a collective agreement containing the points they have agreed upon. This collective agreement must be registered at the Industrial Relations Court.

2. The parties do no reach an agreement. In such case the dispute is forwarded to the labor authority in the district where the company is located (tripartite negotiations).

Tripartite Labor Dispute Resolution

Tripartite labor dispute resolution can be divided into three forms:

1. Mediation by a mediator which is registered at the manpower authority at district/city level. Mediation can be requested for any type of labor dispute.

2. Conciliation by a conciliator which is registered at the manpower authority at district/city level. Conciliation can be requested for the following types of labor disputes:

a. Disputes which arose when drawing up or changing labor requirements;
b. Termination conflicts; and
c. Conflicts between labor unions within one company.

3. Arbitration by an arbiter which is appointed by the Minister of Manpower. The working area of the arbiter covers the whole territory of Indonesia. Arbitration can be requested for the following types of labor disputes:

a. Disputes which arose when drawing up or changing labor requirements;
b. Conflicts between labor unions within one company.

In case the parties cannot reach a settlement of the dispute in Mediation or Conciliation, either party may forward the dispute to the Labor Court (industrial relations court). Only in limited cases the arbitral decision may be disputed at the Supreme Court.

Labor Court (Industrial Relations Court)

The Industrial Relations Court is a special court within the general court. Depending on the type of dispute, the decision of the Industrial Relations Court is either final or can be appealed at the Supreme Court. In our future columns we will explain in more detail the Labor Court procedures.