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UNDERSTANDING THE UNDERSTANDING THE

CRITICAL POINTS IN CRITICAL POINTS IN

COMPANY REGULATIONS COMPANY REGULATIONS

OR COLLECTIVE LABOR OR COLLECTIVE LABOR

AGREEMENTAGREEMENT

B.M. B.M. SuryantoSuryanto SinuratSinuratB.M. B.M. SuryantoSuryanto SinuratSinuratHead of Information and Member Services AffairsHead of Information and Member Services Affairs

The Employers Association of Indonesia (APINDO)The Employers Association of Indonesia (APINDO)

Presented at Employment Law & Contracts Conference Indonesia 2007Hotel Mulia, Jakarta, Indonesia

10-11 December 2007

OUTLINE OUTLINE

I.I. Understanding the kind of industrial relations Understanding the kind of industrial relations disputes in Indonesia that can be raised from making disputes in Indonesia that can be raised from making or arranging Company Regulations (CR) and or arranging Company Regulations (CR) and Collective Labor Agreement (CLA)Collective Labor Agreement (CLA)

II.II. The fundamental legal principles in creating Company The fundamental legal principles in creating Company Regulations (CR) and Collective Labor Agreement Regulations (CR) and Collective Labor Agreement (CLA) under Indonesia Law(CLA) under Indonesia Law

III.III. Identifying the critical points in Company Regulation Identifying the critical points in Company Regulation (CR) and Collective Labor Agreement (CLA) that (CR) and Collective Labor Agreement (CLA) that ought to be stipulated in relation with the rights of ought to be stipulated in relation with the rights of trade union, working condition, rule of conduct and trade union, working condition, rule of conduct and dismissal (PHK)dismissal (PHK)

IV.IV. Understanding the best practice from other Understanding the best practice from other companies; how to stipulate the critical points in their companies; how to stipulate the critical points in their Company Regulations (CR) and Collective Labor Company Regulations (CR) and Collective Labor Agreement (CLA)Agreement (CLA)

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I. INDUSTRIAL I. INDUSTRIAL

RELATIONS DISPUTESRELATIONS DISPUTES

INDUSTRIAL RELATIONS DISPUTESINDUSTRIAL RELATIONS DISPUTES

A difference of opinion resulting in a dispute A difference of opinion resulting in a dispute

between employers or an association of between employers or an association of

employers with workers or trade unions employers with workers or trade unions

due to due to disagreement on rightsdisagreement on rights, , conflicting conflicting

interestsinterests, , a dispute over termination of a dispute over termination of

employmentemployment, or , or a dispute among trade a dispute among trade

unions within one companyunions within one company

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INDUSTRIAL RELATIONS DISPUTE INDUSTRIAL RELATIONS DISPUTE

SETTLEMENT PROCEDURESETTLEMENT PROCEDURE

SUPREME COURT(CASSATION)

CIVIL REVIEW

FINAL DECISON

ARBITRATION

RIGHTS D TERMINATION D

INDUSTRIAL RELATION COURT

SA

CONCILIATION MEDIATION

SA

30 DAYS

ART 115

50 DAYS

ART 103

30 DAYS

Art 15,

Art 25,

Art 40 (1)

30 DAYS

Art. 3 (2)

140

DAYS

LOCAL AUTHORIZED MANPOWER OFFICES

BIPARTITE

DISPUTE

INTEREST UNIONS RIGHTS PHK/TRM

SETTLEMENT AGREEMENT

SA

I

N

C

O

U

R

T

OU

T

OF

C

O

U

R

T

DISPUTE OVER INTERESTSDISPUTE OVER INTERESTS

Any dispute which arises in the work Any dispute which arises in the work

relationship due to nonrelationship due to non--convergence of convergence of

opinions in the drawing up of, and/or opinions in the drawing up of, and/or

changes in the work requirements as changes in the work requirements as

stipulated in the working agreement, or stipulated in the working agreement, or

company regulations, or collective labor company regulations, or collective labor

agreementagreement

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DISPUTE OVER RIGHTSDISPUTE OVER RIGHTS

Any dispute which arises over the nonAny dispute which arises over the non--

fulfillment of rights, as a result of fulfillment of rights, as a result of

differences in implementation or differences in implementation or

interpretation concerning the laws and interpretation concerning the laws and

regulations, working agreements, company regulations, working agreements, company

regulations, or collective labor agreementregulations, or collective labor agreement

II. LEGAL PRINCIPLES IN II. LEGAL PRINCIPLES IN

CREATING CR OR CACREATING CR OR CA

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LEGAL FOUNDATION OF CR/CLA LEGAL FOUNDATION OF CR/CLA

1.1. Article 108Article 108--135 Law No 13 of 2003135 Law No 13 of 2003

2.2. KepmenakertransKepmenakertrans No. 48/MEN/IV/2004 No. 48/MEN/IV/2004 Concerning Procedures for The Making Concerning Procedures for The Making and Legalizing of The Company and Legalizing of The Company Regulations and Procedure for The Regulations and Procedure for The making and Registration of The making and Registration of The Collective Labor AgreementCollective Labor Agreement

3.3. PermenakertransPermenakertrans No. No. PER.08/MEN/III/2006 Concerning The PER.08/MEN/III/2006 Concerning The Alteration of Alteration of KepmenakertransKepmenakertrans No. No. 48/MEN/IV/200448/MEN/IV/2004

DEFINITIONSDEFINITIONS

�� COMPANY REGULATIONSCOMPANY REGULATIONS: A set of rules and : A set of rules and regulations made in writing by an Employer that regulations made in writing by an Employer that specifies work requirements and the company’s specifies work requirements and the company’s discipline and rule of conduct.discipline and rule of conduct.

�� COLLECTIVE LABOR AGREEMENTCOLLECTIVE LABOR AGREEMENT: An agreement : An agreement resulted from negotiations between a labor union resulted from negotiations between a labor union or several labor unions registered at a government or several labor unions registered at a government agency responsible for manpower affairs and an agency responsible for manpower affairs and an employer or several employers or an association of employer or several employers or an association of employers that specifies work requirements, rights employers that specifies work requirements, rights and obligations of the parties.and obligations of the parties.

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LEGAL PRINCIPLESLEGAL PRINCIPLES

Validity of an agreement:Validity of an agreement:

1. 1. The consentThe consent of those who bind of those who bind

themselvesthemselves

2. 2. The capabilityThe capability to take legal actions;to take legal actions;

3. 3. A particular objectA particular object: the availability of the : the availability of the

job which the parties have agreed about;job which the parties have agreed about;

4. 4. A lawful causeA lawful cause: not against public order, : not against public order,

morality and what is prescribed in the morality and what is prescribed in the

prevailing laws and regulations.prevailing laws and regulations.

CONSENT (CR)CONSENT (CR)

�� Declaration of will that poured forth on the draft is Declaration of will that poured forth on the draft is

an employer’s initiative and responsibility (take it an employer’s initiative and responsibility (take it

or leave it agreement).or leave it agreement).

�� Any inputs submitted by worker union/workers’ Any inputs submitted by worker union/workers’

representative shall be deemed as representative shall be deemed as

recommendations and considerations only, so that recommendations and considerations only, so that

cannot be disputed.cannot be disputed.

�� The amendment of CR must be based on a The amendment of CR must be based on a

agreementagreement between employer and the labor union between employer and the labor union

and/or worker’s representative (if the company and/or worker’s representative (if the company

doesn’t have labor union)doesn’t have labor union)

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CONSENT (CLA)CONSENT (CLA)

�� Declaration of will that poured forth on the Declaration of will that poured forth on the

draft is a Labor Unions’ initiative (has been draft is a Labor Unions’ initiative (has been

registered pursuant to Law No.21/2000) registered pursuant to Law No.21/2000)

�� Must be negotiated and conducted Must be negotiated and conducted

amicably. amicably.

�� The time for negotiation shall based on a The time for negotiation shall based on a

consensus between parties and shall be consensus between parties and shall be

contained in negotiation rules. contained in negotiation rules.

CAPABILITY (CR)CAPABILITY (CR)

I.I. EMPLOYER: Employer/Board Of Director or a person EMPLOYER: Employer/Board Of Director or a person whose get an authority.whose get an authority.

II.II. EMPLOYEE : EMPLOYEE :

1. The workers’ representative that shall be elected by 1. The workers’ representative that shall be elected by workers based on democracy and shall represent every workers based on democracy and shall represent every division of the company. division of the company.

2.If the labor union has been established, the worker’s 2.If the labor union has been established, the worker’s representative is the board of the labor union.representative is the board of the labor union.

3. In the case that members of the labor union do not 3. In the case that members of the labor union do not represent the majority number of workers in the represent the majority number of workers in the company, the employer must also consider the company, the employer must also consider the recommendation and considerations of the workers’ recommendation and considerations of the workers’ representative.representative.

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CAPABILITY (CLA)CAPABILITY (CLA)

I.I. EMPLOYER: Employer/Board Of Director EMPLOYER: Employer/Board Of Director or a person whose get an authority.or a person whose get an authority.

II.II. EMPLOYEE:EMPLOYEE:

1. Labor Union has been registered 1. Labor Union has been registered pursuant to Law No.21/2000pursuant to Law No.21/2000

2. Has members or support more than 2. Has members or support more than 50% of the total workers in the 50% of the total workers in the company.company.

PARTICULAR OBJECT (CR)PARTICULAR OBJECT (CR)

�� The rights and obligations of the The rights and obligations of the employer;employer;

�� The rights and obligations of the worker;The rights and obligations of the worker;

�� Working requirements;Working requirements;

Rights and obligations of the employer Rights and obligations of the employer and the worker that have not been and the worker that have not been regulated under laws and regulations;regulated under laws and regulations;

�� Rule of Conduct;Rule of Conduct;

�� The period of validity of the CR;The period of validity of the CR;

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PARTICULAR OBJECT (CLA)PARTICULAR OBJECT (CLA)

�� The rights and obligations of the The rights and obligations of the employer;employer;

�� The rights and obligations of the labor The rights and obligations of the labor union and the worker;union and the worker;

�� The period during which and the date The period during which and the date starting from which the CLA takes effect;starting from which the CLA takes effect;

�� The signatures of those involved in The signatures of those involved in making the CLA;making the CLA;

LAWFUL CAUSE (CR/CLA)LAWFUL CAUSE (CR/CLA)

Shall not against the prevailing laws and Shall not against the prevailing laws and

regulations (must not be lower in both regulations (must not be lower in both

quality and quantity than those stipulated quality and quantity than those stipulated

under the prevailing laws and regulations. If under the prevailing laws and regulations. If

proved otherwise, the contradictory proved otherwise, the contradictory

stipulations shall be declared null and void stipulations shall be declared null and void

and the stipulations of prevailing laws and and the stipulations of prevailing laws and

regulations shall apply)regulations shall apply)

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III. CRITICAL POINTSIII. CRITICAL POINTS

The Council of Judges takes into The Council of Judges takes into

consideration the laws, consideration the laws, existing existing agreementsagreements, custom and justice in , custom and justice in

passing the verdict.passing the verdict.

(Art. 100 Act No. 2 Year 2004)(Art. 100 Act No. 2 Year 2004)

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CRITICAL POINTSCRITICAL POINTS

Stipulation that Stipulation that have not been set forthhave not been set forth in the in the prevailing laws or according to the laws prevailing laws or according to the laws shall shall be determined and stipulatedbe determined and stipulated in the CR/CLA.in the CR/CLA.

��If there’s a dispute over drawing up of or If there’s a dispute over drawing up of or changeschanges→→ Dispute over InterestDispute over Interest

��If thereIf there’’s a dispute over the non fulfillment of s a dispute over the non fulfillment of rights, as a result of differences in rights, as a result of differences in implementation or interpretation implementation or interpretation →→ Disputes Disputes over Rightsover Rights

CRITICAL POINTSCRITICAL POINTS

I.I. In relations with labor union In relations with labor union

II.II. In relations with working conditionsIn relations with working conditions

III.III. In relations with rules of conductIn relations with rules of conduct

IV.IV. In relations with terminationIn relations with termination

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I. In Relations With Labor UnionI. In Relations With Labor Union

1.1. The stipulation of certain positions that cannot The stipulation of certain positions that cannot

be allowed as board members of labor union for be allowed as board members of labor union for

may be potentially causing conflict of interestsmay be potentially causing conflict of interests

2.2. The stipulation of opportunities for the board The stipulation of opportunities for the board

members of labor union to conduct the unionmembers of labor union to conduct the union’’s s

activities: a) Types of activities; b) Procedures activities: a) Types of activities; b) Procedures

for the provision of the opportunity and c) for the provision of the opportunity and c)

Which provisions shall be entitled to pay and Which provisions shall be entitled to pay and

which ones shall not be entitled to paywhich ones shall not be entitled to pay

II. In Relations With Working ConditionsII. In Relations With Working Conditions

1.1. The stipulation of certain employees who reserve The stipulation of certain employees who reserve the rights to obtain overtime paymentthe rights to obtain overtime payment

2.2. The stipulation of General IncreaseThe stipulation of General Increase

3.3. The stipulation of employerThe stipulation of employer’’s obligation to pay the s obligation to pay the workersworkers’’ wages although the workers do not wages although the workers do not perform worksperform works

4.4. The stipulation of Wages Structure and ScaleThe stipulation of Wages Structure and Scale

5.5. The stipulation between Fix Allowance and The stipulation between Fix Allowance and Variable AllowanceVariable Allowance

6.6. The stipulation of penalties over violationsThe stipulation of penalties over violations

7.7. The stipulation of Medical BenefitsThe stipulation of Medical Benefits

8.8. The stipulation of Annual LeaveThe stipulation of Annual Leave

9.9. The stipulation of Unpaid LeaveThe stipulation of Unpaid Leave

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III. In Relations With Rules of ConductIII. In Relations With Rules of Conduct

1.1. The stipulation of violation qualifications that The stipulation of violation qualifications that may be resulted in First Warning Letter/Second may be resulted in First Warning Letter/Second WL/WL/ThirdWLThirdWL--First and FinalFirst and Final

2.2. The stipulation of administrative sanctions: The stipulation of administrative sanctions: wage deduction, demotion, job degrading, wage deduction, demotion, job degrading, suspendingsuspending

3.3. The stipulation of mutation procedures in The stipulation of mutation procedures in distinctive and reasonable mannerdistinctive and reasonable manner

4.4. The workerThe worker’’s obligation to provide accurate s obligation to provide accurate and latest informationand latest information

5.5. The stipulation of Grievance procedure or The stipulation of Grievance procedure or Complaint Settlement procedureComplaint Settlement procedure

IV. In Relations With TerminationIV. In Relations With Termination

1.1. The category of violation that may resulted in The category of violation that may resulted in immediate termination (with regards to Constitutional immediate termination (with regards to Constitutional Court Decision)Court Decision)

2.2. The stipulation of termination in relation with marriage The stipulation of termination in relation with marriage between employeesbetween employees

3.3. The stipulation of Retirement age and compensation The stipulation of Retirement age and compensation (Please note if the Company has included workers in a (Please note if the Company has included workers in a retirement benefit program)retirement benefit program)

4.4. The stipulation detachment money in 3 conditions of The stipulation detachment money in 3 conditions of termination: voluntary resignation, absence, violations termination: voluntary resignation, absence, violations that leads to immediate terminationthat leads to immediate termination

5.5. The stipulation of terminated employeeThe stipulation of terminated employee’’s debt s debt calculationcalculation

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IV. SAMPLE OF BEST PRACTISEIV. SAMPLE OF BEST PRACTISE

Stipulation of Certain PositionsStipulation of Certain Positions

“Employees in HR department and “Employees in HR department and Corporate Secretary department are not Corporate Secretary department are not allowed to become board members of labor allowed to become board members of labor unionunion””

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Stipulation of Providing Opportunities to carry out Stipulation of Providing Opportunities to carry out

labor union activities (1)labor union activities (1)

1)1) The Company may provide permission to leave The Company may provide permission to leave work without any consequences toward the work without any consequences toward the employee’s performance nor any decreases of the employee’s performance nor any decreases of the employee’s rights toward the labor union board. employee’s rights toward the labor union board. The permission will be given in turns, for 2 The permission will be given in turns, for 2 employees at most, for maximum 6 days period to employees at most, for maximum 6 days period to attend congress or seminars, courses or attend congress or seminars, courses or government invitations that are related with the government invitations that are related with the labor union and considered legallabor union and considered legal

2)2) For foreFor fore--mentioned necessity, the labor union is mentioned necessity, the labor union is obliged to apply written submission providing legal obliged to apply written submission providing legal proofs not later than 2 weeks before the execution, proofs not later than 2 weeks before the execution, with the exception of certain urgent reasons that is with the exception of certain urgent reasons that is taken by the Company as acceptabletaken by the Company as acceptable

3)3) The Company has the rights not to provide The Company has the rights not to provide permissions as mentioned above, and in such permissions as mentioned above, and in such cases the Company is obliged to give reasons cases the Company is obliged to give reasons for such decisionsfor such decisions

4)4) The board members of labor union are The board members of labor union are approved to be given permissions to leave approved to be given permissions to leave work for attending needed meetings, without work for attending needed meetings, without any deductions from their wagesany deductions from their wages

Stipulation of Providing Opportunities to carry out Stipulation of Providing Opportunities to carry out

labor union activities (2)labor union activities (2)

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Violations of CR/CLAViolations of CR/CLA

Termination10 days6 daysV

Third Warning Letter; Increasement or Promotion Delay

8 – 9 days5 daysIV

Second Warning Letter; Increasement or Promotion Delay

5 – 7 days4 daysIII

First Warning Letter4 days3 daysII

Oral Warning1 dayI

SanctionNo of inconsecutive absence in a year

No of consecutive absence in a year

Level of Violation

Violations which Leads to Immediate Violations which Leads to Immediate

Termination (1)Termination (1)

�� Ask for/receive money from client/future client in Ask for/receive money from client/future client in intention to smooth the approval of credit intention to smooth the approval of credit application [note: applicable in financing application [note: applicable in financing companies]companies]

�� Carelessly conduct tasks, by violating the existing Carelessly conduct tasks, by violating the existing standard operational procedures, which at the end standard operational procedures, which at the end causes danger or danger potentials for own self or causes danger or danger potentials for own self or other people or Company’s assets [note: applicable other people or Company’s assets [note: applicable in mining industries]in mining industries]

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�� Violate the standard operational Violate the standard operational procedures on data system [note: procedures on data system [note: applicable in IT industries] applicable in IT industries]

�� Illegal and without prior permission usage Illegal and without prior permission usage or removal of Company’s facilities or or removal of Company’s facilities or assets including Self Protection assets including Self Protection Equipments that will lead the Company’s Equipments that will lead the Company’s operation into danger [note: applicable in operation into danger [note: applicable in Chemical companies]Chemical companies]

Violations which Leads to Immediate Violations which Leads to Immediate

Termination (2)Termination (2)

Stipulation over Employee’s Debts Stipulation over Employee’s Debts

in Relation with Terminationin Relation with Termination

1)1) When an employee is terminated, thus the When an employee is terminated, thus the employee’s debts to the Company which may be employee’s debts to the Company which may be legally proven, will be calculated together with the legally proven, will be calculated together with the last payment of salary, severance payment, last payment of salary, severance payment, and/or reward for service or others on behalf of and/or reward for service or others on behalf of the employee. the employee.

2)2) If it is found after calculation that the terminated If it is found after calculation that the terminated employee is still indebted, thus the employee is employee is still indebted, thus the employee is obliged to pay the rest of the debt to the obliged to pay the rest of the debt to the Company.Company.

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Termination in Relation with Termination in Relation with

Marriage between EmployeesMarriage between Employees

““In case of marriage between employees In case of marriage between employees within 1 department, one of the employees within 1 department, one of the employees must apply for a voluntary resignation no must apply for a voluntary resignation no longer than 6 months after the marriage.longer than 6 months after the marriage.””

CONCLUSION:CONCLUSION:

�� Make sure the worker or labor union as Make sure the worker or labor union as

the entitled party to whom given the right the entitled party to whom given the right

during the process of CR/CLA during the process of CR/CLA

arrangement.arrangement.

�� Indonesia's labor law has regulated labor Indonesia's labor law has regulated labor

affairs in a rigid way, thus (you should) affairs in a rigid way, thus (you should)

take a prior notice toward the critical take a prior notice toward the critical

pointspoints

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THANK YOU…THANK YOU…