ISSUE:

For industrial companies in Indonesia, one of the issues that will be faced is related to the Collective Labor Agreement (“CLA” of in bahasa is “PKB”) negotiation, between the Company’s Management and the Labor Union. Whether it’s in the stage of forming the CLA for the first time, or the extension/renewal of the CLA.

The issue that most often occurs and becomes a routine question is, if there is a deadlock in negotiations, what should one of the parties do? And does the old CLA still apply or vice versa?

This situation sometimes forces the Company to compromise with the situation in order to maintain a conducive situation at the Company, because legally in Indonesia, Unions and Employees are protected of their rights in conducting CLA negotiations.

To get an overview of the situation if the CLA negotiations deadlock, bellow we will elaborate brief overview:

Based on the Manpower Law in Indonesia, the CLA can be valid for a maximum period of 4 years (2 years + 1 year extension + 1 year validity due to failure to negotiate), however, Ministerial Regulation no. 28/2014 may lead to an interpretation that the CLA can be valid forever until a new PKB is agreed upon. However, if referring to Article 7 (2) of Law no. 12/2011 concerning the Establishment of Legislation, the Manpower Law is stronger in force than Ministerial Regulation No. 28/2014.

Based on the Manpower Law, If the CLA negotiation process has been carried out in accordance with the procedures specified in Ministerial Regulation no. 28/2014, but no agreement was reached, then:

1. the parties make notes regarding the conditions of the last negotiations along with the minutes of the meeting;
2. then based on these notes, one of the parties proposes to resolve the problem to the local manpower office to mediate;
3. if mediation is not agreed, then proceed to the process in the Court;
4. The decision of the first instance of the PHI is the final decision.

There are two issues that need to be confirmed with this issue, ie.: if no agreement is reached on the New CLA after the extension of the CLA, which CLA will apply, and if the Company intends to keep the New PKB even though the Labor Union refuses, what process can be taken?

APPLICABLE CLA BASED ON LAW

In such a situation, the reference that can be used as a guide is the provisions of Law no. 13 of 2003 concerning Manpower as amended by Law no. 11 of 2020 concerning Job Creation (Labor Law) and the Minister of Manpower Regulation No. 28 of 2014 concerning Procedures for Making and Ratifying Company Regulations and Making and Registration of Collective Labor Agreements (Ministerial Regulation No. 28/2014).

Based on the two regulations above, it is determined that:

1. The validity period of the CLA is a maximum of 2 (two) years from the date of signing or otherwise regulated in the CLA. (Article 123 (1) Manpower Law, Jo. Article 29(1) Ministerial Regulation No. 28/2014).
2. In the event that the New CLA negotiations have not reached an agreement, the current CLA may be extended for a maximum of 1 (one) year based on a written agreement between the company and the trade union, within 30 (thirty) days the validity period of the CLA (Article 123 (2) Manpower Law, Jo. Article 29(2) Ministerial Regulation No. 28/2014).
3. Negotiations for making the next CLA can be started no later than 3 (three) months before the end of the current CLA, and in the event that the negotiations do not reach an agreement then in this situation:
   1. Based on Article 123 (4) of the Manpower Law, the current CLA remains valid for a maximum of 1 (one) year;
   2. Based on Article 29 (1) of the Ministerial Regulation no. 28/2014, the applicable CLA is the previous CLA, until the new CLA is agreed.

Based on the description above, there are differences between the provisions contained in the Manpower Law and Ministerial Regulation no. 28/2014. If it refers to the Manpower Law, it can be said that the maximum CLA can be valid for 4 years (2 years + 1 year extension + 1 year enforcement due to failure to negotiate). However, if referring to Ministerial Regulation No. 28/2014 then the PKB can even be valid without limitation.

If we refer to the hierarchy of provisions of the Legislative Regulations, then because the structure and positions of the ministers are under the President, the Ministerial Regulations are hierarchically under the Law/Act. So based on Article 7 (2) of Law no. 12/2011 concerning the Establishment of Legislation, the Manpower Law is stronger in force than Ministerial Regulation No. 28/2014.

SETTLEMENT OF CLA DISPUTES (DISPUTES OF INTEREST) BASED ON LAW

Normally, what will happen in the making of a CLA that is not agreed upon by the parties is:

1. One of the parties asked for negotiations;
2. After the parties agree to negotiate, then a Negotiation Rules must be drawn up, one of which is related to the agreement on the negotiation period (Article 21 of Ministerial Regulation No. 28/2014);
3. In the event that the negotiations on the making of the CLA are not completed within the time agreed upon in the Negotiations Rules, both parties may reschedule the negotiations within a maximum of 30 days after the negotiations fail (Article 25 (1) of Ministerial Regulation No. 28/2014);
4. If after rescheduling, the CLA still does not agree, then the Parties must make a statement containing: a. CLA materials that have not been reached an agreement; b. the stance of the parties; c. minutes of negotiations; and d. place, date and signature of the parties (Article 25 (2) of Ministerial Regulation No. 28/2014);
5. Based on the statement, then the CLA dispute is registered in the local Manpower Office for Mediation (Article 25 (4) Ministerial Regulation No. 28/2014);
6. If mediation by the Manpower Office does not reach an agreement, either party can file a lawsuit with the Industrial Relations Court (Article 26 of Ministerial Regulation No. 28/2014);

If Referring to Law no. 2 of 2004 concerning Settlement of Industrial Relations Disputes (Law No. 2/2004), it is known that there are 4 types of disputes in the scope of employment, namely:

1. disputes regarding rights;
2. disputes of interest;
3. disputes over termination of employment; and
4. disputes between trade unions/labor unions within one company.

Regarding the disagreement of the CLA in the Negotiations between the Company and the Labor Union, this is included in the “Dispute of Interest” (Article 1 (3) of Law No. 2/2004). In resolving the dispute, it not only be done through the Court, as long as it is agreed by the parties, it can also be done through arbitration.

If the process is carried out through the Industrial Relations Court (PHI), then the decision of the first instance of the Court of Appeal is a final decision and cannot be appealed or kasasi (Articles 56 and 109 of Law No. 2/2004).

SAMPLE CASE

After conducting a search related to a similar case related to the dispute over Article 123 of the Manpower Law, no specific case was found, but there is a decision that can be used as a reference in considering the existence of Article 123 of the Manpower Law, namely the case between PT Bumi Asri Pasman (Plaintiff ) v. The Bumi Asri Workers Union (Defendant) which was processed at the Palangkaraya Industrial Relations Court with case number 2/Pdt.Sus-PHI/2018/PN Plk.

In this case, the Plaintiff filed a request for cancellation of one of the provisions (articles) in the CLA 2014-2016, but in legal considerations of the court decision, in addition to providing legal considerations on the article for which the cancellation was filed, the Judge decision also considered that in accordance with Article 123 of the Manpower Law, the PKB is valid for a maximum of 4 years (2 years + 1 year extension + 1 year enforcement due to failure to negotiate), but for the extension of 1 year and other 1 year due to failure of negotiations, cannot be applied automatically and must comply with the required conditions in Article 123 of the Manpower Law, namely that negotiations have been carried out but have reached a deadlock.

In its decision, the panel of judges in the case considered that, if the period of validity of the PKB has passed, then the CLA is not binding on the parties.

Regards