Indonesia’s Constitutional Court has ordered the government to make a number of changes to its controversial Job Creation law in response to a petition by a group of labor unions.
The court was responding to a petition filed by a group of labor unions, which claim that the government’s Job Creation law undermines workers’ rights in a number of respects. In a ruling yesterday, Reuters reported, the court accepted several of the petitioners’ demands while rejecting several others.
The Job Creation law, widely known as the Omnibus Law, aims to attract investment by slashing regulations and other red tape. The bill, first passed by the House of Representatives in October 2020, was a centerpiece of the administration of President Joko Widodo, which said that the bill was necessary spur to economic growth and attract foreign manufacturers that are relocating away from China.
However, the law has been heatedly contested. Its passage prompted mass protests across the nation, and led trade unions and civil society groups to file a judicial review at the Constitutional Court. Unions have taken aim at provisions that will allow employers to cut mandatory leave and slash severance pay, while environmentalists have criticized a stipulation that environmental studies be required only for high-risk investments.
In September, Said Iqbal, general chair of the Labor Party, a major union and political party that was among the groups that filed yesterday’s petition, called upon President-elect Prabowo Subianto to review the Omnibus Law. The Labor Party has also demanded an 8 percent increase in the minimum wage in 2025.
Yesterday, thousands of workers gathered outside the Constitutional Court building in Jakarta, calling for the law’s repeal and the introduction of restrictions on permanent outsourcing, improved severance pay for terminated employees, and protection against easy layoffs.
In November 2021, the Constitutional Court ruled that the law was partially unconstitutional, due to inadequate public consultations. The court ordered the government to amend key parts of the legislation within two years of the law’s passage, saying that if the changes were not made, the legislation would be deemed “permanently unconstitutional.” In late 2022, however, Jokowi responded by signing an emergency regulation that essentially overrode the law and forced the changes by executive fiat.
In its 2o-point ruling yesterday, Reuters reported, judges “ordered local leaders to set sectoral minimum wages, as sought by unions” and introduced limited protections against unfair dismissal. In response to petitioners’ complaints the law would lead to many jobs being outsourced, it also ordered the Ministry of Manpower to provide clarity on what sort of jobs can be outsourced.
At the same time, the ruling also rejected a number of the demands made in the petition, including a demand for an increase in severance benefits. It also rejected a request to change the formula used to set the annual rise in minimum wages.
The Constitutional Court ordered legislators to pass a new manpower law within two years, in order to streamline the existing legislation, which is currently scattered among a number of different bills, and harmonize it with yesterday’s ruling.