23 July 2007

Mass Terminations - Companies Beware

Mass terminations of employees is not a new phenomenon in Indonesia despite there being laws and regulations in place to reduce this practice or at least ensure that all efforts are undertaken to ensure that a mass termination only occurs where it is absolutely the last option and resort for the company. PT. Panin Lestari Internusa learned this the hard way at the Industrial Relations Court. The company owns and manages the Sogo franchise and when it closed the department store component of the Plaza Indonesia location it terminated 51 employees.

The Court held that this breached Article 151(1) of the Labor Law and the provisions of a Circular on the prevention of mass terminations. The Circular lists 8 things a company can do before choosing the termination option. The 8 things include reducing the wages and facilities enjoyed by senior staff, reduce shifts, stop or limit overtime, reduce work hours, and voluntary retrenchment, among others.

The crux of this case rests on the fact that the employer had sufficient time to explore other options to avoid a mass termination but chose not to.

The lesson to be learned here is that the responsibility and burden is on the employer to do everything they possibly can to avoid a mass termination. However, the courts will not punish employers who make that effort but they will find against those who do not. In this case the company has been ordered to pay the salaries of the 51 employees from the date of their termination through to the date of the decision.

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