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Are Non-solicitation and Non-competition Clauses in Employment Agreements Necessary in Indonesia?

There are clauses in employment agreements that are often included, namely confidentiality, non-solicitation and non-competition clauses. The purpose of these clauses is to avoid unfair competition and attempts to create competitors or having former employees take advantage of the company's data, information and customers.

The non-solicitation clause prohibits former employees from enticing or trying to take customers from the company. Meanwhile, the non-competition clause is a clause that prohibits an employee from working for a competing company for a certain period after their working period is over. However, these two clauses can be considered contradictory to the law in Indonesia, specifically to Article 28 E paragraph (1) of the 1945 Constitution, Article 31 of the Manpower Law and Article 38 paragraph (2) of the Human Rights Law, which states that everyone is free to choose a job.

Referring to regulation in Indonesia, the matter of non-solicitation and non-competition has not been explicitly regulated. Indeed, there is a provision in Article 1601 of the Indonesian Civil Code that allows agreements that reduce workers' rights regarding not being allowed to do specific jobs when the employment relationship ends.

Standard terms in a non-competition agreement include:

  • Confidentiality. The terms of the agreement are to remain confidential. However, this provision must permit the employee to discuss the terms of the agreement with certain professionals, such as an attorney or an accountant.
  • Non-disparagement. Both the employer and employee agree to refrain from making negative statements about one another. This prevents employees from trying to take business away from the former employer and prevents the former employer from making negative comments about a former employee.
  • Opportunity to Review and Consider, a clause indicating that the employee has read and understands the agreement. This prevents the employee from claiming they did not read or understand the agreement before signing it.
  • Severability. If a court finds a specific employment agreement term invalid, the remainder of the provisions will still be enforceable.
  • Applicability to Successor. If the company is purchased or merges with another business, the terms of the agreement are still valid.

If you are entering into a non-solicitation and/or non-competition agreement, it is wise to consult with an experienced attorney to ensure the contract will be valid and enforceable. It is also essential to understand precisely what types of post-employment conduct will be covered, and that the agreement accurately reflects your understanding and expectations. At Schinder Law Firm, as one of many corporate law firms in Indonesia, our professional civil lawyers strive to understand your unique needs and concerns and will develop creative, cost-effective ways to solve your problems. To learn more, contact us atinfo@schinderlawfirm.com today to schedule a confidential consultation to discuss your situation and how we can help.

Author: Dewi Susanti

Schinder Consultant London Ltd.


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