Worker’s Wage During the Global Pandemic: Can Employers Pay Workers Less if they Agree?

The Minister of Manpower has asked the provincial Governors to implement wage protection during the Covid-19 Pandemic (Covid-19) as stated in the Circular Letter of the Minister of Manpower No. M/3/HK.04/III/2020 concerning Protection of Workers and Business Continuity in the Context of Prevention and Control of Covid-19 issued on 17 March 2020. The Circular Letter noted one of the recommendations of the Minister of Manpower as follow: -Companies that restrict (suspend) business activities due to the policies of their respective local governments in preventing and overcoming COVID-19, causing some or all of their workers unable to work, taking into account business continuity, changes in the amount and manner of payment of wages are made per an agreement between employers and workers.

The writer would like to focus on the last point above. Problematic statement of “…changes in the amount and manners of payment of wages are made per an agreement between the employers and workers “likely to violate the wage regulations. Further, according to the tenet of the Indonesia Administrative Law, a Circular letter is an administrative recommendation, instruction, or guidance for executive officials or agencies to carry out certain things that are considered essential and urgent. Still, on the subject matter, the primary source of positive law in Indonesia remains unclear. A circular letter is basically a policy from Administrative officials, such as Ministers or Governors, instead of legal products. It is only played a role as internal instruction and recommendations. Thus, there is no legal consequence for not complying with Circular Letters. Further, Circular Letter substance should not oppose superior laws or regulations. If there is a conflict between Circular Letters and Laws or Regulations, the eminent Laws and Regulations take precedence.

After a plethora of dissenting opinions about the incapability of positive laws to maintain the protection of workers wage during the Pandemic, on 15 February 2021, the Minister of Manpower enacted the Minister of Manpower Regulation No. 2 of 2021 concerning the Implementation of Wage in Certain Labour Intensive Industry During the Covid-19 Pandemic. Article 6 of the respective Regulation stated the following:
Article 6
(1) For certain labor-intensive industrial companies affected by the Corona Virus Disease 2019 pandemic (COVID-19) can make adjustments to the amount and how to pay wages to their workers.
(2) The adjustment as referred to in paragraph (1) shall be done based on an agreement between the employer and workers.

The Minister of Manpower Regulation in question does not explicitly state the possibility of paying less than minimum wage per se. This perhaps is a way to circumnavigate Article 88E paragraph (2) of the amended Labour Act No. 13 of 2003 and Article 23 paragraph (3) of the Government Regulation No. 36 of 2021 stipulating that employer must not pay workers less than the minimum wage. However, Article 6 in question is problematic as an agreement shall determine the wage amount. Even if the agreement shall be made in “good faith,” as implicitly mentioned in Article 7 paragraph (1) of the Minister of Manpower Regulation No. 2 of 2021, it dismisses the uneven power relations between employers and workers. Indonesian workers’ inherent weak bargaining position, emasculating even more by economic contraction as the Pandemic effect, likely resulted in a coerced or forced agreement to be paid less than minimum wage.

The proponents of this type of regulation likely claimed that wage by agreement is better off than the worse off no work no pay (Article 93 paragraph (1) of the amended Labour Act No. 13 of 2003). Then again, the no work no pay concept in the National Labour Regulations applies when the worker did not come to work because of their negligence. With the issuance of the Decree of the Head of the National Disaster Management Agency regarding movement restriction to the suppression and control of Covid-19 infection, the negligence element is not met.

What about the negligence element implied in the Labour Act No. 13 of 2003, which annulled the concept of no work yes pay in the situation when workers are ready to work, but employers could not provide work because of preventable reasons? In the case of the global pandemic status of Covid-19, the employer negligence element is not met either. Thus, at face value, it could be argued that the freedom of contract principle is used in determining worker’s wages in this unpreventable situation.

This assertion, however, has one major flaw. Freedom of contract as stipulated in Article 1338 of the Civil Code comes with its legal conditions. One of the conditions specified by Article 1320 of the Civil Code is a permissible cause. According to Article 1337 of the Civil Code, a permissible cause is construed as what is agreed upon must not conflict with the law or provide less protection. Thus, any agreement between employers and workers on wage arrangement during the Covid-19 pandemic which amount likely lower than the wage provisions stipulated in the applicable laws and regulations has no legal value or void.

Circling back to the labour law reforms discourse. It is worth considering as fundamentally labour regulations a derivative of contract law and force majeur is a principle of contract law, to have National Labour Regulations adopting force majeure doctrine-a convenient “label” used to refer to clauses which relieve a party from performance of its contractual obligations where events outside their control impact that performance. Thus, in the event of force majeur such as the Covid-19 global Pandemic the convenient principle in question can be used as a relief argument to delay, withhold or reduce statutory rights and allows employers and workers to negotiate and agreed on new terms. This adoption of the force majeur principle into the National Labour Regulations should also be accompanied by reform of the national welfare system as a safety net replacement in uncertain times, which negatively affecting both businesses and workers.

SE Menaker No. M_3_HK.04_III_2020

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