Non-compete clauses can be included in Indonesian employment contracts, but their post-employment enforceability is uncertain. Indonesian contract law recognizes contractual agreements, while employment law protects workers’ freedom to choose and change employment.
Foreign companies should not rely on broad post-employment restrictions alone to protect confidential information, clients, or other commercial interests.
Can Employers Enforce Non-Compete Clauses in Indonesia?
Indonesian law does not contain a dedicated statutory framework establishing when a post-employment non-compete will be enforceable.
The Manpower Law recognizes workers’ right to choose, obtain, or change employment and receive appropriate remuneration. Indonesia’s Constitution also protects the right to work and earn a humane livelihood.
Protecting confidential information? Contact MAP Resources Indonesia at info@mapresourcesindonesia.com
At the same time, Indonesian contract law generally recognizes agreements that satisfy the applicable contractual requirements. These principles can come into conflict when an employment contract attempts to restrict what an employee can do after leaving the company.
Employers should not assume that a non-compete clause will prevent a former employee from taking another position simply because the restriction appears in a signed employment contract. Multinationals should also review global contract templates against their Indonesian HR compliance framework before using them locally.
What Makes a Non-Compete More Problematic?
A non-compete may attempt to restrict:
- The companies an employee can join;
- The industries in which the employee can work;
- The geographic area in which the employee can work;
- The activities or positions the employee can perform; or
- The period for which the restriction applies.
A clause preventing an employee from working for any competitor across an entire industry for an extended period creates a much wider restriction than a provision aimed at protecting a specific business interest.
Narrow drafting may reduce some of these concerns, but it does not guarantee that a post-employment non-compete will be enforced.
What Can Employers Protect Instead?
Confidentiality provisions can restrict employees from disclosing or misusing confidential company information during and after employment. These can cover internal financial information, customer data, pricing information, business plans, technical information, and other confidential material.
Indonesia also provides statutory protection for qualifying trade secrets, giving companies another mechanism for protecting commercially valuable confidential information.
Intellectual property provisions can establish ownership and permitted use of intellectual property created or accessed during employment, subject to the applicable Indonesian IP rules.
Employers may also consider narrowly drafted non-solicitation provisions concerning customers or employees, although their enforceability should be assessed separately under Indonesian law.
Companies should also require departing employees to return company documents, devices, data, access credentials, and other confidential material.
What Happens When an Employee Leaves?
Before an employee leaves, the employer can identify confidential information and company property held by the employee, terminate access to internal systems where appropriate, recover company devices and records, and remind the employee of continuing confidentiality or other contractual obligations.
Managing a sensitive employee departure? Contact MAP Resources Indonesia at info@mapresourcesindonesia.com
Where the employee later misuses confidential information or protected trade secrets, the legal issue may be the misuse of that information rather than the fact that the employee has joined a competitor.
Structure Employment Contracts With MAP Resources Indonesia
MAP Resources Indonesia assists foreign-owned companies with Indonesian employment contracts, HR compliance, payroll, and employee termination requirements. Contact MAP Resources Indonesia at info@mapresourcesindonesia.com.
