In today’s competitive business environment, protecting sensitive information is a priority for every employer. For foreign companies operating in Indonesia, two common contractual tools are non-compete and confidentiality clauses. Yet, their enforceability under Indonesian law is not as straightforward as in some other jurisdictions.

The Legal Context

Indonesia’s Manpower Law (Law No. 13/2003, amended by the Job Creation Law No. 11/2020) does not explicitly regulate non-compete clauses. Instead, their enforceability relies on principles of freedom of contract under the Indonesian Civil Code (KUH Perdata) and judicial interpretation. Confidentiality clauses, on the other hand, are generally respected and enforceable because they align with good faith and the protection of trade secrets, as recognized in Law No. 30/2000 on Trade Secrets.

Practical Challenges

Non-compete clauses are often challenged in court. Judges tend to scrutinize whether such clauses unreasonably restrict an employee’s right to work. For example, in a 2018 case in Jakarta, a former executive of a multinational logistics company successfully contested a one-year non-compete clause on the grounds that it prevented him from earning a livelihood. Courts generally require these clauses to be reasonable in scope, duration, and geography.

Confidentiality clauses, however, are more secure. Employers can restrict the disclosure of sensitive data, client lists, and pricing structures even after employment ends. Still, to enforce these clauses, the employer must demonstrate that the information qualifies as a trade secret and was indeed misused.

Best Practices for Employers

Foreign employers are advised to:

1. Keep non-compete clauses narrow (e.g., 6–12 months, limited to direct competitors).
2. Pair them with compensation during the restriction period to improve enforceability.
3. Clearly define what constitutes confidential information.
4. Use separate confidentiality agreements alongside employment contracts.

Conclusion

In Indonesia, confidentiality clauses are enforceable, but non-compete clauses face hurdles unless carefully crafted. Employers should treat them as deterrents rather than guaranteed protections and always seek legal review.

References

• Law No. 13 of 2003 on Manpower (as amended by Law No. 11 of 2020, Job Creation Law).
• Indonesian Civil Code (KUH Perdata), Book III on Contracts.
• Law No. 30 of 2000 on Trade Secrets.
• Supreme Court Decision No. 601 K/Pdt.Sus-PHI/2018 (Jakarta case on non-compete).
• Ministry of Manpower, Republic of Indonesia – https://kemnaker.go.id