When Employees Leave: Non-Compete Agreements And Protecting Confidential Information

Indonesian labor and employment laws do not expressly impose or regulate non-competition obligations of employees with the exception of the Chief Representative of the local representative office of an overseas principal.

However, Indonesian law recognizes the principle of freedom of contract. This principle is codified in Articles 1337 and 1338 of the Indonesian Civil Code (the Civil Code). The parties to a contract are free to include any provisions they wish, subject only to the mandatory provisions of Indonesian law, as well as the general principles that contract terms must be implemented in good faith and not contrary to public order.

With regard to non-competition during the period of employment, it is essential to include a provision in the employment agreement imposing a duty on the employee not to compete or otherwise act in conflict with the interests of the employer. The same provision may be set forth in the so-called Company Regulation, which sets