LEGAL DILEMMA OF USING DIPLOMAS AS COLLATERAL
IN EMPLOYMENT RELATIONSHIPS
Rifo Rinaldi1, Hono
Sejati2, Tri Susilowati3
Universitas Darul Ulum Islamic Center Sudirman, Semarang, Indonesia
[email protected]1, [email protected]2, [email protected]3
ABSTRACT
The concern in Indonesia is that explicit regulations
addressing this issue still need to be improved. This study aims to analyze the
legal dilemmas surrounding diploma retention, identify weaknesses in current
regulations, and propose solutions to protect employee rights. Using a
normative juridical approach, this research employs statutory and conceptual
methodologies. Data were collected through document analysis of legal statutes,
employment agreements, and relevant legal literature. The findings indicate
that ambiguity in regulatory frameworks concerning legal sanctions leads to
repeated violations and construction failures.
The findings reveal that diploma retention as collateral needs a solid
legal foundation, creating an imbalance of power that disadvantages employees.
The study highlights the novelty of examining diplomas as collateral within the
broader principles of collateral law, offering new perspectives on their
inapplicability as valid collateral objects. By proposing clear regulatory
frameworks and alternative approaches, such as proportional penalties, the
study contributes to safeguarding workers’ rights while addressing employers'
concerns. These findings aim to promote fairness and legal certainty in
employment practices.
Keywords:
building
failures, diploma withholding, employment relationship collateral, legal
certainty, penal sanctions
Corresponding Author: Rifo Rinaldi
E-mail: [email protected]
INTRODUCTION
Indonesia is a state of law, meaning every state activity must be
subject to legal rules. As a law-governed country, Indonesia guarantees legal
protection for each of its citizens, even from the moment they are a fetus in
the womb
The law regulates relationships among individuals in society, primarily
aiming to create social tranquility, order, peace, and security
Recently, issues have arisen in employment agreements, particularly
regarding clauses burdening workers, such as withholding diplomas during the
contract period
The importance of legal protection for workers who hold their diplomas
by companies can be found in international principles. Various international
human rights legal instruments, such as the International Covenant on Civil and
Political Rights (ICCPR) and the International Covenant on Economic, Social,
and Cultural Rights (ICESCR), implicitly support individuals' rights to possess
and control personal documents. In Indonesia, the Job Creation Law provides a
legal framework that regulates workers' and companies' rights and obligations.
Although this law does not explicitly address diploma withholding, the
principles of equality, fair treatment, and the right to privacy recognized
within it can serve as a basis for re-evaluating such practices if they risk harming
employees.
Recently, issues have arisen in employment agreements, particularly
regarding clauses that burden workers, such as the withholding of diplomas
during the contract period. This practice has gained attention due to the
imbalance between job seekers and available positions, compounded by rising
living costs. For instance, Egels-Zandén and Lindholm
Moreover, international human rights instruments, such as the
International Covenant on Economic, Social, and Cultural Rights (ICESCR), have
increasingly been applied to employment practices to uphold workers' rights
Employers'
withholding of original diplomas has been a contentious issue in employment
relationships, as it often places employees in a vulnerable position. A notable
case occurred in Indonesia, where employees complained against a prominent
company for retaining their diplomas as collateral for employment contracts.
These employees argued that this practice restricted their ability to seek
better opportunities and pursue further education, leading to career stagnation
and financial distress. The case highlighted significant gaps in labor law, as
no explicit legal framework addressed the permissibility or conditions for such
practices. The company justified its actions to ensure employee loyalty and
prevent abrupt resignations; however, the lack of clear regulations left the
affected workers with limited recourse to reclaim their documents. This
incident underscores the need for legal clarity and protections surrounding
diploma retention practices. By examining such cases, this study aims to shed
light on the implications of withholding diplomas in employment and offer
actionable solutions to safeguard employee rights while addressing employer
concerns.
METHOD
The normative juridical research method is used in legal studies to
examine legal documents and norms
RESULT AND DISCUSSION
According to the Job Creation Law, an employment agreement is a
consensus between workers or laborers and employers that regulates working
conditions, as well as the rights and obligations of each party
The contents of an employment agreement include substantive elements,
such as types of work that must comply with applicable legal provisions and
social norms. According to Article 52, paragraph (1) of the Job Creation Law,
the employment agreement is formulated considering the mutual agreement of both
parties, their legal capacity, the existence of a mutually agreed work, and
compliance with legal and ethical standards. As the foundation of the
employment relationship, the employment agreement is part of the obligation
that must satisfy the principles of contract law and the valid conditions for
obligations. Contract law has three main principles: the principle of freedom
of contract, the binding nature of contracts, and the principle that contracts
only bind the parties who have agreed to them. The principles of contract law
include the principle of consensualism, the principle of freedom of contract,
the principle of binding force, the principle of good faith, the principle of
privity of contract, the principle of equality in contracts, and the principle
of good faith as a foundational element of law as a whole. These principles
should be realized equally in every agreement without prioritizing one over
another, as inequality among the principles can lead to an imbalance that harms
one party.
The principle of freedom of contract grants parties the freedom to
determine the agreement's content, terms, and form as long as they do not
contradict applicable legal provisions. This freedom reflects the rights of the
parties to arrange their respective rights and obligations according to their
interests while adhering to legal boundaries and moral norms. The principle of
the binding nature of contracts states that agreed-upon contracts have a legal
force that must be upheld by the parties involved. In other words, this
contract serves as a law for them, obligating both parties to fulfill the
commitments they have agreed upon in the agreement. This is also known as the
principle of pacta sunt servanda, meaning agreements must be respected and
fulfilled responsibly. The principle that an agreement binds only the parties
that have consented or the principle of privity of contract asserts that a
contract only creates rights and obligations between the parties who sign it
and does not bind third parties. This protects the rights of third parties from
being harmed by contracts they did not create and ensures obligations in the
agreement do not extend to parties uninvolved. Besides these three main
principles, several other principles also affect the validity and effectiveness
of a contract, such as the principle of consensual emphasizing that a contract
is formed based on honest agreement from both parties and the principle of
equality in contracts ensuring that no party is unjustly favored or harmed
unilaterally. All these principles, perfect faith, must be implemented
collectively in every agreement. If one principle is overly prioritized, it can
lead to imbalances that may result in injustice and potential harm to one
party. Equal application of these principles creates a healthy and just
contractual relationship.
The terms of employment agreements in Article 52 of the Employment Law,
which the Job Creation Law has now repealed, bear similarities to the valid
conditions of an agreement according to Article 1320 of the Civil Code.
Specifically regarding the agreement condition or the principle of
consensualism regulated in Article 1320 paragraph (1) of the Civil Code,
various theories assert that the agreement condition is only considered
fulfilled if both parties have the freedom to express their will without any
force or pressure, whether physical or psychological, in agreeing. The
agreement condition is only deemed fulfilled if this freedom is met. If the
condition related to the agreement's subject, the freedom to make agreements,
is not met, the agreement can be annulled. This follows the provisions of
Article 1321 in conjunction with Article 1323 of the Civil Code, where Article
1321 states that there is no valid agreement if the agreement is reached due to
error, coercion, or fraud. Article 1323 further explains that coercion against
a person agreeing may serve as grounds for annulment, even if such coercion was
carried out by a third party for the interest of the agreement.
By adopting this provision, employment agreements made without free
consensus between the parties should also be eligible for annulment in court.
If the court decides that the agreement is annulled, then the agreement is
considered null and void. Thus, the parties bound by the agreement are not
obligated to pay penalties or other provisions. However, if the agreement is
not declared null, then Article 62 of Law No. 13 of 2003, which the Job
Creation Law repealed, applies, stating that if one party terminates the
employment relationship before the term of the fixed-term employment agreement,
the terminating party must pay compensation to the other party equivalent to
the worker's wages until the term of the agreement expires. This does not apply
if there are exceptions such as the death of the worker, expiration of the
employment agreement, court decisions, or decisions by industrial relations
dispute resolution bodies that have legal force, or specific events as
stipulated in the employment agreement, company regulations, or collective
labor agreements.
Referring to the Job Creation Law, no provisions require the diploma to
be submitted to the company. This diploma retention policy may be practiced by
several companies that ignore the provisions in employment regulations. The
practice of diploma retention by companies can occur as long as there is an
agreement between the worker and the employer, generally articulated in the
binding employment agreement, either verbally or in writing. However, in this
context, the worker's position tends to be weaker, so this agreement could
potentially harm the worker. Although employment law does not explicitly
regulate the diploma retention policy, some companies still withhold employees'
diplomas as security in the employment agreement. In practice, this diploma
retention often serves as a tool to pressure employees to comply with the rules
and terms of the employment contract, such as maintaining their work commitment
or avoiding resignations without notice. However, clear regulations regarding
this practice make employees vulnerable, mainly when the agreement is
unbalanced. The lack of strict legal rules often compels employees to feel
forced to accept these terms to secure employment, even though the
ramifications could be detrimental if they wish to terminate their employment
relationship.
Regarding the diploma as collateral in employment relationships, this
collateral concerning construction is an additional or accessory security.
Security is understood as any form the creditor receives from the debtor
concerning the debt relationship between them. Article 1131 of the Civil Code
defines collateral or security as all property owned by the debtor, both
movable and immovable, that exists or will exist in the future, which is
subject to the entire personal obligation. Using diplomas as collateral in
employment relationships is often considered additional or accessory security.
In collateral law, this extra security serves as a mechanism to ensure that
obligations agreed upon between both parties can be fulfilled. However, since a
diploma is a personal document without direct economic value, its use as
contractual collateral faces several limitations and challenges in its
implementation. According to Article 1131 of the Civil Code, collateral or
security is anything owned by the debtor, either movable or immovable, that has
existed or will exist, which is subject to the entire personal obligation. In
the context of debts, this applies to all debtor assets as collateral for the
creditor. Although diplomas are not assets with easily measurable economic
value, some companies still use diplomas as collateral to ensure that employees
do not leave jobs without permission or violate contracts.
Using diplomas as contractual collateral can be valid if both parties
agree upon a binding contract. However, its compliance with the principles of
collateral in the Civil Code remains debated. Collateral regulation in the
Civil Code should ideally have a tangible nature, possess economic value, and
be transferable. However, diplomas need to meet these criteria as they cannot
be transferred and lack direct sale value. The purpose of withholding diplomas
by companies is to make the employee's original diploma the object of
collateral in the employment agreement between the company and the employee.
This reflects a broad interpretation of the concept of collateral objects.
Essentially, a tangible collateral object can be transferred and has economic
value. However, diplomas as collateral only partially satisfy these criteria
because they lack transferability and market value. Nevertheless, some
companies now use copies of employees' diplomas as collateral for employment
contracts.
According to Article 1320 of the Civil Code, the valid conditions for an
agreement include the parties' consensus. Thus, using diplomas as employment
collateral is considered valid as both parties, the company and the worker,
approve it, resulting in a legal bond (Article 1331 of the Civil Code). Until
now, no government regulation has explicitly prohibited using diplomas as
collateral, so legally, the status of diplomas as contractual collateral can be
considered valid. The diploma can be treated as collateral for tangible assets,
even though it does not fall into the category of pure property collateral.
As a collateral object, a diploma only holds power over its original
document, an authentic letter. Generally, the company only requires the
original diploma to be compared with the copies kept by the company. The
function of the diploma as collateral is to ensure that workers fulfill their
obligations under the employment contract, serving as a coercive tool. However,
a diploma can only be collateral for employment obligations, not debts. This
necessitates a notarial deed in Indonesian for the imposition of fiduciary
collateral. Employment regulatory legislation, including the Job Creation Law,
does not address companies' rights or prohibitions regarding withholding
employees' documents, including diplomas. However, based on collateral law, an
object used as a general guarantee must meet specific criteria, such as
possessing economic value and being transferable. If the company requires the
submission of diplomas as employment collateral in a document separate from the
employment agreement, this needs to be reviewed against the relevant legal
basis. According to principles in collateral law, documents such as diplomas
cannot serve as collateral due to their lack of economic value, typically found
in valuable securities such as land certificates, shares, and bonds. Therefore,
diplomas, which do not possess direct monetary value, need to meet the
requirements to be considered collateral.
Regulations regarding diploma retention as collateral in employment
relationships in Indonesia have several significant weaknesses that impact the
protection of employee rights. First, the absence of provisions that explicitly
regulate or prohibit the practice of diploma retention in the Job Creation Law
allows this practice to operate in a "gray area," often leading
companies to misuse it to coerce workers into adherence to employment
contracts. Concerning collateral, diplomas do not possess direct economic value
and are not transferable objects. Thus, their use as collateral does not align
with the principles of property collateral in the Civil Code. The withholding
of diplomas without clear regulations poses potential harm to employees,
especially if there is an imbalance of bargaining power between the company and
the employees, possibly forcing workers to agree to diploma retention terms
that could be better for them. This legal vacuum also complicates employees'
efforts to demand the return of their diplomas when disputes arise, leaving
them in a vulnerable position without adequate legal protection. This
highlights the need for more specific and stringent regulations concerning
diploma retention in employment laws to balance rights and obligations between
employees and companies.
The absence of specific regulations prohibiting the retention of
diplomas as collateral in employment relationships creates a legal loophole
that certain companies often exploit. Current labor regulations do not
explicitly govern this practice, leaving companies that choose to withhold
employees’ diplomas without clear legal consequences. This practice becomes a
security measure for companies to ensure that employees remain committed or
fulfill specific obligations in their employment contracts, even though there
is no solid legal basis to support such actions. In this situation, employees’
bargaining positions tend to be weak, as they often feel compelled to agree to
the terms of diploma retention to obtain or maintain their employment.
Moreover, this practice is frequently carried out without written consent or
transparent requirements, meaning employees are not assured when their diplomas
will be returned. As a result, employees wishing to terminate their employment
or move to other companies unilaterally often find it challenging to reclaim
their diplomas, which are vital personal documents—retaining diplomas as
collateral raises ethical and practical dilemmas regarding employees’ rights to
their papers. A diploma serves as proof of educational attainment that should
be in the possession of its holder, not held by a third party such as a
company. However, due to the lack of specific prohibitions within the law, this
practice has become a habit that is difficult for employees to contest, even if
they feel aggrieved.
The absence of binding regulations regarding diploma retention further
complicates employees’ ability to litigate this issue in court, as no solid
legal basis explicitly governs it. In the workplace, especially in the formal
sector with high competition, employees often find themselves in a weaker
bargaining position than companies. This situation is exacerbated by employees'
dependence on their jobs, which usually leads them to overlook employment
contract terms that may disadvantage them. Diploma retention as collateral
frequently adds to this imbalance. Employees typically feel pressured to accept
unfair company policies due to fear of job loss, particularly in challenging
labor market conditions. This situation creates significant psychological
pressure for employees. The retention of diplomas can be seen as a form of
control exerted by the company, which ensures that employees remain within the
constraints set by the employer. With the retention of diplomas, companies can
leverage a stronger bargaining position to coerce employees into agreeing to
terms that may not align with their interests. Employees often feel trapped and
have little choice but to accept the requirements offered, even when they
recognize that doing so could negatively impact their careers and futures. This
imbalance may lead employees to feel powerless in asserting their rights.
Although they may realize that diploma retention is not aligned with fair
practice, many believe asserting their rights may lead to negative
consequences, such as job loss or damage to their reputation within the
industry. In the long term, this situation harms individuals and creates an
unhealthy work culture where employees feel trapped and pressured by unjust
practices.
In civil law, collateral or guarantees should fulfill specific criteria,
including possessing economic value and being transferable. A diploma, a
personal document that proves educational attainment, needs to meet these
requirements. Although diplomas can be viewed as symbols of academic
achievement, they cannot be sold and lack measurable monetary value.
Consequently, using diplomas as contractual collateral raises doubts regarding
their validity and legality as collateral objects. This issue becomes even more
complex when differing interpretations arise concerning the status of diplomas
in employment relationships. Some parties may argue that diplomas can be
collateral to ensure employees do not breach contracts.
In contrast, others may oppose this usage because diplomas do not meet
the criteria of valid collateral. This uncertainty can lead to prolonged legal
disputes, in which employees pressed by diploma retention policies find
themselves needing more legal protection. In such cases, employees need legal
certainty regarding their right to lose their diplomas. Therefore, legal
resolution can be complex if a dispute arises between the employee and the
company concerning the status of the diploma as collateral. Courts may need to consider
various factors, including the purpose of using diplomas as collateral,
agreements between both parties, and general principles of civil law. This
uncertainty can often disadvantage employees who do not adequately understand
their rights. This creates a scenario where employees feel they lack the power
to seek justice, further deteriorating their bargaining position with the
company.
The lack of legal protection for employees about diploma retention
creates extremely disadvantageous conditions, especially in labor disputes.
Employees often find themselves in a weak position when conflicts arise between
employees and companies, particularly regarding the retention of diplomas as
collateral. They need clear and definitive regulations governing this practice
to obtain justice. The absence of rules protecting their rights leaves many
employees feeling trapped, with no option to demand the return of their
diplomas without risking termination or retaliation from the company. This
situation is exacerbated by diplomas being essential documents for various
purposes, including further education, applying for new jobs, or fulfilling
other administrative requirements. Employees lose proof of their education when
diplomas are withheld and forfeit opportunities to enhance their quality of
life and careers. This has social and economic repercussions, leading employees
trapped in such situations to experience reduced income, career instability,
and even psychological impacts due to feelings of powerlessness. The ambiguity
surrounding the status of diploma retention also complicates the dispute resolution
process. Employees may find asserting their rights in court challenging due to
the need for clear legal precedents. Without adequate legal support, employees
often feel compelled to accept unjust conditions, ultimately exacerbating
dissatisfaction and frustration in the workplace. This can result in a high
turnover rate, with employees choosing to leave the company rather than risk
losing their diplomas.
Therefore, there is a need to establish clear regulations regarding
diploma retention as collateral in employment relationships, which is an
essential step toward creating legal certainty and protection for both parties,
workers and employers. These regulations should detail the provisions that must
be adhered to, including the conditions to be met for diploma retention to be
considered valid. With such regulation, workers will clearly understand their
rights and obligations concerning diploma retention, preventing them from
feeling pressured or compelled to agree to detrimental terms. One aspect that
needs to be addressed is the emphasis on agreements that must be free from
coercion. This is crucial to ensure that any deal involving diploma retention
is made voluntarily and is not tainted by psychological or physical pressure.
This provision could include the necessity of written evidence showing that
workers agreed to hand over their diplomas as collateral, as well as mechanisms
to ensure that workers understand the consequences of their decisions.
Regulations could also include provisions for regular review of agreements,
allowing workers to reconsider their choices without fear of negative
repercussions.
Clear regulations will also assist companies in implementing diploma
retention practices more responsibly. With definite guidelines, companies will refrain
from retaining employees' diplomas recklessly and will be compelled to consider
the legal implications of their actions. This may reduce the risk of future
legal disputes and foster a more harmonious employer-employee relationship.
Companies can avoid the negative reputation that may arise from unethical or
harmful diploma retention practices. These regulations could include sanctions
for companies that violate provisions regarding diploma retention
Enhancing the socialization and understanding of employee rights is
crucial to creating a fair and balanced work environment
Companies should consider employing other more relevant collateral with
economic value as an alternative to retaining diplomas as collateral in
employment relationships. One approach could be the application of proportional
fines or penalties for employees who violate terms in their employment
agreements. In this way, companies can still ensure employee compliance without
relying on retaining personal documents that should not be used as collateral.
The fines or penalties imposed can be clearly defined in the employment
contracts and should reflect the nature of the violations committed, creating
justice and transparency for both parties. Implementing a bonus or incentive
system for employees who perform well or meet work expectations could also be
an appealing alternative. This motivates employees to work better and fosters a
more productive work culture. By emphasizing performance-based rewards,
companies can encourage employees to comply with work rules and conditions
while reducing the risk of disputes regarding diploma retention.
Therefore, the government needs to reinforce the role of industrial
relations dispute resolution institutions (PHI) by providing mechanisms for
complaints that are more accessible to employees. These institutions must be
able to handle complaints related to diploma retention and detrimental work
practices. Employees can report issues without complex and costly legal
processes by providing a clear and structured complaint channel. This will make
them feel more protected and heard when confronting unfair practices. Easy and
affordable dispute resolution also has the potential to reduce tensions between
employees and employers. When employees know they have access to quick and
efficient resolutions, they are more likely to bravely raise complaints about
diploma retention or other inappropriate practices. In this regard, the
government’s role is crucial to ensure that dispute resolution institutions
have sufficient resources and expertise to handle the various issues that may
arise. Thus, these measures will enhance employee protection and create a fair
and harmonious work environment.
CONCLUSION
The practice of
retaining diplomas as collateral in employment relationships in Indonesia
presents significant legal and ethical issues. The absence of explicit
regulations in the Job Creation Law creates a legal loophole that allows
companies to exploit employees, particularly those in weaker bargaining
positions. Diplomas, as personal documents with no economic value and
non-transferable, do not meet the requirements for valid collateral under the
Civil Code. This practice harms individual employees and perpetuates injustices
in the employment relationship.
Clear and
comprehensive regulations are urgently needed to address this issue. Retaining
diplomas creates legal uncertainty and disrupts the balance of power between
employees and employers, often compelling employees to accept unfair terms. It
is essential that any employment agreements are free from coercion and respect
employees' rights to their personal documents. Employers should explore
alternatives such as proportional fines or rewards for high performance,
promoting fairness in the workplace. To empower employees and protect their
rights, greater socialization of employees' rights is necessary, alongside
enhanced access to industrial relations dispute resolution institutions.
Strengthening these institutions will ensure that employees can easily file
complaints and seek redress when their rights are violated. By implementing
these measures, Indonesia can foster a fairer and more harmonious employment
environment that respects the rights and dignity of all workers.
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