Companies Withholding Employees’ Diplomas: Is it Legal?

By 28 October 2022 Articles

Diplomas are essential documents that serve as proof of graduation from formal education. However, in some cases, employees are demanded to give up this essential, personal document and be ready for it to be withheld by the company where they work.

In fact, companies requesting copies of several documents such as ID cards, transcripts, and diplomas, is common practice. This is so companies can verify the accuracy of the information listed on diplomas and transcripts through the Education-verification platform.

There are several companies that ask for and withhold original diplomas once candidates are declared accepted as official employees. This certainly needs to be taken into consideration when employees seek to join companies that mandate this.

Reasons for withholding an employee diplomas

According to a career development expert interviewed by Kompas, the main reason the company does this is to prevent employees from easily leaving the company. This is certainly related to the need for company management to retain employees for longer periods within the company, so as to reduce the percentage of employee turnover.

This, in turn, is associated with the company’s efforts to secure its confidential and internal information—preventing employees in certain positions from resigning or moving to competing companies.

Trying to achieve this by withholding employee diplomas is actually an old-school method that is still practiced by several companies to this day. Other more up-to-date methods are by creating agreements to impose penalties for employees who leave before the mutually agreed-upon working period, applying Non-Disclosure Agreements (NDA) to maintain company confidentiality, and/or extending notice periods.

Is it legal to withhold diplomas?

To answer this question, there are two sides that need to be considered. On one hand, the act of withholding employee diplomas is not regulated in the Manpower Act No. 13 of 2003 and Law No. 11/2020 on Job Creation, specifically the employment cluster and its implementing regulations—there are no regulations regarding the provisions for the detention of diplomas. This means that there are no provisions or prohibitions for companies to legally detain their employees’ diplomas.

Nevertheless, the detention of employee diplomas can only be done if there is a written agreement between the company and the employee. The agreement must state that the employee is aware and willing to submit the diploma as collateral while working at the company concerned.

Conversely, with the agreement, the company is now responsible for the employee’s diploma. If the diploma is lost or damaged, the company must bear the risk.

Before signing the agreement, employees must pay attention to and understand the intended withholding period of the diploma, the terms and conditions of the agreement, and the risks that may occur. Employees must also understand their position in the company so they are aware of the need to submit original educational diplomas to the company.

It’s illegal if…

According to a legal practitioner, Fauzan Amin, the founder of Fauzan Haryanto & Partners Law Firm, one thing to note is that the agreement should not be made based on coercion.

The detention of a diploma will be considered illegal if, in the process of making the agreement, there is a violation of the provisions of Article 1320 of the Civil Code concerning the legal terms of agreements, and it is carried out in bad faith.

Such violations and bad faith may include:
The company retaining the employee’s diploma beyond the agreed-upon period.
The company deliberately did not notify the payment penalty or other conditions that accompany the detention of the diploma.
The company damages or misplaces the collateral certificate.
The company retains the employee’s diploma even after they have completed their obligations.

If any of the above occurs, the employee has the right to report the company to the authorities. Even so, before making this choice, both parties should prioritize the principles of amicable deliberation.

The impact of withholding a diploma

Apart from the potential legal consequences faced by each party, companies should reconsider this act of withholding diplomas. There are several liabilities that can accompany this policy.

First, the act of withholding an employee’s diploma seemingly places the company in a higher position compared to the employee. This should not be the case, as a two-party agreement requires both parties to be equal before the law.

Second, this kind of system gives the impression that the company exhibits an excessive “fear” due to high turnover in the organization. This, in turn, affects the credibility and reputation of the company, especially in the eyes of prospective employees.

In the end, diplomas are not documents that can simply be handed over to other parties, since they are considered essential, personal documents. Furthermore, this act of withholding diplomas limits a person’s opportunities to develop a career in other companies, so both parties should reconsider before entering into this agreement.


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