Conditions of Labor
to 30 days; any more than that amounts to constructive dismissal
(Pido vs. NLRC, 2007)
B. SUBSTANTIVE DUE PROCESS – AUTHORIZED CAUSES (ART. 283)
Recognition of Right Uichico v, NLRC (1997):
a. The law recognizes the right of every business entity to reduce its workforce if the same is made necessary by compelling economic factors which would endanger its existence or stability.
b. The fundamental law itself guarantees, even during the process of tilting the scales of social justice towards workers and employees, “the right of enterprises to reasonable returns of investment and to expansion and growth.”
c. To hold otherwise would not only be oppressive and inhuman, but also counter-productive and ultimately subversive of the nation's thrust towards resurgence in our economy which would ultimately benefit the majority of our people.
Procedure: At least 1 month before the intended date of termination, Employer is to serve written notice to:
Affected Employees, and
DOLE (Art 283)
Art. 283 and 284 are not exhaustive;
other authorized causes are:
a. total and permanent disability, b. disease incurable in 6 mos,
c. valid application of union security clause,
d. expiry of term employment period, e. completion of project,
f. failure in probation, etc
In computing separation pay, a fraction of at least six (6) months shall be considered as one (1) year. (Art. 283)
Authorized Causes:
1. Installation of labor saving devices (asked in the ’94 ’00 BAR)
Entitlement: Employee is entitled to separation pay of 1 month pay or 1 month pay per year of service whichever is higher.
2. Redundancy (asked in the ’89 ’94
’99 ’00 ’01 BAR)
a. Entitlement: Employee is entitled to separation pay of 1 month pay or 1 month pay per year of service, whichever is higher.
b. Definition:
Wiltshire File Co., Inc. v. NLRC (1991):
1) It exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise.
REVIEWER IN LABOR LAW Chapter 8. Termination of Employment
LABORSTANDARDS
2) A position is redundant where it is superfluous,
3) and superfluity of a position or positions may be the outcome of a number of factors, such as over hiring of workers, decreased volume of business, or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise.
c. Requisites:
Written notice served on both the Employees and the DOLE at least 1 month prior to the intended date;
Payment of separation pay equivalent to one month pay or one month pay for every year of service, whichever is higher;
Good faith in abolishing the redundant positions; and
Fair and reasonable criteria in ascertaining what positions are to be declared redundant and accordingly abolished. (Asian Alcohol Corp. v. NLRC, 1999), such as but not limited to:
Panlilio v. NLRC (1997); Golden Thread Knitting Industries, Inc. v. NLRC (1999):
1) preferred status; (e.g. temporary, casual or regular Employees)
2) efficiency; or 3) seniority.
d. Other concepts
In redundancy, the following are considered:
1) the position itself;
2) the nature of the services performed by the employee; and 3) the necessity of such position.
(Tierra International Construction Corp. v. NLRC, 1992; Edge Apparel, Inc. v. NLRC, 1998)
Redundancy does NOT refer to duplication of work. That no other person was holding the same position which the dismissed employee held prior to the termination of his services does not show that his position had not become redundant. (Escareal v.
NLRC, 1992)
Creation of positions with functions related or similar to those of the abolished functions does not necessarily invalidate the declaration of redundancy. – the old and new positions were different
and the declaration was not maliciously motivated. (Santos vs.
CA, 2001)
ER’s good faith in implementing a redundancy program is not necessarily put in doubt by the availment of services of an independent contractor. (Asian Alcohol Corp vs. NLRC, 1999)
Financial Loss is NOT a requisite.
(Escareal v. NLRC, 1992)
3. Retrenchment to prevent losses (asked in the ’94 ’98 ’00 ’01 ’03 BAR) a. Entitlement: Employee is entitled
to separation pay of 1 month pay or 1/2 month pay per year of service whichever is higher
b. Definition:
FF Marine Corp., v. NLRC (2005):
1) Retrenchment is the termination of employment initiated by the employer 2) through no fault of the employees and
without prejudice to the latter, 3) resorted to by management during
a) periods of business recession;
b) industrial depression, or c) seasonal fluctuations or
d) lulls occasioned by lack of orders, e) shortage of materials,
f) conversion of the plant for a new production program, or
g) the introduction of new methods or more efficient machinery, or of automation.
c. Basic Requisites: N N S G F
Necessary to prevent or minimize losses and such losses are proven;
Lopez Sugar Corp. v. Federation of Free Workers (1990):
Financial statements audited by independent external auditors constitute the normal method of proof of the profit and loss performance of a company.
Bogo-Medellin Sugar Cane Planters Assn., Inc. v.
NLRC (1998):
A financial statement for 2 corporate years is insufficient proof of serious business losses.
There must be one (1) month written notice to
o DOLE and the o Employees;
Separation pay is paid;
Exercise is in good faith – meaning the prerogative was exercised for the advancement of Employer’s interest and not to defeat or circumvent Employee’s right to security of tenure; and
REVIEWER IN LABOR LAW Chapter 8. Termination of Employment
LABORSTANDARDS
Fair and reasonable criteria in ascertaining who will be affected.
Normally used are preferred status, (e.g. temporary, casual or regular Employees) efficiency, physical fitness, age, financial hardship, or seniority.
d. General Standards: (S I N S) – for when retrenchment is preventive rather than curative
Losses expected are substantial and not merely de minimis in extent;
Apprehended losses are reasonably imminent, can be perceived objectively and in good faith;
Retrenchment must be reasonably necessary to prevent the expected losses – measure of last resort; and
Expected or actual losses must be proved by sufficient and convincing evidence. (Lopez Sugar Corp. vs.
Federation of Free Workers, 1990) e. Other concepts
Re-hiring or reemployment does NOT negate the imminent losses which prompted the Employer to retrench. (Atlantic Gulf and Pacific Co. of Manila v. NLRC, 1999)
Still, reorganization cannot be used as a convenient device to get rid of existing personnel in order to replace them with new ones.
(Gregorio Araneta Univ. vs. NLRC, 1987)
Reduction of work days may be considered constructive retrenchment (International Hardware vs. NLRC, 1989)
Temporary retrenchment or temporary cessation or suspension of operations: (Art 286) (asked in the ’87 ‘94 ‘99 ‘00 BAR)
International Hardware vs. NLRC (1989):
A specific period that employees may remain temporarily laid-off or in floating status. The temporary lay-off or bona fide suspension of operation of a business or undertaking wherein the employees likewise cease to work should also not last longer than six (6) months. After 6 months, the employees should either be recalled to work or permanently retrenched following the requirements of the law, and that failing to comply with this would be tantamount to dismissing the employees and the employer would thus be liable for such dismissal.
4. Closure or cessation of operations (asked in the ’90 ’94 ’99 ’00 ’01 ’06 BAR)
a. Entitlement: Employee is entitled to separation pay of one (1) month pay, or 1/2 month pay per year of service whichever is higher.
b. Employer may close or cease his business operations or undertaking even if he is not suffering from serious business losses or financial reverses, as long as he pays his employees their termination pay in the amount corresponding to their length of service. (Catatista v. NLRC, 1995)
c. Must be bona fide or in good faith.
d. It includes both the complete cessation of all business operations and the cessation of only part of a company’s business. (Coca-Cola Bottlers Inc. vs. NLRC, 1991)
e. Requirements: 1 month written notice to DOLE and Employee plus payment of separation pay
f. Separation Pay: Employee is entitled to separation pay except when:
a) Closure is due to serious business losses; or (North Davao Mining Corp. vs. NLRC, 1996)
b) Closure is due to an act of government. (National Federation of Labor vs. NLRC, 2000)
g. Special Case of Business Transfers Sale in good
faith
Purchaser, unless he contractually commits to absorb Employees of seller, has no legal obligation to retain Employees.
Seller is obliged to pay separation pay and other benefits.
EEs may be given but are not entitled to employment preference.
Sale of business is considered to be a closure and not a mere cessation of operations. (San Felipe
Neri School of
Mandaluyong vs. NLRC, 1991)
Merger Absorbing corporation must retain Employees and recognize the length of their service. (Filipinas Port Services vs. NLRC, 1991)
Consolidation Same as in merger
REVIEWER IN LABOR LAW Chapter 8. Termination of Employment
LABORSTANDARDS
5. Disease (asked in the ‘88 ‘94 ‘00 ’04 BAR)
a. Entitlement: Employee is entitled to separation pay of one (1) month pay, or 1/2 month pay per year of service whichever is higher.
b. Requisites:
a) Employee has been found to be suffering from any disease;
b) His continued employment is prohibited by law or is prejudicial to his health as well as as to the health of his co-employees; (Art. 284)
c) Payment of separation pay;
d) A medical certification by a competent public health authority that the disease cannot be cured within six (6) months even with proper medical treatment. (IRR Book VI Rule I Sec. 8)
Medical certificate cannot be dispensed with (Manly Express Inc. vs.
Payong, 2005).
It must be issued by a competent public health authority and NOT the company physician (Cebu Royal Plant vs. Deputy Minister of Labor, 1987)
AUTHORIZED CAUSES COMPARED