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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
An employer may terminate the employment of an employee due to (1) the installation of labor-saving devices, (2) redundancy, (3) retrenchment to prevent losses, or (4) the closing or cessation of operation of the establishment or undertaking. (Article 298, Labor Code)
Business-related causes refer to the grounds for termination explicitly provided under Article 298 of the Labor Code. These are 1) the installation of labor-saving devices, (2) redundancy, (3) retrenchment to prevent losses, or (4) the closing or cessation of operation of the establishment or undertaking.
The law says:
“Article 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof.
In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher.
In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.” (Article 298, Labor Code, as renumbered)
Installation of labor-saving device
Rule I-A, DOLE Department Order No. 147-15 defines installation of labor-saving device as the reduction of the number of workers in any workplace made necessary by the introduction of labor-saving machinery or devices. (Section 4 (m), Rule I-A, DOLE Department Order No. 147-15)
Redundancy
Redundancy refers to the condition when the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise or superfluous. Section 4 (q), Rule I-A, DOLE D.O. No. 147-15)
As held in the case of Bernilo Aguilera v. Coca-Cola FEMSA Philippines, Inc. (G.R. No. 238941, September 29, 2021), the characterization of an employee’s services as redundant, and therefore, properly terminable, is an exercise of management prerogative, considering that an employer has no legal obligation to keep more employees than are necessary for the operation of its business. But the exercise of such prerogative “must not be in violation of the law, and must not be arbitrary or malicious.
Jurisprudence says:
“An employer has no legal obligation to keep more employees than are necessary for the operation of its business. In fact, even if a business is doing well, an employer can still validly dismiss an employee from the service due to redundancy if that employee’s position has already become in excess of what the employer’s enterprise requires.” (3M Ohilippines, Inc. v. Lauro Yuseco, G.R. No. 248941, November 09, 2020)
Retrenchment
Retrenchment refers to the economic ground for dismissing employees and is resorted to primarily to avoid or minimize business losses. Section 4(r), Rule I-A, DOLE D.O. No. 147-15)
Jurisprudence says:
“Alleged losses if already realized, and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence. The reason for requiring this quantum of proof is readily apparent: any less exacting standard of proof would render too easy the abuse of this ground for termination of services of employees.” (Andrada, et al. v. NLRC, G.R. No. 173231, December 28, 2007)
Closure or cessation of business operation
Closure or cessation of business refers to the complete or partial cessation of the operations and/or shut-down of the establishment of the employer. Section 4 (c), Rule I-A, DOLE D.O. No. 147-15)
Termination dues to the above business-related causes
For a termination due to business-related causes to be considered as valid, the employer must serve written notices of the intended termination separately and simultaneously to the employee or employees to be terminated, and to the appropriate DOLE Regional at Office at least one (1) month before the intended date of termination specifying the ground/s therefor and the undertaking to pay the separation pay required under Article 298 of the Labor Code.
Jurisprudence says:
“It must be noted that in termination cases, the employer bears the burden of proving that the employee’s dismissal was for a valid and authorized cause. Consequently, the failure of the employer to prove that the dismissal was valid, would mean that dismissal was unjustified, and thus illegal.” (San Miguel Corporation v. Rosario Gomez, G.R. No. 200815, August 24, 2020)
Read also: Disregarding Company Rules and Regulations: A Ground for Termination
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