REQUIREMENTS FOR THE VALID TERMINATION OF EMPLOYMENT DUE TO AUTHORIZED CAUSES
By: Atty. Nica Marsha Gasapo on October 8,2020
The Supreme Court has emphasized that a person’s employment — the main source of livelihood for most families — is something that no one may be deprived of without due process of law. This basic doctrine has gained special significance after the coronavirus pandemic caused mass layoffs, workforce reductions and business closures.
Laying off workers or downsizing a firm’s workforce to prevent or minimize economic losses or avoid closure are among the authorized causes for the termination of employees recognized by the Labor Code of the Philippines. Such causes are those brought about by the necessity and exigencies of business and changing economic conditions. Other causes include the installation of labor-saving devices, redundancy and an employee’s disease.
When dismissing an employee for an authorized cause, the employer must observe both the procedural and substantial due process of law. The employer satisfies procedural due process, which constitutes compliance with the procedures laid down in the Labor Code, after serving a written notice of termination to the employee concerned, and the appropriate regional office of the Department of Labor and Employment, at least 30 days before the effective date of the termination, specifying the ground/s for termination. The employer follows substantial due process when the requisites for the authorized cause/s are present and supported by substantial evidence.
To validly terminate employment due to retrenchment (or downsizing the workforce to prevent or minimize economic losses), the employer must prove that the move is arguably necessary and likely to prevent losses. He or she must also prove that these losses, if already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, must be reasonably imminent. The retrenchment must also be done in good faith and not for defeating or circumventing the employee’s rights. When selecting the employees to be retrenched, the employer must use fair and reasonable criteria, such as status, efficiency, seniority, physical fitness, age and financial hardship.
Closure or cessation of operations
For closure or cessation of operations to be a valid ground for termination, the employer must prove that: there must be a decision by the management to do so; the decision was made in good faith; and there is no other option available to the employer except to close or cease operations.
Installation of labor-saving devices
In case the termination or downsizing of workforce is due to the installation of labor-saving devices, there must be an introduction of machinery, equipment or other devices that was done in good faith. Also, the purpose for this introduction must be valid, such as to save on costs, enhance efficiency or other justifiable economic reasons. There also must be no option available to the employer other than introducing the machinery, equipment or device and the consequent termination of the employment of those affected by it. Finally, there must be fair and reasonable criteria used in selecting which employees would be terminated.
On redundancy, there must be: superfluous positions or services of employees; the positions or services are more than what are reasonably demanded by the actual requirements of the enterprise to operate economically and efficiently; good faith in abolishing redundant positions; fair and reasonable criteria in selecting the employees to be terminated; and adequate proof of the basis of redundancy, such as but not limited to the new staffing pattern, feasibility study or proposal on the viability of the newly created positions, job description, and management’s approval of the restructuring.
For the termination of an employee on account of a disease to be valid, the employer must prove that the employee concerned must be suffering from it; his or her continued employment is prohibited by law or prejudicial to his or her health and to those of his or her co-employees; and there must be a certification from a competent public health authority that the disease cannot be cured within six months, even with proper medical treatment.
An employee terminated on the ground of retrenchment or closure or cessation of business not due to serious business losses or financial reversal is entitled to a separation pay equivalent to one-month pay or at least one-half-month pay for every year of service, whichever is higher.
In case the termination is due to installation of labor-saving devices or redundancy, the employee concerned shall be paid by the employer a separation pay equivalent to at least one-month pay or at least one-half-month pay for every year of service, whichever is higher.
If the ground for termination is disease, the employee shall be paid a separation pay equivalent to at least one-month salary or one-half-month salary for every year of service, whichever is higher.
For all the instances cited, a fraction of six months’ service is considered one year.