BUSTAMANTE, Darniel R.

Dakanay-Galano 3-F

Atty. Rochelle Yvette

Written report on Authorized causes of Termination (Art. 283-284)

Termination of employment - is the cessation of the employment of an employee for just or authorized causes provided under the Labor Code. Authorized causes for termination - are those enumerated in Article 283-284 of the Labor Code. The definition of authorized causes as against just causes is not observed. Even the court sometimes interchange the two terms. The employer may also terminate the employment of any employee due to: 1. Installation of labor saving devices 2. Redundancy 3. Retrenchment 4. Disease 5. Closure of Establishment Although Articles 283-284 provide only the following there are other authorized causes of termination such us: 1. Total or partial disability of an employee 2. Disease not curable within 6 months 3. Valid application of union security clause 4. Expiration of term of employment 5. Completion of project in project employees 6. Failure in probation 7. Sale amounting to closure 8. Relocation of a business to a distant place 9. Defiance of return to work order

10. 11. 12.

Commission of illegal acts in a strike Retirement Death

Labor-Saving devices
Is the reduction of the number of workers in a companys factory made necessary by the introduction of machinery in the manufacture of its products.

It cannot be argued that it is the right of the management to introduce the use of labor-saving device to effect more economy and efficiency in its methods of production.

Of course the introduction of labor-saving devices should not be used to defeat the rights of the employees with respect to union activities and their right to organize

In case of termination due to installation of labor-saving devices the worker affected shall be entitled to a separation pay equivalent to at least one month (1) pay or at least (1) month pay for every year of service, which ever is higher. Written notice should be given also to the employee to be affected and the DOLE within 1 month before the intended date.

Redundancy
Exists where the services of an employee are in excess of what is reasonably demanded by the actual requirement of the enterprise.

There is redundancy when: 1. There is a over hiring of workers 2. Decrease of volume of business 3. Dropping of a particular product line or service previously being undertaken

There is valid redundancy when a company abolishes a position and institutes another with functions related or similar to those previously hired when done in good faith.

Abolition if position and transfer to lower position

o It is a management prerogative to abolish a position which is no longer necessary, absent the finding of bad faith. For as long as the termination is without malice, or is unjust, arbitrary or oppressive the court will sustain the termination. o In Petrophil vs. NLRC, the court upheld the management prerogative to transfer, demote, discipline and even to dismiss an employee to protect its business, provided it is not tainted with unfair labor practice.

o If redundancy is employed with bad faith as to remove an unwanted employee the same shall not be allowed.

In case of termination due to redundancy the worker affected shall be entitled to a separation pay equivalent to at least one month (1) pay or at least (1) month pay for every year of service, which ever is higher. Written notice should be given also to the employee to be affected and the DOLE within 1 month before the intended date.

Retrenchment
Is an economic ground that may be resorted to by an employer to terminate the employment of primarily to AVOID or MINIMIZE business losses. However, the employer has the burden of proving his allegation of economic or business reverses. Failure to prove the same would render the termination of an employee unjustified.

The employer has the right to determine who among its employees should be retained or dismissed should not be interfered with unless it was exercised in an unjust or capricious manner.

Causes for retrenchment

1. Lack of work when there is no more work available for workers they may be validly terminated. But the court may impose the condition that the employer shall not admit any new laborer, before the laid-off men who are able and willing to do the same shall have been recalled.

2. Business Recession when the management found it unnecessary to continue employing some of its laborers because of a business recession, lack of materials to work on due to government control or lack of demand for its products.

3. Other supervening event that justifies the retrenchment of employees.

Requisites of a valid retrenchment

1.

When the retrenchment is necessary to prevent or minimize losses and such losses are proven;

- it must answer the question of whether or not an employer would be imminently suffer serious or substantial losses for economic reasons is essentially a question of fact for the Labor arbiter and NLRC to determine.

2.

Written notice is given to the employee and the Department of Labor and Employment at least one month before the intended date of retrenchment;

- Notice should be given one month prior to the intended retrenchment. The notice given should

be with respect to the permanent retrenchment and not any other notice.

3.

If not due to serious financial loss separation pay is paid equivalent to (1) month or at lease (1/2) month pay for every year of service, which ever is higher.

4.

Retrenchment must be done in good faith and for the advancement of its interest and not to circumvent the right of the employees.

5.

Employer uses fair and reasonable criteria in ascertaining who will be dismissed or retained among the employees, such as status, efficiency, seniority, physical fitness, age and financial hardship.

The case of Lopez Sugar Corporation vs. Federation of free workers, provides for standards of retrenchment: 1. To prevent losses - retrenchment of some employees is authorized to be undertaken by the employer sometime before the losses anticipated are actually sustained or realized.

2. Standards which justify retrenchment Losses should be substantial and not merely de minimis. Such substantial loss must be reasonably imminent, as such imminence can be perceived objectively and in good faith by the employer. 3. Effects of unjustified retrenchment we conclude that attempted retrenchment is unjustified, all retrenched employees should be reinstated and back wages should be paid.

Retrenchment should not be allowed to be used to get rid existing personnel in order to replace them with new ones. For this purpose, the regular rules and procedures on dismissal will have to be followed.

Redundancy versus Retrenchment Redundancy results from the fact that the position of the employee has become a superfluous, an excess over what is actually needed, even if the business has not suffered reverses. It exists where the services of an employee are in excess of what is reasonably demanded by the actual requirement of the enterprise. However, retrenchment is linked with losses; it is a cost cutting measure made immediately necessary by business reduction or reverses. As to effect, the separation pay in redundancy is higher as to retrenchment on the account of the anticipated or realized economic damage. It is resorted by the management during the periods of business recession, industrial depression, seasonal fluctuations or during lulls occasioned by lack of orders, shortage of materials or conversion of the plant. Retrenchment may be permanent or temporary. It is temporary when within a 6 month period and employee temporarily retrenched is not called back to work he is deemed to be constructively dismissed. Temporary retrenchment should not last more than 1 month. Retrenchment is always based on business losses or reverses which are serious, actual and real. Reason for allowing retrenchment is the right of every business entity to reduce its workforce if such measure is made necessary or compelled by economic factors that would otherwise endanger its stability or existence.

In case of termination due to retrenchment not due to serious business losses or financial reverses, the worker affected shall be entitled to a separation pay equivalent to at least one month (1) pay or at least (1/2) month pay for every year of service, which ever is higher. Written notice should be given also to the employee to be affected and the DOLE within 1 month before the intended date.

Closure of business
The employer may terminate the services of his employee in case of the closure of business as a result of a grave financial loss. But the employer must comply with the clearance or report required under the Labor Code and implementing rules before terminating the employment.

Closure should not be arbitrary and ruthless as to find flimsy excuses for their decisions. Ratio: The means of livelihood of the employee is one the line so the termination may not be arbitrary or whimsical. The alleged financial losses as a basis for the cessation or closure of the business must be proven as the same are questions of fact. However, a business may close even if it is not suffering from any loss. The owner for reasons of his own, in good faith, can lawfully close on his own. No law compels him to stay in business. But employees should be paid the severance pay. Requisites of closure to be valid

1. Service of a written notice to the employee and to the DOLE at least 1 month before the intended date thereof; 2. The cessation or withdrawal of the business must be for bona fide in character 3. Payment of employee of termination pay amounting to at least month pay for each year of service, or 1 month pay, whichever is higher, unless the closure is for serious financial loss. A corporation may also , by management prerogative, abolish , close a department or section for economic reasons. Rationale: It would be better to close down a division or section than to close the whole business down due to economic conditions. In the case of North Davao mining the court held that if the closure or cessation is due to serious business losses or financial reverses the Labor Code does not impose any obligation upon the employer to pay separation benefits.

Closure not justifiable when: 1. Justification for closure not credible when in fact there was no indeed not substantial enough as to warrant closure.

2. When there has been unfair labor practice when closure was effected to avoid entering into a collective bargaining or to defeat the right of the employees to self organize.

Sale of the business in good faith

Is the transfer, conveyance or assignment of the interest of the previous employer to a new entity. No law prohibits the bona fide sale of a going enterprise. The transferee is not obliged to hire the employees of the previous employer. If the sale is tinged with bad faith, unfair labor practice will may make the doctrine of successor employee doctrine applicable. If there is a contract to retain the employees o the transferor the same must be honored.

Merger
This happens between the absorbing corporation and the employee of the absorbed corporation.

Ailment or disease
If the employee suffers from a disease and his continued employment is prohibited by law or prejudicial to his health or to he health of his co employees, the employee shall not terminate his employment unless there is a certification by a competent public health officer that the disease is in a nature or at a stage that it cannot be cured within a period of six months even with proper medical treatment. Burden of proof lies with the employer that the dismissal was for a valid dismissal due to a disease have been complied. In the absence of the certification of a public authority, the court has ruled against the validity of the employees dismissal. He is paid separation pay equivalent to at least 1 month salary or month salary for every year of service, which ever is greater, a fraction of at least 6 months being considered as one year.

Rationale of giving notice and separation pay:

Giving of notice is indispensable to apprise the employee that he is being lay-off and the reason for it. Also that he can properly prepare to look for a new job to which he may transfer The giving of separation pay is also necessary as to lessen the burden of the employee being lay-off for his and his familys support