Published — February 20, 2021
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.
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.
More on illegal dismissal, read also: Knowing the Difference Between Retrenchment and Redundancy as Authorized Causes for Dismissal from Employment
-
Retrenchment is the separation from employment without the fault of the employee
-
Retrenchment is intended for the advancement of the employer’s interest and not for the purpose of defeating or circumventing the rights of the employees
-
Employees cannot be temporarily laid-off
May you dismiss an employee from his employment on the ground of retrenchment?
The law says:
Yes.
In fact, retrenchment is defined by Supreme Court cases as the severance of employment, through no fault of and without prejudice to the employee, which management resorts to during the periods of recession, industrial depression, or seasonal fluctuations, or during lulls caused by lack of orders, shortage of materials, conversion of the plant to a new production program or the introduction of new methods or more efficient machinery, or of automation.
In other words, lay-off is an act of the employer in dismissing employees because of losses in the operation, lack of work, and considerable reduction on the volume of its business. However, lay-off would amount to dismissal only if it is permanent. When it is only temporary, the employment status of the employee is not deemed terminated, but merely suspended.
When is a retrenchment considered an illegal dismissal?
For a better understanding, let us take the case of Innodata Knowledge Services, Inc. vs. Inting et.al, G.R. No. 211892, December 6, 2017.
In this case, Innodata Knowledge Services, Inc. (IKSI) is a company engaged in data processing. At one time, Applied Computer Technologies (ACT), a company based in the United States of America, hired IKSI to review various litigation documents. Due to the nature of the job, ACT required IKSI to hire lawyers, or at least, law graduates, to review various litigation documents. For this purpose, IKSI engaged the services of Inting and other employees.
On January 7, 2010, however, Inting and the other employees received a Notice of Forced Leave from IKSI informing them that they shall be placed on indefinite forced leave effective that same day due to changes in business conditions, client requirements, and specifications. This prompted Inting and her group to file a complaint for illegal dismissal, reinstatement or payment of separation pay, backwages, and damages against IKSI. Inting and her group said that there was a constructive dismissal.
Is an indefinite forced leave valid?
The law says:
No.
The law set six (6) months as the period where the operation of a business undertaking may be suspended resulting to the suspension of employment. The resulting temporary lay-off where the employees likewise cease to work, should also not last longer than six (6) months. After the period of 6 months, the employees should either then be recalled to work or permanently retrenched following the requirements of the law. Failure to comply with the requirement would be tantamount to dismissing the employees, making the employer responsible for the dismissal.
In other words, the employer may validly put his or her employees on forced leave or floating status upon a genuine suspension of the operation of its business for a period not exceeding six (6) months. In such a case, there is no termination of the employment of the employees, but only a temporary displacement. When the suspension of the business operations exceeds six (6) months, then the employment of the employees would be deemed terminated, and the employer would be liable for the same.
Was there a valid retrenchment in the case?
The Supreme Court says:
There is none.
In this case, IKSI never presented any evidence that would indicate that there is a genuine suspension of its business operations or undertaking. It failed to prove that there is a clear and compelling economic reason which reasonably constrained it to temporarily shut down its business operations or that of the ACT Project which incidentally resulted in temporarily shutting down its business operations.
In fact, IKSI still continued its operations and retained several employees who were also working on the ACT Project. The placing of an employee on floating status presupposes that there is less work than there are employees.
There being no valid suspension of business operations. IKSI’s act amounted to constructive dismissal of Inting and her group since it could not validly put them on forced leave or floating status. Assuming that there was indeed suspension of operations, IKSI did not recall Inting and her group back to work or place them on valid permanent retrenchment after the period of six (6) months as required of them by law. As a consequence, IKSI was made to pay Inting and her group the following:
- Backwages and all other benefits from the time compensation was withheld unitl the finality of the decision of the Supreme Court;
- Separation pay equivalent to one (1) month salary for every year of service, with a fraction of at least six (6) months to be considered as one (1) whole year, to be computed from the date of their employment up to the finality of the decision of the Supreme Court Decision;
- Moral and exemplary damages, each in the amount of P50,000.00;
- Attorney’s fees equivalent to ten percent (10%) of the total awards; and
- Legal interest of twelve percent (12%) per annum of the total monetary awards computed form January 8, 2010 up to June 30, 2013 and six percent (6%) per annum from July 1, 2013 until their full satisfaction.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding illegal dismissal, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
All rights reserved.
SUBSCRIBE NOW FOR MORE LEGAL UPDATES!
[email-subscribers-form id=”4″]