Termination of an employee due to substantial financial losses
"My employer incurred continuous financial losses. Subsequently, a retrenchment program was implemented by our company to prevent its total bankruptcy and closure. I was one of the 50 employees retrenched without any notice. After eight years of service, I was merely advised by my supervisor that my employment has been terminated. Was my termination valid?
We shall refer to Article 283 of the Labor Code of the Philippines, which states:“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. xxx” (Emphasis supplied)
Retrenchment to prevent financial losses is an authorized cause for terminating the services of an employee. The Supreme Court through Associate Justice Jose Perez in the case of Sanoh Fulton Phils., Inc. vs. Emmanuel Bernardo (GR 187214, Aug. 14, 2013), discussed the requirements for retrenchment to be valid, to wit:“Retrenchment is reduction of personnel usually due to poor financial returns so as to cut down on costs of operations in terms of salaries and wages to prevent bankruptcy of the company. It is sometimes also referred to as down-sizing. Retrenchment is an authorized cause for termination of employment which the law accords an employer who is not making good in its operations in order to cut back on expenses for salaries and wages by laying off some employees. The purpose of retrenchment is to save a financially ailing business establishment from eventually collapsing. xxx For retrenchment, the three basic requirements are: (a) proof that the retrenchment is necessary to prevent losses or impending losses (b) service of written notices to the employees and to the Department of Labor and Employment at least one (1) month prior to the intended date of retrenchment and (c) payment of separation pay equivalent to one (1) month pay, or at least one-half (1/2) month pay for every year of service, whichever is higher. In addition, jurisprudence has set the standards for losses which may justify retrenchment, viz: (1) the losses incurred are substantial and not de minimis (2) the losses are actual or reasonably imminent (3) the retrenchment is reasonably necessary and is likely to be effective in preventing the expected losses and (4) the alleged losses, if already incurred, or the expected imminent losses sought to be forestalled, are proven by sufficient and convincing evidence.” (Emphases supplied)
Termination on the ground of retrenchment can only be valid if there is a written notice to the employee and to the Department of Labor and Employment at least one month prior to the termination of the employee, who should be paid an equivalent of one month pay, or at least one-half month pay for every year of service, whichever is higher. Hence, your termination was not made in accordance with the requirements of the law since no written notice and separation pay was given you.In termination cases by retrenchment, the burden of proving that the termination of services is for a valid cause rests on the employer. The employer must prove that the losses are substantial and the retrenchment is necessary to forestall such losses. The employer must likewise prove that it exercised its prerogative to retrench employees in good faith and that it used fair and reasonable criteria in ascertaining who would be dismissed based on status, efficiency, seniority, physical fitness, age and skills of the employees.This opinion is solely based on the facts you have narrated and our appreciation of the same. The opinion may vary when the facts are changed or further elaborated. We hope that we were able to enlighten you on the matter.Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to "
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"Termination of an employee due to substantial financial losses"
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