How To Lose Your Job– Part iii: Authorized Causes

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Posted by Sonnie

May 10, 2007 | 4,798 Views |

This is the 4th installment to my blog series “How To Lose Your Job”. The intention of this series is to guide entrepreneurs how to weed their organization of the “pasaways” the proper way, and at the same time educate employees of their rights and the parameters governing security of tenure and due process of law. Either way, I hope to add value to readers.

In an earlier post, we have discussed about the the valid causes to terminate an employee — (1) the just causes or the acts of the employee that can lead to termination and (2) the authorized causes or the other factors, aside from the act of the employee, that may also lead to termination.Part i and part ii of this series has focused on the just causes, and on this issue, we’ll look into the authorized causes.

Art. 283 and 284 of the Philippine Labor Code

Art. 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.

Art. 284. Disease as ground for termination. An employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his co-employees: Provided, That he is paid separation pay equivalent to at least one (1) month salary or to one-half (1/2) month salary for every year of service, whichever is greater, a fraction of at least six (6) months being considered as one (1) whole year.

On this post, let’s focus on Art. 283

Yes, you read it right, an employee can also lose his job for the following reasons:

• installation of labor-saving devices
• redundancy
• retrenchment to prevent losses
• the closing or cessation of operation of the establishment.

Installation of Labor Saving Devices, Redundancy

With the stiff global competition, an enterprise, in order to survive, must institute productivity measures. This can be in a form of investment on equipment, technology or systemization of operations. This may result to the streamlining of organization and make certain positions “redundant” (in short, not needed). In this way, an employee can lose his job.

Retrenchment

Likewise, if an establishment is not making enough to keep itself afloat, one option is to downsize it’s operations. Downsizing will also lead to the termination of some employees.

Closure

On extreme situation, if the losses can’t be reversed, the best option may be to shut down operations. In this case, all employees will lose their job.

Losses, however, is not a pre-requisite for an investor to close his company. A capitalist may opt to pull out his investments and relocate to another country. This had happened in the Philippines where in some companies relocated their operations to another ASEAN country or China, for productivity and competitiveness reasons.

In all of these, guidelines are in place so employers will know how to go about the situation. Like in cases of redundancy and retrenchment, bases on who to retain and who to terminate should be clear. Like the first in-last out method or performance based scheme. End result, should be strive to be value adding to all stakeholders.
Other pre-requisites provided for by the law are as follows:

• serving a written notice on the workers and the Department 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. A fraction of at least six (6) months shall be considered one (1) whole
• 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. Please note that financial assistance may not be required if closure is due to serious business losses.

This series is far from over, I first thought this will end after 3-4 posts but the more I think about it, the series may turn out to be longer than I expected. Those who missed the previous posts, go visit these links:

1. How to lose your job: i n t r o d u c t i o n
2. How to lose your job: part i– killing you softly
3. How to lose your job: part ii– pull the trigger

aside:

readers outside the Philippines are advised to look into their country’s labor code or related laws.

disclaimer:

The opinions expressed herein does not constitute legal advise. For professional help, please seek the services of a lawyer.

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