Retrenchment and security of tenure
The Department of Labor and Employment has urged and encouraged employers to adopt flexible work arrangements as remedial measures due to Covid-19.
Employers were asked to consider remedial measures instead of removing employees or closing businesses. However, sometimes, these remedial measures are not enough.
Companies have to make painful decisions to lay off or retrench employees to save the business.
The Labor Code of the Philippines recogni-zes retrenchment as a right of the management to meet clear and continuing economic threats or during periods of economic downturn to prevent losses.
Retrenchment is the termination of employment initiated by the employer through no fault of and without prejudice to the employees. It is an act of the employer of dismissing employees because of losses in the operation of a business, lack of work, and considerable reduction on the volume of his business.
In order to legally retrench employees, the following must be followed: 1. Retrenchment is undertaken to prevent losses, which are not merely de minimis, but substantial, serious, actual, and real, or if only expected, are reasonably imminent as perceived objectively and in good faith by the employer; 2. The employer serves written notices both to the employees and the DOLE at least one month prior to the intended date of retrenchment; 3. The employer pays the retrenched employees separation pay equivalent to one month pay or at least ½ month pay for every year of service, whichever is higher; 4. The employer must use fair and reasonable criteria in ascertaining who would be dismissed and retained among the employees; and 5. The retrenchment must be undertaken in good faith.
What is the right to security of tenure? The right to security of tenure means that a regular employee shall remain employed unless his or her services are terminated for just or authorized cause and after observance of procedural due process.
An employer may dismiss an employee on the following just causes: a. serious misconduct; b. willful disobedience; c. gross and habitual neglect of duty; d. fraud or breach of trust; e. commission of a crime or offense against the employer, his family or representative; f) other similar causes.
The other grounds for terminating an employment are authorized causes: a. installation of labor-saving devices; b. redundancy; c. retrenchment to prevent losses; d. closure and cessation of business; and e. disease/illness.
However, before terminating the services of an employee, the procedure an employer must observe is the procedural due process before terminating one’s employment.
The components of procedural due process are; in a termination for just cause, due process involves the two-notice rule: a. A notice of intent to dismiss specifying the ground for termination, and giving said employee reasonable opportunity within which to explain his or her side; b. A hearing or conference where the employee is given opportunity to respond to the charge, present evidence or rebut the evidence presented against him or her; c. A notice of dismissal indicating that upon due consideration of all the circumstances, grounds have been established to justify termination.
In a termination for an authorized cause, due process means a written notice of dismissal to the employee specifying the grounds at least 30 days before the date of termination. A copy of the notice shall also be furnished the DOLE regional office where the employer is located.