How to Suspend Employment Relationship (Bona fide Suspension) Due to Natural Calamity or on Order of the Government (i.e. Taal Ashfall)

Bona-fide suspension of the operation of a business or undertaking for a period not exceeding six (6) months, or the fulfillment by the employee of a military or civic duty shall not terminate employment. (Art. 301, Labor Code; The Labor Code of the Philippines, Villanueva, pp. 295-296)

In all such cases, the employer shall reinstate the employee to his former position without loss of seniority rights if he indicates his desire to resume his work not later than one (1) month from the resumption of operations of his employer or from his relief from the military or civic duty. (Art. 301, Labor Code; The Labor Code of the Philippines, Villanueva, pp. 295-296)

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Under Art. 286 [now Article 301] of the Labor Code, a bona fide suspension of business operations for not more than six (6) months does not terminate employment. After six (6) months, the employee may be recalled to work or be permanently laid off. (Waterfront Cebu City Hotel vs. Jimenez, G.R. No. 174214, June 13, 2012 cited in The Labor Code of the Philippines, Villanueva, pp. 296)

Recently, Rappler reported that Labor Secretary Silvestre Bello III ordered business owners not to lay off any of their workers during the impending 6-month closure of Boracay starting April 26.

According to Bello, temporary suspension of business operations should not and must not result in the termination or separation of any employee. Bello said business owners can only observe the “no work, no pay” scheme, or suggest that their employees go on forced leave by using their leave credits.

Those who go on leave, according to the Department of Labor and Employment (DOLE), should be called back when the temporary closure order is lifted in October. The labor advisory is for “strict observance and compliance.”

Bello’s position recognizes only single reality in this situation. That is, all companies will survive the 6-month closure. There is apparent failure to recognize that small and medium businesses may not be able to bear the impact of closure.

Can these businesses close down? Based on Bello’s pronouncement it seems prohibited.

The Labor Code is clear under Article 298 that employers may close or cease its operations regardless of the reason. If the reason is not due to losses, it has to pay employees separation pay of at least one-month pay or ½ month per year of service whichever is higher. If the closure is due to losses it may not pay separation pay consistent with the doctrine laid down in the case of North Davao Mining vs. NLRC (G.R. No. 112546, March 13, 1996).

Hence, the DOLE cannot characterize the decision of the employer if its financial circumstances warrant the closure of business as a result of closure of Boracay.

However, companies which decide to suspend have to follow the rules on bona fide suspension of operations. It should not exceed six (6) months otherwise, it shall result in illegal dismissal.

It bears stressing that notice of bona fide suspension should also be sent to DOLE.

Below are sample of notices of Bona Fide Closure to employees and the DOLE:

Sample Notice of Bona Fide Suspension of Operations to Employee

To:                  JUAN DELA CRUZ
 From:             HR
 Date:              _____________________
 Subject:         BONA FIDE SUSPENSION OF OPERATIONS

 The company has decided to suspend its operations for a period not exceeding six (6) months due to government decision to evacuate the areas surrounding Taal volcation due to its eruption.

 The situation is beyond the control of the company being an Act of God or force majeure, as in fact, the DILG issued a directive for establishments to perform evacuation. Thus, the company has no choice but to resort to suspension as this is a decision that is beyond the management’s control.

 Hence, the company has decided to suspend the operations for a period not to exceed six (6) months in compliance with government mandate. You are being temporarily laid off effective January 15, 2020 as provided in the government directive. You will be given equivalent wage to complete the thirty (30)-day prior notice

 You will receive a written notice prior to end of six months whether the company would be able to continue in operation or cease in coordination with the proper government authorities.

 Please be guided accordingly.

                                                                                     _________________________

HR Manager

See other sample notices of termination in Human Resource Forms, Notices and Contracts Volume 2 by Atty. Villanueva

Sample Notice of Bona Fide Suspension of Operations to DOLE

January 10, 2020

 DEPARTMENT OF LABOR AND EMPLOYMENT
REGIONAL OFFICE – REGION VI
Swan Rose Building, Commission Civil St.,
Tagaytay City
 
 Subject:         BONA FIDE SUSPENSION OF OPERATIONS
 

 Gentlemen: 

 The company, XYZ Club Resort, Inc. (company) has decided to suspend its operations for a period not exceeding six (6) months beginning January 15, 2020 pursuant to the order of evacuation by the DILG due to the eruption of Taal Volcano.

 The situation is beyond the control of the company being an Act of God or force majeure, as in fact, the DILG issued a directive for establishments to perform evacuation. Thus, the company has no choice but to resort to suspension as this is a decision that is beyond the management’s control.

Hence, the company has decided to suspend the operations for a period not to exceed six (6) months. Employees have been notified as well of the temporarily lay off effective January 15, 2020. To satisfy the 30-day prior notice, the company will pay the wages of employees to the extent of the balance of period of notice and the 30-day requirement. The list of affected employees is attached here as Annex “A” and the Establishment Report as Annex “B”.

Employees will receive a written notice prior to end of six months whether the company would be able to continue in operation or cease in coordination with the appropriate government agencies concerned.  

                           Very truly yours,

_________________________