Notice Requirement and Compelling Economic Reason in Bona Fide Suspension of Operations

Notice Requirement and Compelling Economic Reason in Bona Fide Suspension of Operations

The suspension of employment under Article 301 of the Labor Code is only temporary and should not exceed six months, as the Supreme Court (SC) explained in PT&T Corp. vs. National Labor Relations Commission, it may be applied but only by analogy to set a specific period that employees may remain temporarily laid-off or in floating status.

Six months is the period set by law that the operation of a business or undertaking may be suspended thereby suspending the employment of the employees concerned. The temporary lay-off wherein the employees likewise cease to work should also not last longer than six months.

After six months, the employees should either be recalled to work or permanently retrenched following the requirements of the law, and that failing to comply with this would be tantamount to dismissing the employees and the employer would thus be liable for such dismissal.

In implementing this measure, jurisprudence has set that the employer should notify the Department of Labor and Employment (DOLE) and the affected employee, at least one month prior to the intended date of suspension of business operations.

An employer must also prove the existence of a clear and compelling economic reason for the temporary shutdown of its business or undertaking and that there were no available posts to which the affected employee could be assigned. The SC explained further in Lopez vs. Irvine Construction Corp. that mere project completion is not a compelling economic reason for suspension of operations.

Where the employer merely completed one of its numerous construction projects when it suspended operations, the SC held that it does not, by and of itself, amount to a bona fide suspension of business

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operations or undertaking.

In invoicing Article 301 of the Labor Code, the paramount consideration should be the dire exigency of the business of the employer that compels it to put some of its employees temporarily out of work. This means that the employer should be able to prove that it is faced with a clear and compelling economic reason which reasonably forces it to temporarily shut down its business operations or a particular undertaking, incidentally resulting to the temporary lay-off of its employees.

Due to the grim economic consequences to the employee, case law states that the employer should also bear the burden of proving that there are no posts available to which the employee temporarily out of work can be assigned.

Thus, in the case of Mobile Protective & Detective Agency vs. Ompad, the Court found that the security guards therein were constructively dismissed considering that their employer was not able to show any dire exigency justifying the latter’s failure to give said employees any further assignment.

In the case of Airborne Maintenance and Allied Services, Inc. vs. Egos (April 3, 2019, G.R. No. 222748), a review of the submissions of the parties shows that the employer failed to show compliance with the notice requirement to the DOLE and respondent.

Making matters worse, it also failed to prove that after the termination of its contract with Meralco it was faced with a clear and compelling economic reason to temporarily shut down its operations or a particular undertaking. It also failed to show that there were no available posts to which the employee could be assigned.

Also, not only did the company fail to prove it had valid grounds to place the employee on a floating status, but the NLRC and the CA both correctly found that the employee even had to ask for a new assignment from petitioner, but this was unheeded. Further, when the employee filed the complaint, the company, as an afterthought, subsequently sent notices/letters to the worker directing him to report to work. These, however, were not received by employee as the address was incomplete.

In Morales vs. Harbour Centre Port Terminal, Inc., the Court defined constructive dismissal as a dismissal in disguise as it is an act amounting to dismissal but made to appear as if it were not.

Constructive dismissal exists where there is cessation of work because “continued employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank or a diminution in pay” and other benefits. Aptly called a dismissal in disguise or an act amounting to dismissal but made to appear as if it were not, constructive dismissal may, likewise, exist if an act of clear discrimination, insensibility, or disdain by an employer becomes so unbearable on the part of the employee that it could foreclose any choice by him except to forego his continued employment.

The totality of the circumstances could show that the employer’s acts of not informing respondent and the DOLE of the suspension of its operations, failing to prove the bona fide suspension of its business or undertaking, ignoring employee’s follow-ups on a new assignment, and belated sending of letters/notices which were returned to it, were done to make it appear as if respondent had not been dismissed. These acts, however, clearly amounted to a dismissal, for which the company is liable.

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