Retrenchment Based on Lack of Order
Retrenchment is one of the grounds for dismissal under Art. 298 of the Labor Code, as amended.
Retrenchment usually pertains to financial difficulty encountered by the employer. It can include business hardship due to lack of order.
The rule in this case states that if the ground cited by the employer for retrenchment is lack of order the same must be of such nature as would severely affect the business operations.
In a 2013 case the employer pointed out as reason for retrenchment cancellation of orders of its clients. The Court held that while losses in the operation of the enterprise, lack of work, or considerable reduction on the volume of business may justify an employer to reduce the work force, such lull caused by lack of orders or shortage of materials must be of such nature as would severely affect the continued business operations of the employer to the detriment of all and sundry if not properly addressed.
Thus, the employer asserts that cancelled orders of wire condensers led to the phasing out of the Wire Condenser Department which triggered retrenchment. Sanoh presented the letters of cancellation given
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by Matsushita and Sanyo as evidence of cancelled orders.
According to the Supreme Court, the evidence presented by the employer barely established the connection between the cancelled orders and the projected business losses that may be incurred by the company. The employer failed to prove that these cancelled orders would severely impact on their production of wire condensers.
In Indino vs. National Labor Relations Commission (G.R. No. 80352, September 29, 1989, 178 SCRA 168, 175-176.), the Court held that it is almost an inflexible rule that employers who contemplate terminating the services of their workers cannot be so arbitrary and ruthless as to find flimsy excuses for their decisions. This must be so considering that the dismissal of an employee from work involves not only the loss of his position but more important, his means of livelihood.
Applying this caveat, it is therefore incumbent for the employer, before putting into effect any retrenchment process on its work force, to show by convincing evidence that it was being wrecked by serious financial problems. Simply declaring its state of insolvency or its impending doom will not be sufficient.
To do so would render the security of tenure of workers and employees illusory. Any employer desirous of ridding itself of its employees could then easily do so without need to adduce proof in support of its action.
Security of tenure is a right guaranteed to employees and workers by the Constitution and should not be denied on the basis of mere speculation.
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