Termination due to Closure of Service Business: Sample Notice of Termination

Termination of business is one of the prerogatives which business owner may exercise in the pursuit of his business.

The decision to close business is a management prerogative exclusive to the employer, the exercise of which no court or tribunal can meddle with, except only when the employer fails to prove compliance with the requirements of Art. 283 [now Art. 298]. (Page 263, Guide to Valid Dismissal of Employees, 2^nd Edition, Eastridge Golf Club, Inc. vs. Eastridge Golf Club, Inc., et al., G.R. No. 166760, August 22, 2008 citing Mac Adams Metal Engineering Workers Union-Independent vs. Mac Adams Metal Engineering, 460 Phil. 583 (2003).)

Closure or cessation of operations for economic rea- sons is recognized as a valid exercise of management prerogative. The determination to cease operations is a prerogative of management which the State does not usually interfere with, as no business or undertaking must be required to continue operating at a loss simply because it has to maintain its workers in employment. Such an act would be tantamount to a taking of property without due process of law. (Industrial Timber Corporation vs. NLRC, G.R. Nos. 107302- 107306 & 108559-10860, June 10, 1997 citing San Pedro Hospital of Digos, Inc. vs. Secretary of Labor, et al., G.R. No. 104624, October 11, 1996.)

Closure or cessation of business is the complete or partial cessation of the operations and/or shutdown of the establishment of the employer. It is carried out to either stave off the financial ruin or promote the business interest of the employer. (page 272, Guide to Valid Dismissal of Employees, 2^nd Edition, citing Angeles vs. Polytex Design, Inc., G.R. No. 1576273, October 15, 2007, 536 SCRA 159.)

Requirements for cessation or closure:

1. That the closure/cessation of business is bona fide, i.e., its purpose is to advance the interest of the employer and not to defeat or circumvent the rights of employees under the law or a valid agreement;
2. That written notice was served on the employees and the DOLE at least one month before the intended date of closure or cessation of business; and
3. In case of closure/cessation of business not due to financial losses, that the employees affected have been given separation pay equivalent to 1⁄2 month pay for every year of service or one month pay, whichever is higher. (Eastridge Golf Club, Inc. vs. Eastridge Golf Club, Inc. et al., G.R. No. 166760, August 22, 2008.)
4. The purpose should not be to circumvent the provisions of Title I (Termination of Employment) of Book Six (Post Employment) of the Labor Code;
5. There is no other option available to the employer except to close or cease its business operations. (Page 277, Guide to Valid Dismissal of Employees, 2^nd Edition citing Catatista vs. NLRC, G.R. No. 102422, August 3, 1995)

Considering that one of the requirements is the 30-day prior notice to both DOLE and the employee, below is a sample Notice of Termination due to closure to an affected employee:

To:             MA. UAWALA N. ACIA
                  Customer Service
From:         HR
Date:          November 11, 20____
Subject:      CLOSURE OF SERVICE BUSINESS

On ______________, 2019, the Board of Directors approved a Resolution to close the service division of the company. This is pursuant to the study undertaken recommending the cessation of the division to cut administrative costs in accordance with the company’s financial model.

The company’s existing service obligations will be outsourced to a third party that conducts customer service operations. Hence, the company will be closing its customer service division effective December 15, 2019.

In your case, we regret to inform you that your services will be until December 11, 20_____. Please make a complete turnover to relevant departments of accountabilities, accomplish your clearance, and process all exit documents for the immediate release of your final pay.

The company will pay you one (1) month for every year of service. We wish you all the best on your future endeavors.

GUS T. OMAGZARA
HR Manager

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