PHILIPPINES Law and Practice Contributed by: Rashel Ann C Pomoy and Paolo Miguel Consignado, Villaraza & Angangco
The business-related causes under Article 298 of the Philippine Labour Code are: • installation of labour-saving devices; • redundancy; • retrenchment; and • closure or cessation of business operations. For guidance, the requisites for each ground of busi - ness-related causes are outlined in D.O.147-15. In general, these grounds require good faith in effect - ing the termination, and that termination is a matter of last resort, there being no other option available to the employer after resorting to cost-cutting meas - ures. Fair and reasonable criteria in the selection of employees to be terminated are likewise required for all grounds, except for the closure or cessation of business operations. Health-related causes, specifically “disease” under Article 299 of the Philippine Labour Code, require the following conditions: • the employee has been found to be suffering from a disease; • the continued employment is either: (a) prohibited by law; or (b) prejudicial to the health of the employee or their co-workers; and • a competent public health authority has issued a medical certificate stating that the disease is of such nature or stage that it cannot be cured within six months, even with proper medical treatment. Collective Redundancies Collective terminations may generally be carried out via redundancy, retrenchment, or closure or cessation of business operations. Under Philippine law, redundancy is specifically des - ignated as a valid ground for employee termination. Redundancy generally refers to the condition when the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise or are superfluous. This ground for termination may be collective, particularly when there is a dismissal of a large number of employees due to business or operational reasons rather than indi -
vidual performance or conduct, such as the overhir - ing of workers, decreased volume of business, or the dropping of a particular product line or service activity. Regardless of the number of employees affected by the redundancy, the following requisites under D.O.147-15 must be complied with for redundancy to be a valid ground for termination: • there must be superfluous positions or services of employees; • the positions or services must exceed what is required for the enterprise to operate efficiently; • the decision to abolish the redundant positions must be made in good faith; • there must be fair and reasonable criteria for selecting which employees to terminate; and • there must be adequate proof of redundancy, such as staffing patterns, feasibility studies, or manage - ment-approved restructuring plans. Conversely, retrenchment occurs when a business finds itself in a precarious financial situation and must reduce labour costs to continue operating. Unlike redundancy, retrenchment does not necessarily mean that the position is no longer needed, but rather that the business can no longer afford to maintain its work - force at its current size. Retrenchment is valid when the following requisites are present: • the retrenchment must be reasonably necessary and likely to prevent business losses; • the losses should be substantial, actual, or immi - nent, and not merely minor or de minimis; • the expected or actual losses must be supported by sufficient and convincing evidence; • the retrenchment must be carried out in good faith to advance business interests and not as a means to circumvent employee rights; and • fair and reasonable criteria must be applied to determine which employees are retained or dis - missed, based on factors such as efficiency, sen - iority, age, and financial hardship. Lastly, closure or cessation of business, as the name suggests, refers to the complete or partial cessation of
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