Termination due to Installation of Labor Saving Device

Modern business world is a slave to new technology. It is a fact that most business processes cannot be done without the aid of robots and computer. As the number of non-human labor forces rises, the demand for human labor diminishes.

In a case, the company brought in its plant high- speed machines to be used in the manufacture of its beer.

affected by the introduction of such machines. Disgruntled employees challenged their dismissal. But the Supreme Court ruled that the installation of labor-saving devices by the company at its plant was a proper ground for terminating employment.

The termination of employment of the affected employees due to the introduction of machinery in the manufacture of its products for purposes of effecting more economy and efficiency was declared valid.

Companies may yield to faster production system and higher efficiency methods. Unfortunately, the usual effect of new technology is the displacement of employees. Yet, our laws recognize this situation as long as there is not bad faith on the part of the employer.

In fact, the law authorizes an employer to terminate the employment of any employee due to the installation of labor saving devices. The installation of these devices is a management prerogative, and the courts will not interfere with its exercise in the absence of abuse of discretion, arbitrariness, or maliciousness on the part of management.

While the law acknowledges the management prerogative of closing the business, it does not, however, allow the business establishment to disregard the requirements of the law.

Thus, to validly invoke installation of labor-saving devices as ground for termination, the following requisites must concur:

1. The introduction of the machinery, equipment or other devices must be done in good faith;
2. The purpose for such introduction must be valid, such as to save on cost, enhance efficiency and other justifiable economic reasons;
3. There is no other option available to the employer but the introduction of the machinery, equipment or device and the consequent termination of employment of those affected thereby;
4. The one (1) month prior written notice requirement under Article 283 should be complied with;
5. There should be reasonable and fair standards or criteria in selecting who to terminate such as nature of work, status of the employees (whether casual, temporary or regular), experience, efficiency rating and seniority, among other considerations; and
6. Separation pay must be paid to the affected employees in such amount equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is high- er, a fraction of at least six (6) months shall be considered as one (1) whole year. In case the CBA or company policy provides for a higher separation pay, the same must be followed in- stead of the one provided in Article 283 (now Art. 298).

Learn how to Validly Terminate Employee in the Philippines with this Tutorial Video of Atty. Elvin

Read more on procedural due process discussion by Atty. Elvin:

Read more on procedural due process by Atty. Villanueva:

Twin Requirements of Notice and Hearing

Procedural Due Process for Other Types of Employment

Notice to Explain: Contents and Requirements