It is  the voluntary act of an employee who is in a  situation where he believes that personal reasons cannot be sacrificed in favor of the exigency of the service, and he has then no other choice but to disassociate himself from employment. [Bance, et al. vs. University of St. Anthony, G.R. No. 202724, February 3, 2021]

The intent to relinquish must concur with the overt act of relinquishment; hence, the acts of the employee before and after the alleged resignation must be considered in determining whether he in fact intended to terminate his employment. In illegal dismissal cases, it  is a  fundamental rule that when an employer interposes the defense of resignation, on him necessarily rests the burden to prove that the employee indeed voluntarily resigned.

In the case of Bance, the SC resolved the situation where the employees resigned prior to the effectivity of their termination. Then they filed an illegal dismissal case.

What will happen to the labor case?

The complainants resigned prior to the effectivity date of the termination of their employment. There were ongoing investigations against them for the irregular acts they committed thereby placing them in a  difficult position. The SC found that from the wordings of the resignation letters, it could be implied that their resignations were voluntary.

Though not the sole test, the SC held that the wording of resignation letters may be considered as a factor, together with other circumstances, in assessing the voluntariness of a  resignation.

Also, to emphasize, petitioners did not contend or present countervailing evidence that their resignation was involuntary. Likewise, it is settled that there is  nothing reprehensible or illegal when the employer grants the employee a  chance to resign and save face rather than smear the latter’s employment record.”

Thus, because of the voluntary resignations of complainants prior to the termination of their employment, their complaints for illegal dismissal have no basis.

See here the procedure to observe when the employee refuses to receive employer’s notice.

In addition, the company should send another copy by registered mail and keep the registry receipt for future reference.

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Twin Requirements of Notice and Hearing

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Notice to Explain: Contents and Requirements

However, this constitutional commitment to the policy of social justice does not mean that every labor dispute shall be automatically decided in favor of labor. It must also be remembered that in protecting the rights of the workers, the law does not authorize the oppression of the employer.

Hence, due regard is likewise given to the right of an employer to manage its operations according to reasonable standards and norms of fair play. This means that an employer has free reign over every aspect of its business, including the dismissal of its employees, as long as the exercise of its management prerogative is done reasonably, in good faith, and in a manner not otherwise intended to defeat or circumvent the rights of workers.

Accordingly, Article 297 of the Labor Code affirms the right of an employer to dismiss a miscreant employee on account of the latter’s willful disobedience.

Significantly, jurisprudence ordains that for an employee to be validly dismissed on the ground of willful disobedience, the employer must prove by substantial evidence that: (i) “the employee’s assailed conduct must have been willful or intentional, the willfulness being characterized by a wrongful and perverse attitude; and (ii) the order violated must have been reasonable, lawful, made known to the employee and must pertain to the duties which he had been engaged to discharge.

In the case of Mamaril vs. The Red System Company, Inc. [G.R. No. 229920, July 04, 2018], the Supreme Court (SC) held, in ruling for the validity of the dismissal of the employee, that the lifeblood of Red

System’s business is the safe transport and delivery of Coca-Cola products from the warehouse to the customers. As such, Red System imposed stringent guidelines to ensure the safe and efficient delivery of all the products.

Specifically, drivers were repeatedly reminded to place a tire choke, shift the engine to first gear, and pull the hand brake, upon parking the truck. Compliance with these safety measures was essential to prevent the sudden movement of the truck while parked and pushed by a forklift during loading and unloading operations. Likewise, caution was necessary to avoid damage to the new trucks. Moreover, extra-care was mandated in hauling Coca-Cola products to avoid accidents which would result in needless delays and unnecessary expenses and ruin Red System’s good will.

The SC further noted that the Red System was not remiss in reminding its drivers of the importance of abiding by their safety regulations. To ensure a strict observance of the rules, the company required its drivers to attend various safety seminars, in addition to a mandated pre-employment orientation. In fact, the complainant in said case attended a pre-orientation seminar and five safety seminars over the course of his two-year stint with Red System.

Added to this, the safety rules were also written in Red System’s Code of Conduct. There can be no doubt as to the lawfulness, reasonableness and necessity of Red System’s safety instructions. Moreover, the rules pertained to the duties performed by complainant. Accordingly, complainant was duty-bound to comply with such safety orders, as his main task consisted in driving and delivering fragile products. This notwithstanding, the complainant still willfully and negligently failed to abide by the safety rules.

The records show that three days after complainant was employed, he failed to put a tire choke, and worse, shifted the truck’s gear to neutral. As a result, the parked vehicle moved causing damage to Coca-Cola products valued at Php 14,556.00, in addition to the damage he caused to the truck. To make matters worse, instead of reporting the incident to his supervisor, as mandated under Red System’s rules, complainant deliberately concealed the incident. If not for his belated admission in an administrative hearing on a different incident, Red System would not have learned about his prior misdeed.

To make matters worse, complainant was again found to have committed the same violation of Red System’s safety rules. On November 12, 2011, he parked the truck with plate number PIK 726, without again putting a tire choke and engaging the hand brake. Due to his failure to perform the required safety standards, the truck moved backwards and hit another vehicle. This caused damage amounting to Php 25,500.00.

Brazenly, the complainant again purposely concealed the incident. Red System belatedly learned of the accident only after conducting an investigation, after it was surprised to receive Job Order from Motormall Davao Corporation for the repair of the said truck.

Clearly, complainant’s acts constituted a violation of Red System’s company policy. Rule 5, Section 2(b)(3) of Red System’s Code of Conduct penalizes other acts of negligence or inefficiency in the performance of duties or in the care, custody and/or use of company property, funds and/or equipment, where the amount of loss or damage amounts of more than Php 25,000.00. A violation of such rule warrants a penalty of dismissal.

Notably, the complainant violated Red System’s safety rules twice, and caused damage amounting to over Php 40,000.00. To make matters worse, he even deliberately and willfully concealed his transgressions. Such flagrant violation of the rules, coupled with the perversity of concealing the incidents, patently show a wrongful and perverse mental attitude rendering his acts inconsistent with proper subordination. Indubitably, this shows that complainant was indeed guilty of willful disobedience of Red System’s lawful orders.

Guided by the ruling in St. Luke’s Medical Center, Inc. v. Sanchez, the SC held that the deliberate disregard or disobedience by an employee of the rules, shall not be countenanced, as it may encourage him or her to do even worse and will render a mockery of the rules of discipline that employees are required to observe. To allow a recalcitrant employee to remain in employ shall amount to coddling an obstinate employee at the expense of the employer.

Thus, taking all the circumstances collectively, the Court is convinced that Red System had sufficient and valid reason for terminating complainant’s services, as his continued employment would be patently inimical to its interest. It is evident from the circumstances that Red System’s decision to terminate him was exercised in good faith, for the advancement of its interest and not for the purpose of defeating or circumventing the latter’s rights.

The SC finally held that this valid exercise of management prerogative must be upheld.

See here the procedure to observe when the employee refuses to receive employer’s notice.

In addition, the company should send another copy by registered mail and keep the registry receipt for future reference.

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Twin Requirements of Notice and Hearing

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The Supreme Court (SC) concluded that this constitutes retrenchment by, and not closure of, the enterprise or the company itself as SMC has not totally ceased operations but is still very much an on-going and highly viable business concern.

Retrenchment is a management prerogative consistently recognized and affirmed by this Court. It is, however, subject to faithful compliance with the substantive and procedural requirements laid down by law and jurisprudence.

For retrenchment to be considered valid the following substantial requirements must be met: (a) the losses expected should be substantial and not merely de minimis in extent; (b) the substantial losses apprehended must be reasonably imminent such as can be perceived objectively and in good faith by the employer; (c) the retrenchment must be reasonably necessary and likely to effectively prevent the expected losses; and (d) the alleged losses, if already incurred, and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence.

In the discharge of these requirements, it is the employer who has the onus, being in the nature of an

affirmative defense.

Normally, the condition of business losses is shown by audited financial documents like yearly balance sheets, profit and loss statements and annual income tax returns. The financial statements must be prepared and signed by independent auditors failing which they can be assailed as self-serving documents.

In the case of SMC, company losses were duly established by financial documents audited by Joaquin Cunanan & Co. showing that the aquaculture operations of SMC’s Agribusiness Division accumulated losses amounting to Php145,848,172.00 in 1992 resulting in the closure of its Calatrava Aquaculture Center in Negros Occidental, PhP11,393,071.00 in 1993 and PhP80,325,608.00 in 1994 which led to the closure of its San Fernando Shrimp Processing Plant in Pampanga and the Bacolod Shrimp Processing Plant in 1995.

SMC has thus proven substantial business reverses justifying retrenchment of its employees.

For termination due to retrenchment to be valid, however, the law requires that written notices of the intended retrenchment be served by the employer on the worker and on the DOLE at least one (1) month before the actual date of the retrenchment, in order to give employees some time to prepare for the eventual loss of their jobs, as well as to give DOLE the opportunity to ascertain the verity of the alleged cause of termination.

Affected employees, however, were merely verbally informed on September 10, 1995 by SMC Prawn Manager Ponciano Capay that effective the following day or on September 11, 1995, they were no longer to report for work as SMC would be closing its operations.

Where the dismissal is based on an authorized cause under Article 283 [now Art. 301] of the Labor Code but the employer failed to comply with the notice requirement, the sanction should be stiff as the dismissal process was initiated by the employer’s exercise of his management prerogative, as opposed to a dismissal based on a just cause under Article 282 [Art. 297] with the same procedural infirmity where the sanction to be imposed upon the employer should be tempered as the dismissal process was, in effect, initiated by an act imputable to the employee.

In light of the factual circumstances of the case at bar, the SC awarded PhP50,000.00 to each complainant as nominal damages.

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Twin Requirements of Notice and Hearing

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Notice to Explain: Contents and Requirements

However, the fact of dismissal, if disputed, must be duly proven by the complainant. In relation thereto, Section 3, Rule 1 of the 2011 NLRC Rules of Procedure provides for the suppletory application of the Rules of Court for proceedings before the LA and the NLRC.

It states that in the absence of any applicable provision in these Rules, and in order to effectuate the objectives of the  Labor Code, as amended, the pertinent provisions of the Rules of Court of the Phllippines, as amended, may, in the interest of expeditious dispensation of labor justice and whenever practicable and convenient, be applied by analogy or in a  suppletory character and effect.

Section 11, Rule 8 of the Rules of Court, in turn, provides that material averments in the complaint, other than those as to the amount of unliquidated damages, shall be deemed admitted when not specifically denied.

Thus, in illegal dismissal cases, it follows that when the employer fails to specifically deny the complainant employee’s material averments as to the circumstances of his dismissal, the employer is  deemed to have admitted the fact of dismissal and must then discharge his burden of proving that the dismissal of the employee was valid.

In Fernandez vs. Kalookan Slaughterhouse Incorporatec [G.R. No. 225075, June 19, 2019], the Court

deemed as an admission by silence the employer’s failure to rebut petitioner employee’s allegation that on a specific date, he was informed by the employer’s personnel, who exercised control over petitioner’s means and methods, that he could no longer report for work.

Hence, in the case of Guinto vs. Sto. Niño Lang-Zeny [G.R. No. 250987. March 29, 2022], the employer did not specifically deny and rebut complainant’s allegations as to the fact of his dismissal from employment. Meanwhile, in an attempt to relieve themselves from liability, the company raised the defense that there was no employer-employee relationship between the Consignee and complainant.

In other words, the company did not specifically deny that its representative, on separate occasions, told complainant to leave and to stop going to work. Thus, the employer is deemed to have admitted complainant’s allegations as to his dismissal from work.

Under the circumstances, the Supreme Court found that the complainant, who was a regular employee of the company, had been illegally dismissed from his employment considering: first, the latter’s deemed admission of the fact of dismissal; and second, the absence of any clear showing of a just or valid cause for such dismissal.

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Notice to Explain: Contents and Requirements

It is one of the exceptions to the rule on regular employment under Article 295 which states that the provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season.

Thus:

“An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists.”

Casual employment is loosely referred to in business talk as “contractual.” This is not an accurate reference but the obvious intention of people calling it as such is to refer to temporary employment or “contractual.”

However, if the intention of hiring a casual is to obviate the regularization of employee, then it cannot be permitted by the Court. As held by the Supreme Court (SC), the Court cannot countenance this practice as to do so would effectively permit companies to avoid hiring permanent or regular employees by

simply hiring them on a temporary or casual basis, thereby violating the employees’ security of tenure relative to their jobs. (University of Santo Tomas [UST] vs. Samahang Manggagawa ng UST, April 24, 2017, G.R. No. 184262)

In a 1990 case, the complainants were cogon grass cutter who claim to be regular employees. The employer is engaged in the manufacturing of cultured milk. Thus, the SC held that the activity is not related to the business of the employer. The employment is not regular.

The cutting of the cogon grasses in the premises of its factory is hardly necessary or desirable in the usual business of the private respondents. Indeed, it is alien thereto. (Capule vs. NLRC, G.R. No. 90653, November 12, 1990)

It is vital at this point that the contract for casual employment should comply with the requisites to be a valid casual contract. Otherwise, the presumption is that the employee is regular. (See Omni Hauling Services, Inc. v. Bon, 742 Phil 335, 344-345 (2014), and Basan v. Coca-Cola Bottlers Philippines, 753 Phil 74, 90-91 (2015).)

Just like all other employees, a casual employee may be terminated for just cause and authorized cause. A special case for termination of this employment is when the reason for hiring ceases to continue and such activity ceases to exist.

However, it is still better to indicate the duration of the cessation of such activity, and to have a good practice of limiting the activity to at most five (5) months only.

Below is an incomplete sample template for Casual Employment for Daily Paid Employee, just to provide an idea of salient provisions to include (View the description and contents of the full version of the Casual Employment Contract here)

Project employment is an exception to the rule on regular employment.

The Labor Code, under Article 295 states that the provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in me usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season.

Project employment exists when the employee is hired under a contract which specifies that the employment will last only for a specific project or undertaking, the completion or termination of which is determined at the time of engagement. (Carpio vs. Modair Manila Co. Ltd., Inc., G.R. No. 239622, June 21, 2021)

The act of termination is essentially a challenge to the security of tenure of the employee being terminated. There is no doubt that a regular employee has a security of tenure. However, as to project employee, is the right to security of tenure also available?

Yes, although in a limited sense.

The SC held in Carpio case, as regards security of tenure, regular employment may be terminated for just or authorized causes; whereas, for project employment, lawful dismissal is brought about by the completion of the project or contract for which the employee was engaged, unless terminated during the life of the project, in which case, only just or authorized causes may be invoked.

Unlike in regular employment though, the employment of project employee is co-terminus with the completion of the project.

Thus, the services of a project-based employees are co-terminus with the project and may be terminated upon the end or completion of the project of phase thereof for which they were hired. [Engineering Construction Corporation of Asia vs. Palle, G.R. 201247, July 13, 2020]

The services of the project employees are legally and automatically terminated upon the end or completion of the project as the employee’s services are coterminous with the project. [Universal Robina Sugar Milling Corporation vs. Acibo, G.R. No. 186439, January 15, 2014]

It bear noting though that there are other requirements for such termination. One of which is the report or notice to be submitted to the appropriate DOLE office.

See sample project employment contracts to make it easy for HR practitioners, business owners, and managers to craft:

1. Project Employment Contract – English Version Soft Copy
2. Project Employment Contract – Filipino / Tagalog Soft Copy

As a background, a probationary employee is one who is placed on trial by an employer, during which the latter determines whether or not the former is qualified for permanent employment. [See Canadian Opportunities Unlimited, Inc. v. Dalangin, Jr., 681 Phil. 21, 33 (2012), citing International Catholic Migration Commission v. NLRC, 251 Phil. 560 (1989)]

By virtue of a probationary employment, an employer is given an opportunity to observe the fitness and competency of a probationary employee while at work. During the probationary period of employment, an employer has the right or is at liberty to decide who will be hired and who will be denied employment. [Moral vs. Momentum Properties Management Corporation, G.R. No. 226240, March 06, 2019.]

The essence of a probationary period of employment lies primordially in the purpose or objective of both the employer and the employee during such period. While the employer observes the fitness, propriety, and efficiency of a probationary employee, in order to ascertain whether or not such person is qualified for regularization, the latter seeks to prove to the former that he or she has the qualifications and proficiency to meet the reasonable standards for permanent employment.

A probationary employee enjoys security of tenure, although it is not on the same plane as that of a permanent employee. Other than being terminated for a just or authorized cause, a probationary employee may also be dismissed due to his or her failure to qualify in accordance with the standards of the employer made known to him or her at the time of his or her engagement.

Hence, the services of a probationary employee may be terminated for any of the following: (1) a just cause; (2) an authorized cause; and (3) when he or she fails to qualify as a regular employee in accordance with the reasonable standards prescribed by the employer.

The Labor Code, as amended, provides, that the services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement.

With respect to the termination of a probationary employee, a different procedure is applied – the usual two-notice rule does not govern. The aforesaid two-notice rule is that which is found under Article 292 (b) of the Labor Code, as amended.

If the termination is brought about by the failure of an employee to meet the standards of the employer in case of probationary employment, it shall be sufficient that a written notice is served the employee within a reasonable time from the effective date of termination.

Below is sample Notice of Termination of Probationary Employment for Failure to Qualify:
To:             JUAN DELA CRUZ
                  Probationary Clerk

From:         HR

Date:          ______ October 20____

Subject:     FAILURE TO QUALIFY

This refers to your probationary employment wherein it was mentioned at the time of your engagement that during the trial period for a maximum of 6 months, you would be periodically evaluated to determine your fitness as regular employee.

These standards are as follows:

Performance                         30%
Punctuality/Attendance          20%
Behavior                               20%
Teamwork                             20%
Initiative                               10%
TOTAL                                   100%

It was mentioned to you that any score below 85% shall be deemed as a failed rating which shall be caused for your failure to qualify.

Thus, using the above standards, the following are the results of your four-month evaluation period:

June 20___                            75%
July 20__                               81%
August 20___                        80%
September 20___                  79%

Hence, despite the chances given to you and the support system accorded, you have failed to meet the reasonable standards mentioned. In this regard, we regret to inform you that your employment is hereby being terminated effective seven (7) calendar days from service of this notice.

For your guidance.

BAGSIC S. ARETING
HR Manager

The following are sample probationary employment contracts which can help HR practitioners, business owners, and managers craft with ease:

1. Daily Paid in English
2. Monthly Paid in English
3. Daily Paid in Filipino / Tagalog

Get a complete package of probationary employment documents from employment contract, evaluation criteria, notices, etc. through the Super 5 Packet.

See also the Probationary Tabulation Metrics.

Previous offenses may be used to aggravate a subsequent infraction to justify an employee’s dismissal only if they are related to the subsequent offense upon which termination is  decreed. (Celis vs. Bank of Makati (A Savings Bank), Inc., G.R. No. 250776. June 15, 2022)

In the Celis case, the Supreme Court (SC) reckons that in 2016, the company previously found the employee liable for the following infractions: (1) improper conduct and acts of gross discourtesy or disrespect to fellow employees; and (2) personal borrowing from the bank’s clients.

On account of these infractions, the company placed Celis under a 10-day and 15-day suspension, respectively.

The SC ratiocinated that while Celis had committed two previous offenses, the Principle of Totality of Infractions cannot be utilized against her as she committed no subsequent violation of respondent’s Code of Conduct. She did not commit the subject infraction. Simply put, there is no subsequent offense which her previous infractions could aggravate.

But even assuming that Celis had committed the subject infraction, the CA still erred in applying the Principle of Totality of Infractions considering that her previous infractions and the subject offense

upon which her termination was decreed were in no way related to each other.

Instructive on this matter is the case of Sy vs. Neat, Inc., wherein the SC ruled that the Principle of Totality of Infractions cannot be used against the employee because his transgression for wearing an improper uniform was not related to his latest infractions of insubordination and purported poor performance evaluation.

Previous offenses may be used as valid justification for dismissal only if they are related to the subsequent offense upon which the basis of termination is decreed, or if they have a  bearing on the proximate offense warranting dismissal.

In the case of De Guzman vs. NLRC, the SC ruled that the Principle of Totality of Infractions applies when prior infractions are similar to the subsequent offense. In such case, the SC instructs that the previous offense that employee involved had committed on 3 July 1993 for willful refusal to perform one’s assigned work or to comply with instruction of supervisor, for which she had been administered a sufficient disciplinary sanction of six days suspension, could no longer be utilized to aggravate the present offense.

De Guzman’s previous offense was an entirely separate and distinct violation of company rules. The SC held that the correct rule is that previous infractions may be used as justification for an employee’s dismissal from work in connection with a subsequent similar offense.

For the SC, in the Celis case, the first offense of Celis, i.e., discourtesy or disrespect to fellow employees, was an offense concerning improper behavior towards co-workers. On the other hand, her second offense, i.e., personal borrowing from the   bank’s clients, was a transgression relating to conflict of interest. The subject infraction differs from the aforementioned offenses in that, the subject infraction concerns dishonesty.

Celis’ infractions not being related or similar in nature to the present charge, the CA erred in applying the Principle of Totality of Infractions against her. Indubitably, the company failed to substantially prove that her dismissal from employment was for a just cause.

All told, the SC found substantial evidence to support the finding that the company illegally dismissed Celis from employment. Thus, the CA erred in imputing grave abuse of discretion against the NLRC. The SC agreed with the labor tribunals that Celis was indeed illegally terminated from her job.

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Twin Requirements of Notice and Hearing

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Notice to Explain: Contents and Requirements

Retrenchment is the reduction of personnel for the purpose of cutting down on costs of operations in terms of salaries and wages resorted to by an employer because of losses in operation of a business occasioned by lack of work and considerable reduction in the volume of business.

Stated in another way, retrenchment is defined as the termination of employment initiated by the employer through no fault of the employee and without prejudice to the latter, resorted by management during periods of business recession, industrial depression or seasonal fluctuations or during lulls over shortage of materials. It is a reduction in manpower, a measure utilized by an employer to minimize business losses incurred in the operation of its business.

The law recognizes the right of every business entity to reduce its work force if the same is made necessary by compelling economic factors which would endanger its existence or stability. Where appropriate and where conditions are in accord with law and jurisprudence, the Court has authorized valid reductions in the work force to forestall business losses, the hemorrhaging of capital, or even to recognize an obvious reduction in the volume of business which has rendered certain employees redundant.

Retrenchment is used interchangeably with the term “lay-off.”

Simply put, it is an act of the employer of dismissing employees because of losses in the operation of a business, lack of work, and considerable reduction on the volume of his business, a right consistently recognized and affirmed by the courts.

Retrenchment is a management prerogative consistently recognized by the Court.

Nevertheless, while it is true that the exercise of this right is a prerogative of management, there must be faithful compliance with substantive and procedural requirements of the law and jurisprudence, for retrenchment strikes at the very heart of the worker’s employment, the lifeblood upon which he and his family owe their survival.

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Notice to Explain: Contents and Requirements

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).

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Twin Requirements of Notice and Hearing

Procedural Due Process for Other Types of Employment

Notice to Explain: Contents and Requirements