Dear PAO,
My cousin worked for a private company that manufactures and supplies school materials. Unfortunately, their office and warehouse were gutted by fire. As a result, he and his co-workers were left without work because all the company equipment and materials were destroyed. For several months, my cousin had to take odd jobs to support his family while waiting for the company to resume operations. Recently, they learned that the company had resumed its operations, but they never received any call or notice from their employer despite constantly messaging their supervisor to ask for updates.
When they tried to report back to work, they were not allowed to enter the warehouse. A company representative told them that the old company had closed because of the fire and that this was a newly set-up company. But they were not notified of the closure nor were they given separation pay. Also, they discovered that this “new company” is composed of the same owners and officers as the “old company.” They have been trying to get their jobs back, but the representative kept refusing. Can my cousin and his co-workers file a complaint for illegal dismissal?
Alex
Dear Alex,
Closure of business is one of the authorized causes for an employer to terminate the services of its employees. Regardless of the reason behind such closure, it may be pursued by the employer, provided that it is not done to circumvent the provisions of the Labor Code on Termination of Employment. In addition, as part of procedural due process, a written notice should be served to the employees concerned and the Department of Labor and Employment (DoLE) at least one month before the intended date of closure. The employer must also provide appropriate separation pay to the employees. This is in consonance with Article 298 of the Labor Code of the Philippines, as renumbered, which states:
“ART. 298. [283] Closure of establishment and reduction of personnel. – The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.” (Emphasis supplied)
Accordingly, while your cousin's employer may have the liberty of closing its business due to the fire incident that gutted its properties, it is still necessary for them to show that there was indeed a bona fide closure of the business and not merely an attempt to circumvent the law. If the company has resumed its operations under a new name, providing very similar services, it may negate the bona fide intention to close the former business. Moreover, since the concerned employees were not notified prior to the intended closure and were not given their separation pay, such closure can be viewed as an attempt to circumvent the rights of its employees. In such a situation, the concerned employees may pursue filing a complaint for illegal dismissal.
In line with the foregoing, we wish to impart the explanation laid by the Supreme Court in the case of Keng Hua Paper Products Co. Inc. and James Yu v. Carlos E. Ainza et al. (GR 224097, Feb. 22, 2023, Ponente: Associate Justice Rodil Zalameda):
“x x x the law authorizes termination of employment due to business closure, regardless of the underlying reasons and motivations therefor, be it financial losses or not. However, to put a stamp to its validity, the closure/cessation of business must be 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.
“In termination cases, either by retrenchment or closure, the burden of proving that the termination of services is for a valid or authorized cause rests upon the employer. Not every loss incurred or expected to be incurred by an employer can justify retrenchment. The employer must prove, among others, that the losses are substantial and that the retrenchment is reasonably necessary to avert such losses. And to repeat, in closures, the bona fides of the employer must be proven.”
We hope that we were able to answer your queries. Please be reminded that this advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated on.
Editor's note: Dear PAO is a daily column of the Public Attorney's Office. Questions for Chief Acosta may be sent to dearpao@manilatimes.net
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