Legal Q&A: In order for a retrenchment scheme to be valid, what elements must be present or concur?

October 19, 2009

In order for a retrenchment scheme to be valid, all of the following elements under Article 283 of the Labor Code must concur or be present, to wit:

(1)        That retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are reasonably imminent as perceived objectively and in good faith by the employer;

(2)        That the employer served written notice both to the employees and to the Department of Labor and Employment at least one month prior to the intended date of retrenchment;

(3)        That the employer pays the retrenched employees separation pay equivalent to one (1) month pay or at least one-half (½) month pay for every year of service, whichever is higher;

(4)        That the employer exercises its prerogative to retrench employees in good faith for the advancement of its interest and not to defeat or circumvent the employees’ right to security of tenure; and,

(5)        That the employer uses fair and reasonable criteria in ascertaining who would be dismissed and who would be retained among the employees, such as status, efficiency, seniority, physical fitness, age, and financial hardship for certain workers. (FASAP vs. Philippine Airlines, G.R. No. 178083, October 2, 2009)

7 Responses to “Legal Q&A: In order for a retrenchment scheme to be valid, what elements must be present or concur?”

  1. Does “retrenchment” always initiated by the company?

  2. if by company you mean employer, yes.

  3. does an unproven accusation be a gruond for termination?

  4. Under the guise of Redundancy, an employee was terminated from his employment, as he was issued a Notice of Redundancy. The employee questioned the propriety of the redundancy but the employer failed to respond. Employee in fraustration, informed the DOLE about his termination from the company. No less than the DOLE Secretary replied in writing to the employee that his redundancy was NOT reported to DOLE. It turned-out that while a Notice of Redundancy was issued to the employee, the DOLE was not furnish such. Can this be in violation of Art. 283, so much so to declare the termination illegal?

  5. Our company went through a series of retrenchment because of our client pulling out. The first one was in April wherein 100+ employees were removed from our account because the client pulled out and cutting down the number of people to 80 and was given retrenchment status.

    The second retrenchment happened in May wherein from 80 people down to 30. Again retrenchment was the term used by the company as the client reduced the number of employees.

    And just recently we were told that the client will completely pull out the account but this time the term they used was not retrenchment. We are told that no retrenchment will happen and we will be transferred to another account. By the way our account is transcription service (non-voice account) and we will be transferred to a CCA or a voice account which we are not qualified and capable of doing. And we are left with options or either continuing with the new account or if you don’t want to continue you will be in a floating status or you can voluntarily resign.

    The reason they gave us was the same that the account was pulled out and they used a different term for the last batch to be removed. Is it possible that we don’t have the option of being retrenched? Are they just exempting themselves to pay retrenchment pay because most of the people who are included in the last batch worked for them for a long time and that means paying them a big amount?

    Is it possible for us to get a separation pay or retrenchment pay?

  6. my husband were told by the office that he is included or one of the employees who is or will be retrenched. Can he ask for one month salary for separation pay? He served the office for 14 1/2 years.

  7. Hi I have some questions nung Monday (Nov.5 2012) nagkaroon ng retrenchment dito sa company namin, wala po sila binigay na 1 month notice basta po nung Monday lang sinabi at effective dn sa araw na yun pinaalis na sila at yung cheque nila inhold pa di daw ibibigay kung hndi sila mgtratransistion, i believe they doing the wrong thing

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