Published 5 June 2020, The Daily Tribune

The COVID-19 pandemic has crippled businesses worldwide and resulted in closure of establishments and mass layoffs in several industries. In this time of crisis and economic difficulty, the Department of Labor and Employment (DOLE) urges businesses to find measures to preserve employment of workers. DOLE encourages employers to adopt flexible work arrangements in lieu of outright termination of the services of the employees or total closure of the businesses. This scheme is recognized as beneficial in terms of reducing costs and in helping save jobs while maintaining productivity in industries.

As defined under DOLE Labor Advisory 9, Series of 2020, “Flexible Work Arrangements” refer to alternative arrangements or schedules other than the traditional or standard work hours, workdays and workweek. The effectivity and implementation of any flexible work arrangements shall be temporary in nature, subject to the prevailing conditions of the company.

DOLE recommends three types of flexible work arrangement that may be considered by employers after consultation with the employees.

First is the reduction of the normal work hours or workdays per week. For example, if the company operates five days a week, the company may opt to reduce the number of working days to four or any number, as it may deem necessary. Similarly, the company may reduce the number of work hours say from eight to five per day. By decreasing the general work days or hours of the company’s employees, their salaries/wages are likewise correspondingly reduced.

Second is the rotation of workers where the employees are rotated or alternately provided work within the week. To illustrate, employees may be divided into groups or shifts. One shift will work M-W-F and the other shift will work T-Th-S.

Note that in reduction of work hours/workdays and rotation of workers, only the hours worked by the employees shall be paid, while the unworked hours shall be unpaid consistent with the principles of “no work, no pay” and “a fair day’s wage for a fair day’s labor.”

Third is the implementation of forced leaves where the employees are required to go on leave for several days or weeks utilizing their leave credits, if any. Pursuant to DOLE Labor Advisory 04-20, workers’ leaves of absence may be charged to their annual sick leaves/vacation leaves, if any. If the workers’ leave credits have been used up, employers may grant (a) leave of absence without pay;
or (b) additional leaves with pay.

Relatedly, considering that the employee’s take home pay is effectively reduced because of the adoption of flexible work arrangements, one of the most frequently asked questions is whether the same violates the principle of “non-diminution of benefits.” Under the said principle, employees generally have a vested right over their existing benefits voluntarily granted to them by their employer. Thus, any benefit and supplement being enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the employer. (Vergara, Jr. Coca-Cola Bottlers Philippines Inc., G.R. 176985, 1 April 2013)

It bears noting that the Supreme Court in the 1988 case of Philippine Graphic Arts Inc. v NLRC (G.R. L-80737, 29 September 1988) upheld the validity of the reduction of working hours, taking into consideration the following: the arrangement was temporary, it was a more humane solution instead of a retrenchment of personnel, there was notice and consultations with the workers and supervisors, a consensus was reached on how to deal with deteriorating economic conditions and it was sufficiently proven that the company was suffering from losses.

While the Supreme Court did not make a categorical pronouncement that there was no violation of the principle of non-diminution, it goes without saying that if the adoption of flexible work arrangement is based on legitimate business considerations, then there can be no illegal diminution of benefits. Further, it is submitted that while employees subject of flexible work arrangements may not be receiving their salaries or wages based on a full workweek in the meantime, the bottom line is they should still be paid in full for actual hours worked.

Interestingly, on 18 May 2020, DOLE issued Labor Advisory 17 Series of 2020 (Guidelines on Employment Preservation upon the Resumption of Business Operation) which now appears to have allowed a “temporary adjustment” in employees’ wages and wage-related benefits provided that the employer and employee voluntarily agree in writing on said adjustment (Section 5). Based on this, there can also be no illegal diminution of benefits when businesses implement temporary pay-cuts and other wage adjustments as long as there is a written agreement to that effect with the concerned employees. Note, however, that the adjustments in wage and/or wage-related benefits should not exceed six months. After such period, employers and employees shall review their agreement and may renew the same.

Furthermore, Labor Advisory 17 Series of 2020 also suggests the following additional alternative work schemes: 1. Transfer of employees to another branch or outlet of the same employer; 2. Assignment of employees to other function or position in the same or other branch or outlet of the same employer; and 3. Partial closure of establishment where some units or departments of the establishment are continued while other units or departments are closed.

DOLE also encourages the employers and the employees to explore other alternative schemes in order to cushion and mitigate the effect of the loss of income of the employees. For instance, they may also adopt compressed workweek where the normal workweek is reduced to less than six days but the total number of work-hours per week shall remain. The normal workday is increased to more than eight hours but not to exceed 12 hours, without corresponding overtime premium. The concept can be adjusted accordingly depending on the normal workweek of the company.

Employers implementing the flexible work arrangements are required to keep and maintain, as part of their records, the documentary requirements proving the measures adopted. Further, employers shall post a copy of DOLE Labor Advisory 9, Series of 2020 in a conspicuous location in the workplace and shall notify the DOLE, through the Field Office which has jurisdiction over the workplace, of the adoption of any of the flexible work arrangements.

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