Published 22 May 2020, The Daily Tribune

Businesses are not exempt from the adverse effects of the advent of COVID-19. Considering that most establishments have been closed or constrained to operate on a less than optimal capacity, business owners might be wondering what options they have in order to remedy, and hopefully reverse, any business losses they have incurred during the lockdown. After all, staying afloat during an economic slowdown may depend on the legal and financial strategies employed to salvage the business.

1. Registration as BMBE. If the business qualifies as a Barangay Micro Business Enterprise or BMBE, it may register as such in order to qualify for exemption from tax for income arising from the operations of the enterprise and from the coverage of the Minimum Wage Law.

2. Suspension of Work. Pursuant to Department of Labor and Employment (DOLE) Labor Advisory 01, Series of 2020, employers in the private sector shall, by exercise of management prerogative, suspend work to ensure the safety and health of their employees during natural or man-made calamity. Under this arrangement, an employee is not entitled to pay for unworked days unless there is a favorable company practice or collective bargaining agreement (CBA) granting payment of wages. If the employee has accrued leave credits, the same can be applied so that he/she can have compensation on said days. For worked days, no additional pay shall be given to the employees, only their salary on said day. Employees may grant incentives for such employees.

Nonetheless, if an employee fails or refuses to work by reason of imminent danger resulting from the natural or man-made calamity then prevalent, he/she may not be administratively sanctioned.

3. Flexible work arrangements. These arrangements are encouraged as an alternative to outright termination of services or closure of businesses. Some of the arrangements recognized under DOLE Labor Advisory 09, series of 2020, are: (1) Reduction of Workhours and/or Workdays, where normal workhours or workdays per week are reduced, (2) Rotation of Workers, where employees are rotated or alternately provided work within the week, and (3) Forced Leave, where  employees are required to go on leave for several days or weeks utilizing their leave credits, if any. These arrangements must only be temporary and subject to the prevailing conditions of the company.

Under the more recent DOLE Labor Advisory 17 series of 2020, alternative work schemes include (1) transfer of employees to another branch/outlet of the employer; (2) assignment to another function or position in the same or other branch/outlet; (3) reduction of normal work days per week; (4) job rotation alternately providing work within the workweek or work month (5) partial closure of establishment where some units or departments are continued while others are closed. Employers and employees may also agree voluntarily and in writing to temporarily adjust employees’ wages and benefits which shall not exceed six (6) months or the period agreed upon in the CBA.

These arrangements must be reported to the DOLE Regional Office.

4. For  Philippine Economic Zone Authority (PEZA)-registered Ecozone I.T. Enterprises, they may: implement work-from home arrangements for employees delivering critical services, or those exhibiting COVID-19 symptoms but physically able to work, or suspected of exposure to those exhibiting COVID-19 symptoms; re-assign employees to other PEZA-registered facilities of the business in other PEZA I.T. parks or centers; assign employees to work in facilities that are not PEZA-registered I.T. parks/centers; and, such other justifiable and reasonable courses of action to respond to COVID-1 even pending approval of the Letter of Authority from PEZA (PEZA Memorandum Circular 2020-011).

5. Redundancy measures. A labor-saving device that businesses may consider under the Labor Code is the installation of a redundancy program. This requires the existence of fair and reasonable criteria in ascertaining what positions are to be declared redundant, good faith in abolishing the redundant positions, written notice served on both the employee and the DOLE at least one month prior to the intended date of separation, and  payment of separation pay equivalent to at least one  month pay or at least one month pay for every year of service, whichever is higher.

6. Retrenchment. Unfortunately, retrenchment on the ground of business reverses is an option that businesses may consider at the final hour if the financial situation is so dire that layoffs need to be made in order to keep the business going. Under the Labor Code, retrenchment to prevent serious losses is one of the authorized causes of termination of employment. The existence of substantial losses that is reasonably imminent, and such imminence can be perceived objectively and in good faith by the employer, must be shown. The retrenchment must reasonably and necessary and likely to effectively prevent the expected losses, and other measures, such as cost cutting, should have been taken to forestall losses. The business owner must be able to prove the fact of substantial losses, serve written notices on the employees and DOLE at least 30 days prior to the intended date of retrenchment, and pay separation pay equivalent to at least one month pay or at least one-half month pay for every year of service, whichever is higher.

7. Closure of the business. As a last resort, and we sincerely hope that businesses do not come to this point, is the closure of the establishment. If the closure is due to serious business losses or financial reverses, there is no separation pay required to be paid. However, if the decision to close comes from another ground, the separation pay shall be equivalent to one month pay or at least one-half month pay for every year of service, whichever is higher.

In the next article, we will discuss once again the remedies under the Financial Rehabilitation and Insolvency Act.

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