By: Atty. Alwyn Faye B. Mendoza, Associate

Dismissal of employees requires the observance of the two-fold due process requisites, namely: (1) Substantive aspect which means that the dismissal must for any of the just causes provided under Article 297 of the Labor Code or the company rules and regulations promulgated by the employer or authorized causes under Article 298 of the Labor Code, and (2) Procedural aspect which means that the employee must be accorded due process, the elements of which are notice and the opportunity to be heard and to defend himself.

dismissal based on just cause means that the employee has committed a wrongful act or omission; while a dismissal based on authorized cause means that there exists a ground which the law itself authorizes to be invoked to justify the termination of an employee even if he has not committed any wrongful act or omission.

Under the Labor Code, authorized causes are classified into two (2) classes, namely: (1) Business-related causes and (2) Health-related causes. Business-related causes which are recognized under the said Code are as follows:

1. Installation of Labor-Saving Device

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 malice on the part of management.[1] Installation of labaor-saving device will result in making positions being held by employees who will be adversely affected thereby redundant and unnecessary.[2]

2. Redundancy

Redundancy exists when the services of an employee are in excess of what is reasonably demanded by the actual requirements of an enterprise.[3] This happens when the position is superfluous because of a number of factors such as over-hiring of workers, decreased volume of business, dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise or phasing out of service activity priorly undertaken by the business.[4]

3. Retrenchment

Retrenchment has been defined as “the termination of employment initiated by the employer through no fault of the employees and without  prejudice to the latter, resorted to by management during periods of business recession, industrial depression, or seasonal fluctuations; or during lulls occasioned by lack of work or orders, shortage of materials; or considerable reduction in the volume of employer’s business, conversion of the plant for a new production program or the introduction of new methods or more efficient machinery, or of automation.[5] Proof of losses or possible imminent losses is the distinctive requisite of retrenchment.

4. Closure or Cessation of Business Operations

Closure or cessation of business is the complete or partial cessation of the operations or shutdown of the establishment of the employer. It is carried out to stave off the financial ruin or promote the business interest of the employer.[6]

Disease is also of one the authorized causes to terminate employment. However, not all kinds of disease may be considered as a valid ground to terminate employment. It must be proven that an employee’s continued employment is prohibited by law or prejudicial to his health as well as to the health of his co-employees. Further, a competent public health authority must issue a medical certificate that the disease is of such nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical treatment.[7]

[1] Magnolia Dairy Products Corporation v. NLRC, G.R. No. 114952, 29 January 1996.
[2] Soriano, Jr. v. NLRC, G.R. No. 165594, 23 April 2007.
[3] Nippon Housing Phil. v. Leynes, G.R. No. 177816, 03 August 2011.
[4] Ibid.
[5] F.F. Marine Corporation v. Hon. Second Division, NLRC, G.R. No. 152039, 08 April 2005.
[6] Eastridge Golf Club v. Eastridge Golf Club – Union, G. R. No. 166760, 22 August 2008.
[7] Article 299 of the Labor Code; Section 8, RULE I, BOOK VI, of the Rules Implementing the Labor Code.