August 4, 2020

“Various causes lead to retrenchment. They include but are not limited to losses in operation, lack of work, and reduction in the volume of business. While a legitimate business option, retrenchment may only be exercised in compliance with the substantive and procedural requisites.” These were some of the salient points discussed by DivinaLaw Partner Atty. Ian Jerny de Leon in the recently concluded free webinar on Retrenchment 101.

More and more companies are downsizing to survive the economic downturn brought about by the pandemic. DivinaLaw’s 5th free webinar, which drew close to 800 registrants from all over the Philippines, covered relevant and timely topics such as the rights of employees to security of tenure vis-à-vis Management prerogative, retrenchment requisites, temporary lay-off, and all the basic legal considerations in laying off employees.

Guest speaker Atty. Abigail dela Rosa, mediator-arbiter for the Bureau of Labor Relations under the Department of Labor and Employment, discussed retrenchment vs redundancy, the standards of authorized causes, as well as the SSS unemployment benefit.

“An employee may only be dismissed from service by reason of just causes or on grounds authorized by law,” said DivinaLaw’s Atty. De Leon. While just causes are usually blame-worthy acts on the part of the employee, authorized causes like retrenchment usually have business-related reasons.

Substantive requisites include evidence which prove a) retrenchment is necessary to prevent or minimize losses, b) the employer exercises its prerogative to retrench employees in good faith, and c) the employer uses fair and reasonable criteria in determining which employees will be dismissed and which will be retained. Procedural requisites are a) a written notice given to employees and DOLE at least 1 month before the intended date of retrenchment and b) payment of separation pay.

DOLE-BLR’s Atty. dela Rosa shared that as of June 29 this year, nearly 10,000 workers from 3,745 establishments have been displaced nationwide. Of these establishments, 3,389 implemented a retrenchment or reduction program and 356 establishments chose to permanently close. Nearly half of all the displaced workers were from NCR.

In comparison to retrenchment, Atty. dela Rosa clarified, “Basically, when we say a position is redundant, there is superfluity or excess in the position. In the case of retrenchment, it is usually linked to business losses. Redundancy (on the other hand) can be implemented even if the company is not suffering losses.” Closure of business may also not necessarily be due to serious losses. This free webinar is a part of DivinaLaw’s public service and advocacy efforts to offer legal perspective on various relevant topics.

Next month’s webinar, “Taxes on Online Sellers” will be held on August 18.