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    Retrenchment: Cartajenas-Cabanilla Law Office 3 FLR, Infinity Business Center Don Anselmo Bernad Avenue Ozamiz City

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    Cleo Marjo B. Cartajenas
    Retrenchment is defined as dismissing employees due to losses in business operations, lack of work, or reduced business volume. For retrenchment to be valid, an employer must prove substantial actual or imminent losses, that retrenchment is reasonably necessary to prevent further losses, and use fair criteria such as status, efficiency, and seniority in determining who to retrench. Procedurally, employers must provide one month notice to employees and the Department of Labor and implement severance pay equivalent to one month salary or half a month's salary per year of service.

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    Retrenchment: Cartajenas-Cabanilla Law Office 3 FLR, Infinity Business Center Don Anselmo Bernad Avenue Ozamiz City

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    Cleo Marjo B. Cartajenas
    85 views12 pages
    Retrenchment is defined as dismissing employees due to losses in business operations, lack of work, or reduced business volume. For retrenchment to be valid, an employer must prove substantial actual or imminent losses, that retrenchment is reasonably necessary to prevent further losses, and use fair criteria such as status, efficiency, and seniority in determining who to retrench. Procedurally, employers must provide one month notice to employees and the Department of Labor and implement severance pay equivalent to one month salary or half a month's salary per year of service.

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    Retrenchment is defined as dismissing employees due to losses in business operations, lack of work, or reduced business volume. For retrenchment to be valid, an employer must prove substantial actual or imminent losses, that retrenchment is reasonably necessary to prevent further losses, and use fair criteria such as status, efficiency, and seniority in determining who to retrench. Procedurally, employers must provide one month notice to employees and the Department of Labor and implement severance pay equivalent to one month salary or half a month's salary per year of service.

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    85 views12 pages

    Retrenchment: Cartajenas-Cabanilla Law Office 3 FLR, Infinity Business Center Don Anselmo Bernad Avenue Ozamiz City

    Uploaded by

    Cleo Marjo B. Cartajenas
    Retrenchment is defined as dismissing employees due to losses in business operations, lack of work, or reduced business volume. For retrenchment to be valid, an employer must prove substantial actual or imminent losses, that retrenchment is reasonably necessary to prevent further losses, and use fair criteria such as status, efficiency, and seniority in determining who to retrench. Procedurally, employers must provide one month notice to employees and the Department of Labor and implement severance pay equivalent to one month salary or half a month's salary per year of service.

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    of 12

    RETRENCHMENT Atty. Cleo Marjo C.

    Cabanilla

    Cartajenas-Cabanilla Law Office


    3rd Flr, Infinity Business Center
    Don Anselmo Bernad Avenue
    Ozamiz City
    Definition

     Retrenchment is an act of the employer in dismissing employees because of


    losses in the operation of a business, lack of work, and considerable reduction
    on the volume of his business, a right consistently recognized and affirmed by
    this Court. (Arabit, et. Al. vs. Jardine Pacific Finance, Inc. G.R. No. 181719,
    April 2014)
    Elements:
    1. The losses incurred are substantial and not de minimis
    2. The losses are actual and reasonably imminent
    3. The retrenchment is reasonable necessary and is likely to
    be effective in preventing the expected losses
    4. The alleged losses, if already incurred, or the expected imminent
    losses sought to be forestalled, are proven by sufficient and
    convincing evidence.
    Employer must exercise its prerogative
    to retrench in good faith
     Illustration:
     Mitsubishi was bleeding to the tune of 1.2Billion pesos in years 1997 and 1998
     To stop the losses, it implemented many cost-cutting measures
     It reduced office supplies use, deferred project implementation, froze hiring, and
    implemented a 5% cut in managerial salaries among others
     It decided it would need to permanently retrench.
     When this was challenged, the Supreme Court upheld the decision in favor of
    Mitsubishi.
     It pointed to all the proof Mitsubishi submitted to show that there was a real
    reason for retrenchment.
    Alfredo Mendros, Jr. vs. Mitsubishi Motors Phils.
    Corporation (MMPC), G.R. NO. 169780, February 16,
    2009
     The right of management to retrench or to lay-off workers to meet clear and
    continuing economic threats or during periods of economic recession to
    prevent losses is recognized by Article 283 of the Labor Code, as amended,
    partly providing:
    Art. 283. Closure of establishment and reduction of personnel.––The employer
    may also terminate the employment of any employee due to x x x retrenchment
    to prevent losses or the closing or cessation of operations of the establishment x
    x x by serving a written notice on the worker and the [DOLE] at least one month
    before the intended date thereof. x x x In case of retrenchment to prevent
    losses, the separation pay shall be equivalent to one (1) month pay or at least
    one-half month pay for every year of service whichever is higher. x x x (Emphasis
    ours.)
    Alfredo Mendros, Jr. vs. Mitsubishi Motors Phils.
    Corporation (MMPC), G.R. NO. 169780, February 16,
    2009
     it bears to state that the aforequoted Art. 283 of the Code uses the phrase
    "retrenchment to prevent losses." The phrase necessarily implies that
    retrenchment may be effected even in the event only of imminent,
    impending, or expected losses. The employer need not wait for substantial
    losses to materialize before exercising ultimate and drastic option to prevent
    such losses. In the case at bench, MMPC was already financially hemorrhaging
    before finally resorting to retrenchment.
    The employer uses fair and reasonable criteria in
    ascertaining who would be retrenched or retained

     When termination of employment is occasioned by retrenchment to prevent


    losses, an employer must declare a reasonable cause or criterion for
    retrenching an employee. Retrenchment that disregards an employee's record
    and length of service is an illegal termination of employment. (La Consolacion
    College of Manila Sr. Imelda A. Mora, et. Al. vs. Virginia Pascua. G.R. No.
    214744, March 14, 2018)
    La Consolacion College of Manila Sr. Imelda A. Mora,
    et. Al. vs. Virginia Pascua. G.R. No. 214744, March 14,
    2018
     Retrenchment is normally resorted to by management during periods of
    business reverses and economic difficulties occasioned by such events as
    recession, industrial depression, or seasonal fluctuations. It is an act of the
    employer of reducing the work force because of losses in the operation of the
    enterprise, lack of work, or considerable reduction on the volume of business.
    Retrenchment is, in many ways, a measure of last resort when other less
    drastic means have been tried and found to be inadequate.
     While a legitimate business option, retrenchment may only be exercised in
    compliance with substantive and procedural requisites.
    La Consolacion College of Manila Sr. Imelda A. Mora,
    et. Al. vs. Virginia Pascua. G.R. No. 214744, March 14,
    2018
     Asia World Publishing House, Inc. v. Ople[37] considered seniority, along with
    efficiency rating and less-preferred status, as a crucial facet of a fair and
    reasonable criterion for effecting retrenchment.
     Emcor, Inc. v. Sienes[39] was categorical, a "[r]etrenchment scheme without
    taking seniority into account rendered the retrenchment invalid“
     In Philippine Tuberculosis Society, Inc. v. National Labor Union,[42] this Court
    quoted with approval the following discussion by the National Labor Relations
    Commission:
    La Consolacion College of Manila Sr. Imelda A. Mora,
    et. Al. vs. Virginia Pascua. G.R. No. 214744, March 14,
    2018
     We noted with concern that the criteria used by the Society failed to consider the
    seniority factor in choosing those to be retrenched, a failure which, to our mind,
    should invalidate the retrenchment, as the omission immediately makes the selection
    process unfair and unreasonable. Things being equal, retaining a newly hired
    employee and dismissing one who had occupied the position for years, even if the
    scheme should result in savings for the employer, since he would be paying the
    newcomer a relatively smaller wage, is simply unconscionable and violative of the
    senior employee's tenurial rights. In Villena vs. NLRC, 193 SCRA 686. February 7, 1991,
    the Supreme Court considered the seniority factor an important ingredient for the
    validity of a retrenchment program. According to the Court, the following legal
    procedure should be observed for a retrenchment to be valid: (a) one-month prior
    notice to the employee as prescribed by Article 282 of the Labor Code; and b) use of a
    fair and reasonable criteria in carrying out the retrenchment program, such as 1) less
    preferred status (as in the case of temporary employees) 2) efficiency rating, 3)
    seniority, and 4) proof of claimed financial losses.
      status (i.e., whether they are temporary, casual, regular or managerial
    employees), efficiency, seniority, physical fitness, age, and financial hardship
    for certain workers.
    PROCEDURAL REQUIREMENTS

     Procedurally, employers must serve a "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.“ Likewise, they must pay "the retrenched
    employees separation pay equivalent to one month pay or at least 1/2 month
    pay for every year of service, whichever is higher."
    THANK YOU!

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