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IV.

SUSPENSION OF BUSINESS OPERATIONS

A. Basis and Maximum period allowed


Article 286. When employment not deemed terminated. The bonafide suspension of the
operation of a business or undertaking for a period not exceeding six months, or the fulfillment
by the employee of a military or civic duty shall not terminate employment. In all such cases, the
employer shall reinstate the employee to his former position without loss of seniority rights if he
indicates his desire to resume his work not later than one month from the resumption of
operations of his employer or from his relief from the military or civic duty.

B. Effect on employment status

If the period of suspension of operations do not exceed six months, the workers shall be
reinstated to their respective positions without loss of seniority rights if they indicated their
desire to resume work not later than one month from the resumption of operations of business.
If the shutdown is for a period of not more than six months such as may occur in equipment
check or repair, stock inventory or lack of raw materials, the employee is only temporarily laid of
and, therefore, employer-employee relationship is not severed.
Compensation of employees during the six-month suspension.
Employees are not entitled to their wages and benefits during the 6-month period.
The reason is, within the said period, the employer-employee relationship is deemed
suspended. The employment relationship being suspended, both the employer and
the employees cease to be bound, at least temporarily, by the basic terms and
conditions of their employment contract - the employer regarding his obligation to
provide salary to his workers; and on the part of the workers, to provide their
services to the former

If it will last for a period of more than six months and is of an indefinite character , it
may be considered as equivalent to closure of the establishment leading to termination of
employment. In such a case, the requirements of the law and rules on employee dismissals must
be observed.
In the 2005 case of Mayon Hotel & Restaurant vs. Adana, [G. R. No. 157634, May 16,
2005], the High Court declared that Article 286 is clear - there is termination of
employment when an otherwise bona fide suspension of work exceeds six (6)
months. Moreover, even assuming arguendo that the cessation of employment on
April 1997 was merely temporary when hotel operations were suspended due to the
termination of the lease of the old premises, it became dismissal by operation of law
when petitioners failed to reinstate respondents after the lapse of six (6) months,
pursuant to Article 286. And even assuming that the closure was due to a reason
beyond the control of the employer, it still has to accord its employees some relief
in the form of severance pay.
Effect of employment of the employee in other establishments during 6-month period.
In the 2005 case of JPL Marketing Promotions vs. CA, [G. R. No. 151966, July 8,
2005], it was established that private respondent-employees sought employment
from other establishments even before the expiration of the six (6)-month period
provided by law. They admitted that all three of them applied for and were
employed by another establishment after they received the notice from JPL.
Consequently, it was held that petitioner JPL cannot be said to have terminated their
employment for it was they themselves who severed their relations with JPL. Thus,
they are not entitled to separation pay, even on the ground of compassionate
justice. Clearly, the principle in the law which grants separation pay applies only
when the employee is dismissed by the employer, which is not the case in this
instance. In seeking and obtaining employment elsewhere, private respondents
efectively terminated their employment with JPL.

C. Fulfillment of a Military or Civic Duty; Effect


Section 12, Rule 1 of Book VI of the Omnibus Rules Implementing the Labor Code:
'Sec. 12. Suspension of relationship. The employer-employee relationship shall be deemed
suspended in case of suspension of operation of the business or undertaking of the employer for
a period not exceeding six (6) months, unless the suspension is for the purpose of defeating the
rights of the employees under the Code, and in case of mandatory fulfillment by the employee of
a military or civic duty. The payment of wages of the employee as well as the grant of other
benefits and privileges while he is on a military or civic duty shall be subject to special laws and
decrees and to the applicable individual or collective bargaining agreement and voluntary
employer practice or policy.'
From the foregoing provisions, it is clear that management can temporarily suspend business
operations or undertakings for a period not exceeding six (6) months without having to pay
separation pay to workers, but the suspension must be done bona fide and not for the purpose of
defeating the rights of employees. Within this period, the employer-employee relationship shall
be deemed suspended.

D. Analogous situation; Temporary Lay-off valid exercise of management


prerogatives
Dela Cruz vs. NLRC [G.R. No. 119536 February 17, 1997] A lay-off, used interchangeably with
"retrenchment," is a recognized prerogative of management. It is the termination of employment
resorted to by the employer, through no fault of nor with prejudice to the employees, during
periods of business recession, industrial depression, seasonal fluctuations, or during lulls
occasioned by lack of orders, shortage of materials, conversion of the plant for a new production
program, or the introduction of new methods or more efficient machinery, or of automation.
Simply put, it is an act of the employer of dismissing employees because of losses in 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. 8 The requisites of a valid retrenchment are
covered by Article 283 of the Labor Code.
When a lay-off is temporary, the employment status of the employee is not deemed terminated,
but merely suspended. Article 286 of the Labor Code provides, in part, that the bona fide
suspension of the operation of the business or undertaking for a period not exceeding six
months does not terminate employment.
The standard then by which to judge the validity of the exercise of this aspect of management
prerogative is good faith. Thus, in San Miguel Brewery Sales Force Unit v. Ople, 9 this Court
held that so long as company prerogatives are exercised in good faith for the advancement of
employers' interest and not for the purpose of defeating or circumventing the rights of the
employees under special laws or under valid agreements, this Court will uphold them.
In the instant case, the petitioner was laid-off allegedly pursuant to the private respondent's
"cost-saving program" brought about by the daily brownouts. Under the established facts
summarized by the Office of the Solicitor General, which the private respondents were unable to
refute, we agree with the former that the program was "but a camouflage of the true reason or
intention of the company to eventually rid petitioner from the service." Indeed, if there was need
to temporarily lay-off to save on costs due to the brownouts, this Court cannot understand why,
first, the private respondents disallowed, due to heavy volume of work, the availment of vacation
and sick leaves unless the sickness or injury occurred inside company premises; and second,
only the petitioner out of more than 100 employees was laid-off. These alone showed beyond
cavil that the so-called cost-saving program was nothing but a sham and contrived as a belated
defense.

E. Suspension of Business operation (Art 300/286) Distinguished from Stoppage or


suspension of Work (Art 123c)
Art. 128. Visitorial and enforcement power.(c) The Secretary of Labor and Employment may
likewise order stoppage of work or suspension of operations of any unit or department of an
establishment when non-compliance with the law or implementing rules and regulations poses
grave and imminent danger to the health and safety of workers in the workplace. Within twentyfour hours, a hearing shall be conducted to determine whether an order for the stoppage of work
or suspension of operations shall be lifted or not. In case the violation is attributable to the fault
of the employer, he shall pay the employees concerned their salaries or wages during the period
of such stoppage of work or suspension of operation.
Article 286. When employment not deemed terminated. The bonafide suspension of the
operation of a business or undertaking for a period not exceeding six months, or the fulfillment
by the employee of a military or civic duty shall not terminate employment. In all such cases, the
employer shall reinstate the employee to his former position without loss of seniority rights if he
indicates his desire to resume his work not later than one month from the resumption of
operations of his employer or from his relief from the military or civic duty.
situations contemplated under Article 286 of the Labor Code when employment not
deemed terminated?
1. bona-fide suspension by the employer of the operation of his business or undertaking
for a period not exceeding six (6) months;
2. fulfillment by the employee of a military duty; or
3. fulfillment by the employee of a civic duty.
What is bona-fide suspension of operations for a period not exceeding six months?
No law on temporary retrenchment or lay-of, Article 286 applies only by analogy.
Extent of suspension of operation - may involve only a section or department of the
company - not necessarily the entire operations.
Burden to prove bona-fide suspension of operation is on the employer.

F. temporary or periodic shutdown and temporary cessation of work


Rule IV, OMNIBUS RULES IMPLEMENTING THE LABOR CODE
SECTION 7. Temporary or periodic shutdown and temporary cessation of work. (a) In cases of
temporary or periodic shutdown and temporary cessation of work of an establishment, as when a
yearly inventory or when the repair or cleaning of machineries and equipment is undertaken, the
regular holidays falling within the period shall be compensated in accordance with this Rule.
(b) The regular holiday during the cessation of operation of an enterprise due to business
reverses as authorized by the Secretary of Labor and Employment may not be paid by the
employer.

V. DISEASE AS A GROUND FOR TERMINATION


Article 284. Disease as ground for termination. An employer may terminate the services of an
employee who has been found to be sufering from any disease and whose continued
employment is prohibited by law or is prejudicial to his health as well as the health of his coemployees: Provided, That he is paid separation pay equivalent to at least one month salary or to
one-half month salary for every year of service, whichever is greater, a fraction of at least six
months being considered as one whole year.
Requisites for termination on the ground of disease.
1. The employee sufers from a disease;
2. His continued employment is prohibited by law or prejudicial to his health or to the health
of his co-employees; and
3. The disease is of such nature and at such a stage that it cannot be cured within a period of
six months even with proper medical treatment. (Sec. 8, Title I, Bk. VI, IRR)
Certification from public health authority required
Certification by competent public health authority that the disease is of such nature and of
at such a stage that it cannot be cured within a period of six months even with proper medical
treatment.
Right to reinstatement if disease is curable with six months
If the disease or ailment can be cured within six months, the employer shall not terminate
the employee but shall ask the employee to take a leave of absence.
The employee is entitled to be reinstated to his former position immediately upon the
restoration of his normal health.
Disability distinguished from Disease
Disability should not be confused with disease. Disability itself, even if permanent, is not a
ground for termination. The Magna Carta for Disabled Persons prohibits the termination of a
disabled employee based on disability alone. This constitutes act of discrimination, a criminal
ofense for which fine and/or imprisonment may be imposed. (Magna Carta for Disabled Persons)
Cases
1. The requirement for a medical certificate under Article 284 of the Labor Code cannot be
dispensed with; otherwise, it would sanction the unilateral and arbitrary determination by
the employer of the gravity or extent of the employees illness and thus defeat the public
policy in the protection of labor. (Sy vs. Court of Appeals, G.R. No. 142293 February 27,
2003)

VI. OTHER CAUSES OF SEVERANCE OF EMPLOYMENT RELATION


A. Resignation
Article 285. Termination by employee. (a) An employee may terminate without just cause the
employee-employer relationship by serving a written notice on the employer at least one month
in advance. The employer upon whom no such notice was served may hold the employee liable
for damages.
(b) An employee may put an end to the relationship without serving any notice on the employer
for any of the following just causes:

(1) Serious insult by the employer or his representative on the honor and person of
the employee;
(2) Inhuman and unbearable treatment accorded the employee by the employer or
his representative;
(3) Commission of a crime or ofense by the employer or his representative against
the person of the employee or any of the immediate members of his family; and
(4) Other causes analogous to any of the foregoing.
Voluntary Resignation
Resignation is defined as the voluntary act of an employee who finds himself in a situation where
he believes that personal reasons cannot be sacrificed in favor of the exigency of the service and
he has no other choice but to disassociate himself from his employment. (Virgen Shipping Corp.
vs. Barraquio, G.R. No. 178127, April 16, 2009 citing Valdez vs. NLRC.)
The key is that resignation must be a voluntary act, and that the employee must have
knowingly and voluntarily dissociate himself from his employment for his own personal reasons.
It does not cover cases where the employee is forced to resign with the use of threats,
intimidation, coercion or manipulation, or where resignation is imposed as a penalty for an
ofense.
The common practice of allowing an employee to resign, instead of terminating him for just
cause so as not to smear his employment record, also fall under the category of voluntary
resignation. (See J Marketing Corp. vs. Taran, G.R. No. 163924, June 28, 2009).

Resignation Notice
The Labor Code requires the employee to give an advance notice to the employer of his intention
to resign. The notice of resignation must be in writing and must be served to the employer at
least one month prior to the efective date of his resignation.
Resignation notice usually takes the form of a letter (commonly called resignation letter)
addressed to the employer, expressing the employees intention to terminate his employment. It
must state the date when resignation is to take efect because of the 30-day notice requirement
under the law. It may also contain the reason or justification of the employee for filing his
resignation, although legally, this is not important. The employee may resign for whatever
reason, or even for no reason at all. Thus, in legal parlance, voluntary resignation is also called
termination by employee without just cause.

Resignation letter normally contains explicit words expressing employees intention to terminate
his employment. However, lack of explicit words stating the employees intention to resign is
deemed not crucial, as long as the employees intention to resign can be deduced from letter
itself. In one case, the Supreme Court held that a memorandum written by the employee
containing his deep resentment towards his superior juridically constituted a letter of resignation.
Even if the employee did not expressly indicate his intention to resign (neither of the words
resign or resignation was mentioned), the resentful and sarcastic tone of the memorandum
was held to be sufficiently indicative of such intention.
Effect of Failure to Tender Resignation Notice
If the employee fails to give the employer one month advance notice of his intention to resign,
he may be held liable for damages.

Instances when Notice of Resignation is Not Required


The employee may resign even without serving any notice on the employer for any
following reasons:
1. Serious insult by the employer or his representative on the honor and person
employee;
2. Inhuman and unbearable treatment accorded the employee by the employer
representative;
3. Commission of a crime or ofense by the employer or his representative against the
of the employee or any of the immediate members of his family; and
4. Other causes analogous to any of the foregoing.

of the
of the
or his
person

Resignation under any of the instance enumerated above is also called termination by
employee with just cause.
Separation Pay
An employee who voluntarily resigns from his work is not entitled to separation pay. There is no
provision in the Labor Code which grants separation pay to voluntarily resigning employees.
Separation pay as a rule is paid only in those instances where the severance of employment is
due to factors beyond the control of the employee. Thus, in case of retrenchment to prevent
losses where the employee is forced to depart from the company due to no fault on his part,
separation pay is required by law to be paid to the dismissed employee.
The case is totally diferent in case of voluntary resignation where severance of employment is
due to employees own initiative. The law does not oblige the employer to give separation pay if
the initiative to terminate employment comes from employee himself.
Exceptions
However, by way of exceptions, there are at least two instances where an employee who
voluntarily resign is entitled to receive separation pay, as follows:
1. When payment of separation pay is stipulated in the employment contract or Collective
Bargaining Agreement (CBA, for companies with existing bargaining agent or union);
2. When it is sanctioned by established employer practice or policy.
In Hinatuan Mining Corporation, et al. vs. NLRC, et al., G.R. No. 117394, February 21, 1997, the
court ruled viz.:
It is well to note that there is no provision in the Labor Code which grants separation
pay to voluntarily resigning employees. Separation pay may be awarded only in cases
when the termination of employment is due to: (a) installation of labor saving devices,
(b) redundancy, (c) retrenchment, (d) closing or cessation of business operations, (e)
disease of an employee and his continued employment is prejudicial to himself or his coemployees, or (f) when an employee is illegally dismissed but reinstatement is no longer
feasible. In fact, the rule is that an employee who voluntarily resigns from employment is
not entitled to separation pay, except when it is stipulated in the employment contract
or CBA, or it is sanctioned by established employer practice or policy.

In Lilia Pascua, et al. vs. NLRC, et al., G.R. No. 123518, March 13, 1998, the Supreme Court,
reiterated that:
The grant of separation pay, however, is inconsistent with existing employment or
voluntary resignation, for it presupposes illegal dismissal.
Special cases
In addition to the exceptions cited above, there are other cases where the court may award
separation pay to voluntarily resigning employee. For example, in Alfaro vs. CA, G.R. No. 140812,
August 28, 2001, the Court ordered the payment of separation pay despite holding that the
employee voluntarily resign from service, and although such payment was not mandated under
the CBA or employment contract. Same conclusion was arrived at in J Marketing.
In both of the above cases, the employer agreed to give separation pay to the employee as an
incident of the latters resignation, but later on renege in the performance of such commitment.
The Court held that such practice should not be countenanced.
In Alfaro, the Court ruled as follows:
Generally, separation pay need not be paid to an employee who voluntarily resigns.
However, an employer who agrees to expend such benefit as an incident of the
resignation should not be allowed to renege in the performance of such commitment.
B. Retirement
REPUBLIC ACT NO. 7641 AN ACT AMENDING ARTICLE 287 OF PRESIDENTIAL DECREE NO. 442, AS
AMENDED, OTHERWISE KNOWN AS THE LABOR CODE OF THE PHILIPPINES, BY PROVIDING FOR
RETIREMENT PAY TO QUALIFIED PRIVATE SECTOR EMPLOYEES IN THE ABSENCE OF ANY RETIREMENT PLAN
IN THE ESTABLISHMEN

ART. 287. Retirement. Any employee may be retired upon reaching the retirement age established in the
collective bargaining agreement or other applicable employment contract.
"In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have
earned under existing laws and any collective bargaining agreement and other agreements: Provided,
however, That an employee's retirement benefits under any collective bargaining and other agreements
shall not be less than those provided herein.
"In the absence of a retirement plan or agreement providing for retirement benefits of employees in the
establishment, an
employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is
hereby declared the compulsory retirement age, who has served at least five (5) years in the said
establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half (1/2)
month salary for every year of service, a fraction of at least six (6) months being considered as one whole
year.
"Unless the parties provide for broader inclusions, the term 'one-half (1/2) month salary' shall mean fifteen
(15) days plus
one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5) days of service
incentive leaves.
"Retail, service and agricultural establishments or operations employing not more than ten (10) employees
or workers
are exempted from the coverage of this provision.
"Violation of this provision is hereby declared unlawful and subject to the penal provisions provided under
Article 288 of this Code.

What is the coverage of the Retirement Pay Law?


The Retirement Pay Law applies to all employees in the private sector, regardless of their
position, designation or status and irrespective of the method by which their wages are paid,
except those specifically exempted. It also includes and covers part-time employees, employees
of service and other job contractors and domestic helpers or persons in the personal service of
another.
Who are the employees not covered by the Retirement Pay Law?
The Retirement Pay Law does not apply to the following employees:
1. Employees of the National Government and its political subdivisions, including
government-owned and/or controlled corporations, if they are covered by the Civil Service
Law and its regulations.

2. Employees of retail, service and agricultural establishments or operations regularly


employing not more than ten (10) employees. As used in this sub-section:
"Retail establishment" is one principally engaged in the sale of goods to end-users for
personal or household use It shall lose its retail character qualified for exemption if it is
engaged in both retail and wholesale of goods.
"Service establishment" is one principally engaged in the sale of service to individuals
for their own or household use and is generally recognized as such.
"Agricultural establishment/operation" refers to an employer which is engaged in
agriculture. This term refers to all farming activities in all branches and includes,
among others, the cultivation and tillage of soil, production, cultivation, growing and
harvesting of any agricultural or horticultural commodities, dairying, raising of livestock
or poultry, the culture of fish and other aquatic products in farms or ponds, and any
activities performed by a farmer or on a farm as an incident to, or in conjunction with,
such farming operations, but does not include the manufacture and/or processing of
sugar, coconut, abaca, tobacco, pineapple, aquatic or other farm products.
May an employee retire under the CBA or employment contract?
Any employee may retire or be retired by his employer upon reaching the retirement age
established in the CBA or other applicable employment contract and he shall be entitled to the
benefits thereunder. If the amount is less than those provided under the law, the employer shall
pay the diference.

What is the distinction between optional and compulsory retirement?


Article 287 of the Labor Code, as amended by Republic Act No. 7641, provides for two (2) types
of retirement: (a) optional; and (b) compulsory.
1. Optional retirement. - In the absence of a retirement plan or other applicable agreement
providing for retirement benefits of employees in an establishment, an employee may retire
upon reaching the age of sixty (60) years or more if he has served for at least five (5) years
in said establishment.
2. Compulsory retirement - Where there is no such retirement plan or other applicable
agreement providing for retirement benefits of employees in an establishment, an employee
shall be retired upon reaching the age of sixty-five (85) years.
Is the option granted to the employer to retire an employee valid?
Yes. The decision of the Supreme Court in the case of PAL VS. ALPAP.(G.R. No.143888, January
15,2002), is instructive:
"Finally, on the issue of whether petitioner should consult the pilot concerned before exercising
its option to retire pilots, we rule that this added requirement, in efect, amended the terms of
Article VII, Section 2 of the 1978 PAL-ALPAP Retirement Plan. The option of an employer to retire
its employees is recognized as valid.
"Surely, the requirement to consult the pilots prior to their retirement defeats the exercise by
management of its option to retire the said employees. It gives the pilot concerned an undue
prerogative to assail the decision of management Due process only requires that notice be given
to the pilot of petitioner's decision to retire him. Hence, the Secretary of Labor overstepped the
boundaries of reason and fairness when he imposed on petitioner the additional requirement of
consulting each pilot prior to retiring him.
"Furthermore, when the Secretary of Labor and Employment imposed the added requirement
that petitioner should consult its pilots prior to retirement, he resolved a question which was
outside of the issues raised, thereby depriving petitioner an opportunity to be heard on this
point.
May an employee retire at an earlier or older age?

The law recognizes as valid any retirement plan, agreement or management policy regarding
retirement at an earlier or older age.
What are included in the minimum 5-year service requirement?
The minimum 5-year service requirement includes the following.
1. Authorized absences, vacations, regular holidays, included.
2. Only actual service included.
What are included in the retirement benefits under the Retirement Pay Law?
1. One-half (1/2) month salary In the absence of an applicable employment contract, an
employee who retires shall be entitled to retirement pay equivalent to at least one-half (1/2)
month salary for every year of service, a fraction of at least six (8) months being considered as
one (1) whole year.
2. One-half (1/2) month salary, components. - For the purpose of determining the minimum
retirement pay due an employee, the term "one-half month salary" shall include all the following:
(a) fifteen (15) days salary of the employee based on his latest salary rate.
(b)the cash equivalent of five (5)days of service incentive leave; (c) one-twelfth (1/12)
of the 13th month pay due the employee; and
(d) all other benefits that the employer and employee may agree upon that should be
included in the computation of the employee's retirement pay.
3. One-half monthly salary of employees who are paid by results. - For covered workers who are
paid by results and do not have a fixed monthly rate, the basis for determination of the salary for
fifteen (15) days shall be their average daily salary (ADS).

Does the Retirement Pay Law have any retroactive effect'?


Yes. R. A. 7841 (Retirement Pay Law) is applicable to services rendered prior to January 7, 1993.
Consequently, in reckoning the length of service, the period of employment with the same
employer before the efectivity date of the law (Republic Act No. 7841)shall be included.
May Pag-IBIG be considered as substitute retirement plan?
As provided in R. A. No. 7742, a private employer shall have the option to treat the coverage of
the Pag-IBIG Fund as a substitute retirement benefit for the employee concerned within the
purview of the Labor Code as amended; provided such option does not in any way contravene an
existing collective bargaining agreement or other employment agreement
Thus, the Pag-IBIG Fund can be considered as a substitute retirement plan of the company for its
employees provided that such scheme ofers benefits which are more than or at least equal to
the benefits under Republic Act No. 7841. If said scheme provides for less than what the
employee is entitled to under Republic Act No. 7841, the employer is liable to pay the diference.

VII. PRESCRIPTION OF CLAIMS


A. Claim for Illegal dismissal
Art. 1146. The following actions must be instituted within four years:
(1) Upon an injury to the rights of the plaintif;
(2) Upon a quasi-delict;
However, when the action arises from or out of any act, activity, or conduct of any public officer
involving the exercise of powers or authority arising from Martial Law including the arrest,
detention and/or trial of the plaintif, the same must be brought within one (1) year. (As amended
by PD No. 1755, Dec. 24, 1980.)

B. Money Claims
ART. 291. Money claims. - All money claims arising from employer-employee relations accruing
during the efectivity of this Code shall be filed within three (3) years from the time the cause of
action accrued; otherwise they shall be forever barred.
All money claims accruing prior to the efectivity of this Code shall be filed with the appropriate
entities established under this Code within one (1) year from the date of efectivity, and shall be
processed or determined in accordance with the implementing rules and regulations of the Code;
otherwise, they shall be forever barred.
Workmens compensation claims accruing prior to the efectivity of this Code and during the
period from November 1, 1974 up to December 31, 1974, shall be filed with the appropriate
regional offices of the Department of Labor not later than March 31, 1975; otherwise, they shall
forever be barred. The claims shall be processed and adjudicated in accordance with the law and
rules at the time their causes of action accrued.
C. Claim for illegal Dismissal with money claims

D. Unfair Labor Practice