1 December 2020
Not everything is black and white when it comes to business and employment. The question of whether the suspended operations of an establishment will resume is not easily answered even by the most seasoned entrepreneurs, especially given the ongoing pandemic.
Perhaps, it is precisely such unintended scenarios that legislators had in mind when they provided for a provision in the Labor Code allowing an employer to temporarily suspend work relations, or as some would call it, “temporarily lay off” employees, but only for legitimate reasons. These reasons include suspension of business operations for a period not exceeding six (6) months or the performance of a military or civil duty of an employee.
Under Art. 300 of the Labor Code, the employer shall reinstate the employee to his former position without loss of seniority of rights if he indicates his desire to resume his work not later than one (1) month from the resumption of operations of his employer.
With the onslaught of the pandemic, the Department of Labor and Employment (DOLE) introduced last October an amendment to the Implementing Rules and Regulations (IRR) of the Labor Code, which allows the extension of suspension of work relationship for another six (6) months. Under DOLE Department Order no. 215 series of 2020, in case of declaration of war, pandemic and similar national emergencies, the initial six (6) months suspension may be extended for a period not exceeding another six (6) months by the employer and employee through mutual agreement.
The employer shall report to the DOLE Regional Office such extension at least ten (10) days prior to effectivity and subject to inspection.
The Department Order further provides that employees shall not lose employment if they find other work during the suspension, unless there is written, unequivocal and voluntary resignation. If retrenchment becomes necessary, affected employees shall be entitled to separation pay. If work should resume, affected workers placed on suspension shall be prioritized. DOLE clarified that the extension of suspension of work relationship shall not affect workers’ right to separation pay, and that first six (6) months of suspension shall be included in the computation of separation pay.
Reasons for suspension of business operations may vary. It can range from the most serious financial reasons, such as business reverses or serious losses, or legal impediments that make it impossible to resume operations, such as the loss of a permit, or by court order directing work stoppage, or a court-issued injunction. Whatever the alleged cause may be, the key principle is that the reason for work suspension must be bona fide, otherwise the employer may be held liable for labor violations.
In MMCEAFFW Chapter v. Manila Mining Corp. (G.R. Nos. 178222-23, September 29, 2010), the Supreme Court sustained the validity of the suspension of Manila Mining Corp. (MMC)’s mining operations based on evidence that MMC cannot conduct mining operations without a tailings disposal system. Nevertheless, the High Court clarified that the validity of its act of suspending its operations does not excuse it from paying separation pay. The Court opined that the Labor Code indeed allows the bona fide suspension of operations for a period not exceeding six (6) months. During the suspension, an employee is not deemed terminated. As a matter of fact, the employee is entitled to be reinstated once the employer resumes operations within the 6-month period.
In an earlier case, PFBOEU vs. CIR(G.R. No. L-30592. February 25, 1982), the High Court likewise held that the employer-employee relationship between the petitioners and respondent fishing company was not severed but merely suspended during the time the vessels are dry docked or undergoing repairs or being loaded with the necessary provisions for the next fishing trip, notwithstanding that even during the time that they worked with respondent company, petitioners alternated their employment on different vessels when they were not assigned on the company’s vessel.
The Court reasoned that temporary suspension of the business due to some foreseeable events – for example, the scarcity of ice for the fishing trips or when the fishing vessels cannot go out to sea due to repairs or strong typhoons – does not sever the employer-employee relationship between the parties. Hence, the employer-employee relationship is merely suspended during the time the vessels are dry docked or undergoing repairs or being loaded with the necessary provisions for the next fishing trip. All these activities form part of the regular operation of the company’s fishing business.
Hence, employees who are placed on temporary work suspension are not strictly speaking separated from the service. Their employment relationship is not severed but merely suspended.
First published on The Daily Tribune.
For further information, please contact:
Nilo T. Divina, Managing Partner, DivinaLaw
nilo.divina@divinalaw.com
