Authorized Causes

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  • P.D. 442, as amended, Supreme Court Decisions, and DOLE Regulations, are the bases for authorized causes.
  • Authorized causes are grounds for separation of employment of an employee.
  • Authorized causes cover all employees, regardless of rank or status.
  • There are standards for each just cause set or prescribed by Supreme Court Decisions or Jurisprudence.
  • Separation pay is due to employees who have be separated due to authorized causes.
  • If there is no just cause in the termination of employment, the employer may be held liable for illegal dismissal.

Legal basis

The legal basis is the P.D. 442, otherwise known as the Labor Code, Supreme Court Decisions, and DOLE Regulations.

Concept

Authorized causes are grounds for separation of employment.

It is called authorized causes because the separation from employment is justified due to a legitimate business reason or a requirement by law or regulations.

In these situations, and in the exercise of its management prerogative, the employer is justified letting go of the employee who is not at fault and thus given a separation pay.

Coverage

Just causes cover all employees, regardless of rank or status.

Whether rank-and-file, supervisory, managerial in rank, an employee is covered by just causes.

Whether regular, probationary, casual, project, seasonal, or fixed-term, an employee is covered by just causes.

The authorized causes

The Labor Code provides for the following authorized causes:

1. Installation of labor-saving devices;

2. Redundancy;

3. Retrenchment;

4. Closing or cessation of business operations; and

5. Disease.

Supreme Court Decisions provide for the following authorized causes:

1. Reinstatement is no longer feasible to a former position or to a substantially equivalent position for reasons not attributable to the fault of the employer, as when the reinstatement ordered by a competent authority cannot be implemented due to closure or cessation of operations of the establishment/employer, or the position to which he or she is to be reinstated no longer exists and there is no substantially equivalent position in the establishment to which he or she can be assigned (Gaco v. NLRC, G.R. No. 104690, 23 February 1994); and

2. Strained relations.

DOLE Regulations provide for the following authorized causes:

1. Lack of service assignment of security guard for a continuous period of six (6) month (Department Order No. 150, series of 2016);

2. Lack of service assignment of security guard by reason of age (Ibid); and

3. Lack of re-assignment of deployed personnel after three (3) months (Department Order No. 174, series of 2017).

Standards for authorized causes

Standards have been set or prescribed for each authorized cause through Supreme Court Decisions and DOLE regulations, such as Department Order No. 147, series of 2015.

Standards for: Installation of labor-saving devices

The standards are:

1. There must be introduction of machinery, equipment or other devices;

2. The introduction must be done in good faith;

3. The purpose for such introduction must be valid such as to save on cost, enhance efficiency and other justifiable economic reasons;

4. There is no other option available to the employer than the introduction of machinery, equipment or device and the consequent termination of employment of those affected thereby; and

5. There must be fair and reasonable criteria in selecting employees to be terminated.

For more detailed discussions, refer to Installation of Labor-Saving Devices.

Standards for: Redundancy

The standards are:

1. There must be superfluous positions or services of employees;

2. The positions or services are in excess of what is reasonably demanded by the actual requirements of the enterprise to operate in an economical and efficient manner;

3. There must be good faith in abolishing redundant positions;

4. There must be fair and reasonable criteria in selecting the employees to be terminated;

5. There must be an adequate proof of such redundancy such as but not limited to the new staffing pattern, feasibility studies/proposal, on the viability of the newly created positions, job description and the approval by the management of the restructuring.

For more detailed discussions, refer to Redundancy.

Standards for: Retrenchment or Downsizing

The standards are:

1. The retrenchment must be reasonably necessary and likely to prevent business losses;

2. The losses, if already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are reasonably imminent;

3. The expected or actual losses must be proved sufficient and convincing evidence;

4. The retrenchment must be in good faith for the advancement of its interest and not to defeat or circumvent the employees’ right to security of tenure; and

5. There must be fair and reasonable criteria in ascertaining who would be dismissed and who would be retained among the employees, such as status, efficiency, seniority, physical fitness, age, and financial hardship for certain workers.

For more detailed discussions, refer to Retrenchment or Downsizing.

Standards for: Closure or Cessation of Operation

The standards are:

1. There must be a decision to close or cease operation of the enterprise by the management;

2. The decision was made in good faith; and

3. There is no other option available to the employer except to close or cease operations.

For more detailed discussions, refer to Closing or Cessation of Operation.

Standards for: Disease

The standards are:

1. The employee must be suffering from any disease;

2. The continued employment of the employee is prohibited by law or prejudicial to his/her health as well as to the health of his/her co-employees; and

3. There must be a certification by a competent public health authority that the disease is incurable within a period of six (6) months even with proper medical treatment.

For more detailed discussions, refer to Disease.

Separation pay

Employees who have been separated from employment are entitled to separation pay.

For more detailed discussions, refer to Separation Pay.

Consequence if no authorized cause

If there is no authorized cause in the separation from employment of an employee, the employer may be held liable for illegal dismissal.

References

  • 1987 Constitution
  • Presidential Decree No. 442, a.k.a. Labor Code
  • DOLE Department Order No. 147, Series of 2015