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Retrenchment

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Summary

  • To be valid, the authorized cause of retrenchment or downsizing should comply with prescribed standards.

Legal basis

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

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 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.

References

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