Retrenchment, redundancy as authorized causes for separation from service

Under the Labor Code, retrenchment and redundancy are authorized causes for separation from service. However, to protect labor, dismissals due to retrenchment or redundancy are subject to strict requirements under Article 283 of the Labor Code, to wit:

ART. 283. CLOSURE OF ESTABLISHMENT AND REDUCTION OF PERSONNEL. The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title by serving a written notice on the worker and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to separation pay equivalent to at least his one (1) month pay or at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered as one (1) whole year.

Retrenchment is an exercise of managements prerogative to terminate the employment of its employees en masse, to either minimize or prevent losses, or when the company is about to close or cease operations for causes not due to business losses. (G.R. No. 173231; December 28, 2007)

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