With the continued onslaught of the Covid-19 pandemic, most businesses have either closed or suspended their operations.
In these situations, what are the legal responsibilities of employers and the rights of employees?
CLOSURE
Closing a business is a valid exercise of management prerogative and a right granted by law to business owners.
Just as no law forces anyone to go into business, no law can compel anybody to continue his business, even if the same is profitable; PROVIDED, that the employer complies with the requirements of the law on closures, to wit:
a) That the closure is done in good faith and not intended to defeat the tenurial rights of employees;
b) There must be a written notice to the affected employee/s and the Department of Labor and Employment at least one (1) month before the intended date of closure; and
c) If the reason for the closure is NOT due to serious business losses or financial reverses, to pay the affected employees separation pay equivalent to one (1) month salary OR ½ month salary for every year or service, whichever is higher
What if the closure is by reason of serious business losses or financial reverses?
Under the law, if the closure of business is due to serious business losses or financial reverses, employers are not obliged to pay the affected employees separation pay.
HOWEVER, the law emphasizes that such losses must be serious in nature and that the employer must substantially prove such losses through income tax returns, audited financial statements and other verifiable documentation. It would entail a deeper inquiry into the veracity of the documents presented by the employer.
Failure of the employer to prove serious business losses, shall entitle the employee to separation pay.
TEMPORARY SUSPENSION OF OPERATIONS
An employer may temporarily suspend its operations for a period not exceeding six (6) months. In this case, employment is not deemed terminated, but merely suspended.
Before the end of the six (6) month period of suspension, the employer shall reinstate the affected employee to his former position without loss of seniority rights.
Otherwise, the employee shall be deemed terminated, to which the latter may seek legal relief by filing an illegal dismissal case against the employer; UNLESS, such failure to reinstate is based on any of the valid grounds for termination of employment under the Labor Code and that due process was observed.*
