On Oct. 23, the Honorable Secretary of the Department of Labor and Employment (DoLE), Silvestre H. Bello, signed Department Order No. 215 Series of 2020 (DO No. 215-20) entitled, “Rule Amending Section 12 of Rule I, Rules Implementing Book VI of the Labor Code on Suspension of Employment Relationship.”

Before this issuance, the bona fide suspension of business operations by an employer was limited to a period of six months (under Article 301 [286] of the Labor Code, as amended), during which the employer-employee relationship shall also be deemed suspended. This basically means that an employee may be placed on a floating status or temporarily laid off from work for the said period without losing his or her employment. In implementing such a measure, jurisprudence requires the employer to provide notice to both the DoLE and the affected employees at least one month prior to the intended date of suspension of business operations.* In addition, the employer must also prove the existence of a clear and compelling economic reason for the temporary shutdown of its business or undertaking and that there were no available posts to which the affected employee could be assigned.**

After such time of suspension, Article 301 provides that “the employer shall reinstate the employee to his former position without loss of seniority rights if he indicates his desire to resume his work not later than one month from resumption of operations of his employer xxx.” Employers are cautioned that a suspension beyond such a period may lead to a finding of constructive dismissal in the event that an employee questions the same.

DO No. 215-20 has allowed the extension of such a suspension period for another six months in the event of a declaration of war, pandemic, and similar national emergencies. It also provides for separation from employment due to retrenchment before or after the expiration of the extended suspension period. Prior to the amendment, the provision on suspension of operations was silent on such a point, although jurisprudence has ruled that employers may separate employees due to authorized causes if there is no more work to be done after six months.

This amendment is a timely one, given the myriad of changes brought about by the COVID-19 pandemic which has rocked the labor sector to its very core. Millions of people have lost their jobs and thousands of companies were forced to board up their doors permanently. Companies which suspended their operations for six months following the imposition of quarantine restrictions early this year were faced with a conundrum when the six-month period was nearing its end — will they have to let go of their employees because of the uncertainty of the times or risk facing constructive dismissal cases for not being able to direct them to report back to work by virtue of said restrictions?

The issuance is not without safeguards. A resort to the extension of suspension requires the existence of a national emergency as well as consultation in good faith by the employers with their employees, through their unions, if any. In addition, the employers must ensure compliance with the reportorial requirements for such an event by reporting to the DoLE Regional Offices, which have jurisdiction over their place of business, the extension of the suspension of employment 10 days prior to the effectivity thereof.

The amendment not only protects the employment status of affected employees by honoring their right to seek alternative employment during the extended suspension period and giving them priority in the re-rehiring, but also recognizes the employers’ rights vis-à-vis the time-honored principle of “no work, no pay.” Nevertheless, while being allowed to seek alternative employment, employees must bear in mind that they may be recalled to work or even retrenched prior to the end of the extension period by virtue of a mutual agreement with their employers for such a purpose. Interestingly, the requirement of such a mutual agreement under the amendment only referred to retrenchment and made no mention of redundancy. It may then be argued that there is no need for such an agreement when an employer resorts to redundancy during the extension period.

Employees who are retrenched are entitled to the payment of separation pay in accordance with law or as may be provided by their respective Company Polices or Collective Bargaining Agreements, whichever is higher. The first six months of suspension will be included in the computation of the employees’ separation pay in the event that retrenchment is resorted to. It must be reminded, however, that the notice requirements to the DoLE and affected employees for retrenchment must still be complied with.

While DO No. 215-20 has presented a viable option for employers and employees alike, it is hoped that circumstances in the future will not necessitate a resort to its provisions.

* Airborne Maintenance and Allied Services, Inc. v. Arnulfo M. Egos, G.R. No. 222748, 3 April 2019.

** Ibid. 

This article is for informational and educational purposes only. It is not offered and does not constitute legal advice or legal opinion.

Laurie Christine P. Quiambao is an Associate of the Labor and Employment Department of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW).

(632) 8830-8000
lpquiambao@accralaw.com