Because of dwindling sales and the consequent limitation of productions, rumors were rife that XYZ, Inc. would reduce its employee force. The next day, the employees of XYZ, Inc. received a notice that the company will have a winding down period of 10 days, after which there will be a six (6)-month suspension of operations to allow the company to address its precarious financial position.
On the fourth (4th) month of suspension of its operations XYZ, Inc. posted announcement that it will resume its operations in 60 days but at the same time announced that instead of closing down due to financial losses, it will retrench 50% of the work force.
(a) Is the announcement that there would be retrenchment affecting 50% of the work force sufficient compliance with the legal requirements for retrenchment? Explain. (2.5%)
(b) Assuming that XYZ, Inc., instead of retrenchment, extended the suspension of its operations from six (6) months to eight (8) months, would the same be legally permissible? If not, what are the consequences? (2.5%)
Suggested Answer:
(a) No. Answer
Under the Labor Code, retrenchment requires two notices to be sent, to wit: (a) a 30-day advance notice to DOLE; and (b) a 30-day advance notice to the employees. Rule
In the case at bar, the Company did not send a 30-day advance notice to DOLE and to the employees in violation of the Labor Code. Apply
Thus, the announcement is not sufficient to comply with the legal requirements for retrenchment. Conclusion
(b) No. Under the Labor Code, an employer is allowed to undergo a bona fide suspension of business operations for a period not exceeding six (6) months. On/before the expiration of the last day of the 6-month period, the employer may either re-admit the employees back to work or to permanently retrenched them subject to payment of separation pay. If no action is taken by the employer before the lapse of the period, the employer may be held liable for constructive dismissal.
