HR Talk: Employers of “floating employees” only have 1 week to go

Today is September 5, and we’re almost at the 6th month mark since ECQ started!

 

According to Article 301 (Ex. Art. 286) of the Labor Code — companies can place their employees on floating status so long as the period does not exceed SIX months. 

When employment not deemed terminated. The bona-fide suspension of the operation of a business or undertaking for a period not exceeding SIX (6) months, or the fulfillment by the employee of a military or civic duty shall not terminate employment. In all such cases, 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 (1) month from the resumption of operations of his employer or from his relief from the military or civic duty.

There’s two ways to count a 6th month notice — first is to count the actual number of days.

The Supreme Court has made it clear that for probationary status, 6 months is 180 days. So if we consider 180 days, the 180th day is September 12, 2020 (Next Saturday) if our forced leave started last March 17, 2020. 

Source: Time and Date Calculator

Many other readers would count 6 months from March 17 to September 16, 2020 (Wednesday).

You know me though… I would prefer to be conservative, especially when it comes to labor laws. So the safest calculation is September 12, 2020 as the deadline to place the staff who have been on leave since March 17 on floating status. Once you reach this point, you have to make a decision on what to do with your employees. 

Employers have TWO choices available… all you have to do is pick one:

Choice 1: Cut the Person Loose and Pay the Appropriate Separation Pay

Choose this option if you can no longer sustain the employee or you need to close down the business. To do so, you need to do two things:

  1. Inform DOLE AND the Employee in writing that you will be Terminating her Employment, and her last day of employment will be on the 30th day of the letter. You can report to DOLE electronically HERE
  2. Pay her Final Pay within the 30 days of her last day of employment (Labor Advisory No. 6, Series of 2020)

Question 1: How Much Separation Pay do We Need to Pay Out if Retrenchment?

Separation Pay for Retrenchment has been discussed extensively on my previous post, How Much Separation Pay Do I get in the Philippines?

To recap, Separation Pay falls under Article 298, Authorized Causes of Termination —- For termination due to retrenchment or closure/cessation of operation its one month pay or 1/2 month pay for every year of service whichever is higher. This means a MINIMUM of ONE MONTH OF SEPARATION PAY.

Retrenchment is defined by the Supreme Court as follows:

Retrenchment definition

In short:

Retrenchd

Separation pay may NOT be as big as you think.

So Sir Richard DeDios gave this calculation of the severance of a 22-month tenured employee:

“Ang 22 months is equivalent to 2 years tenure by virtue of the provision that a fraction of 6 months or more is considered 1 year.

Then said employee is only entitled to 1 month separation pay (1/2 per year of service x 2 years). The minimum 1 month applies to those with less than 1.5 years of tenure since they will only be entitled to 1/2 month pay if the entitlement is 1/2 month per year of service”

In short, for Retrenchment:

1 mo – 2 yrs 5 mos = 1 month pay

2 yrs 6 mos – 3 yrs 5 mos = 1.5 months pay

3 yrs 6 mos – 4 yrs 5 mos = 2 months pay

4 yrs 6 mos – 5 yrs 5 mos = 2.5 months pay

Thank you Sir Richard! ❤️

IMPORTANT: Please use the Date and Time Calculator to count the length of service. So many people compute their years of service WRONG. When in doubt, use the Internet:

Date and Time

Question 2: Can an Employer Just Say He’s Retrenching So-and-So Just Because?

One has to be very careful when retrenching. To do a successful retrenchment, the following conditions must be met:

  1. The losses expected should be big and substantial.
  2. The losses are actual OR reasonably imminent. Such imminence is perceived objectively and in good faith by the employer. In short, you can’t say there’s a loss just because you want to save up on the separation pay.
  3. You can prove that retrenchment is the only reasonably, necessary and likely action you can do to effectively prevent the expected losses. This means that the employer should have taken other measures prior or parallel to retrenchment to forestall losses such as cutting other costs other than labor cost before making such a drastic move.
  4. It bears emphasis that serious business losses can be proven by financial statements duly audited by an independent external auditor.

In Sanoh Fulton Phils Inc. vs. Emmanuel Bernardo (GR 187214, August 14, 2013, Ponente: Associate Justice Jose Perez), the Supreme Court discussed the requirements for retrenchment to be valid, to wit:

“Retrenchment is reduction of personnel usually due to poor financial returns so as to cut down on costs of operations in terms of salaries and wages to prevent bankruptcy of the company. It is sometimes also referred to as down-sizing. Retrenchment is an authorized cause for termination of employment which the law accords an employer who is not making good in its operations in order to cut back on expenses for salaries and wages by laying off some employees. The purpose of retrenchment is to save a financially ailing business establishment from eventually collapsing. 

Question 3: How Will an Employer Choose Who to Retrench?

Here’s the clincher — the Employer must use a fair and reasonable criteria in deciding who will be dismissed. They can base this criteria based on status, efficiency, seniority, physical fitness, age and skills of the employees.

You cannot pick and choose whichever employee you’d like to retrench just because you say so. This is not a game of eeny-meeny-minee-mo. Making rash decisions in removing people just because you don’t like their face can hit you back in the future, especially if  such employee questions your decision to dismiss them.  

If the grounds for retrenchment are NOT proved, the retrenchment can and will be declared illegal and of no effect. Even if the employee who was retrenched signed a quitclaim, such document can be declared as invalid. Even if he has accepted his separation pay, he can still contest his separation pay and ask for more, if the employee feels that he was duly robbed of the correct separation pay.

The fair and reasonable criteria can be as follows:

  1. If the staff is temporary or probationary following a “Last-In-First-Out-Rule”
  2. Efficiency or performance rating
  3. Seniority
  4. Among others, kailangang mayroon

Company must prove that some thought was made in choosing who to keep and who to dismiss. 

Choice 2: Recall the Worker and Ask them to Report Back to Work within 6 Months

Fact is, 6 months is the maximum period allowable by the Law to place workers on floating status. As of this writing, the government has already issued the go-signals for most of the companies to open. There should be no legal reason for the company to extend their workers’ floating status unnecessarily. To recall your staff back to work, simply ask your staff to report back to work.

1st Question: Can the Staff Refuse to Report Back to Work Due to the Pandemic?

There are many reasons why a staff may refuse to report back to work as follows:

  1. He’s angry at the boss for not receiving any ayuda from ECQ to present day. 
  2. He’s already in the province and don’t want to take the trouble to return back to his workplace.
  3. There’s no convenient public transportation available to report to work day by day.
  4. He’s living with at-risk individuals and don’t want to expose them to COVID-19.
  5. His parents don’t want him to work in the fears of him getting sick. In short, “Takot ako sa buhay ko.”
  6. He does not think it’s worthwhile to work only 3x a week since the company is doing Flexible Work Arrangement.
  7. He does not want to physically report to the office and insists that he does WFH.
  8. He stubbornly just does not want to report to work. 
  9. Any other reason as to why the staff refuses to return back to work.

The problem is, so long as the company follows the minimum health guidelines indicated by DOLE and DTI for the company to start working, the company can compel the staff to report back to work. These guidelines are as follows:

Hence, if the staff stubbornly refuses to report back to work despite the company’s insistence for them to do so, the company can follow the proper due process to compel the staff to report back to work. While workers in the Philippines have a lot of rights, employers also have the right to ask the staff to do their job and show up to work so as not to hurt business operations. If the staff cannot even show up to work, the company can follow DUE PROCESS to get the staff to report.  

2nd Question: What is the Proper Due Process in Asking the Staff to Report Back to Work?

First, the company has to send the staff a clear Return to Work Order (RTWO). You can make this friendlier and more to your taste, but the instruction must be clear that their presence back in the office is required:

Dear Sir/Madam,

We would like to ask you to REPORT TO WORK on September 10 (Thursday), following normal office hours of 9:00 am to 6:00 pm. Failure to report is tantamount to Absence without Leave (AWOL). Disciplinary action following due process will be imposed if in case you do not show up to work. We are mandated to resume normal operations with complete number of people as declared.

Sincerely, 

If they do not show up to their first day of reported work, please follow the procedural due process as follows so as not to be charged with Illegal Dismissal. There are:

  • Notice to Explain (NTE)
  • Notice of Hearing
  • Notice of Termination

Notice to Explain

If there’s an offense, always send them a Notice to Explain (NTE) first.

The NTE must be in WRITTEN format, printed on company letterhead and factually includes the Details of the Offense that was made, which Code of Conduct that they have violated, the possible sanction if the offense is proven true, a period to answer the allegation, and if they do not explain by X date, that they waive their right to explain their side. Have the NTE sent via courier service AND registered post mail to his last known address to be valid. While emailing may be an option especially during COVID-19 season, be prudent and make sure you send the letter to their last known address.Source: Ariva, Company Policy: Elements of Administrative Investigation and Progressive Discipline. July 24, 2014. Philippines.

Does an Notice to Explain (NTE) mean that the employee would be fired?

Absolutely not.

A Notice to Explain (NTE) merely asks the employee to explain his side of the story in writing to rebut the charges hurled to him. While it is the first procedural step to dismiss a staff, the default though is that the employee most likely has a good explanation to an incident. In most cases, especially if the offense is light, the end game is not a dismissal but rather a warning, a light punishment, or at most suspension,  

Notice of Hearing

The next step is to invite them to an administrative hearing so that you can at least hear their side on why they were unable to show up to work. My friend and HR Guru Sonnie Santos shares his thoughts on how to properly conduct an administrative hearing.

Please ensure that there’s minutes to the meeting and an attendance sheet to ensure that the administrative hearing was conducted.

This is a time where the employee is given a chance to present his testimony, defend himself and provide evidences as to why the charges against him. This gives the employee a fair chance to be heard, and he can even bring his lawyer to the hearing for added protection.

Now, what if the employee did not show up to the administrative hearing. Can he later say that the company did not follow due process?

Nope, by holding an administrative hearing, the company shows good will in allowing the employee’s side to be heard. If the employee fails to show, he waives his right to have his side heard, leaving the company to make a decision based on the facts presented. 

Can the employee not be fired if he was able to defend himself properly during the admin hearing?

Absolutely — the company can only fire the staff if the offense was true and valid. If it’s just a case of mistaken identity or if the staff can prove that he himself did not do the offense, there is no reason to discipline the staff.

Is the administrative hearing dispensable?

G.R. No. 117453, Autobus Workers Union and Ricardo Escanlar vs. NLRC and Mr. Robert Ong (June 26, 1998) answers this question:

The Supreme Court decided: “The twin requirements of notice and hearing constitute the essential elements of due process. Due process of law simply means giving opportunity to be heard before judgment is rendered. In fact, there is no violation of due process even if no hearing was conducted, where the party was given a chance to explain his side of the controversy. What is frowned upon is the denial of the opportunity to be heard.19

A perusal of the record reveals that petitioner was duly notified of the charges against him and given the opportunity to defend himself via a written explanation and thereafter, to adduce evidence on his behalf during a formal hearing where he was represented by a counsel of his own choice.

A formal trial-type hearing is not even essential to due process. It is enough that the parties are given a fair and reasonable opportunity to explain their respective sides of the controversy and to present supporting evidence on which a fair decision can be based.20 This type of hearing is not even mandatory in cases of complaints lodged before the Labor Arbiter.21.”

Notice of Decision/Termination

The Notice of Termination should reiterate the reasons why the person is being terminated, starting from the offense up until his termination. The details must be complete with all the circumstances involving the charge against the employee in question, and the grounds must be established on why the company has decided to severe their employment. The ground in the notice of termination should of course be the same as that stated in the NTE. 

It must once again be in written format and presented either to the person himself, or be sent via registered mail to his last known address. Keep the stub as proof and file it to the 201 files. 

3rd Question: But there’s still COVID-19 Out There? I’m Placing Myself in Danger. Should not me considering myself to be in imminent danger give me sufficient legal reason for me to refuse to work?

While the staff can conveniently declare that his work space is unsafe and he’s placed in imminent danger and hence, has the excuse to not report to work, sadly, fact of the matter is, DOLE or the company’s safety officer must first determine that the workplace is indeed dangerous, and issue a Work Stoppage Order to suspend operations.

Imminent danger

Hence, employees cannot use the excuse that “takot ako sa buhay ko,” to refuse to go to work without any repercussions. For them to use the excuse that their workplace is dangerous,

So long as the company complies with the DTI and DOLE Interim Guideline Workplace Prevention and Control of COVID, workers cannot say that there is imminent danger in the workplace without any proof.

Duties of employers

Without the Work Stoppage Order from DOLE, employees must report if asked by their employees. If they went absent, employers have the right to issue warnings and sanctions to get them to come in.

 

work stoppage ruke

4th Question: Can’t the Employer Just Pay Me Separation Pay so I can Move on with My Life?

Yes, a worker can always request to just be paid separation. Sometimes, the staff would like to keep life simple, and would rather just ask to get paid the separation pay so that they can move on with their lives, hopefully with another company.

However, it is still company prerogative to approve such request or not. 

In short, if you just want to get paid separation pay na lang, idadaan na lang sa maayos na pakiusap. Baka sakali lang ibigay ni company.

Final Words

The decision to retrench an employee or to recall the employee within the 6th month mark is not an easy decision for the company. 

Retrenching consists of following the right due process and paying the correct separation pay timely. Recalling is to ensure that enough work can be given to the said employee. Regardless of whichever decision they make, companies must decide quickly and act decisively as time is running out.

My advice?

Always treat your employees well, regardless of the decision. Give the decision as humanely and nice as possible. Don’t be a total ass and scrimp from paying the correct separation pay. No matter what you decide, know that what you do reflects on who you are. So always act with care that still protects your reputation as a good employer, and don’t cheat the employees.

Remember, both company and employees have a symbiotic relationship. Employees need to company, and the business needs the employees to operate. The best plan of action is to do what is right and always act in good faith.

Have a great week ahead!

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10 thoughts on “HR Talk: Employers of “floating employees” only have 1 week to go

  1. Hi Tina!

    Nice post, very timely! I love your all your posts/blogs actually but this one caught my attention. Regarding the severance pay, Many employers (even suggested by company lawyers) use this formula:

    1/2 month pay for 1 month to 5 months
    1 month pay per year of service for 6 months and above

    Example

    6 months to 1 year= 1 month
    1 year to 1.5= 1.5 months
    1.6 to 2 years= 2 months

    However, In the severance pay computation provided it is the other way around. Pag mas matagal 1/2 lang per year of service ang binibigay. So which one do you think must be followed given that there is no specific example indicated in the labor law. It is just 1/2 month or 1 month which ever is higher. And do you think their computation is incorrect?

    Thanks, Tina! 🙂

    1. THE EXACT WORDINGS AS FOLLOWS:

      “In cases of retrenchment, closure or cessation of business or incurable disease, the employee is entitled to receive the equivalent of one month pay or one-half month pay for every year of service, whichever is higher.”

      https://blr.dole.gov.ph/2014/12/11/termination-of-employment/

      As it clearly shows, the law is CLEAR on what the correct sep pay should be —- equivalent to ONE MONTH PAY OR 1/2 MONTH PAY FOR EVERY YEAR OF SERVICE WHICHEVER IS HIGHER.

      This means employers either give out 1/2 pay bec of ignorance OR many are taking advantage of employees’ weak English comprehension to cheat them of the correct separation pay. Even if the staff complains, the company need only pay a single staff their correct pay and shaft the rest, thus saving companies a lot of money.

      So yeah, it’s ONE MONTH PAY MINIMUM.

      Hope this helps!

      1. Second part: “A fraction of a year, or more than six months but less than a year of employment, is considered as one whole year when computing for an employee’s separation pay.”

        That’s why it’s:

        1 mo – 2 yrs 5 mos = 1 month pay
        2 yrs 6 mos – 3 yrs 5 mos = 1.5 months pay
        3 yrs 6 mos – 4 yrs 5 mos = 2 months pay
        4 yrs 6 mos – 5 yrs 5 mos = 2.5 months pay

  2. Hi Tina! Question, shouldn’t it start when the industry reopened, when we shifted to GCQ? The ECQ was mandated and everything stopped. Is that really counted?

    1. Uhhh no. DOLE has been silent as to whether ECQ is exempted from the count except in the case of probationary employers. To date, there is ZERO labor advisory or labor law that says the time in ECQ is not counted in the 6-month period.

      In the absence of any advisory, the law Art 301 is followed —- Max 6 months. Cannot exceed.

      Hence, if you started floating your staff last March 17, the 180th day is September 12.

      We cannot make our own rules kasi. We have to follow only what’s written in our law. Hope this helps!

  3. Hi Mam Tina
    Thanks for this info.
    I have a question, can a company renew the agreed reduction of wages after the said 6months. We are in salon industry and we are allowed to open under GCQ with 50% capacity and still under recovery from losses. Can still applied reduction of pay aside from flexible work arrangements? Thanks a lot.

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