HR Talk: Can Companies REALLY Extend Floating Status For A Year?

The DOLE Department Order No. 215, Series of 2020, which dropped just last October 26, caused a lot of confusion in the HR space.

Personally, I found the Department Order No. 215, Series of 2020 weird since paragraphs over paragraphs are in BOLD and ALL CAPITAL as if someone in DOLE has been shouting their heads off. We can read so there’s really no need to shout. Secondly, since the allowable 6th month suspension of work allowed by Article 301 (ex. Article 286) of the Labor Code expired already last September 12 or September 16 depending on who you ask, the memo came a wee bit too late. For all readers’ easier reference, here is what Article 301 of the Labor Code clearly states:

Article 301 (previously Art. 286) of the Labor Code:

ART. 301. When employment not deemed terminated.- The bonafide 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.”

Since the lay-off is only temporary, the employment status of the employee is not deemed terminated, but is merely suspended [Dela Cruz v. NLRC, 335 SCRA 932]. Hence, the staff in question still remains as an employee of the company. I wrote about this in detail on my blog posts, HR Talk: Employers of Employees Under Floating Status have Only One Week to Go and HR Talk: 16 Most Common Questions About Employees on Floating Status.

So it is a joy to see Department Order No. 215 released well over a month later after the 6-month period has expired. And with headlines such as these thus flaming the confusion amongst both employees and companies alike, one cannot help but comment — Did anyone really read the exact wordings of the Department Order No. 215, Series of 2020 to make such misleading headlines such as these?

Source: GMA News: DOLE now allowas employees to be placed under floating status for a year, October 28, 2020

So let’s go through the Department Order No. 215, Series of 2020 clearly and decisively to say what is right or wrong. I don’t want fellow employers to read the headline, forward this to their employers, and make shitty negligent mistakes that would cost them a lot of grief and money.

While DOLE does allow companies to extend the suspension of work for employees placed under floating status for a year, it comes with a boatload of heavy conditions and a scary warning. While it is allowed, it does not mean companies should and easily could make it happen. 

Why? Let’s go through the Department Order No. 215, Series of 2020 to explain why. Here is the Department Order for everyone’s reference:

Please reread the Department Order No. 215, Series of 2020 in FULL to answer the following questions—Can Companies Extend the Floating Status of Employees for a Year? Given that they may, should they?

1. Is Department Order No. 215, Series of 2020 Constitutional, Valid and Legal?

There are many flaws to Department Order No. 215, Series of 2020.

For one, it’s stated that DOLE should be informed within 10 days BEFORE extending the suspension of operation. Such provision is virtually impossible to comply with since the 6-month allowable suspension of work already expired last September 12. Hence, anyone who has continued to not operate from March 16 up until today has already gone against this condition, giving DOLE an out in case of any employee complaints.

Two, while it is stated in Article 5 of the Labor Code of the Philippines that DOLE can promulgate the necessary implementing rules and regulations of the Labor Code, DOLE still has to follow the existing laws, rules and regulations, jurisprudence and collective bargaining agreements, if any.

This means that if DOLE issues something that may be unconstitutional, such decisions can be contested in the Supreme Court. Hence, labor groups can challenge the extension allowed by Department Order No. 215 since DOLE may not have the sufficient jurisdiction to extend the 6-month floating status of suspended employees since Article 301 of the Labor Code clearly states that the allowable period of suspension is only for a maximum of 6 months.

Source: CNN Philippines: DOLE extend workers on floating status amid pandemic, October 28, 2020.

In other words, abangan ang susunod na kabanata. Personally, if employees don’t complain, companies don’t have an issue. If employees complain against the employer, then this technicality will pose a problem. Because at the end of the day, Labor Code of the Philippines is the one that’s followed. And Article 301 of the Labor Code clearly states, maximum 6 months lang talaga ang allowed for floating status.

2. What are the Conditions Set by DOLE that Allows Companies to Extend the Floating Period?

Contrary to what the headline states, extension of floating status to one year is NOT AUTOMATIC. This means that companies do not get an automatic pass for floating their employees for over 6 months. In fact, anyone who believes that you can and should extend the floating status of your employees for a year without anything in return is negligent and should be fired from their HR post. Such negligence will cause the company to face labor cases left and right, and trust me when I say this—If done improperly, employees will prevail and companies will pay humongous damages and backpay to the staff for their failure to read the small print of Department Order No. 215, Series of 2020.

The rules are simple. You can only extend the Floating Status of Employees if you click ALL of the following conditions:

  1. The extension of floating status must be done in GOOD FAITH. It should NOT defeat the rights of the employees under the code.
  2. The Company shall report to DOLE through its regional offices the extension of suspension of employment TEN DAYS BEFORE the effectivity of its suspension, SUBJECT TO INSPECTION.
  3. The Employees are allowed to find other employment during the extension of employment suspension except when they resign afterwards.
  4. Companies should pay the employees Retrenchment Pay if Retrenchment is necessary.
  5. If you rehire anyone for that same position, the Retrenched Employee should be given PRIORITY IN THE REHIRE if they indicate interest to get their position back no later than one month from operation resumption.
  6. The Extension is by MUTUAL AGREEMENT of the Employer and the Employees. Pag ganoon, need written agreement ha.
  7. If you extend the employment suspension, you still have to count the entire floating status from the first month to the nth month of the extension as part of the count in calculating separation pay.

    In other words, if a company is not too careful, this Department Order No. 215, Series of 2020 is a ticking timebomb waiting to happen.

3. Why is this a Ticking Timebomb for Companies?

Most companies and their HR might take the careless liberty of using Department Order No. 215, Series of 2020 to automatically extend the employees’ suspension of work/floating status without reading the fine print. They may feel emboldened after reading all the headlines published by GMA News, CNN Philippines and other news outlets that says in Bold Letters:  The problem is, Department Order No. 215, Series of 2020 NEVER said that allowable extension for the suspension of work is automatic. In contrary, it contains this warning — Unless the suspension is for the purposes of defeating the rights of the employees under the Code…

This is very dangerous since if the Company is not careful, and the employee construes that the employers’ issuance of work suspension impedes on employee rights, they can easily file a complaint with DOLE for Constructive Dismissal. And this is what Constructive Dismissal is:

4. What Happens When A Company is NOT Careful?

They may be hit with a Constructive Dismissal accusation by their angry employees.

Constructive Dismissal is when a company forces the employee to resign by making life hard for the employee. It’s an action of bad faith, where the company wants to fire the employee without cause, undergoing due process and/or terminating an employment without paying the proper separation pay. If proven guilty, companies are penalized heavily for such a negligent act:

Source: DOLE, Termination of Employment

Backwages have to be paid by an employer as part of the price or penalty he has to pay for illegally dismissing his employee. It is computed from the time of the employees illegal dismissal (or from the time his compensation was withheld from him) up to the time of his reinstatement.

Specifically, backwages include all unpaid wages and allowances of the employee, 13th Month Pay, Service Incentive Leaves—basically, everything the employee should have earned if he/she was not illegally fired from the day s/he was illegally dismissed up until his/her reinstatement or court decision PLUS Lawyer’s Fees, Damages. This can easily reach millions if left unchecked.

5. So How Can Companies Successfully Extend Floating Status to One Year Without Receiving Employee Complaints?

Companies should exercise prudence if they decide to extend the work suspension of their employees. Most importantly, HR should communicate to the employees and ensure that they are in SOLID AGREEMENT on what the company is planning for them. No matter what companies decide to do—to open, to not open, to recall employees, or to just to suspend work—it is crucial that it is done in such a way that the employees do not see this move as done in bad faith and Employees DO NOT FIND CAUSE to complain to DOLE.

As a good friend of mine once said, pag walang reklamo, walang problema. But if the staff complains, make sure that your hands are clean and DOLE will decisively decide that the fault is in the employee, and not the company’s.

Real talk tayo ha—COVID-19 has been sucky for most companies in the Philippines. Sales have dropped to at least half, and many companies do not even know if they will survive up until 2021. Let us not increase our problems beyond 2020 by inviting labor cases just because we did not treat our staff fairly.

Here is my suggestion to all companies and HR:

  1. If you’re going to extend the floating status of your employees, make sure you communicate properly what your plans are and why you’re doing it. IMPORTANT: Make sure you have the employees’ written agreement that they agree that their work will be suspended up until Date X. Never extend without a written agreement in PAPER.
  2.  If you have no plans to recall them or if they do not agree to the extension of suspension, simply retrench them. Separation pay for Retrenchment is computed at 1/2 month pay for every year of service, or a minimum of one month pay whichever is higher. In short:1 mo – 2 yrs 5 mos = 1 month pay2 yrs 6 mos – 3 yrs 5 mos = 1.5 months pay3 yrs 6 mos – 4 yrs 5 mos = 2 months pay4 yrs 6 mos – 5 yrs 5 mos = 2.5 months pay
    • This by the way is relatively smaller than paying the separation pay for Redundancy, Retirement or Illegal dismissal kaya bayaran mo na. You need to inform DOLE and the Staff 30 days before the Retrenchment.
  3. If you Retrench, make sure it is done in good faith and the company has a Retrenchment Plan.
  4. If you want to retrench, employer must use fair and reasonable criteria in ascertaining who would be dismissed and retained among the employees. A common practice is Last-In-First-Out, or hitting via performance metrics. However, a company cannot just retrench staff randomly or at whim. There has to be a plan, and if questioned, company must prove that the retrenchment was done in good faith and hindi lang dahil pinaginitan si employee.
  5. Do NOT be stupid to immediately rehire for the same position that was vacated by the Retrenched Employee, lest you be accused of Constructive Dismissal.Give it some time before hiring again for that position, or as per Department Order No. 215, Series of 2020 had said: When market recovers, PRIORITIZE the retrenched employee when hiring for that position so that there’s no misunderstandings.
  6. Make sure you over coordinate with DOLE regarding your plans. Remember, they are our partners in managing our businesses here in the Philippines. Take seriously all the warnings and inform DOLE of your plans if you want to extend your work suspension.

Final Words: Huwag ninyong pahirapan ang staff ninyo

Look, nobody wants the COVID-19 pandemic. And most companies are either not opening, or cautiously opening amidst the pandemic. To be fair, most employees have suffered. Many of them have already been floated for over 6 months, are undergoing various ways of Flexible Work Arrangements, have less 13th month pay due to less working days, and/or are suffering from No Work No Pay, which severely decreases their earning capabilities. 

Huwag na nating pahirapan ang staff.

If we cannot keep them, retrench them and pay them what’s due them based on their tenure so that everyone can move on with their lives.

If we can keep them, let them know. But papasukin na natin if pwede, and not let them float for the rest of their lives.

At the end of the days, our employees are our partners in business. Let’s not lead them on or keep them hanging if we can’t keep them. If hindi na natin kaya, retrench. If market recovers, we can hire them back again. Pero huwag nating paasahin sa wala.

Because while employees are overly patient and understanding, pissed off employees will complain. And rightly so if you really made life harder for them to force them to resign. Para wala na lang problema, let’s just ensure they leave us properly.

In short, while we CAN float our staff, it does NOT mean we should. And if we do, better make sure we cover our assses and get our staff’s full approval. Because if we don’t, we have nobody but to blame but ourselves when they complain.  

Have a great week everyone!


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3 thoughts on “HR Talk: Can Companies REALLY Extend Floating Status For A Year?

  1. Sobrang ganda ng final words nyo. Kung pwede lang sana isend sa mgt namin para mabasa. Dahil ang management ng pinapasukan namin, ni ha ni ho, wala man lang sinasabi sa mga empleyado…kung ano ba plano nila sa mga employee? kung balak ba nila magretench? Hinhintay lang ata nila na mga empleyado na kusang sumuko at magresign para wala na sila kelangan bayaran na separation pay.

    Kaming mga empleyado gusto sana magapply muna sa ibang mga kumpanya habang naghihintay ng update mula sa management, pero di naman makakaapply sa iba dahil ang nieerequire ng bagong kumpanya na aapplyan ay resignation letter. Eh ayaw namam namin magresign sa current employer dahil retrenchment ang hinihintay namin para at least man lang may makuha kaming separation pay.

    1. If you start working for another company, and they have this requirement, you may have to resign. Usually naman, most companies don’t require this. But the new company may just want na malinaw na commitment.

      This means you will now work for them and them alone and hindi ka pumupusta sa dalawang bangko which is unfair for your new employer.

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