Termination of employment under guise of bankruptcy

Dear PAO,

The company where I worked was one of the companies that suffered recession in 2008. In 2009, the company closed its office after it declared bankruptcy. All the employees were terminated but we were not given our respective separation pay. Two months after the closure, we heard that the company reestablished its operation under the same management. But the rank-and-file employees were all newly hired. What are my rights concerning this matter?

Bat

Dear Bat,

Closure of business is the reversal of fortune of the employer whereby there is complete cessation of the business operations and/or an actual locking-up of the doors of the establishment, usually due to financial loses. It is an authorized cause for termination of employment which aims to prevent further financial drain upon an employer who cannot pay anymore his employees since business has already stopped (JAT Gen. Services v NLRC, 26 January 2004, 78 SCRA 420).

An employer may terminate the employment of his employees whether or not it is based on business loss or financial reverses. Provided, that if the closure or cessation of operation of the establishment is not due to business loss or financial reverses, the employer is mandated to comply with the procedures under Article 283 of the Labor Code before he would terminate his employees. Under the said article, the employer should serve a written notice to the workers and the Department of Labor at least one month before the intended date of termination. He should also give his employees their separation pay equivalent to one month pay or at least one-and-a-half month pay for every year of service, whichever is higher. A fraction of at least six months shall be considered one whole year.

No separation pay shall be given to the employee if such closure or cessation is because serious business losses or financial reverses (JAKA Food v Pacot, 28 March 2005, 454 SCRA 119).

Based on your narration, your company’s declaration that it was bankrupt may not be true since it reestablished its operation under the same management only after two months from its closure. Since it has not reemployed you, the company may be held liable for illegal dismissal if it is proven that it has terminated your employment under a guise of bankruptcy. Here, the reason of your dismissal is not one of the authorized causes under the Labor Code since there were neither business losses nor financial reverses to justify the dismissal. You may therefore file a complaint for illegal dismissal in the National Labor Relations Commission, which has jurisdiction over your former workplace. –PERSIDA ACOSTA, Manila Times

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