Closure of Business Concept

Closure or cessation of operation of the establishment or undertaking is another authorized cause for termination of employment under Article 283 of the Labor Code. (See Authorized Causes for Dismissal of Employee.)

Closure of business is the reversal of fortune of the employer whereby there is a complete cessation of business operations and/or an actual locking-up of the doors of establishment, usually due to financial losses. Closure of business as an authorized cause for termination of employment aims to prevent further financial drain upon an employer who cannot pay anymore his employees since business has already stopped. (See JAT General Services vs. NLRC, G.R. No. 148340, January 26, 2004.)

Total or Partial Closure of Business

Closure or cessation of business may mean either total closure or partial closure, as in the case of abolition of only a department or section of the establishment or of only a part of company activities. In either case, the right of the employer to terminate employee affected by the closure has been recognized. (See Dangan vs. NLRC, G.R. No. 63127-28, February 20, 1984; Also, La Union Cement Workers’ Union vs. NLRC, G.R. No. 174621, January 30, 2009.)

Closure of Business Distinguished from Retrenchment

While closure of business and retrenchment are often used interchangeably and are interrelated, they are actually two separate and independent authorized causes for termination of employment. Termination of an employment may be predicated on one without need of resorting to the other. (Read more about Retrenchment.)

Closure of business, on one hand, is the reversal of fortune of the employer whereby there is a complete cessation of business operations and/or an actual locking-up of the doors of establishment, usually due to financial losses. Closure of business as an authorized cause for termination of employment aims to prevent further financial drain upon an employer who cannot pay anymore his employees since business has already stopped. On the other hand, 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. (See JAT General Services case.)

Cessation Strictly Management Prerogative

Cessation of business is strictly management prerogative. No law can compel a company to continue operation. The management may decide to cease operation for whatever reason it deems proper, as long as it is done in good faith.

In Mac Adams Metal case, the court reiterated viz. “Just as no law forces anyone to go into business, no law can compel anybody to continue in it. It would indeed be stretching the intent and spirit of the law if we were to unjustly interfere with the management’s prerogative to close or cease its business operations just because said business operation or undertaking is not suffering from any loss or simply to provide the workers continued employment.

Cessation Need not be Due to Financial Losses

The reason for cessation need not be financial losses or drain, as long as it is done in good faith and not for the purpose of defeating or circumventing the rights of employees under the law or a valid agreement. Article 283 of the Labor Code does not require that the cessation be due to serious business reverses.

The cause of cessation, whether it is due to financial losses or not, is material only in the determination of entitlement to separation pay.

In Maya Farms Employees Organization vs. NLRC, 1994, the Court held that even if the employer is not suffering from business losses, it can still resort to closure of business as long as the company’s exercise of the same is done in good faith to advance its interest and not for the purpose of defeating or circumventing the rights of employees under the law or a valid agreement such exercise will be upheld.

Separation Pay

In case of retrenchment and closures not due to serious financial reverses, the employee shall be entitled to separation pay equivalent to one month pay or at least one-half month pay for every year of service, whichever is higher.

If the closure is due to business losses, there is no obligation on the part of the employer to pay separation benefits to employees.

Cases

  1. The company terminated its employees when its plant was relocated from Makati to Batangas. The relocation was in view of the expiration of the lease contract on the premises it occupied in Makati and the refusal of the lessor to renew the same. The termination was for authorized cause as there was cessation of the company’s operations in Makati. (Cheniver Deco vs. NLRC, G.R. No. 122876, February 17, 2000.)
  2. The closure of business by the owner after she became sickly and her health did not improve despite proper medical attention, was affirmed as valid as it was done in good faith although the business was not undergoing economic losses. (Mac Adams Union vs. Mac Adams, G.R. No. 141615, October 24, 2003.)

Last Edited: Friday, August 19, 2011

Caveat: Subsequent court and administrative rulings, or changes to, or repeal of, laws, rules and regulations may have rendered the whole or part of this article inaccurate or obsolete.
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64 comments

  1. Dear Sir Ted,

    Our company is winding down operations of which a few employees are going to continue employment under a new rep. office.

    Around September, we were given the confirmation letter on the new rep. office set-up stating that all salaries and benefits will remain unchanged together with continuous years of service etc. My remaining colleagues and I then signed the confirmation letter. New rep. office is still pending approval of company name so in effect, we are still under the old company which is winding down its operations.

    We are using corporate account mobile phones during which our HR and regional HR confirmed to us prior to signing the confirmation letter that these mobile phones will be transferred to new rep. office name which the company pays directly. The use of the mobile phones are important for us to do our customer relations and marketing functions. I was already coordinating with the service provider on the needed documents for transfer when our finance manager advised us that they will follow the other division’s 2009 policy on mobile phones stating ” employees shall use personal registered mobile phone line” so they will terminate our subscription to the mobile company as a corporate account and wants us to apply new mobile phones under our personal account for company use and reimburse the monthly billing instead. It doesn’t sound right considering we have our own personal mobile phones with the same service provider already to separate from company use.

    Further our corporate mobile phones are also using blackberry services so in effect the expenses are a lot higher and difficult for employees to shell out from our own pockets first and reimburse later also considering reimbursements take longer to receive back. The 2009 policy is in conflict with the agreement and discussions we had this June 2010. If they insist on terminating the corporate account mobile phones and have us apply under our own personal account for reimbursement later on, is this a form of diminution of benefits?

    [Reply]

    Ted Ferrolino Reply:

    I think it is more of a business judgment. Whether it is sound or unsound, it is hard for anyone to challenge its legality. Business judgment is protected from judicial review.
    The employees’ best remedy in cases like this is to raise the issue with the management and convince them to change their mind.

    [Reply]

    Ronnie Reply:

    Thanks, Sir.

    I have actually raised this with my immediate supervisor and will discuss with the other division.

    [Reply]

  2. Dear Sir Ted,
    My wife’s office, which is located in QC, has advised that they will be ceasing its operations in the current facility and transferring to Laguna. All production workers will be retrenched and paid separation benefits. Non-production workers, not within the retirable age, will not be offered retrenchment.
    It will be difficult for us to relocate as I work in the north and my kids all study near our residence.
    By moving to Laguna, she will be entailing additional transportation cost thereby reducing her income.
    I am wondering why she can’t be offered retrenchment? What are our options?
    Thanks.

    [Reply]

    Ted Ferrolino Reply:

    Transfer of employees, as long as there is valid reason for it (transfer of facility is a valid reason to transfer employees), is a management prerogative. It is hard to question, and courts would normally refuse to interfere with its exercise, as long as it is not motivated with bad faith or ill-motive.
    Your wife’s best recourse is to negotiate with the management to accomodate her and allow her to avail of the retrenchment program. If not, she will have no other choice but to go with the transfer, or resign.

    [Reply]

  3. Sir Ted,

    I work in the BPO industry and I will be rendering my resignation upon the cessation of operations of the LOB (line of business) I am in. however, HR is informing me that I still need to abide by the 30 notice period lest I am liable for the 30 day that I have not rendered which will be deducted from my backpay.

    I think its unfair that I will still be liable when:

    1. I will be technically in floating status as the LOB will be ceasing operations and the company will not be losing any money even if I do not report for work since technically, there is no operation.

    2. I will be doing the company a favor since after the cessation on Feb 25, Next training will be on March 15 where I will still be paid as mandated so I chose to render my resignation as the next LOB is way different with my functions on the previous LOB and I am just a rank and file employee.

    I was planning to talk with them and raise the matter to be settled in a professional manner. However, if we fail to settle the issue; will I be able to demand for a separation when all I wanted in the 1st place is the full amount of my leave credits and 13th amount computation.

    Please enlighten me on this matter.

    [Reply]

    A BPO post employee Reply:

    Hi there,

    the 30 day notice is what the law states. This way, the company that you’re working in can look for someone to replace you. I think, floating status is not applicable to you as, from what you said, you will get paid – that means your not temporarily laid-off. Remember that you’re not employed by the account, you are employed by the PBO. seperation pay are computed using your monthly salary. 1st instance is 1 month salary or 2nd instance is 1/2 monthly salary multiplied by your years in service. the instance to be applied depending on which one is higher. Leave cradits and 13th month is upon company’s desgression.

    thanks :)

    [Reply]

  4. Dear Sir Ted,

    If managers enjoy an executive check-up package in their annual physical exam in the previous company and finds out that the current annual physical exam under the new rep. office (that promised continuous years of service and all benefits and salaries remain the same) is reduced to regular physical exam that other employees undergo, is this a form of diminution of benefits for the managers?

    [Reply]

  5. Dear Sir Ted,

    I work in website devt. company and a management employee. Lately, I was advised that I will not be absorbed by their newly form single proprietor business from a corporate business with same nature of business.Other employees (IT employees) will be absorbed. My concern what is our legal claims on this? Since the operation began (3years from now) they are not paying our SSS, PHIC, HDMF and witholding taxes regularly.I am serving one year and 2 months from now as HR Officer. Those will be absorbed what is also their legal claims? Will their length of service be forfieted?

    [Reply]

  6. In addition, the reason for forming new company is to focus on the operation, while the old will wait for process of dissolution.They will file bankruptcy, but no declaration of income. How the process of dissolution goes? Can we claim separation pay and other benefits? How are we going to claim such benefits if they will not pay us if they say they are insolvent? any alternative of getting our final pay? will we sign final pay even the SSS, PHIC, HDMF and tax are not yet settled? can we ask Certification though I am advised verbally by the operation head that I will not be absorbed? Lately, they requested me to reduce my wages because of they can not afford to pay me with my existing salary and almost 10k is reduced.I agreed but I negotiate to lower my hours to 6 hours. Is that also legal? I just agreed thru email, will it be enuf as basis?

    [Reply]

  7. Dear Ted,

    I am on a regular managerial position for 2 years now in the company. The HRD said that I will be retrenched since there are 4 outlets that will cease operations in order to save on operating costs. I will be paid separation pay. What is the rule on retrenchment of employees? who would come first? rank and file or managers? I want to demand for a higher separation pay. is this valid?

    [Reply]

  8. In addition, the company has several employees on other departments, if in case they really want to cut on operating cost they should start with those probationary employees and not managerial. Is there a last in first out rule when retrenching employees?

    [Reply]

  9. Dear Ted,

    i have been working with this company for 4 years and now they are working on a new company which they are about to start and we employees is still in the old company and we are wondering if this is legal when in fact the old company wants us to absorb to this new company? Is in it they had to terminate us and signed a new contract? of course they have to pay us our separation pay ? right? Now this company is operating now and will start tomorrow and we are still in dark if we are still in the old or new. Can we demand that they still have to pay us from our previous company? and start a new contract with this new company ?

    [Reply]

  10. Melissa M. Ortono Comment:
    June 21st, 2011 at 01:01 pm

    I am working in a non-profit non government organization for 3o years now. I have been paying my regular contribution to SSS under the name of the Project in January 1991. This project is not registered in a Municipal or City Hall or SEC.

    I encountered in one agency that private sector employers, including those of household helps, who have registered with the SSS prior to July 1, 1999 are considered automatically registered and only be required to update their records.

    In 2005, we created a foundation and it was registered in SEC, it has a business permit.

    My question is, can I separate from the previous employer and use the registered one and continue paying my contribution to the new one? What procedure to follow when the old employer has no substantial documents and it will be declared as closed?

    It will be most willing to hear from your reply.

    [Reply]

  11. gud pm sir,

    currently i am working in a private company. we have branch somewhere in visayas but because of employees poor performance, our main office decided to close the branch. our main office shouldered the whole expenses for six months. obviously, the branch office did not make any profit at all. there were only 5 employees under agency. they were hired for 1 month, 2 months then 3 months. there end contract will be on oct. 31, 2011 but the office will closed on sep 15, 2011. my question is, does the company still need to pay them until there contract ends? despite we loss a big amount for there expenses and we are only a small company people. d 4 branch employees are sales agents that did not even make a sales for 5 months. it was like our company was just there milking cow. please answer my question….
    thanks in advance….for

    [Reply]

  12. Dear Sir Ted,
    Last year, our company decided to close our department due to the reason that the company is bleeding and direct selling department is not the company’s priority and would like to retain the retail department.All employees in our department were terminated and were given the amount due to us depending on the number of years. However, we have known after one year that the company maintained selected accounts from our department a few months after we were terminated and continued the direct selling business from selected accounts.
    Did our company violated some labor law practices?if yes what are those?
    The reason behind is that we felt deceived us with what the company had projected during the closure.Most of us are still on our productive years and most of us these days had find difficulty establishing ourselves with other companies too.
    I would like to know what will be your legal advice. You can email it to me to mawee_28@yahoo.com.

    [Reply]

  13. I work for an American Multinational company. Our company has recently been acquired by another American multinational company with operations here also in the Philippines although in a different line of business. The acquiring company has a pension plan that is not as good as our existing company. Its pension plan pays only 1/2 month for every year of service while ours pays up to 1.5 months depending on tenure. Is there a possibility that our pension plan will be changed to one that will pay lower than our existing plan. I am a long service employee of the company that was bought out and am already vested and am due to retire in less than 5 years under normal retirement. The acquiring company also has a lower compensation and benefits package and we are concerned that our comp and ben package will be changed to align with that of the new owners. if this happens, is that considerd a diminution of benefits our compensation, benefits and pension plan? Thank you.

    [Reply]

    Ted Ferrolino Reply:

    Compensation and benefits, including company pension plan, etc., to which the employee has already acquired vested rights either by virtue of employment contract, collective bargaining agreement, long and established company practice, may not be remove or diminished as a result of the acquisition.

    [Reply]

  14. Hi!
    Our company filed for closure not due to financial losses or bankruptcy because they want to change the name of company,before they filed for closure we worked 2 and 1/2 years with contract but during that time they asked us if we are willing to wait for new company so we can continue to work for them and we accepted the offer and worked 2 years without contract
    (because the closure was not finish).

    I just want to ask if we are entitled to get the separation pay?

    Hope you will help and reply me soon.
    Thank you very much!
    Have a nice day!

    Respectfully yours,
    Theresa

    [Reply]

  15. i just wanna ask something about separation pay.i work as a call center agent and last week we received a news that our line of business will no longer continue its operation here in the philippines.do we have still the right to demand for a separation pay eventhough they say that they will relocate us to another line of business but still under the same call center company?what if we refused to relocate and decide to just leave the company and find another job in different company.are they obliged to give as what is due to us like the separation pay and other benefits?

    [Reply]

  16. Atty,

    What if our company is about to be sold – assets and liab only. Contracts of employment is not included. What will happen to the remaining balance of the car we availed via car benefit, supposedly a 60/40 sharing? Can the company use the following clause as their basis to collect from the employees entire balance (100%), bale mawawala na yun 60/40 sharing at ikakarga na sa employees, even if separation is not voluntary?

    “9. In the event of employee’s resignation, retirement and/or separation, the employee must purchase the car at the bank’s net book value via two (2) options : cash basis or through a commercial loan with EBU rates. The term of the commercial loan shall be dependent on the useful economic life of the car. Should the resigning employee decide NOT to purchase the car, he/she must turn-over the car to the Bank on his/her LAST DAY of employment.”

    [Reply]

  17. Hi!
    Our company changed it’s name (the old one closed and there’s a new one, so technically a new company). They have asked us to write resignation letters for the old company and signed a new contracts under the new one. It is suspicious though that the contract (or a separate form, i’m not sure) has a waiver at the back stating that we received some amount from the old company (even though we didn’t).
    Was that amount pertaining to our supposedly separation pay? Are we entitled to it? Is there a workaround so we can still claim them?
    I hope you can respond to my queries. Thanks!

    [Reply]

  18. Our company is not earning to sustain the monthly operation expenses for the few months and the fund is drained already. My questions are:

    Is it lawful to retrench employees and not give separation pay? Or at least give them 1/2 for each year of service?

    Is it also lawful that only the operations would stop but will resume until a new light to the business is seen and money start to come in? And when this happens, is the company required by law to get the same people who were retrenched?

    I really need your advice because we don’t want to totally close the business. It is just, no money coming in but the expenses are constant every month.

    Thank you very much.

    [Reply]

  19. Sir,

    Ung company po dw namin ngfile ng bankruptcy. Before sila ng file ngresign n ako 3 weeks. Dapat ung backpay ko makukuha last july 15. Binigay lng ung pay ko nung last days n pinasok ko. Pano yung back pay ko? At ng iba. My habol pa ba kmi since before pa sila ngfile dapat nabigay n nila.

    Also balita namin til 31st n lng sila dun s inuupahan nila n place at mgbabaklas n daw s monday.

    [Reply]

  20. Hi Sir Ted,

    Our company is Australian owned and operating here in the Philippines. We will be having a 2 week shutdown after Christmas and employees will be back by January. What would be the treatment of their pay especially since this is going to raise issues with employees for sure especially the new ones. We have stated in our employee handbook the clause below:

    CHRISTMAS HOLIDAYS
    Australian employees typically take their annual leave within the period between Christmas Eve and Australia Day on January 26. During this time many Australian businesses will effectively shut down.

    Company employees are advised that a significant number of all employees will be required to use their 10 day annual leave during this period – in particular from Christmas Eve through to just after New Year.

    Holidays will be paid but people without leaves yet will not be paid the rest of the days that we will not operate. The clause is silent when it comes to paying them so I just wanted to make sure that this is ok and that we will not have any legal problems once this is implemented. Also are there other options for us to consider for a win-win situation with them?

    Thanks and looking forward to your response.

    [Reply]

  21. Hi Sir,
    I would like to ask how many times must can a company reduce employee in a year before it declares bankrupcy,because right now on our company we already had 2 times retrencement in a single year, please give a link or advice regarding this matter

    [Reply]

  22. Sir,

    Can employees of a single proprietorship business (X) be absorbed by another single proprietorship business (Y)? If yes, then is business X considered close and thus be obligated to pay separation pay for their employees?

    [Reply]

  23. sir ted, nag work ako ngayon s marikina for 15 yrs. minimum wage earner hanggang ngayon walang SL at VL,naka base ako s marikina pero yong company name ko iba iba nasa branches pero isa lang ang may ari.yong first 4yrs. ko s cavite then nag sara yong next five yrs. ko s laguna then nilipat uli s metro manila until now doon p rin ako nka contract. regular employee po ako at tuloy tuloy ang trabaho..s branch may regular 6 working days every week samantalang s main office 5 days lang. may lapses po ba and securities ang pagiging regular employee ko s company..s bawat pag palit ko ng company name wala akong nakukuha at ng minsan n tinanong ko ang tungkol dito nasabihan ako na baka mawalan ako ng trabaho…

    [Reply]

  24. If the company is for closure due to financial losses, are the allowed not to give the employees 13th month pay?

    [Reply]

  25. Geraldine Sanchez Comment:
    January 9th, 2013 at 11:13 am

    hi, i was relocated overseas to the new company owned by the parent company of the Philippine company I used to work with, I want to know if my tenure wont expire and I wont be deemed resigned to the Philippine company I used to work with in terms of retirement and other benefits entitlement. I did not render a resignation letter as well. thanks.

    [Reply]

  26. i am working for an international bank as a customer service assoc. our company has been bought by another u.s based company. my question is, are we entitled to get separation pay once we are transferred to the new company?? how much can i get for my separation pay?? i have been w/the company for 3yrs and 2mos..

    [Reply]

  27. Veronica Panganiban Comment:
    January 22nd, 2013 at 10:47 am

    Dear Sir Ted,

    If the company dissolved, and open a new company name, with same employees, will the employees received also the separation pay from the said dissolved company? What will be the employees rights from the old “dissolved” company to the “new” company?

    [Reply]

  28. ANDREA CHUA Comment:
    May 3rd, 2013 at 04:07 pm

    Good day Sir,
    The company was adopted for 3 years in service. i’ve been working for 3 years. at the end of the contract of the third year employment, the boss company have decided to give up or return the company to its original owner. or let’s say: the original owner will manage the company.
    can i still avail the separation fee? though i will stay until the fourth year of service.
    thank u..

    [Reply]

    admin Reply:

    Asked your HR whether there will be continuity of your years of service. As long as your years of service is not interrupted, you don’t have to worry about separation pay.

    [Reply]

  29. margie sayson Comment:
    May 8th, 2013 at 03:46 pm

    Good Day Sir:
    the company im working for almost 6yrs is planning to close due to financial incapabilities.. do i have any rights to claim any benefit from them like separation or whatever?

    [Reply]

  30. Good day sir,
    I would like to ask, our company closed down because our clients end the contract to us…
    I’ve been working there for more than 4 years. I started working as a regualar on Feb 2009 and I end up my regularity as an employee on Oct. 2012 and resigned because I was to be terminated. I did not received any seperation pay. So before I get I termination, I rendered my resignment and pass my application again. After 10 days of resignment, they hire me again as a trainee. I’ve been working for almost 6 months of trainee. But lately, the company expectantly shut down coz our client unexepectedly end their contract to us. I don’t receive any pay for rendering almost 5 months to them. What would I do? Should I demand for a pay or not?
    Thank you.

    [Reply]

  31. Good day!

    I learned that my company will be closing down since the business doesn’t generate income. Can the company file for bankruptcy or closure of establishment? and what are the requirements for these? Will the company give us separation pay? Please clarify these issues.
    Thank you.

    [Reply]

  32. Good day!
    I’am working here in Laguna, our company had announced closure last April they said that the company will last until July 31,2013 and promise us that all employees will receive separation pay. They also entertain Voluntary Retrenchment by other employees who had apply in other companies, and they already receive their separation pay. Our problem now is that there are many rumors that our company will continue it’s production and the remaining employees will not be paid by the company. And one thing more is that we have three departments, the Assembly department already sign their waiver / agreement to the company stating that their last day will be on july 31,2013, while the two department is not yet signing and we cannot get any information from our superiors & HR department of what will happen to us, will the company will close or not.. If our company will continue its operation are we liable to receive separation pay?

    [Reply]

  33. Joyce Iya Comment:
    July 12th, 2013 at 04:56 pm

    Magandang araw sir ted,.Isa po ako sa 99 na empleyado na natira sa aming kompanya sa ngaun..6 na ta0n na p0 ak0ng empleyado ng isang multi nati0nal c0mpany d2 sa camarines n0rte..kami po ngaun sa kasalukuyan dahil sa mababang demand sa global market ng aming produkto ay ng reduce ng numbr of w0rking days..15 days per m0nth nlng po started febuary 2013 kung kaya’t hinati din po ang aming sah0d..ang n0tice po na pinirmahan nmn last january ay 6m0nths lng po na 50-50 na mag end na dapat ngaung july subalit nais p0 sana naming humingi ng tul0ng sa inyo kung legal pa po ba sa batas kung mgpapatul0y pa rin ng panibag0ng 6m0s mula ngaun august ang 15dys/m0nth of w0rk..sinasabi rin po ng aming HR d2 na hindi na kailangan ng 1m0nth n0tice para simulan ulit ang panibag0ng 15dys/m0nth of w0rk..kailangan po ba ng appr0val ng DOLE para dun? Sabi po kasi ng DOLE nung january ay isang beses lng pwd sa isang ta0n ang 50-50 work..sana po ay matulungan ninyo kmi sa sitwasyon namin ngaun..maraming salamat p0.

    [Reply]

  34. emz opolencia Comment:
    October 19th, 2013 at 08:14 am

    hai po sir ted,,,nagtatrabaho po ako s company under po s isang cooperative almost 9yrs n po ako na member dito then na pull out ang cooperative namin s company na pinag tatrabahuan q e absorb kami ng other cooperative kung gusto namin mg patuloy s company na yun….ang tanong ko po ay kung entitled ba kmi s length of service ng aming cooperative kasi 9 yrs dn po ako member ng coop at advice to resign lng kami…. thanks in advance po s reply

    [Reply]

  35. Good day !

    May I ask if separation pay is taxable?

    thanks,

    sophie

    [Reply]

  36. Good day!

    May I ask if separation pay is taxable?

    thanks,

    sophie

    [Reply]

  37. Concerned Employee Comment:
    February 27th, 2014 at 11:48 pm

    Hi Ted our company will be sold soon and taken over by a new one. Operations will continue as normal and according to our current and soon to be previous president there will be no change in the organizational structure.

    My question is 1) If operations continue but we will be under new management and a new company is this considered closure of business as with our old company?
    2) If technically our old company closed are we not entitled to separation pay?
    3) Is it really possible that our tenure with our old company be honored and that if in any case the new company makes lay offs we will be paid according to our original tenure?

    Thanks a lot and hope you can answer this.

    [Reply]

    admin Reply:

    1. Yes.
    2. Yes, you are entitled to separation pay, unless there is an express agreement that your tenure will not be affected, such that there will be no interruption of your service.
    3. Yes (See No. 2).

    [Reply]

    Concerned employee Reply:

    So who is obligated to pay us in case we are removed? Will it be our old company or the new one? Also if for example the new company did not honor our tenure and we decided not to stay, should our old company pay us separation pay?

    Thanks a lot for your help.

    [Reply]

  38. Gud day sir…Im a polsci student, I would like to ask sir about the case of an illegally dismissed employee. that if an employee is illegally dismissed he or she shall be entitled to reinstatement or separation pay in lieu of reinstatement plus backwages. What if sir the company is closing due to serious business losses/ bankruptcy .. is such employee still be enttled to separation pay plus his backwages??, since there is a rule that if the cessation or closing of business is due to seroius business losses, the company is no longer oblige to give his employess with their separation pay..and does this situation sir happens??…your answer sir is very well appreciates

    [Reply]

  39. Your comment is awaiting moderation.

    Gud day sir…Im a polsci student, I would like to ask sir about the case of an illegally dismissed employee. that if an employee is illegally dismissed he or she shall be entitled to reinstatement or separation pay in lieu of reinstatement plus backwages. What if sir the company is closing due to serious business losses/ bankruptcy .. is such employee still be entitled to separation pay plus his backwages??, since there is a rule that if the cessation or closing of business is due to serious business losses, the company is no longer oblige to give his employees with their separation pay..and does this situation sir happens??…your answer sir is very well appreciated:-)

    [Reply]

  40. Concerned employee Comment:
    March 5th, 2014 at 04:16 pm

    So who is obligated to pay us in case we are removed? Will it be our old company or the new one? Also if for example the new company did not honor our tenure and we decided not to stay, should our old company pay us separation pay?

    Thanks a lot for your help.

    [Reply]

  41. Good day sir Ted,
    Yung company na pinapasukan ko po events management ang line of business, Sole proprietor po ang company, sinabihan kami ng may ari ng company na mag stop na daw po kami ng operation dahil wala daw nakuhang client kaya wala daw income ang company and so wala ng pang pa sweldo samin, dalawa lang po kaming regular employee dito, the rest po ay mga prod.manager, account exec na per project lang po nag work sa company. I’ve been working to this company for 5years already. Nabasa ko po na ” If the closure is due to business losses, there is no obligation on the part of the employer to pay separation benefits to employees.”.. Ibig po ba sabihin nito wala ako makukuhang separation pay sa company ko pag nag sara na ito sa march 31.? Biglaan po kasi ang pag sasabi nya sa amin na mag close na ang company. Pwede po bang verbal lang na sabihin samin ng may ari ng company na bankrupt na sya kahit wala naman syang pinapakitang documents na mag papatunay na bankrupt na nga po sya, di po ba ang pag declare ng bankrupt ng isang company ay may file pa from DOLE? Paano po ito kung wala naman syang documents from dole na hindi nqman sya bankrupt, and alam naman namin na may mga assets pa sya kaya di sya ma bankrupt. Please po patulong naman. Ano po ba gagawin ko..?

    [Reply]

    admin Reply:

    The employer closing his business establishment (and terminating his employees) must give notice to the DOLE at least 1 month prior to the date of termination.

    If the cessation of business or termination of employement is intended only to circumvent the law, the employee may file a complaint for payment of separation pay with the National Labor Relations Commission (NLRC).

    [Reply]

  42. Good day sir Ted,

    Yung company na pinapasukan ko e call center. Nag pull out na po ung account ( department ) na pinapasukan ko pero ongoing pa din ung business ng company dahil madami silang account. Ngayun po, sinabihan kami na magpa interview sa ibang account para ma transfer kami since mag pupull out na ung account na pinapasukan ko. Ang question ko po ay posible po ba na mag request nalang kami ng separation pay kasi ang account na pinapa applyan sa amin ay ibang iba sa kasalukuyang trabaho namin? salamat!

    [Reply]

  43. Hi,

    Our parent company in the US was acquired by another company and the office in the Philippines will have to cease operation because there’s already an offshore company in another country. We were served a notice of ternination effective 30 days. They gave us severance pay of 50% of the currently salary or 1 month salary whichever is higher. Here are my questions:

    1. Is it right that we will given only 50% by virtue of the acquisition of the parent company?
    2. The 30 days notice means we have to go to the office until the termination date? How can we look for another job if that’s the case?

    Hope to hear from you soon. Thanks a lot!!!

    [Reply]

  44. Hi sir ted,magtatan0ng lng po aq kc ndamay aq sa pagprotesta ng mga kwork q sa casino po aq ngtatrbho.ngfile po kc cla ng notice na “NOTICE OF PERMANENT CLOSURE OF BUSINESS AND TERMINATION OF SERVICES” nung june 17,reas0n nla significnt financial losses pero ang t0t0o my bumbli ng casin0.pagpas0k ng july inextend n2man ang operati0n.last july 19,inut0s po kc ng pit manager q na icl0se ang table q around 2pm hbng ngdedeal aq.temporarily cl0se dw,dhl after meeting ngkagulo n sa pnapasukn q dhl sa d nga dw po kmi mk2tanggap ng demand namin n kht 1/2 lng muna ng sep.pay ang ibigay,tp0s po dhl nga sa ut0s ng manager,inist0p namin operati0n,ngwait kmi result sa baba ng casino,mga ar0und 5pm pnaakyat ang mga gus2 pang mgdeal at mggng exempted dw sa pagaklas,umakyat po aq at 4 kming ngdeal at nkpgout ng 10pm,pero knbuksn d na kmi pnapas0k sa casino,dhl inimbestghn dw ung ngyri nung 19.ngaun po nkapreventive suspension kme ng 15days, 16 kming nasuspende.tama po b ang gnwa nla? Kht d kmi tlg nkiaklas?dhl nkapgout pa po kmi ng 10pm.

    [Reply]

  45. Please i need your feedback sir..

    [Reply]

  46. hello,

    this inquiry is for an employer’s view..
    My business (transportation) is doing just okay but due to some new reforms of LTFRB ( phasing out old units in exchange of brandnew ones before it can be registered), we cannot buy new units at the same time because of the high costs. I am thinking of selling my franchise and units to other company.
    I’ve been paying my employees ( drivers/conductors) base on the commission basis since i started my business (10 years ago).When DOLE mandated us operators to implement fix wage plus other benefits given to our employees, I am willing to follow but when we did the computation, it came out that the ” commission” basis is far better or higher than the one mandated by the DOLE . Our drivers insisted on the old commission basis, so, that was my computation to their salary ” porsyentuhan” until now.
    My question is if i will be selling my business, how much will i pay for the separation pay? will it be the one being ordered by DOLE? but how about the “commission” basis that I used in paying them? it was only in 2012 that the DOLE ‘s mandate came out. Can’t i just compute their separation pay starting 2012?
    also, will i be responsible if the new buyer will absorb or not the drivers? please help.thanks

    [Reply]

  47. MARIA RAMIRO Comment:
    November 27th, 2014 at 11:24 pm

    Dear Ted,

    I want to close my Lodge business effective jan 1, 2014, and need your guidance how to do it. One problem is I had it rented out for 3 yrs but after one year the tenant is giving up due to low revenue thus incur losses – and the business name was not transferred to the tenant. Reason alos why I rented it out is due to loses of the same reason. Should I declare the tenant as part responsible for the loses or just assume by myself to declare bankruptcy and leave the matter between us only. How may I proceed to deal with CITY HALL, BIR, DOLE, DTI and other govt agencies that might be involced.I am not selling the business and will have it repaired for personal use.

    [Reply]

  48. Cris Telegrafo Comment:
    December 25th, 2014 at 09:24 pm

    Hi Sir Ted,

    Happy holidays!

    Gusto ko lang po iclarify kung ang case po namin is entitle for seperation pay.

    I worked in a BPO company under AEGIS PEOPLESUPPORT for 4 yrs to present but only this year, last August when our company was completely bought by TELEPERFORMANCE. Wala pong formal na advise bakit po ito naibenta sa TP. Sa darating po na Jan 2015, simula na daw po ang pamamalakad ng TELEPERFORMANCE sa amen.

    Ganito din po ang case ng STREAM ng bilhin ng CONVERGYS pero ang mga tenured employee ng STREAM ay nakatanggapo po ng seperation pay.

    Marami pong salamat sa pagbasa.

    Godbless Sir Ted.

    Thanks.

    [Reply]

  49. dear sir:

    may i just inquire po if the owner of a single proprietorship died, are the employees of this business are still entitled to claim payment of separation pay or other money claims..?

    [Reply]

    admin Reply:

    If the business ceased to operate, you can still file your claim against the estate of the deceased owner. It is best to approach your lawyer to help you with this matter.

    [Reply]

  50. rina littaua Comment:
    February 26th, 2015 at 01:12 pm

    hi,just want to ask.my husband worked in a restaurant as a regular employee for 5yrs,now the owner sold the restaurant.what should the regular employees expect from the previous owner?should they have a separation pay?

    thank you.

    [Reply]

  51. Hi sir
    I wud like to ask for opinion.our company,has a plan to shutdown and discontinue business.in the previous years,our company is just a group or department,inside a company,but it is still the same company.since we are export and peza zone,management decided to make this dept a separate company.

    Then this separare company im talking about is about to close and stop.management wants us just to be a lateral transfer to the other company,but in recent years practice,those laid off are paid of the benefits and salary package with the option of rehired .so we think since we are a separate company,we should be paid with same benefits like the years of service we renderd to our company before they make us transferred to the other company.pls advise us if we have the rights to claim or discuss with the management.

    [Reply]

  52. Juan Jesus C. Domingo, Jr. Comment:
    November 2nd, 2015 at 01:29 pm

    Gentlemen:
    Our company announced that effective Jan. 1, 2016; our corporate name will be known by another name. We, the employees are now having apprehensions due to the ff:
    1)that the old company will be declared closed for bankruptcy;
    2)that the new company will absorb the employees of the dissolved company;
    3)that the length of service rendered by the absorbed employees will be back to zero;
    4)that the said employees will not be paid any centavo for their length of service;
    Please enlighten us.
    Thanks and awaiting your reply.

    [Reply]

  53. Sir Ted,

    May I get your email address and contact details. I would like to seek legal help on a labor case.

    Thanks.

    [Reply]

  54. Hi Sir Ted,
    Good Day!
    Iam part of a struggling company in a BPO industry, I have a couple of questions with regards my current status of employment.
    1. Our line of business closed but not the company, according to our HR, ouw leave credits will be used and once it is consumed, we will be in a no work no pay status. Other BPO conpanies provide to thir employees. why does mine doesnt? Is it okay for them to not pay us when we signed a contract and is a regular employee of thr company regardless if the billing department was pulled out by the client?
    2. papers were given with a brief discussion, most are not ammendable with it and expressed to the HR that they want to consult a lawyer or NLRC representative. but our company said that, when we leave the room with unsigned papers, we are considered terminated. are they right about this?
    3. the company said that it will take 6 months for them to look for an account where we can transfer, if they failed in 6 months then that is the time that a separation pay will be given. is that legal?

    thank you for the prompt reply.

    regards,

    [Reply]

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  1. […] is for the purpose of circumventing pertinent provisions of the Labor Code. (Read more about Closure or Cessation of Business Operation) Disease. An employer may terminate the services of an employee who has been found to be suffering […]

  2. […] causes such as installation of labor-saving devices, redundancy, retrenchment to prevent losses, and closure or cessation of operation, the employer must serve written notice to the individual employee concerned and to the appropriate […]