Installation of Labor-Saving Devices Concept
The law authorizes an employer to terminate the employment of any employee due to the installation of labor saving devices. The installation of these devices is a management prerogative, and the courts will not interfere with its exercise in the absence of abuse of discretion, arbitrariness, or maliciousness on the part of management. (See Magnolia Dairy Products Corporation vs. NLRC, G.R. No. 114952, January 29, 1996.)
The installation of labor-saving devices contemplates the installation of machinery to effect economy and efficiency in the method of production.
Distinguished from Retrenchment
The institution of “new methods or more efficient machinery, or of automation” is technically a ground for termination of employment by reason of installation of labor-saving devices but where the introduction of these methods is resorted to not merely to effect greater efficiency in the operations of the business but principally because of serious business reverses and to avert further losses, the device could then verily be considered one of retrenchment. (Edge Apparel vs. NLRC, G.R. No. 121314, February 12, 1998; See also Retrenchment.)
In case of termination due to the installation of labor saving devices, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one month pay or to at least one month pay for every year of service, whichever is higher. (Article 283, Labor Code.)
- An employee was terminated after the company instituted a modernization program. Under said program, the operations of the quality control unit, to which said employee was assigned, were all automated. The dismissal was upheld as valid. (Agustilo vs. Court of Appeals, G.R. No. 142875, September 7, 2001.)
Last Edited: Friday, August 19, 2011