Soon after the Asian meltdown began in October 1997, ABC Realty and Management Corporation undertook a downsizing program and terminated nearly a third of its regular workforce. The affected employees questioned their termination arguing that the action was precipitate in that ABC had not proved that it sustained any losses. Is the claim of the employees correct? Explain your answer.

(Bar Examination in Labor Law, 2001)

Suggested Answer:

The claim of the employees may or may not be correct. The answer depends on the validity of the company’s “downsizing” program.

In legal term, downsizing may mean either Retrenchment or Redundancy.

Both are forms of downsizing and are often resorted to by the employer during periods of business recession, industrial depression, or seasonal fluctuations, and during lulls in production occasioned by lack of orders, shortage of materials, conversion of the plant for a new production program, or introduction of new methods or more efficient machinery or automation. (HEPI vs. Samahan ng mga Manggagawa as HYATT, G.R. No. 165756, June 5, 2009.)

If the “downsizing programs” is interpreted as retrenchment, then proof of losses is required. In this sense, the claim of the employees is correct.

On the other hand, if the “downsizing program” is interpreted as redundancy where proof of losses is not required, then the claim of the employees is not correct.


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