Authorized cause procedure

DOLE D.O. 147-15 requires the following procedure be followed for authorized cause separation:

1) 30-day advance written notice to the employee;

2) 30-day advance written notice to DOLE Regional Office; and

3) Payment of separation pay, if applicable.

In implementing authorized cause separation, many fail to observe the first two notices. Often, it is only the separation pay that is complied. It should be emphasized that all three should be observed to comply with procedural due process.

DOLE D.O. 147-15 expressly states: “the requirements of due process shall be deemed complied with upon service of a written notice to the employee and the appropriate Regional Office of the Department of Labor and Employment (DOLE) at least thirty (30) days before the effectivity of the termination, specifying the ground or grounds for termination.”

1) 30-day advance written notice to the employee

The notice should be given 30 days prior to the date that an employee will be separated.

The purpose of providing advance notice to the employees is for them to prepare for the eventuality that they will lose their means of livelihood and thus they should commence looking for the next gainful employment.

For documentation purposes, the notice should state therein the applicable authorized cause for which the employee is being separated, as well as a breakdown of his Final Pay, monetary equivalent of his benefits/leaves, and separation pay.

2) 30-day advance written notice to DOLE Regional Office

A separate notice should be given to the DOLE 30 days prior to employee separation.

The purpose of providing advance notice to DOLE is for them to be confirm the existence of the authorized cause and ensure that the separate employees will be given what is due to them, particularly on the separation pay.

The Labor Code and even in DOLE D.O. 147-15 do not expressly provide for how the notice to the DOLE should be prepared. This is partially the reason why many employers are unable to comply with this requirement as they do not know or are unaware of how it is done.

In practice, RKS Form 5-2010 or the DOLE Establishment Termination Report is used to inform the nearest DOLE Regional Office regarding the termination of employees due to authorized causes. The report should be submitted at least 30 days from last day of the affected employees. The purpose of notifying DOLE is for its officers/employees to check the legitimacy of the claim for an authorized cause.

After the report is received, DOLE sets a conference to verify the existence of an authorized cause. For instance, the employer will be required to show proof of the installation of labor-saving devices if such is the ground for downsizing its workforce. In some cases, a DOLE officer may conduct an ocular inspection to confirm the report.

Further, it should be noted that the RKS Form 5-2010 should be submitted to the nearest DOLE Regional Office – and not the Field Office – based on DOLE D.O. 147-15. While the form specifies in its heading that it is the notice to be used for closure/retrenchment, it is also used in practice for the other grounds. As of writing, there are no other specific DOLE forms that are labeled for the remaining authorized causes.

On a side note, RKS Form 5-2010 should not be confused with RKS Form 5-2009 which is the DOLE Employment Report. The second form is for notice involving displacement of workers due to flexible work arrangements.

3) Separation Pay

Under the Labor Code, separation pay is required when employees are dismissed for authorized causes. These affected employees did not do anything that could result in their separation, such as serious misconduct or any other just cause grounds. Rather, for certain business reasons, the employer chose to let go of employees via authorized causes.

DOLE D.O. 147-15 explains the computation of separation pay as follows:

“5.5 Payment of Separation Pay. Separation pay shall be paid by the employer to an employee terminated due to installation of labor-saving devices, redundancy, retrenchment, closure or cessation of operations not due to serious business losses or financial reverses, and disease.

An employee terminated due to installation of labor-saving devices or redundancy shall be paid by the employer a separation pay equivalent to at least one (1) month pay or at least one (1) month pay for every year of service, whichever is higher, a fraction of six (6) months service is considered as one (1) whole year.

An employee terminated due to retrenchment shall be paid by the employer a separation pay equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher, a fraction of six (6) months service is considered as one (1) whole year.

An employee terminated due to closure or cessation of business operation not due to serious business losses shall be paid by the employer a separation pay equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher, a fraction of six (6) months service is considered as one (1) whole year. Where closure is due to serious business losses or financial reverses, no separation pay is required.

An employee terminated due to disease shall be paid by the employer a separation pay equivalent to at least one (1) month salary or one-half (1/2) month salary for every year of service, whichever is higher, a fraction of six (6) months service is considered as one (1) whole year.

An employee whose employment is terminated by reason of just causes is not entitled to separation pay except as expressly provided for in the company policy or Collective Bargaining Agreement (CBA).” (Section 5.5, Rule I-A, DOLE D.O. 147-15)

To simplify, separation pay is computed based on the authorized cause:

1) 1 month pay or 1 month pay per year of service, whichever is higher:

a) Installation of labor-saving devices

b) Redundancy

2) 1 month pay or ½ month pay per year of service, whichever is higher:

a) Retrenchment

b) Closure or cessation of business operation not due to serious business losses

c) Disease

When computing the year of service, a fraction or a minimum of 6 months is considered 1 year. Otherwise stated, an employee who has rendered service for 3 years and 7 months shall be considered to have 4 years of service for purposes of computing his separation pay.

Labor Law requires the employer to provide separation pay to help affected employees with their finances as they look for their next gainful employment. It is a general fact that it is usually difficult to get hired for a job. Often, it takes about a month or perhaps longer for affected employees to look for another work. This is particularly true for older employees whose skills may no longer that in demand with the current workforce. Hence, separation pay is designed to assist them in these difficult times.

a. Exception to Separation Pay

There is only one exception to separation pay under authorized causes. There is no separation pay when the closing of a business is due to serious financial losses. When a company closes down due to bankruptcy, it is not reasonable nor expected for it to still release amounts for separation pay. Hence, it is exempted.

The Labor Code requires separation pay for authorized causes only. Thus, employees who resign or get dismissed for just causes are not entitled to separation pay. It is of their own doing why they were separated from employment. Meanwhile, it was the management’s decision letting go of employees via authorized causes.