Closure or cessation of business

Summary

▪ Closure of a business or undertaking due to business losses is the reversal of fortune of the employer whereby there is a complete cessation of business operations to prevent further financial drain upon an employer who cannot pay anymore his employees since business has already stopped.

▪ Closure may be in whole or in part such as a department.

▪ To be valid, the authorized cause of closure or cessation of operation should comply with prescribed standards.

▪ Separation pay is not due if the closure is due to serious business losses or reverses.

▪ Burden of proof is on the employer to establish that the closure is bona fide or valid.

1. Concept

Closure of a business or undertaking due to business losses is the reversal of fortune of the employer whereby there is a complete cessation of business operations to prevent further financial drain upon an employer who cannot pay anymore his employees since business has already stopped. (Manila Polo Club Employees’ Union [MPCEU] FUR-TUCP v. Manila Polo Club, Inc., G.R. No. 172846, 24 July 2013)

Closure of business may be considered as a reversal of an employer’s fortune whereby there is a complete cessation of business operations and/or an actual locking-up of the doors of the establishment, usually due to financial losses. (Benson Industries Employees Union-ALU-TUCP v. Benson Industries, Inc., G.R. No. 200746, 06 August 2014)

a. Legal basis

1) Labor Code

Article 283.Closure of establishment...

 



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