Installation of Labor-saving Devices

Summary

▪ To be valid, the authorized cause of installation of labor-saving devices should comply with prescribed standards.

1. Concept

The installation of labor-saving devices contemplates the installation of machinery to effect economy and efficiency in its method of production. (Edge Apparel, Inc. v. NLRC, G.R. No. 121314, 12 February 1998)

a. Management prerogative

The law authorizes an employer, like the herein petitioner, 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, as in this case. (Magnolia Products Corporation v. NLRC, G.R. No. 114952, 29 January 1996)

b. Automation

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. (Edge Apparel, Inc. v. NLRC, supra.)

2. Standards for installation of labor-saving devices

The standards are:

1. There must be introduction of machinery, equipment or other devices;

2. The introduction must be done in good faith;

3. The purpose for such introduction must be valid such as to save on cost, enhance efficiency and other justifiable economic reasons;

4. There is no other option available to the employer than the introduction of machinery, equipment or device and the consequent termination of employment of those affected thereby; and,

5. There must be fair and reasonable criteria in selecting employees to be terminated. (DOLE Department Order No. 147, Series of 2015)

3. Separation pay

The payment of separation pay would be due when a dismissal is on account of an authorized cause. The amount of separation pay depends on the ground for the termination of employment. A dismissal due to the installation of labor saving devices, redundancy (Article 283) or disease (Article 284), entitles the worker to a separation pay equivalent to “one (1) month pay or at least one (1) month pay for every year of service, whichever is higher.” (Edge Apparel, Inc. v. NLRC, supra.)

References

1987 Philippine Constitution

Presidential Decree No. 442, a.k.a. Labor Code of the Philippines

DOLE Department Order No. 147, Series of 2015

▪ Jurisprudence or Supreme Court Decisions (as cited above)

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