E. Floating status

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1. Bona fide suspension of business operation/undertaking

ART. 301 [286]. When Employment Not Deemed Terminated. – The bona fide suspension of the operation of a business or undertaking for a period not exceeding six (6) months, or the fulfilment (sic) by the employee of a military or civic duty shall not terminate employment. In all such cases, the employer shall reinstate the employee to his former position without loss of seniority rights if he indicates his desire to resume his work not later than one (1) month from the resumption of operations of his employer or from his relief from the military or civic duty. (Labor Code)

Clear and compelling economic reason. An employer must also prove the existence of a clear and compelling economic reason for the temporary shutdown of its business or undertaking and that there were no available posts to which the affected employee could be assigned. (Airborne Maintenenance and Alliance Services, Inc. v. Egos, G.R. No. 222748, 03 April 2019)

Lopez v. Irvine Construction Corp. (August 2014)
In this case, Irvine failed to prove compliance with the parameters of Article 286 of the Labor Code. As the records would show, it merely completed one of its numerous construction projects which does not, by and of itself, amount to a bona fide suspension of business operations or undertaking. In invoicing Article 286 of the Labor Code, the paramount consideration should be the dire exigency of the business of the employer that compels it to put some of its employees temporarily out of work. This means that the employer should be able to prove that it is faced with a clear and compelling economic reason which reasonably forces it to temporarily shut down its business operations or a particular undertaking, incidentally resulting to the temporary lay-off of its employees.
Due to the grim economic consequences to the employee, case law states that the employer should also bear the burden of proving that there are no posts available to which the employee temporarily out of work can be assigned. Thus, in the case of Mobile Protective & Detective Agency v. Ompad, the Court found that the security guards therein were constructively dismissed considering that their employer was not able to show any dire exigency justifying the latter’s failure to give said employees any further assignment x x x

DOLE notice. In implementing this measure, jurisprudence has set that the employer should notify the Department of Labor and Employment (DOLE) and the affected employee, at least one month prior to the intended date of suspension of business operations. (Airborne Maintenenance and Alliance Services, Inc. v. Egos, supra.)

Airborne Maintenenance and Alliance Services, Inc. v. Egos (April 2019)
… petitioner [employer] failed to prove that the termination of the contract with Meralco resulted in a bona fide suspension of its business operations so as to validly place respondent in a floating status.
x x x
Here, a review of the submissions of the parties shows that petitioner failed to show compliance with the notice requirement to the DOLE and respondent.
Making matters worse for petitioner, it also failed to prove that after the termination of its contract with Meralco it was faced with a clear and compelling economic reason to temporarily shut down its operations or a particular undertaking. It also failed to show that there were no available posts to which respondent could be assigned.
Also, not only did petitioner fail to prove it had valid grounds to place respondent on a floating status, but the NLRC and the CA both correctly found that respondent even had to ask for a new assignment from petitioner, but this was unheeded. Further, when respondent filed the complaint on August 5, 2011, petitioner, as an afterthought, subsequently sent notices/letters to respondent directing him to report to work. These, however, were not received by respondent as the address was incomplete.

2. 6-month limitation

6-month limitation, tempary lay-off. The law set six (6) months as the period where the operation of a business or undertaking may be suspended, thereby also suspending the employment of the employees concerned. The resulting temporary lay-off, wherein the employees likewise cease to work, should also not last longer than six (6) months. After the period of six (6) months, the employees should either then be recalled to work or permanently retrenched following the requirements of the law. (Innodata Knowledge Services, Inc. v. Inting, G.R. No. 211892, 06 December 2017)

Constructive dismissal if 6-month limitation is violated. Failure to comply with this requirement would be tantamount to dismissing the employees, making the employer responsible for such dismissal. Elsewise stated, an employer may validly put its employees on forced leave or floating status upon bona fide suspension of the operation of its business for a period not exceeding six (6) months. In such a case, there is no termination of the employment of the employees, but only a temporary displacement. When the suspension of the business operations, however, exceeds six (6) months, then the employment of the employees would be deemed terminated, and the employer would be held liable for the same. (Ibid.)

Same. The placement of an employee on “floating status” must not exceed six months. Otherwise, the employee may be considered constructively dismissed. (Seventh Fleet Security Services, Inc. v. Loque, G.R. No. 230005, 22 January 2020)

Same; Illegal dismissal. The so-called “floating status” of an employee should last only for a legally prescribed period of time. When that “floating status” of an employee lasts for more than six months, he may be considered to have been illegally dismissed from the service. (Valdez v. NLRC, Nelbusco, Inc., G.R. No. 125028, 09 February 1998)

Innodata Knowledge Services, Inc. v. Inting (December 2017)
Indeed, closure or suspension of operations for economic reasons is recognized as a valid exercise of management prerogative. But the burden of proving, with sufficient and convincing evidence, that said closure or suspension is bona fide falls upon the employer. In the instant case, IKSI claims that its act of placing respondents on forced leave after a decrease in work volume, subject to recall upon availability of work, was a valid exercise of its right to lay-off, as an essential component of its management prerogatives. The Court agrees with the LA’s pronouncement that requiring employees on forced leave is one of the cost-saving measures adopted by the management in order to prevent further losses. However, IKSI failed to discharge the burden of proof vested upon it. Having the right should not be confused with the manner in which that right is exercised; the employer cannot use it as a subterfuge to run afoul of the employees’ guaranteed right to security of tenure. The records are bereft of any evidence of actual suspension of IKSI’s business operations or even of the ACT Project alone. In fact, while IKSI cited Article 301 to support the temporary lay-off of its employees, it never alleged that it had actually suspended the subject undertaking to justify such lay-off. It merely indicated changes in business conditions and client requirements and specifications as its basis for the implemented forced leave/lay-off.
In light of the well-entrenched rule that the burden to prove the validity and legality of the termination of employment falls on the employer, IKSI should have established the bona fide suspension of its business operations or undertaking that could legitimately lead to the temporary layoff of its employees for a period not exceeding six (6) months, in accordance with Article 301. The LA severely erred when it sustained respondents’ temporary retrenchment simply because the volume of their work would sometimes decline, thus, several employees at the ACT Project stream experienced unproductive time. Considering the grave consequences occasioned by retrenchment, whether permanent or temporary, on the livelihood of the employees to be dismissed, and the avowed policy of the State to afford full protection to labor and to assure the employee’s right to enjoy security of tenure, the Court stresses that not every loss incurred or expected to be incurred by a company will justify retrenchment. The losses must be substantial and the retrenchment must be reasonably necessary to avert such losses. The employer bears the burden of proving this allegation of the existence or imminence of substantial losses, which by its nature is an affirmative defense. It is the employer’s duty to prove with clear and satisfactory evidence that legitimate business reasons exist in actuality to justify any retrenchment. Failure to do so would inevitably result in a finding that the dismissal is unjustified. Otherwise, such ground for termination would be susceptible to abuse by scheming employers who might be merely feigning business losses or reverses in their business ventures to dispose of their employees.
Here, IKSI never offered any evidence that would indicate the presence of a bona fide suspension of its business operations or undertaking. IKSI’s paramount consideration should be the dire exigency of its business that compelled it to put some of its employees temporarily out of work. This means that it should be able to prove that it faced a clear and compelling economic reason which reasonably constrained it to temporarily shut down its business operations or that of the ACT Project, incidentally resulting in the temporary lay-off of its employees assigned to said particular undertaking. Due to the grim economic repercussions to the employees, IKSI must likewise bear the burden of proving that there were no other available posts to which the employees temporarily put out of work could be possibly assigned. Unfortunately, IKSI was not able to fulfill any of the aforementioned duties. IKSI cannot simply rely solely on the alleged decline in the volume of work for the ACT Project to support the temporary retrenchment of respondents. Businesses, by their very nature, exist and thrive depending on the continued patronage of their clients. Thus, to some degree, they are subject to the whims of clients who may suddenly decide to discontinue patronizing their services for a variety of reasons. Being inherent in any enterprise, employers should not be allowed to take advantage of this entrepreneurial risk and use it in a scheme to circumvent labor laws. Otherwise, no worker could ever attain regular employment status. In fact, IKSI still continued its operations and retained several employees who were also working on the ACT Project even after the implementation of the January 2010 forced leave. Much worse, it continued to hire new employees, with the same qualifications as some of respondents, through paid advertisements and placements in Suns tar Cebu, a local newspaper, dated February 24, 2010 and March 7, 2010. The placing of an employee on floating status presupposes, among others, that there is less work than there are employees. But if IKSI continued to hire new employees then it can reasonably be assumed that there was a surplus of work available for its existing employees. Hence, placing respondents on floating status was unnecessary. If any, respondents – with their experience, knowledge, and familiarity with the workings of the company – should be preferred to be given new projects and not new hires who have little or no experience working for IKSI.
There being no valid suspension of business operations, IKSI’s act amounted to constructive dismissal of respondents since it could not validly put the latter on forced leave or floating status pursuant to Article 301. And even assuming, without admitting, that there was indeed suspension of operations, IKSI did not recall the employees back to work or place them on valid permanent retrenchment after the period of six (6) months, as required of them by law. IKSI could not even use the completion of the duration of the alleged project as an excuse for causing the termination of respondents’ employment. It must be pointed out that the termination was made in 2010 and the expected completion of the project in respondents’ contracts was still in 2012 to 2014. x x x

Return-to-work order does not cure defect of 6-month lapse.

Seventh Fleet Security Services, Inc. v. Loque (January 2020)
In this case, it is undisputed that Loque was placed on floating status beginning on the lapse of his 10-day suspension on January 7, 2014. Thus, at the time he filed the complaint for constructive dismissal and money claims on July 28, 2014, he has been on “floating status” for six months and 21 days.
To avoid liability for constructive dismissal, Seventh Fleet asserted that it had directed Loque “to report to [Seventh Fleet’s office] for posting within forty eight (48) hours” through the letters dated May 14, 2014 and May 28, 2014. Seventh Fleet faulted Loque for not complying with its directive. On the other hand, Loque claimed that he went to Seventh Fleet’s office to report for work on two occasions — on May 19, 2014 and July 11, 2014, as shown by his even dated letters. Loque further alleged that he was barred from entering the premises of Seventh Fleet on those dates and, thus, was constrained to write those letters instead.
… other than bare denials, Seventh Fleet was not able to show that Loque was not barred from entering its premises. Thus, Loque could not be faulted for merely leaving the letter dated May 19, 2014 with security guard Amores, and for sending the letter dated July 11, 2014 through private courier. Also noteworthy, Seventh Fleet did not dispute the July 11, 2014 letter but merely attempted to discredit Loque by saying that the letter was merely “crafted” in preparation to the filing of the complaint. Then again, Seventh Fleet did not respond nor refute the contents of said letter. At this point, it bears stressing that the factual findings of the CA are generally binding on the Court,22 and the latter retains full discretion on whether to review the factual findings of the CA.23 In this case, the Court finds no cogent reason to disturb the findings of the CA that Loque went to the office of Seventh Fleet.
At any rate, the letters dated May 14, 2014 and May 28, 2014 sent by Seventh Fleet to Loque are in the nature of general return to work orders. Such general return to work orders will not absolve Seventh Fleet since jurisprudence requires not only that the employee be recalled to the agency’s office, but that the employee be deployed to a specific client before the lapse of six months. x x x
x x x
Considering that Loque was placed on floating status for more than six months without being deployed to a specific assignment, and that the letters dated May 14, 2014 and May 28, 2014 are bereft of any reference to any specific client or indication that he would be assigned to a specific client, Loque is therefore deemed constructively dismissed. x x x

3. Burden of proof

The burden of proving that there are no posts available to which the security guard can be assigned rests on the employer. (Seventh Fleet Security Services, Inc. v. Loque, supra.)

Disclaimer: All information herein is for educational and general information only intended for those preparing for the bar exam. These should not be taken as professional legal advice or opinion. Please consult a competent lawyer to address your specific concerns. Any statements or opinions of the author are solely his own and do not reflect that of any organization he may be connected.

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