*In a bona fide suspension of business operation, the employer does not terminate the
employment of the employee. Rather, there is only “a temporary displacement of employees.”
Conversely, the employee cannot claim to have been dismissed from employment as his
employment status is merely suspended. Any labor complaint for illegal dismissal before the
lapse of the 6-month period is generally considered premature. For the same reasons, the due
process termination of employment is not necessary or required in a bona fide suspension of
business operations.
*Due to the “grim economic consequences” to the employee, the employer has the burden
of proving that suspension of operation is valid. The same rule applies for employees who are
placed on “floating status.” Failure to do so, the employer may be held liable for illegal
dismissal.
For suspension of business operations due to serious financial losses, these are ordinarily
evidenced by the audited financial statements, balance sheets, profit and loss statements, annual
income tax returns. In Manila Mining Corporation v. Amor, the employer (mining company) was
held liable after failing to present substantial evidence to support its claim for serious financial
losses as the basis for temporary suspension of operations.
Notwithstanding, the presentation of an analysis of an independent certified public accountant
was considered sufficient when a company claimed impending future losses which are neither
past nor actual ones. After all, the employer is not required to actually suffer business losses or
financial reverses to suspend business operations.
Further, this burden of proof is designed to guard against scheming employers who may just be
feigning or pretending of business losses or reverses in their business so as to manage or ease
out employees.
*In Lopez vs Irvine Contruction, GR. 207253, August 20, 2014:
[Article 283 of the Labor Code as above-cited] x x x speaks of a permanent retrenchment as
opposed to a temporary lay-off as is the case here. There is no specific provision of law which
treats of a temporary retrenchment or lay-off and provides for the requisites in effecting it or a
period or duration therefor. These employees cannot forever be temporarily laid-off. To remedy
this situation or fill the hiatus, Article 286 may be applied but only by analogy to set a specific
period that employees may remain temporarily laid-off or in floating status. Six months is the
period set by law that the operation of a business or undertaking may be suspended thereby
suspending the employment of the employees concerned. The temporary lay-off wherein the
employees likewise cease to work should also not last longer than six months. After six months,
the employees should either be recalled to work or permanently retrenched following the
requirements of the law, and that failing to comply with this would be tantamount to dismissing
the employees and the employer would thus be liable for such dismissal. (Emphasis supplied)
Notably, in both a permanent and temporary lay-off, jurisprudence dictates that the one-month
notice rule to both the DOLE and the employee under Article 283 of the Labor Code, as above
cited, is mandatory. Also, in both cases, the lay-off, being an exercise of the employer's
management prerogative, must be exercised in good faith - that is, one which is intended for the
advancement of employers' interest and not for the purpose of defeating or circumventing the
rights of the employees under special laws or under valid agreements. Instructive on the nature
of a lay-off as a management prerogative is the following excerpt from the case of Industrial
Timber Corporation v. NLRC
Closure or [suspension] of operations for economic reasons is, therefore, recognized as a valid
exercise of management prerogative. The determination to cease [or suspend] operations is a
prerogative of management, which the State does not usually interfere with, as no business or
undertaking [is] required to continue operating at a loss simply because it has to maintain its
workers in employment. Such an act would be tantamount to a taking of property without due
process of law.
