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Employees are not entitled to separation pay if a business closes due to serious financial losses. According to Philippine law and jurisprudence, separation pay is only required if a closure is not due to serious business losses. In this case, the closure was due to financial losses, which qualifies as a serious business loss. The Supreme Court has also ruled that closure of a business due to losses is a management prerogative and employers are not obligated to pay separation if closure is due to serious losses.
Employees are not entitled to separation pay if a business closes due to serious financial losses. According to Philippine law and jurisprudence, separation pay is only required if a closure is not due to serious business losses. In this case, the closure was due to financial losses, which qualifies as a serious business loss. The Supreme Court has also ruled that closure of a business due to losses is a management prerogative and employers are not obligated to pay separation if closure is due to serious losses.
Employees are not entitled to separation pay if a business closes due to serious financial losses. According to Philippine law and jurisprudence, separation pay is only required if a closure is not due to serious business losses. In this case, the closure was due to financial losses, which qualifies as a serious business loss. The Supreme Court has also ruled that closure of a business due to losses is a management prerogative and employers are not obligated to pay separation if closure is due to serious losses.
This refers to your query on whether or not employees are
entitled to separation pay in case there is total closure of business because of financial losses.
Upon researching on the matter I would opine that such
employees are not entitled to separation pay. Under the law and Philippine jurisprudence, employees will only be entitled to separation pay if the closure is not due to serious business losses but in our case since the closure of the business was due to financial losses, which is considered as closure due to serious business losses, then the employees are not entitled to separation pay. They are not entitled to anything as long as the closure was done in good faith because the closure of a business is a management prerogative.
In one case the SC has ruled “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. One of the prerogatives of management is the decision to close the entire establishment or to close or abolish a department or section thereof for economic reasons, such as to minimize expenses and reduce capitalization. While the Labor Code provides for the payment of separation package in case of retrenchment to prevent losses, it does not obligate the employer for the payment thereof if there is closure of business due to serious losses.”1
Respectfully submitted,
1 Manila Polo Club Employees’ Union v. Manila Polo Club, Inc., G.R. No. 172846, July 24, 2013