THIRD DIVISION

[G.R. No. 172363. March 7, 2008.]

JUVY M. MANATAD , petitioner, vs . PHILIPPINE TELEGRAPH AND

TELEPHONE CORPORATION , respondent.

DECISION

CHICO-NAZARIO , J : p

Before this Court is a Petition for Review on Certiorari 1 under Rule 45 of the
Revised Rules of Court led by petitioner Juvy M. Manatad seeking the reversal and the
setting aside of the Decision 2 dated 12 July 2005 and the Resolution 3 dated 22 March
2006 of the Court of Appeals in CA-G.R. SP No. 79440. The appellate court, in its
assailed Decision and Resolution, reversed the Decisions 4 of the National Labor
Relations Commission (NLRC) and the Labor Arbiter declaring the dismissal of
Manatad from employment illegal. The dispositive portion of the Court of Appeals
Decision reads: TCaEIc

WHEREFORE, the petition is GRANTED. The Decision dated 18 September

2001 and Resolution dated 22 July 2003 of [NLRC] as well as the Decision
dated 14 July 1999 of the Labor Arbiter are REVERSED and SET ASIDE.
However, [herein respondent] is hereby ordered to pay [herein petitioner]
Php43,5000.00 as separation pay. No costs. 5
The present controversy stems from the following antecedent factual and
procedural facts:
In September 1988, petitioner was employed by respondent Philippine Telegraph
and Telephone Corporation (PT&T) as junior clerk with a monthly salary of P3,839.74.
She was later promoted as Account Executive, the position she held until she was
temporarily laid off from employment on 1 September 1998. acCITS

Petitioner's temporary separation from employment was pursuant to the

Temporary Staff Reduction Program adopted by respondent due to serious business
reverses. On 16 November 1998, petitioner received a letter from respondent inviting
her to avail herself of its Staff Reduction Program Package equivalent to one-month
salary for every year of service, one and one-half month salary, pro-rated 13th month
pay, conversion to cash of unused vacation and sick leave credits, and Health
Maintenance Organization and group life insurance coverage until full payment of the
separation package. Petitioner, however, did not opt to avail herself of the said
package. On 26 February 1999, petitioner received a Notice of Retrenchment from
respondent permanently dismissing her from employment effective 16 February 1999.
Consequently, petitioner led a Complaint for illegal dismissal against
respondent, its Regional Director for Visayas Reynaldo Macrohon, and its President and
Chief Executive O cer Marilyn Eleonor Santiago before the Labor Arbiter claiming the
award of separation pay, damages and attorney's fees. In her Position Paper, petitioner
mainly alleged that the retrenchment program adopted by respondent was illegal for it
was gaining pro ts for the period of July 1997 to June 1998. In support of her
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 allegation that respondent was obtaining pro ts, petitioner presented the central
Visayas Operating Margin Reports 6 showing the respondent's gross revenue and net
profits in the region for the period in question: EHTIcD

Month Gross Revenue Net Profit

July 1997 P2,496,981.31 P775,742.82

August 1997 2,314,527.75 662,812.13
September 1997 2,308,364.14 604,924.51
October 1997 2,403,083.30 649,583.33
November 1997 1,965,446.44 367,956.48
December 1997 2,391,721.94 657,023.23
January 1998 2,649,857.35 825,581.17
February 1998 2,611,029.13 702,132.23
March 1998 2,340,166.83 488,549.78
April 1998 2,199,814.78 230,380.21
May 1998 2,186,735.40 403,416.66
June 1998 2,240,238.94 500,656.64

Petitioner further belied respondent's contention that it was suffering from

serious nancial reverses by presenting respondent's Special Order No. 98-21 7
granting an increase in the salaries of its employees under Job Grade 8 and 9 in the
amount of P2,300.00 a month effective January 1998. Petitioner's evidence supposedly
showed that it was still economically viable for respondent to continue its business
operations without downsizing its workforce. Petitioner thus prayed for the award of
separation pay in the amount of P107,000.00, unpaid salary, prorated 13th month pay,
unpaid vacation leave benefits and attorney's fees. CIScaA

On the other hand, respondent asserted that petitioner was separated from
service pursuant to a valid retrenchment implemented by the company. Retrenchment
is an authorized cause for the employer to terminate the services of an employee. Due
to huge business losses suffered by respondent in the sum of P684,096,285.00 from
1995-1998, it was constrained to arrest escalating operating costs by downsizing its
workforce.
Respondent claimed that it was suffering from serious nancial reverses from
1995 up to 1999, as shown below:
YEAR PROFIT LOSSES

1995 P29,868,406.00
1996 P52,112,986.00
1997 P1,491,532.00
1998 P557,892,627.00
1999 P770,552,970.00 8

To support its claim, respondent submitted its nancial statements for the scal
period of 30 June 1996 to 30 June 1998 audited by independent auditors. Independent
public accountants, Sycip Gorres Velayo (SGV) & Co., reported that respondent incurred
a substantial loss of about P558 Million which resulted in a de cit of about P574
Million as of 30 June 1998. Respondent has been negotiating with its creditors for the
suspension of payments until the completion of an acceptable restructuring plan. 9
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 On 14 January 1999, the Labor Arbiter rendered a Decision in favor of petitioner
ruling that the retrenchment program implemented by respondent was invalid.
According to the Labor Arbiter, respondent failed to prove that it was suffering from
serious nancial reverses warranting the implementation of a retrenchment program.
Mere comparative statements of income submitted by respondent was not a
conclusive proof of serious business losses, more so when their authenticity was
suspected for lack of signature of the one who prepared it. Consequently, petitioner's
separation from employment effected pursuant to an unjusti ed retrenchment
program, was illegal. The dispositive portion of the Labor Arbiter's Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering
the respondent Philippine Telephone and Telegraph Corp. (PT&T) to pay the
complainant Juvy Manatad the following:
1. Separation pay — P107,000.00
2. Backwages — P42,800.00
3. Unpaid wages — P50,850.00
4. Vacation and sick leave pay — P13,563.00
5. Proportionate 13th month pay — P1,335.00
6. Attorney's fee — P21,554.00
—————
TOTAL — P237,102.00
Less Advances — P13,050.00
—————
P224,050.00

The other claims and the case against respondents Reynaldo Machoron
and Marilyn Santiago are dismissed for lack of merit. 1 0
Dissatis ed, petitioner appealed to the NLRC arguing that the Labor Arbiter
gravely abused its discretion in sustaining the illegality of petitioner's dismissal. In
ruling that respondent's retrenchment program was unjusti ed, the Labor Arbiter
disregarded the nancial statements submitted by the respondent which were audited
by independent auditors showing that it was in dire financial distress.
On 18 September 2001, the NLRC rendered a Decision 1 1 a rming with
modi cation the Labor Arbiter Decision. The NLRC sustained the Labor Arbiter's
ndings with respect to respondent's failure to substantiate its claim of nancial
reverses. It further noted that the Department of Labor and Employment (DOLE) was
not noti ed by the respondent of its retrenchment program as required by law. The
NLRC Decision thus decreed:
WHEREFORE, the Decision of the Labor Arbiter dated July 14, 1999 is
a rmed with the modi cation that respondents Reynaldo Macrohon and
Marilyn Santiago are also ordered jointly and severally liable with PT&T, for the
payment of the judgment award. 1 2 AcEIHC

The Motion for Reconsideration led by respondent was denied by the NLRC in
its Resolution dated 22 June 2002.
O n Certiorari, the Court of Appeals reversed the NLRC and the Labor Arbiter
Decisions and upheld the validity of respondent's retrenchment program. 1 3 The
appellate court was fully persuaded that the respondent was besieged by a continuing
downtrend in its business operations and severe nancial losses which justi ed its
immediate drastic reduction of personnel. 1 4 The nancial standing of respondent
cannot be determined by the performance of a single branch or unit alone but by the
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 performance of all its branches integrated as a whole. In addition, the comparative
statements of income prepared by independent auditors constitute a normal method
of proving the pro t and loss performance of a business company. Finally, the Court of
Appeals also observed that respondent duly complied with the requirement of service
of notice to the employee one month before the intended date of retrenchment. SHacCD

Similarly ill-fated was petitioner's Motion for Reconsideration which was denied
by the Court of Appeals in a Resolution 1 5 dated 22 March 2006.
Petitioner is now before this Court via the Petition at bar raising the following
issues:
I.
[WHETHER OR NOT THE COURT OF APPEALS ERRED] IN DECLARING THAT
PETITIONER WAS NOT ILLEGALLY DISMISSED;
II.

[WHETHER OR NOT THE COURT OF APPEALS ERRED] IN FINDING THAT THE

RETRENCHMENT MADE BY PRIVATE RESPONDENT WAS VALID AND LEGAL
WHEN PETITIONER DID NOT GIVE CONSENT;

III.
[WHETHER OR NOT THE COURT OF APPEALS ERRED] IN NOT DECLARING
THAT THE ALLEGED LOSSES OF PRIVATE RESPONDENT WAS ALTERED TO
CONFORM WITH THE EVIDENCE OF PETITIONER SHOWING PROFITS IN THE
CENTRAL VISAYAS OPERATIONS GROUP;
IV.
[WHETHER OR NOT THE COURT OF APPEALS ERRED] IN FINDING THAT
PETITIONER IS BOUND BY THE COLLECTIVE BARGAINING AGREEMENT [CBA]
WHEN SHE IS NOT A UNION MEMBER;

V.
[WHETHER OR NOT THE COURT OF APPEALS ERRED] IN DELETING THE
AWARD OF SEPARATION PAY, BACKWAGES, UNPAID WAGES, VACATION AND
SICK LEAVE PAY, PROPORTIONATE 13TH MONTH PAY, AND ATTORNEY'S
FEES. 1 6
The present controversy hinges on the sole issue of whether or not the
retrenchment program implemented by respondent was valid. DICSaH

The pertinent provision of the Labor Code reads:

Art. 283.Closure of establishment and reduction of personnel. — The
employer may also terminate the employment of any employee due to the
installation of labor saving devices, redundancy, retrenchment to prevent losses
or the closing or cessation of operation of the establishment or undertaking
unless the closing is for the purpose of circumventing the provisions of this
Title, by serving a written notice on the worker and the [Department] of Labor
and Employment at least one (1) month before the intended date thereof. In
case of termination due to the installation of labor saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay
equivalent to at least his one (1) month pay or to at least one (1) month pay for
every year of service, whichever is higher. In case of retrenchment to prevent
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 losses and in cases of closures or cessation of operations of establishment or
undertaking not due to serious business losses or nancial reverses, the
separation pay shall be equivalent to one (1) month pay or at least one-half
(1/2) month pay for every year of service, whichever is higher. A fraction of at
least six (6) months shall be considered as one (1) whole year. IATSHE

Retrenchment is the termination of employment initiated by the employer

through no fault of the employees and without prejudice to the latter, resorted to by
management during periods of business recession; industrial depression; or seasonal
uctuations, during lulls occasioned by lack of orders, shortage of materials,
conversion of the plant for a new production program, or the introduction of new
methods or more e cient machinery or automation. Retrenchment is a valid
management prerogative. It is, however, subject to faithful compliance with the
substantive and procedural requirements laid down by law and jurisprudence. 1 7 In the
discharge of these requirements, it is the employer who bears the onus, being in the
nature of affirmative defense. 1 8
For a valid retrenchment, the following requisites must be complied with: (a) the
retrenchment is necessary to prevent losses and such losses are proven; (b) written
notice to the employees and to the DOLE at least one month prior to the intended date
of retrenchment; and (c) payment of separation pay equivalent to one-month pay or at
least one-half month pay for every year of service, whichever is higher. 1 9
Jurisprudential standards for the losses which may justify retrenchment have
been reiterated by this Court in a long line of cases to forestall management abuse of
this prerogative, viz:
Firstly, the losses expected should be substantial and not merely de
minimis in extent. If the loss purportedly sought to be forestalled by
retrenchment is clearly shown to be insubstantial and inconsequential in
character, the bonafide nature of the retrenchment would appear to be seriously
in question. Secondly, the substantial loss apprehended must be reasonably
imminent, as such imminence can be perceived objectively and in good faith by
the employer. There should, in other words, be a certain degree of urgency for
the retrenchment, which is after all a drastic recourse with serious
consequences for the livelihood of the employees retired or otherwise laid-off.
Because of the consequential nature of retrenchment, it must, thirdly, be
reasonably necessary and likely to effectively prevent the expected losses. The
employer should have taken other measures prior or parallel to retrenchment to
forestall losses, i.e., cut other costs than labor costs. An employer who, for
instance, lays off substantial numbers of workers while continuing to dispense
fat executive bonuses and perquisites or so-called "golden parachutes", can
scarcely claim to be retrenching in good faith to avoid losses. To impart
operational meaning to the constitutional policy of providing "full protection" to
labor, the employer's prerogative to bring down labor costs by retrenching must
be exercised essentially as a measure of last resort, after less drastic means —
e.g., reduction of both management and rank-and- le bonuses and salaries,
going on reduced time, improving manufacturing e ciencies, trimming of
marketing and advertising costs, etc. — have been tried and found wanting. DIETcH

Lastly, but certainly not the least important, alleged losses if already
realized, and the expected imminent losses sought to be forestalled, must be
proved by su cient and convincing evidence. The reason for requiring this
quantum of proof is readily apparent: any less exacting standard of proof would
render too easy the abuse of this ground for termination of services of
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 employees. 2 0
In the case at bar, respondent instituted a retrenchment program to arrest its
alleged escalating nancial losses by downsizing its workforce. Respondent claimed
that a signi cant portion of its operational expenses went to manpower resources
constraining it to implement measures to reduce the number of employees so as to
revive its fiscal condition.
In rejecting respondent's claim of economic reverses, the Labor Arbiter cast
doubt on the authenticity of the nancial statements submitted by respondent, since
these were not signed by the person who prepared them. The Labor Arbiter likewise
ruled that even if the financial statements were valid, they still did not meet the quantum
of proof needed in order to establish losses. These findings were affirmed by the NLRC.
SEDICa

Banking on the Labor Arbiter and NLRC Decisions, petitioner now insists that
respondent failed to prove that it was suffering from substantial loss that would justify
the retrenchment. She asserts that respondent was in sound scal condition when it
embarked on the reduction of its personnel, thus, making the retrenchment program
invalid.
We do not agree.
The theories espoused by the opposing parties must be weighed together with
the evidence adduced and in consonance with the evidentiary principles decreed by law
and jurisprudence. We cannot favor the bare assertions and empty gures submitted
by the petitioner over the nancial statements audited by independent auditors
presented by respondent without transgressing the basic rule in assessing business
losses, entrenched in jurisprudence. SacDIE

Upon examination of the evidence adduced by both parties, we are convinced

that, indeed, respondent experienced serious nancial crises as shown in the nancial
statements audited by independent auditors, SGV & Co. and Alba Ledesma & Co. It is
unlikely therefore that respondent was just feigning business losses in order to ease
out employees. To quote the conclusion by SGV & Co. in its Report of Independent
Public Accountants:
The accompanying nancial statements have been prepared assuming
that the Company will continue as a going concern. The Company has
incurred a substantial loss of about P558 million for the year ended
June 30, 1998, which resulted to a de cit of about P574 million as of
June 30, 1998. As discussed in Note 1, the company has negotiated with its
creditors for the suspension of payments affecting its outstanding balances as
of June 30, 1998 until the completion of an acceptable restructuring plan. The
suspension of payments covers a period of sixty (60) days from the signing of
the Memorandum of Agreement dated August 26, 1998. The Company's ability
to continue as a going concern depends, among others, on the completion of an
acceptable restructuring plan. The nancial statements do not include any
adjustments that might result from the outcome of these uncertainties. 2 1
(Emphasis supplied.) DEHaAS

The nancial statements re ect that respondent suffered substantial loss in the
amount of P558 Million by 30 June 1998. The Report of SGV & Co. substantiates the
alleged precarious nancial condition of the respondent. The nancial statements
audited by independent external auditors constitute the normal method of proving the
pro t and loss performance of a company as enunciated in San Miguel Corporation v.
Abella: 2 2
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 Normally, the condition of business losses is shown by audited nancial
documents like yearly balance sheets, pro t and loss statements and annual
income tax returns. The nancial statements must be prepared and signed by
independent auditors failing which they can be assailed as self-serving
documents. CDESIA

No evidence can best attest to a company's economic status other than its
nancial statement. We de ned the evidentiary weight accorded to audited nancial
statements in Asian Alcohol Corporation v. National Labor Relations Commission: 2 3
The condition of business losses is normally shown by audited nancial
documents like yearly balance sheets and pro t and loss statements as well as
annual income tax returns. It is our ruling that nancial statements must be
prepared and signed by independent auditors. Unless duly audited, they can be
assailed as self-serving documents. But it is not enough that only the nancial
statements for the year during which retrenchment was undertaken, are
presented in evidence. For it may happen that while the company has indeed
been losing, its losses may be on a downward trend, indicating that business is
picking up and retrenchment, being a drastic move, should no longer be resorted
to. Thus, the failure of the employer to show its income or loss for the
immediately preceding year or to prove that it expected no abatement of such
losses in the coming years, may bespeak the weakness of its cause. It is
necessary that the employer also show that its losses increased through a
period of time and that the condition of the company is not likely to improve in
the near future. DcAaSI

Being guided accordingly, we nd that respondent was fully justi ed in

implementing a retrenchment program since it was undergoing business reverses, not
only for a single scal year, but for several years prior to and even after the program. In
a span of six years, respondent realized pro ts only in one year, in 1997. We thus quote
with approval the disquisition of the Court of Appeals:
As shown in the nancial statements, during the years ended June 1995,
1996, 1998, 1999 and 2000, [herein respondent] incurred net losses of P40
million, P85 million, P555 million, P558 million, P700 million and P1.196 billion,
respectively, resulting in a de cit of P2.169 billion as of June 30, 2000. We note,
however, that [herein respondent] earned income in 1997 in the amount of P1.4
million. But it is clear that petitioner suffered a major setback when after
earning P1.4 Million (as of June 1997), [respondent] posted an astronomical
financial loss of P555 million in the succeeding year (as of June 1998). 2 4
Even if we take into consideration the gures submitted by petitioner and accede
to her position that respondent was gaining substantial pro ts from its Central Visayas
o ce, the said numbers, nonetheless, do not bespeak respondent's overall nancial
standing in light of the fact that respondent is operating nationwide and the Central
Visayas o ce is only one of its many branches. Losses or gains of a business entity
cannot be fully assessed by isolating or selecting only particular branches or o ces.
There are recognized accounting principles and methods by which the business rm's
performance can be objectively and thoroughly evaluated at the end of every scal year,
and the assessment accurately reported in the company's financial statement. EAcIST

That the nancial statements are audited by independent auditors safeguards

the same from the manipulation of the gures therein to suit the company's needs. The
auditing of nancial reports by independent external auditors are strictly governed by
national and international standards and regulations for the accounting profession. It
bears to stress that the nancial statements submitted by respondent were audited by
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 reputable auditing rms. Hence, petitioner's assertion that respondent merely
manipulated its nancial statements to make it appear that it was suffering from
business losses that would justify the retrenchment is incredible and baseless.
In addition, the fact that the nancial statements were audited by independent
auditors settles any doubt on the authenticity of these documents for lack of signature
of the person who prepared it. As reported by SGV & Co., the nancial statements
presented fairly, in all material aspects, the nancial position of the respondent as of 30
June 1998 and 1997, and the results of its operations and its cash ows for the years
ended, in conformity with the generally accepted accounting principles. 2 5 THaDAE

In fact, even granting arguendo that respondent was not experiencing losses, it is
still authorized by Article 283 2 6 of the Labor Code to cease its business operations.
Explicit in the said provision is that closure or cessation of business operations is
allowed even if the business is not undergoing economic losses. The owner, for any
bona de reason, can lawfully close shop anytime. Just as no law forces anyone to go
into business, no law can compel anybody to continue in it. It would indeed be
stretching the intent and spirit of the law if we were to unjustly interfere with the
management's prerogative to close or cease its business operations, just because said
business operations are not suffering any loss or simply to provide the worker's
continued employment. 2 7
The law recognizes the right of every business entity to reduce its work force if
the same is made necessary by compelling economic factors which would endanger its
existence or stability. In spite of overwhelming support granted by the social justice
provisions of our Constitution in favor of labor, the fundamental law itself guarantees,
even during the process of tilting the scales of social justice towards workers and
employees, "the right of enterprises to reasonable returns of investment and to
expansion and growth." To hold otherwise would not only be oppressive and inhuman,
but also counter-productive and ultimately subversive of the nation's thrust towards a
resurgence in our economy which would ultimately bene t the majority of our people.
Where appropriate and where conditions are in accord with law and jurisprudence, the
Court has authorized valid reductions in the work force to forestall business losses, the
hemorrhaging of capital, or even to recognize an obvious reduction in the volume of
business which has rendered certain employees redundant. 2 8
We also nd that the respondent complied with the requisite notices to the
employee and the DOLE to effect a valid retrenchment. Petitioner failed to refute that
she received the written notice of retrenchment from respondent on 16 November
1998. Although respondent failed to furnish DOLE with a formal letter notifying it of the
retrenchment, it still substantially complied with the requirement. Since the National
Conciliation and Mediation Board, the reconciliatory arm of DOLE, supervised the
negotiation for separation package, we agree with the Court of Appeals that it would be
superfluous to still require respondent to serve notice of the retrenchment to DOLE. IaAScD

The separation package offered by respondent to its employees was way above
the minimum requirement set by law. Aside from the separation pay equivalent to one-
month salary for every year of service, respondent offered additional monetary bene ts
such as one and a half month salary, pro-rated 13th month pay, conversion of unused
sick and vacation leave credits, and Health Maintenance Organization and group life
insurance coverage until full payment of the separation package.
Petitioner's proposition that she was not a union member and, therefore, not
legally bound by the terms of the Collective Bargaining Agreement, is irrelevant in the
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 instant controversy. Non-membership in a union does not exempt an employee from
the application of Article 283 of the Labor Code which enumerates the authorized
causes for terminating employment. In this case, petitioner was terminated pursuant to
the retrenchment program implemented by respondent. As discussed above, the
respondent complied with the legal requirements for a valid retrenchment. Therefore,
petitioner's separation from employment was legal and valid. TEHDIA

Consequently, petitioner is not entitled to backwages. It is well settled that

backwages may be granted only when there is a nding of illegal dismissal. 2 9
Nevertheless, petitioner is entitled to separation pay as provided under respondent's
Staff Reduction Program Package equivalent to one-month salary for every year of
service, one and a half month salary, pro-rated 13th month pay, conversion to cash of
unused vacation and sick leave credits, and Health Maintenance Organization and group
life insurance coverage until full payment of the separation package.
WHEREFORE, premises considered, the instant Petition is DENIED. The Court of
Appeals Decision dated 12 July 2005 and its Resolution dated 22 March 2006 in CA-
G.R. SP No. 79440 are hereby AFFIRMED. Costs against the petitioner. cDIaAS

SO ORDERED.
Ynares-Santiago, Austria-Martinez, Nachura and Reyes, JJ., concur.

Footnotes
1.Rollo, pp. 4-20. acIHDA

2.Penned by Associate Justice Pampio A. Abarintos with Associate Justices Mercedes Gozo-
Dadole and Ramon M. Bato, Jr., concurring. Rollo, pp. 21-29.

3.Id. at 30-31.
4.Id. at 101-108, 109-113.
5.Id. at 28.
6.Records, p. 15.
7.Id. at 30-31.

8.Id. at 79.
9.Id. at 169.
10.Rollo, p. 107.
11.Records, pp. 329-333.
12.Rollo, p. 113.

13.Id. at 21-28.
14.Id. at 26.
15.Id. at 30-31.
16.Id. at 9.

17.F.F. Marine Corporation v. National Labor Relations Commission, G.R. No. 152039, 8 April
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 2005, 455 SCRA 154, 164-165.
18.San Miguel Corporation v. Aballa, G.R. No. 149011, 28 June 2005, 461 SCRA 392, 429. See
also Anino v. National Labor Relations Commission, G.R. No. 123226, 21 May 1998, 290
SCRA 489, 502. Retrenchment is resorted to by an employer because of losses in the
operation of a business occasioned by lack of work and considerable reduction in the
volume of business. It is a management prerogative consistently recognized and
affirmed by this Court, subject only to faithful compliance with the substantive and
procedural requirements laid down by law and jurisprudence. (Id. at 501.) HcTIDC

19.F.F. Marine Corporation v. National Labor Relations Commission, supra note 17 at 165.
20.Id. at 165-166.
21.Records, p. 169.
22.Supra note 18 at 430.
23.G.R. No. 131108, 25 March 1999, 305 SCRA 416, 430-431.

24.Rollo, pp. 25-26.

25.Records, p. 169. ADSIaT

26.Art. 283.Closure of Establishment and Reduction of Personnel. — The employer may also
terminate the employment of any employee due to the installation of labor saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of
operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the worker and
the [Department] of Labor and Employment at least one (1) month before the intended
date thereof. In case of termination due to the installation of labor saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay equivalent
to at least his one (1) month pay or to at least one (1) month pay for every year of
service, whichever is higher. In case of retrenchment to prevent losses and in cases of
closures or cessation of operations of establishment or undertaking not due to serious
business losses or financial reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half (1/2) month pay for every year of service, whichever is
higher. A fraction of at least six (6) months shall be considered as one (1) whole year. SCIcTD

27.Mac Adams Metal Engineering Workers Union-Independent v. Mac Adams Metal

Engineering, 460 Phil. 583, 590 (2003).
28.Uichico v. National Labor Relations Commission, G.R. No. 121434, 2 June 1997, 273 SCRA
35, 41.
29.Manila Water Company, Inc. v. Peña, G.R. No. 158255, 8 July 2004, 434 SCRA 53, 64-65. ECcaDT

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