Layman’s Notes on Forced Leave in the Philippines

We get a lot of inquiries on Forced Leave here on this blog, so although we’re not lawyers or labor law experts, we will try to present notes in reply to these inquiries. We re-visited our research on Forced Leave in the Philippines that we started in 2009, when I wrote about my personal experiences with forced leave.

forced-leave-philippines

The following are our notes on Forced Leave in the Philippines.  The basis for these notes are all presented farther below. Just scroll down.

  1. Forced Leave is permitted by law if the company is imposing it to prevent outright termination of employees or retrenchment or to save the company from total closure. The company must be able to prove, when questioned by the DOLE NLRC or by the courts, that it’s suffering from tremendous business losses.
  2. The company must notify the DOLE Regional office that has jurisdiction over its workplace at least one month prior to implementation of Forced Leave. There’s a DOLE Report Form for this purpose.
  3. Forced Leave must be temporary. It must not last for more than 6 months. Otherwise, the employees on forced leave will be deemed to have been terminated and must therefore receive a separation pay equivalent to at least one-half month pay for every year of service, or one-month pay, whichever is higher. A fraction of 6 months or more shall be counted as one whole year.
  4. Owners/managers must discuss with supervisors and employees the situation/condition of the company and must arrive at a consensus acceptable to both parties. The imposition of Forced Leave must be communicated to employees prior to implementation.
  5. Employees who have proofs that their Forced Leave was made in bad faith can file their complaint of unfair labor practice with the NLRC Regional Office that has jurisdiction over the employees’ workplace.

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Where’s “Forced Leave” in the Labor Code of the Philippines?

We cannot find the words “Forced Leave” in the Labor Code of the Philippines.

The same with the words ““Reduction of workdays,” “Reduction of workhours,” “No work no pay,” and “Floating status” — we cannot find them in the Labor Code.

What we can find in the Labor Code that are relevant to “Forced Leave” are:

“Suspension of the operation of a business or undertaking”

“Reduction of personnel”

(See farther down below Art. 283 and Art. 286 of the Labor Code)

 

EARLIEST LEGAL USE of the exact words FORCED LEAVE

Perhaps the earliest legal reference to Forced Leave in the Philippines was made by the Supreme Court in its 1988 ruling in the petition filed by Philippine Graphic Arts Inc. vs. the NLRC. In 1984, Philippine Graphic Arts used the words “Mandatory Vacation Leave” when it enforced a forced leave on its employees. See some points on the case farther down below.

EARLIEST USE of the words FORCED LEAVE by the DOLE

Perhaps in January 2009.

We can find the words “Forced leave,” “Reduction of workdays” and “Compressed workweek” in the DOLE Department Advisory No. 2 Series of 2009, titled Guidelines on the Adoption of Flexible Work Arrangements.

In the DOLE Department Advisory No. 2 Series of 2009, signed January 29, 2009 by then DOLE Secretary Marianito D. Roque, Forced Leave is described as one of 6 flexible work arrangements (FWAs) that can be implemented by employers as “one of the coping mechanisms and remedial measures in times of economic difficulties and national emergencies.

  1. Compressed workweek
  2. Reduction of workdays
  3. Rotation of workers
  4. Forced leave
  5. Broken-time schedule
  6. Flexi-holidays schedule

Forced Leave is defined in the advisory as follows:
“Forced leave refers to one where the employees are required to go on leave for several days or weeks utilizing their leave credits if there are any.”

Requirement to Notify DOLE
The advisory also requires employers to notify the DOLE through the Regional Office which has jurisdiction over the workplace prior to implementing any of the six flexible work arrangements.

There are three versions of the DOLE form for notification:

DOLE WSFC Report Form
Title of the Form: Report on the Adoption of Flexible Work Arrangements During Economic
Difficulties and National Emergencies
This form was introduced as part of the DOLE Advisory No. 2 Series of 2009, signed January 29, 2009.
This form includes the following statement:
The scheme is agreed upon voluntarily by the employees.

BWC-WHSD Form4
Title of the Form: Report on the Implementation of the Schemes Adopted During Period of Economic Difficulties
This form does not include “The scheme is agreed upon voluntarily by the employees.”
Instead, the following questions are asked:
Is there an agreement executed? Yes ___ (Attach copy/ies) No___
Is there a waiver executed? Yes ___ (Attach copy/ies) No___

RKS Form 5 2009
Title of Form: Establishment Employment Report
(Accomplish when filing notice of displacement or flexible work arrangements.)
– This form is the most detailed of the 3 forms. It asks for establishment status, main reasons for shutdown or worker retrenchment.

The first form, DOLE WSFC Report Form,   includes the following information:

  • Name of establishment
  • Address
  • Tel. No.
  • Nature of business
  • Total no. of employees (Male and Female)
  • Scheme/s adopted
  • Date Start
  • Date End
  • Departments/Sections Affected
  • No. of Employees Affected (Male and Female)
  • Implication of the scheme’s adopted on:
    Employees
    Employer
  • Statement that “The scheme is agreed upon voluntarily by the employees.”
  • Name and Signature of Employees’ Representative
  • Name and signature of Employer Representative
  • Date Accomplished

Forced Leave was called Reduction of Workdays in 1985

 

In the 1970s and 1980s, the Philippines suffered economic difficulties due to its debt crisis and other external and internal factors, resulting to double-digit inflation never before experienced by the country and the devaluation of the peso by 50%. This led to huge business losses and eventual closures. Many companies then resorted to reducing work days for their employees.

Due to numerous inquiries about reduced workdays, on July 23, 1985, the then DOLE Bureau of Working Condition Director Augusto G. Sanchez issued an explanatory bulletin on the Effect of Reduction of Workdays on Wages/Living Allowances:

Explanatory Bulletin on the Effect of Reduction of Workdays on Wages/Living Allowances Right to Reduce Workdays 
In situations where the reduction in the number of regular working days is resorted to by the employer to prevent serious losses due to causes beyond his control, such as when there is a substantial slump in the demand for his goods or services or when there is lack of raw materials, it is the view of this Bureau that such reduction is valid.Such management action appears to be more humane and in keeping with sound business operations than the outright termination of the services of the employees or the total closure of the enterprise. In this jurisdiction, it is generally recognized that an employer has the prerogative to devise and adopt necessary remedial measures to save his business from serious losses that may eventually result in its total collapse.This prerogative of an employer flows from the right of ownership of property which includes the right of an employer to manage, control and protect his property in a manner that is not contrary to law, morals and public policy. If the law recognizes the right of an employer to terminate the services of his employees and even to close his enterprise if it is suffering from serious losses for reasons beyond his control, the right to reduce the number of workdays of his employees may be conceded to him, which management action is less severe in terms of its effect on the earnings of the employees than their outright lay-off or terminate, or the closure of the enterprise.Reduction of Wage/Allowances
In situations described above, this Bureau is also of the view that the employer may deduct the wages and living allowances corresponding to he days taken off from the workweek, in the absence of an agreement’ specifically providing that a reduction in the number of workdays will not adversely affect the remuneration of the employees.This bulletin does not cover cases where there are existing agreements or employer policy or practice providing for more liberal benefits than those that would result with the application of the opinions or guidelines set forth herein in case of reduction of workdays. It also does not contemplate of situations where the employer has unilaterally reduced the number of working days, although the business is not suffering from losses or there is available work to be done by the employees, and which reduction will alter the agreement or understanding of the parties as to the number of working days that the employees will work in a week or within a payroll period.Furthermore, the explanations herein assume that the reduction of workdays and the corresponding wage/ allowance deductions are done in good faith, justified by circumstance affecting the business of the employer, and are not resorted to for the purpose of defeating or circumventing the provisions of existing laws, applicable individual or collective agreement or any existing practice or policy obtaining in the establishment.

 

Two Articles in Book 1 of the Labor Code Relevant to Forced Leave

 

Book 1: Post Employment
Title 1: Termination of EmploymentArt. 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 workers and the Ministry 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 one (1) whole year.Art. 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 fulfillment 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.

Note:
Art. 283 is Art. 298 and Art. 286 is Art. 301 in the Renumbered 2016 edition of the Labor Code.

Floating Status versus Forced Leave in the Philippines

Are these conditions the same? Basically, yes, because they both refer to a condition of “no work and no pay” for a period of time, either definite or indefinite.

The term “Floating status” is usually used in the call center or business process outsourcing (BPO) industry where
business depends on contracts from clients. When contracts are not renewed by clients, companies no longer have jobs to
give to their employees.

The following are three relevant FAQs, excerpted from the Department of Labor and Employment Bureau of Labor Relations’ FAQs page on Termination of Employment

21. May an employee be placed on floating status?

Yes, provided it is permitted under circumstances for a period of not more than six (6) months. Beyond this period, floating status becomes constructive dismissal which entitles the employee to separation pay (Phil. Industrial Security
Agency Corp. vs. Virgilio Dapiton and NLRC, 320 SCRA 124)

20. What is constructive dismissal?

Constructive dismissal refers to an involuntary resignation resorted to when continued employment becomes impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to an employee or an unwarranted transfer or demotion of a employee, or other unjustified action prejudicial to the employee. The employer has to prove that such managerial actions do not constitute constructive dismissal (Blue Dairy Corp. vs. NLRC, 314 SCRA 401)

22. When an employee resigned voluntarily, is he or she entitled to separation pay?

No. An employee is not entitled to separation pay when he or she resigns voluntarily, unless it is a company practice or
provided in the CBA (Hanford Philippines Inc. vs. Shirley Joseph, 454 SCRA 786, March 31, 2005).

 

4 Court Cases on Forced Leave in the Philippines

 

Petition to the Supreme Court by Philippine Graphic Arts Inc. vs. NLRC

In October 1984, Philippine Graphic Arts put its employees on mandatory vacation leave in batches of 7 or 9 for periods of 15, 30 to 45 days. The employees were paid while on leave but the pay was charged against their earned vacation leaves.

In response, workers filed a labor complaint to the NLRC contending that the company committed unfair labor practice and discrimination.

In September 1988, the Supreme Court ruled as valid the company’s decision to enforce mandatory vacation leave or forced leave without pay or reduction of working days due to economic circumstances.
The Supreme Court noted the following:
– The forced vacation leave was temporary in nature.
– There was notice and consultations with the workers and supervisors.
– There was consensus on how to deal with deteriorating economic conditions.
– It was a more humane solution instead of retrenchment or reduction of personnel.
– There was sufficient proof that the company was suffering from losses.

 

Petition to the Supreme Court vs. Camarines Sur III Electric Cooperative, Inc.

In April 1988, the Coop issued a memo explaining cost-saving measures that included the retrenchment of 30 employees.

In June 1988, the Coop issued another memo declaring 52 employees on forced leave without pay for 3 months.
In October 1988, the Coop issued a memo directing heads not to accept any of the 52 employees who would report back to work.

In November and December 1988, affected employees filed illegal dismissal cases against the Coop.

In August 1996, the Court ordered the Coop to reinstate the petitioners and pay them backwages equivalent to three years’ worth of salaries or wages.

 

Petition to the Supreme Court by Linton Commercial Co.

In December 1997, Linton issued a memo to its employees informing them the suspension of operations from December 18 1997 to January 5, 1998 due to business difficulties caused by the devaluation of the peso. They said that majority of their raw materials were imported.

In January 1997, Linton issued another memo informing employees that it would implement a compressed workweek of 3 days on a rotation basis starting January 12, 1998.

In July 1998, 68 workers filed a complaint with the NLRC contending that Linton committed illegal reduction of workdays.

In October 2007, the Supreme Court ruled that Linton failed to prove that it suffered from drastic business losses, that its compressed workweek arrangement was unjustified and illegal, and that it committed illegal reduction of work hours. It said that Linton has the prerogative to minimize losses, but the privilege is not absolute and must be exercised in good faith and with due regard to the rights of workers.
It mentioned that the alleged loss of P3,645,422.00 in 1997 was insubstantial compared to Lintons’ total asset of P1,065,948,601.76.

Linton was directed to pay monetary awards to the workers, ranging from 15,561.00 pesos to 16,660.00 pesos, excluding the 21 complainants who have already signed waivers and quitclaims.
Petition to the Supreme Court by Filcon Manufacturing Corp. vs Voluntary Arbitrator Josephus Jimenez and the union MAKAPA-FIL-UWP (Manggagawa Para Sa Kagalingan at Pagbabago sa Filcon-United Workers of the Philippines)

In June 1998, Filcon issued a memo to its employees informing them that the number of working days will be reduced from 6 days to 4 days due to declining sales.
In September 1998, Filcon issued another memo announcing that the 5-day work schedule would be reduced to 4 days.

In November 1998, the union filed a case questioning the validity of the workday reduction.

In December 1998, Filcon and the union agreed to arbitration.

In February 1999, the arbitrator decided in favor of the union and against Filcon, directing it to pay the employees based on a formula cited.

Filcon filed a petition to the Supreme Court questioning the arbitrator’s decision.

In January 2000, the Supreme Court denied and dismissed Filcon’s petition. It affirmed the findings of the arbitrator that Filcon failed to prove that it suffered losses sufficient enough to justify the reduction of working days.

 

Another Meaning of Forced Leave

The words “Forced Leave” or “Mandatory Leave” are being used in another sense or context in the management of government employees’ vacation and sick leaves.  All government employees are mandated to go on Forced Leave or Mandatory Leave for 5 working days every year.

The Executive Order No. 1077 does not use the words “Forced Leave,” but subsequent explanations and implementing rules of the EO use the words “Forced Leave.”

Executive Order No. 1077 titled “Revising the Computation of Creditable Vacation and Sick Leaves of Government Officers and Employees” signed January 1986SECTION 2. All officials and employees shall be required to go on vacation leave for a minimum of five (5) working days annually.

This is an excerpt from the Guide for DOLE Employees, 2013 Edition:

Forced/Mandatory Leave
–  If you have at least 10 days vacation leave credits you shall be required to go on vacation leave whether consecutively or intermittently for 5 working days annually. This leave shall be automatically forfeited at the end of the year if not used.

Note:
In the “Guidelines on the Implementation of Flexible Work Arrangements and the Exemption From the Nightwork Prohibition for Women Emplyees in the Business Process Outsourcing Industry,” signed November 25, 2010 by then DOLE Secretary Rosalinda Dimapilis-Baldoz, Forced Leave was not included as one of the flexible work arrangements. This advisory listed only three:
1. Compressed Workweek
2. Gliding of Flexi-time schedule
3. Flexi-holidays schedule
It says though that other alternative work arrangements under any agreement and company policy or practice in accordance with existing laws and regulations may be explored.

REFERENCES:
Department of Labor and Employment, Bureau of Working Conditions (1985). The 1985 Explanatory Bulletin on the Effect of Reduction of Workdays on Wages/Living Allowances. Retrieved from https://tucpblog.wordpress.com/2000/01/

Department of Labor and Employment (2009). Guidelines on the Adoption of Flexible Work Arrangements (DOLE Advisory No. 2 Series of 2009). Retrieved from http://www.dole.gov.ph/fndr/bong/files/DA%2002-09.pdf

Department of Labor and Employment (2009). Labor Code of the Philippines, 1974. Retrieved from http://www.dole.gov.ph/labor_codes

Related Post:
DOLE’s response to My Forced Leave Inquiry

2 Comments

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  1. hi! my company (BPO) are practicing forced leave every US holidays, and we are always forced to use our earned vacation leave. is that a legal? thank you for answering.

  2. What’s up Dear, are you in fact visiting this web page regularly,
    if so afterward you will without doubt obtain good knowledge.

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