AUTHORIZED CAUSES

Art. 298 [283] of the Labor Code

Authorized-cause dismissal is a form of terminating employer-

employee relationship with a liability on the part of the employer to pay
separation pay as mandated by law. It does not necessarily imply delinquency
or culpability on the part of the employee. Instead, the dismissal process is
initiated by the employer's exercise of management prerogative such as
installation of labor saving devices, closure of business or implementing a
retrenchment program (Jaka Food v. Pacot, G.R. No. 151378, 28 March
2005).

Under the Labor Code, authorized causes are classified into two (2)
classes, namely:

(1) Business-related causes – Referring to the grounds specifically

mentioned in Article 298 [283], to wit:
a. Installation of labor-saving device;
b. Redundancy
c. Retrenchment
d. Closure and cessation of business operations not due to serious
business losses or financial reverses; and
e. Closure and cessation of business operations due to serious business
losses and financial reverses.

(2) Health-related causes – Referring to disease covered by Article 299

[284]

The following are the five (5) common requisites applicable to the all
the grounds under Article 298 [283]:

1. There is good faith in effecting the termination;

2. The termination is a matter of last resort, there being no other option

available to the employer after resorting to cost-cutting measures;

3. Two (2) separate written notices are served on both the affected
employees and the Department of Labor and Employment (DOLE) at
least one (1) month prior to the intended date of termination;

4. Separation pay is paid to the affected employees, to wit:

(a) If based on installation of labor-saving device, or redundancy
- One (1) month pay or at least one (1) 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. In case
the Collective Bargaining Agreement (CBA) or company
policy provides for a higher separation pay, the same must be
followed instead of the one provided in Article 298 [283].
 5. Fair and reasonable criteria in ascertaining what positions are to be
affected by the termination, such as, but not limited to: nature of work;
status of employment (whether casual, temporary or regular);
experience; efficiency; seniority; dependability; adaptability;
flexibility; trainability; job performance; discipline; and attitude
towards work. Failure to follow fair and reasonable criteria in selecting
who to terminate would render the termination invalid (Culili v.
Eastern Telecom, G.R. No. 165381, 9 February 2011; Lambert
Pawnbrokers v. Binamira, G.R. No. 170464, 12 July 2010).

I.
INTRODUCTION OF LABOR SAVING DEVICES (AUTOMATION)

It is a management prerogative to terminate employment relationship

by replacing “muscle" power with “machine" power in order to effect more
economy and greater efficiency in the method of production. The switch from
“men” employment to “mechanical” employment has economically
dislocated many workers. Thus, it is proper for the management to pay the
displaced workers in the meantime while they are looking for other jobs. An
employer is free to embark on projects that would insure business success
such as introducing labor saving devices, for a business entity is created for
profit or gain (Labor Relations and Law on Dismissal With Notes and
Comments, Salvador Poquiz, 2018 ed.).

In addition to the five (5) common requisites above, the unique

requisites are as follows:

1. There must be introduction of machinery, equipment or other

devices; and

2. The purpose for such introduction must be valid such as to save on

cost, enhance efficiency and other justifiable economic reasons
(DOLE Department Order No. 147-15, series of 2015, September
07, 2015).

The installation of these devices is a management prerogative and the

courts will not interfere with its exercise in the absence of abuse of discretion,
arbitrariness, or malice on the part of the management (DOLE Phils. v. NLRC,
G.R. No. 120009, 13 September 2004).

It must be stressed however that automation must be valid, such as to

save on cost, enhance efficiency and other justifiable economic reasons.
(Sebuguero v. NLRC, G.R. No. 115394, 27 September 1995).
Case: Asian Alcohol Corp. v NLRC

Facts:
In September, 1991, the Parsons family, who originally owned the
controlling stocks in Asian Alcohol, were driven by mounting business losses
to sell their majority rights to Prior Holdings, Inc. (hereinafter referred to as
Prior Holdings). The next month, Prior Holdings took over its management
and operation.

To thwart further losses, Prior Holdings implemented a

reorganizational plan and other cost-saving measures. Some one hundred
seventeen (117) employees out of a total workforce of three hundred sixty
(360) were separated. Seventy two (72) of them occupied redundant positions
that were abolished. Of these positions, twenty one (21) were held by union
members and fifty one (51) by non-union members.

The six (6) private respondents are among those union members 5
whose positions were abolished due to redundancy. Private respondents
Carias, Martinez, and Sendon were water pump tenders; Amacio was a
machine shop mechanic; Verayo was a briquetting plant operator while
Tormo was a plant helper under him. They were all assigned at the Repair and
Maintenance Section of the Pulupandan plant.

With respect to respondent Verayo and Tormo’s dismissal, AAC

contended that its boiler before was 100% coal fired. The boiler was manned
by a briquetting plant operator in the person of Leandro Verayo and three (3)
briquetting helpers, namely, Ereneo Tormo, Eriberto Songaling, Jr. and Rudy
Javier, Jr. Since AAC had shifted to the use of bunker fuel by about 70% to
fire its boiler, its usage of coal had been drastically reduced to only 30% of its
total fuel usage in its production plant, thereby saving on fuel cost. For this
reason, there was no more need for the position of briquetting plant operator
and the services of only two briquetting helpers were determined to be
adequate for the job of briquetting coal. Of the three (3) briquetting helpers,
Ereneo Tormo was the oldest, being already 41 years old, the other two, Javier
and Songaling, being only 28 and 35, respectively. Considering the manual
nature of the work of coal briquetting, younger workers are always preferred
for reasons of efficiency. Hence the abolition of the position of Ereneo Tormo.

Issue:
Was Verayo and Tormo validly dismissed?

Ruling:

Yes. Private respondent Verayo was the briquetting plant operator in

charge of the coal-fired boiler. Private respondent Tormo was one of the three
briquetting helpers. To enhance production efficiency, the new management
team shifted to the use of bunker fuel by about seventy percent (70%) to fire
its boiler. The shift meant substantial fuel cost savings. In the process,
however, the need for a briquetting plant operator ceased as the services of
only two (2) helpers were all that was necessary to attend to the much lesser
amount of coal required to run the boiler. Thus, the position of private
respondent Verayo had to be abolished. Of the three (3) briquetting helpers,
Tormo was the oldest, being already 41 years old. The other two, Rudy Javier,
Jr. and Eriberto Songaling, Jr., were younger, being only 28 and 35,
respectively. Age, with the physical strength that comes with it, was
particularly taken into consideration by the management team in deciding
whom to separate. Hence, it was private respondent Tormo who was separated
from service. The management choice rested on a rational basis.