May a company resort to the temporary suspension of employment and, at the same time, retrenchment?

Yes, temporary suspension of employment and retrenchment may be availed of at the same time.

Retrenchment is an authorized cause for termination under Article 298 [283] of the Labor Code of the Philippines. In Arabit et al. v. Jardine Pacific Finance, Inc. (G.R. 181719, 21 April 2014), the Supreme Court held that an employer may terminate the employment of any employee because of losses in the operation of a business, lack of work, and considerable reduction in the volume of his business. Retrenchment entails the employer paying the separated employee separation pay, computed at one month salary, or half month salary for every year of service, whichever is higher.

On the other hand, the temporary suspension of the employment relationship or “floating status” may be done by the employer if there has been a suspension of business operations, as provided for by the Labor Code of the Philippines. Article 301 [286] of the Labor Code provides that:

“Article 301 [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.”

Recently, the Department of Labor and Employment allowed the extension of temporary suspension for another six (6) months (see DOLE D.O. No. 215, series of 2020).



If, for example, a client disengages from the company, the employer has the option to either – 1) retrench the concerned employees outright, provided that all the requisites for retrenchment are present; or 2) suspend the employment of the concerned agents temporarily, on the condition that they will be prioritized on the next hiring ramps. If no such hiring occurs or the employee cannot be transferred to other departments/accounts within the period of temporary suspension, retrenchment may again be considered.

The best way to go about this is to conduct a special town hall meeting with the concerned employees, along with a DOLE representative, for the purpose of informing the same of their options regarding their tenure with the company. During this meeting, the employer should inform the employees of the consequences of retrenchment and temporary suspension of employment relationship. In addition, the employer should also inform the concerned employees that they have the choice to either be retrenched or to be put on “floating status” with the same condition mentioned above.

The names of the employees and their respective choices should be submitted to the company’s Human Resources department, which will initiate the retrenchment procedure for those who opted for retrenchment or determine where such employees may be transferred upon availability of work.