Explanation of Authorized Causes.

Authorized causes for termination are different from just causes under Philippines labor law article 282. In contrast, authorized causes are generally reasons of termination that are not attributable to the employee. The termination of the employee’s service is because of reasons initiated by the company to increase profitability such as installation of labor saving device, cessation of business operations or undertaking retrenchment program.

  • Installation of labor-saving devices.

With labor-saving devices and machines, the production will become more efficient. With productivity  increases, the company is able to increase their profitability as well. This however may result in a reduction in the manpower requirement.

  • Redundancy.

Redundancy is when there are more employees than what is required by the company and thus the company has no legal obligation to continue employees more than the number needed for the operation of the business. However, for termination due to redundancy, the company is also required to show that there is good faith in abolishing redundant position; and fair and reasonable criteria in selecting employees to be dismissed, such as but not limited to less preferred status (e.g. temporary employee), efficiency and seniority (Asian Alcohol Corp. vs. NLRC, 305 SCRA 416); and a one-month prior notice to be given to the employee and DOLE Regional Office as prescribed by law.

  • Retrenchment to prevent losses.

When company is making a loss, in order to prevent further losses and the cessation of the operations, the company may choose to downsize or in other words have a retrenchment to reduce the number of employees on the payroll so that the operation cost will be lower.

  • Closure or cessation of operation.

The closing down of the business is usually a last resort whereby the company has stopped all operations and shut the doors for good. This is usually due to financial losses and is a authorized cause of termination of the employees’ services.

  • Disease.

The employer may terminate employment on ground of disease only upon the issuance of a certification by a competent public health authority that the disease is of such nature or at such stage that it cannot be cured within a period of six months even with proper medical treatment. However, disability should not be confused with disease. Disability itself, even if permanent, is not a ground for termination.

Employers should note that termination based on authorized causes shall entitle the employees to separation pay which is intended to provide the employee with the wherewithal during the period he is looking for another employment. (See Gabuay v. Oversea Paper Supply, G.R. No. 148837, August 13, 2004.)


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