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For :

From :
Re :
Scope of Closure or Cessation of Business or partial
cessation of operations and or/shutdown of the establishment of
the employer
Date :
18 October 2016

Art. 283. Closure of establishment and reduction of

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.

According to Commentaries, the closure or cessation

of business is the complete and partial cessation of the
operations and/ or shut down of the establishment of the
employer. It is carried out to either stave off the financial
ruin of promote the business interest of the employer. 1
The Following are some principles on closure
1. Employer may close its business whether it is suffering
from business losses or not; court cannot order employer
to continue its business.
2. Principle of closure under 283 applies to both total and
partial closure and cessation of business operations.

1 Bar Review on Labor Law, J.G.Chan, 2012, citing Eastridge Golf Club, Inc. vs,
East Ridge Golf Club Inc. Labor Union-Super, G.R. 166760, August 22, 2008;
and Espina vs CA, G.R. No.1647582, March 28, 2007
2 Edge Apparel, Inc vs NLRC, G.R. No.121314, February 12, 1998.

In the case of Edge Apparel, Inc vs NLRC, G.R.

No.121314, February 12, 1998, citing Caffco
International Limited vs. Office of the MinisterMinistry of Labor and Employment, G.R. No. 76966,
August 7, 1992, it was said:
The Court agrees with the Solicitor General that
here the NLRC has gravely abused its discretion. The
law acknowledges the right of every business entity
to reduce its work force if such measure is made
necessary or compelled by economic factors that
would otherwise endanger its stability or existence.
In exercising its right to retrench employees, the firm
may choose to close all, or a part of, its business to
avoid further losses or mitigate expenses. In Caffco
International Limited vs. Office of the MinisterMinistry of Labor and Employment, the Court has
aptly observed that "Business enterprises today are faced with
the pressures of economic recession, stiff
unrest. Thus,
businessmen are always pressured to adopt
certain changes and programs in order to
enhance their profits and protect their
investments. Such changes may take
various forms. Management may even
choose to close a branch, a department, a
plant, or a shop (Phil. Engineering Corp. vs.
CIR, 41 SCRA 89 [1971]).

Clearly, the fact alone that a mere portion of

the business of an employer, not the whole of it, is
shut down does not necessarily remove that
measure from the ambit of the term "retrenchment"
within the meaning of Section 283(c) of the Labor

Thus, a partial closure of a business, particularly, as

in this case, the Paranaque Plan, may fall under the
Authorize Causes provided for under the Labor Code.