Pro bono: Temporary Suspension of Business Operations

Dear Atty. Del Puerto,

We are a bus company. We recently had an accident. Consequently, we decided to conduct a safety inspection resulting in a stop of operations. Are we obligated to pay our drivers and conductors during this time?

– R.D.

(Note: The letter above is a paraphrase of the original one for purposes of brevity.)

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Dear R.D.,

No, you are not obligated to pay your drivers and conductors during a bona fide (good faith) suspension. Employers are allowed to suspend their business operations in good faith for a period not exceeding six (6) months.

Article 286 of the Labor Code states: “The bona-fide suspension of the operation of a business or undertaking for a period not exceeding six (6) months… shall not terminate employment. In [such a case], 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…”

In line with management prerogative, the decision to suspend operation “ultimately lies with the employer” (Manila Mining Corp. Employees Association-Federation of Free Workers Chapter v. Manila Mining Corp., G.R. No. 178222-23, 29 September 2010). The suspension of operations applies either to the entire business or of a specific component thereof (Valdez v. NLRC, NELBUSCO, G.R. No. 125028, 09 February 1998).

However, take note that the reasons for suspension should be in good faith in character “and not impelled by a motive to defeat or circumvent the tenurial rights of employees” (Waterfront Cebu City Hotel v. Jimenez, G.R. No. 174214, 13 June 2012).

In your case, safety inspection as a result of a recent accident is a valid reason. The purpose of such inspection is to avoid future mishaps, as well as to ensure the safety of your passengers, drivers, and conductors. It is bona fide in character.

During the suspension of operations, “there is no termination of employment but only a temporary displacement, albeit the displacement should not exceed six (6) months” (Philippine Industrial Security Agency Corporation v. Dapiton, G.R. No. 127421, 08 December 1999). The employee is considered to be on “floating status” while the reason for suspending operation subsists. If the employee is placed on “floating status” for a period exceeding six (6) months, he may be considered illegally dismissed.

In Valdez v. NLRC, NELBUSCO, a bus company stopped operations of a bus assigned to the Complainant-employee due to a breakdown of the airconditioning unit. While that is a valid reason for the suspension of its operation, the suspension should only last for a reasonable period of time. The six months period was sufficient. “Beyond that period, the stoppage of its operation was already legally unreasonable and economically prejudicial to [the Complainant] who was not given a substitute vehicle to drive.” The placing of the Complainant on “floating status” should last only for “a legally prescribed period of time.” If such exceeds six months, he may be considered illegally dismissed resulting in the corresponding benefits for his separation. In this case, the bus was already repaired and driven by another employee without being first offered to the Complainant and still no offer even after 6 months. The employer was held liable for constructive dismissal (a form of illegal dismissal) resulting in the award of “reinstatement without loss of seniority rights and other privileges and to his full back wages, inclusive of allowances, and to other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.”

In summary, the employer should ensure that the suspension of business operations is in good faith and for good reasons. As there is a high probability of an employee filing an illegal dismissal case situations like these, it is a best legal practice to properly and adequately document the suspension.

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