Under Philippine labor law, an employer may validly terminate employment not only for just causes but also for certain statutorily recognized “authorized causes.” These authorized causes differ from just causes in that they do not necessarily arise from an employee’s own wrongdoing or misconduct. Instead, they often stem from legitimate business reasons or situations beyond the employer’s control. The primary legal bases for these causes are found in the Labor Code of the Philippines (particularly in Articles 298 and 299, formerly Articles 283 and 284, before renumbering) and further elucidated by Department of Labor and Employment (DOLE) issuances, including Department Order No. 147-15, Series of 2015.

Below is a meticulous, comprehensive, and structured discussion of the authorized causes, their substantive and procedural requisites, relevant jurisprudence, and administrative guidelines.

Legal Bases

Labor Code of the Philippines:
- Article 298 (previously Article 283): Closure of Establishment, Reduction of Personnel
- Article 299 (previously Article 284): Disease as a Ground for Termination
Implementing Rules and Regulations (IRRs):
The Omnibus Rules Implementing the Labor Code, as amended, flesh out the procedural details surrounding authorized causes.
Department Order No. 147-15, Series of 2015:
Issued by the DOLE to clarify and streamline the procedural requirements and due process standards in cases of employment termination due to authorized causes.

Authorized Causes Enumerated

Under Article 298 (formerly Art. 283), the employer may terminate employment for the following reasons, subject to compliance with statutory requirements:

Installation of Labor-Saving Devices
- This refers to the introduction of machinery, equipment, or technology designed to reduce the number of workers needed to perform certain tasks.
- The termination is justified if the devices are introduced in good faith, with the purpose of improving efficiency, reducing costs, or modernizing operations.
Redundancy
- Redundancy exists when a position has become superfluous due to factors such as overhiring, reduced volume of business, or the reorganization of the workforce to improve efficiency.
- The position itself is unnecessary, and the employer must prove good faith in abolishing it, as well as fair and reasonable criteria in identifying which employees are affected.
Retrenchment to Prevent Losses
- Retrenchment is a reduction of the workforce to cut expenses and stem or prevent substantial and imminent business losses.
- This must be done in good faith, using fair and reasonable criteria for selecting employees to be retrenched.
- Employers must be able to show that losses are real and imminent or that financial forecasts and conditions justify the reduction of personnel.
Closure or Cessation of Operation
- Partial or total closure of business may be due to serious financial reverses, changes in business strategy, or other circumstances beyond mere whim.
- Closure need not be due to losses; even if the business is not in dire straits, the employer may lawfully decide to cease operations. However, the cessation must be genuine and not a subterfuge to circumvent employee rights.

Under Article 299 (formerly Art. 284):

Disease
- If an employee suffers from a disease found to be incurable within six (6) months and his or her continued employment poses a health or safety risk to themselves or others, termination may be effected.
- A competent public health authority’s certification is required. The disease must be of such nature and severity that continued employment is either medically contraindicated or harmful.

Requirements and Standards

Notice Requirements
For authorized causes under Article 298, the Labor Code mandates that the employer provide:
- At least one (1) month prior written notice to the affected employee(s).
- At least one (1) month prior written notice to the DOLE.
These notices are mandatory to give employees and the government time to prepare and address the impending displacement. Failure to comply with the one-month notice period may result in liability for damages, even if the termination is otherwise valid.
Separation Pay
- Installation of Labor-Saving Devices or Redundancy: At least one (1) month pay per year of service, or such higher amount as may be stipulated in employment contracts or collective bargaining agreements. Fraction of a year of service is usually considered on a pro-rata basis.
- Retrenchment or Closure not due to Serious Misconduct: At least one-half (½) month pay per year of service.
- Disease: At least one (1) month pay or one-half (½) month pay per year of service, whichever is greater.
The calculation of separation pay must be based on the employee’s latest salary rate and includes at least a fraction of six (6) months as one year.
Good Faith and Reasonableness
Courts and labor tribunals scrutinize the employer’s good faith in implementing these authorized causes. For instance:
- In redundancy, there must be fair and reasonable criteria in selecting which employees to terminate (e.g., efficiency rating, seniority, status, or skill set).
- In retrenchment, evidence of imminent or substantial losses should be presented (e.g., audited financial statements) to justify the measure as a means to prevent business failure rather than to victimize employees or to illegally dislodge union members.
Documentation and Compliance with DO 147-15
- Department Order No. 147-15 provides guidelines on the proper observance of procedural due process in authorized cause terminations.
- Employers must maintain proper documentation—financial statements for retrenchment, board resolutions for closure, technical reports for installation of labor-saving devices, and medical certifications for disease-related terminations.
- DO 147-15 underscores that the failure to comply with procedural requirements (i.e., notice to DOLE and to the affected employees) can render the employer liable for nominal damages, even if the authorized cause is substantiated.

Procedural Due Process Under Department Order No. 147-15

Procedural Standards:
While the due process requirements for authorized causes are generally less onerous than those for just causes, DO 147-15 still emphasizes compliance:
- Issuance of the required written notice at least 30 days prior to effectivity.
- Submission of required documentation and notice to the DOLE.
- Providing employees with the reason for termination and the basis for the decision.
Notices and Posting:
There should be clear and formal notices indicating the effective date of termination, the computation of separation pay, and the employees affected.
DO 147-15 does not require a hearing as in just cause dismissals, but it demands transparency and the availability of verifiable evidence to show that the chosen authorized cause is genuine and not a disguised form of illegal dismissal.
Compliance Checks and Inspections:
DOLE may verify compliance with the mandated notices and examine supporting documents.
Non-compliance can result in the issuance of labor standards violations or orders for payment of nominal damages to the affected employees.

Disease-Related Terminations: Special Considerations

For terminations under Article 299 (disease):

A competent public health authority’s medical certificate is a prerequisite. The determination that the employee’s condition is incurable within six months and is prejudicial to their health or the health of co-employees must be made by a competent and independent medical professional, often from a government-recognized facility.
The employer must consider the employee’s redeployment or reassignment if possible. Only when the disease is of such a nature that no accommodation can be made, or the employee’s continued employment poses imminent risk, should termination be pursued.

Jurisprudential Guidelines

Philippine jurisprudence has provided several key points in interpreting and applying authorized causes:

Redundancy vs. Retrenchment:
- Redundancy: focuses on the position being superfluous or unnecessary.
- Retrenchment: involves cutting costs due to business losses or the prevention thereof.
Burden of Proof:
- The employer bears the burden of proving that the authorized cause for dismissal is legitimate and not a pretext for illegally terminating employees.
- Clear and substantial evidence must be presented, such as financial documents, board resolutions, feasibility studies, or business plans.
Good Faith in Closure:
Even if the closure is not due to financial losses, it must not be a mere scheme to deprive employees of their tenure or to circumvent union activities. A genuine management prerogative to cease operations is respected, but any evidence of bad faith can void the termination.
Substantial Compliance with Notice:
If the employer fails to strictly comply with the one-month notice but the authorized cause is proven, the termination remains valid, although the employer may be ordered to pay nominal damages. Courts weigh the gravity of procedural lapses and may award indemnities to affected workers.

Effects of Non-Compliance

Failure to comply with the procedural and substantive requirements does not automatically invalidate the ground for termination if it is indeed authorized. However, it can result in:

Damages: Nominal damages may be imposed due to procedural infirmities (e.g., failure to provide proper notice).
Potential Liability for Illegal Dismissal: If the supposed authorized cause is not sufficiently proven, the termination may be ruled as illegal, resulting in reinstatement and full backwages.

Practical Steps for Employers

Plan and Document:
Before implementing authorized cause termination, employers should thoroughly document the business reasons, secure board resolutions, financial reports, and feasibility studies.
Compliance with Notice Periods:
Ensure that at least one (1) month written notice is served to the employees and the DOLE. State clearly the effective date and reason for termination.
Computation and Payment of Separation Benefits:
Prepare accurate computations of separation pay based on length of service. This should be ready and offered to the employee upon the effectivity of termination.
Good Faith and Transparency:
Engage in fair and transparent selection criteria when choosing which employees are to be affected. Provide employees with explanations, if requested, and ensure no discrimination or unfair labor practice occurs.
Consultation with Experts:
Seek guidance from labor law practitioners and, if needed, from DOLE officials to ensure that all requirements are properly met.

Conclusion

Termination of employment for authorized causes under the Philippine Labor Code and DOLE’s Department Order No. 147-15 is a delicate process requiring strict compliance with both substantive and procedural standards. Employers have the prerogative to introduce labor-saving devices, declare redundancies, retrench employees, or close their business. They may also separate employees on the ground of a serious disease. However, these prerogatives are tempered by labor laws designed to protect workers from arbitrary dismissals. Thus, the employer must exercise these rights in good faith, provide timely notices, pay mandated separation benefits, and be prepared to justify the necessity of the termination in the face of possible legal scrutiny.

When meticulously followed, authorized cause terminations respect both the employer’s management prerogatives and the worker’s fundamental rights, thereby fostering stability, predictability, and fairness in labor relations in the Philippines.