7 September 2023

Distancing From Confusion In Philippine Labor Law Compliance During The Covid-19 Pandemic

Villaraza & Angangco Law Offices


Villaraza & Angangco Law is a full-service law firm that has been at the forefront of the legal industry in the Philippines since its founding in 1980. It is widely recognized as one of the top law firms in the country, with a reputation for excellence, professionalism, and integrity. With over forty years of experience in the industry, the Firm has established itself as a trusted partner of both local and international clients, handling complex legal matters with efficiency and expertise.
On the evening of 16 March 2020, the President of the Philippines declared that an enhanced community quarantine ("ECQ") was to be imposed on the island of Luzon.
Philippines Employment and HR
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On the evening of 16 March 2020, the President of the Philippines declared that an enhanced community quarantine ("ECQ") was to be imposed on the island of Luzon. Effective from 12:00 a.m. of 17 March 2020 to 12:00 a.m. of 1 May 2020, the ECQ is a key government measure for addressing the global COVID-19 pandemic.

Under the ECQ, only private establishments providing basic necessities and such activities related to food and medicine production, operating on a strict skeletal workforce to support operations under strict social distancing measures and/or Flexible Work Arrangements ("FWAs"), are allowed to be physically open. Business Process Outsourcing and export-oriented industries are allowed to operate only if they provide appropriate temporary accommodations or transportation arrangements to its employees.

Other private establishments are required to temporarily close their physical offices during the ECQ period, subject to the adoption of Work-From-Home ("WFH") arrangements and/or other alternative FWAs which are consistent with the imposition of the ECQ.

Parallel to the imposition of the ECQ, government agencies, including the Department of Labor and Employment ("DOLE"), came up with various issuances and regulations to address the rapidly evolving government response to the COVID-19 pandemic.

In a time of uncertainty, with government policies to be divined by companies from varied issuances written in legalese, this article is designed to guide employers as they navigate the fundamentals of government regulations affecting employment during the ECQ.

FWAs Available to Employers

Faced with the physical closure of their establishments under the ECQ, the first question that may come to an employer's mind is "how can the company continue to operate during the ECQ?"

Employment relationships in the time of the ECQ are largely governed by Labor Advisory No. 09 Series of 2020 (the "COVID-19 Flexi-Work Advisory"), issued by the DOLE on 4 March 2020, prior to the imposition of the ECQ.

Under the COVID-19 Flexi-Work Advisory, employers are encouraged to adopt FWAs to prevent the spread of COVID-19, including reduction of workhours and/or workdays, rotation of employees and other alternative work arrangements in order to cushion or mitigate the effect of the loss of income of the employee. To adopt an FWA, employers are obliged to notify the appropriate DOLE Office having jurisdiction over the company's workplace by submitting the Establishment Report on COVID-19, with employers and employees being primarily responsible for the FWA's administration.

WFH Arrangements

While there are no specific regulations issued by the DOLE on the adoption of WFH Arrangements during the ECQ, WFH arrangements have emerged as one of the primary FWAs utilized by employers to allow them to continue operating during the ECQ despite the physical closure of their establishments.

Generally, a WFH Arrangement qualifies under the COVID-19 Flexi-Work Advisory as an "alternative work arrangement in order to cushion or mitigate the effect of the loss of income of the employee." It may be adopted as an accommodation to employees as an alternative to the employees' complete loss of income springing from the physical closure of the workplace under the principle of "no work, no pay."

While no specific regulations for such WFH Arrangements have been issued, its closest analogous law or regulation is the Telecommuting Act, under which a WFH Arrangement may be considered as "telecommuting" which refers to: "a work arrangement that allows an employee in the private sector to work from an alternative workplace with the use of telecommunication and/or computer technologies[.]"

The principles of the Telecommuting Act require "fair treatment" of WFH employees as opposed to on-site employees in terms of: (a) mandatory legal benefits, (b) workplace standards, (c) training and career development opportunities, and (d) the exercise of an employee's collective rights. Applying this analogously to WFH Arrangements, an employee engaged under a WFH Arrangement is entitled to receive full pay for a full day's work. However, this list does not extend to other incidental conveniences provided by the employer at the workplace, such as: internet speed, ergonomic chairs, or brewed coffee.

However, it must be emphasized that a distinction must be made between regular telecommuting and WFH Arrangements arising from COVID-19 – WFH Arrangements arising from COVID-19 are adopted as an accommodation to employees and as an alternative to a complete loss of income. As such, while under regular telecommuting, a higher burden for providing the "same treatment" (i.e. in providing tools necessary to perform work such as an stable internet connection) is imposed upon the employer, under a WFH Arrangement, an employer may impose reasonable requirements such that only qualified employees (e.g. those with existing reliable internet connections) are eligible for the WFH arrangement for the duration of the ECQ.

Further, companies may also adopt hybrid arrangements by pairing WFH Arrangements with (a) reduced workdays/workhours, (b) rotation programs, or even (c) temporary partial closures or suspensions of operations for non-eligible employees in order to address the company's business needs while at the same time adopting such alternative work arrangements available in order to cushion or mitigate the effect of the loss of income of the employees.

Reduced Workdays/Workhours

For essential private establishments which are still eligible to operate under the ECQ, an FWA that reduces the number of workdays and/or work hours of an employee in a work week may exclusively be adopted as an option. Under a reduced workhours/workdays arrangement, employees will continue to receive their salaries, albeit reduced in proportion to the reduction of workhours/workdays.

For such employees, hours worked shall continue to be governed by the principles on working time under the Labor Code such that an employee is considered to be working for (a) all hours they are required to give the employer while on duty, (b) when the employee is suffered or permitted to work, as well as (c) time when the employee is considered as on call.

The period of the reduction of workhours/workdays shall not be paid pursuant to the principle of "no work, no pay." This temporary reduction of salaries arising from the reduction of workhours/workdays do not violate the rule of non-diminution of benefits given that the adoption of a reduced workweek/reduced workhours requires the consent of employees.

Employers must be cautioned, however, that a unilateral direct reduction in salaries without adopting an FWA under the COVID-19 Flexi-Work Advisory is considered as a violation of the rule on diminution of benefits.

Rotation of Employees

Employers may also adopt a rotation program in which employees are alternately provided work within the week. This arrangement allows an employer to maintain its operating hours during a work week, albeit with reduced productivity due to the reduction of the number of employees present.

Closures of Business and Lay-Offs

For employers of non-essential establishments which are unable to adopt WFH Arrangements or other FWAs, and are thus unable to continue their operations during the ECQ, the next question to be addressed is "what other alternative is available for the Company?"

Temporary Closures on account of the ECQ

Given the government-mandated requirement for non-essential establishments to physically close down their workplaces during the ECQ, companies which have not adopted FWAs are legally required to temporarily close and/or suspend their operations, with such employers not being required to pay the salary of their employees during the closure period, consistent with the principle of "no work no pay." While such establishments were effectively placed on temporary closure by the ECQ, it is advised that such establishments report their temporary closures with the appropriate DOLE Office using the Establishment Report on COVID-19 prescribed under the COVID-19 Flexi-Work Advisory.

Such temporary closures arising from COVID-19 and effective for the duration of the ECQ may be distinguished from a bona fide suspension of work operations allowed under Article 301 of the Labor Code.

Under Article 301 of the Labor Code, the bona fide suspension of the operation of a business or undertaking for a period not exceeding six (6) months will not terminate employment, and in all such cases, the employer must reinstate the employee to his or her former position without loss of seniority rights if the employee indicates his or her desire to resume work not later than one (1) month from the resumption of operations of his or her employer. During this period of temporary suspension, employees are placed on a "floating status" and are not entitled to any salary or financial benefit provided by law. To implement a bona fide suspension of operations under Article 301 of the Labor Code, case law requires that the appropriate DOLE Office be notified at least one (1) month prior to the effectivity of the suspension of operations.

Permanent Closures and Lay-Offs of Employees

Despite the imposition of the ECQ, permanent closures of establishments and lay-offs of employees continue to be governed by the Labor Code. For this reason, employees may be dismissed from their employment on account of the any of the following authorized causes for termination: (a) Business Closure, (b) Redundancy, or (c) Retrenchment, only upon compliance with the substantive and procedural requirements for an authorized cause dismissal. This includes the requirement to give notice of termination to both the employee and the appropriate DOLE Office within thirty (30) days from the date of termination of employment, and the payment of the appropriate separation pay to the employees.

Use of Leaves by Employees

Employers which have adopted the appropriate measures to continue their operations during the ECQ may also have concerns regarding the use of leave benefits during the ECQ.

Leave benefits allow employees to be absent from work without incurring any reduction in pay or any penalty, and is thus a benefit which presupposes availability of work. They are also in the nature of a right given to employees, either by law (e.g., for service incentive leaves) or by contractual relation (e.g., employment contracts or company rules). As a general rule, leave benefits can only be used by the employee as the owner of such right.

As an exception, employers of essential establishments which continue to physically operate may require their employees to go on "forced leave," as authorized under the COVID-19 Flexi-Work Advisory, whenever they are sick, or as an exercise of management prerogative to mitigate the effects of COVID-19 in the workplace when doing so is necessary to protect the workplace from the threat of COVID-19, such as when a COVID-19 Confirmed, COVID-19 Probable, or COVID-19 Suspect employee has been found in the workplace.

For establishments whose operations have temporarily ceased either completely or partially as a result of the ECQ, only the employee can decide whether to use their leave benefits in order to continue receiving pay even when the workplace has ceased from operating. Employers can no longer interfere with the exercise of such right, as there is no more workplace to protect from a disease.

Work Compensation of Employees

Finally, the next major concern that employers will need to address is "how will the employees be compensated during the ECQ?"

Salary and Other Benefits/Allowances

As discussed above, employees on FWAs are paid their salaries based on their hours worked. For instance, those on WFH arrangements are entitled to a full day's wage for a full day's work. Such employees are entitled to payment of their salaries for as long as they devote time and effort to their work, and provided the work done complies with the FWA being implemented by the employer.

In the event that an employer seeks to modify the grant of other benefits or allowances which are granted on top of the employees' salaries for the duration of the FWA, it is important to consider such benefits/allowances have either (a) ripened into a company practice or (b) are contractually stipulated. In such cases, any reduction of such benefits or allowances while employees are on FWAs must be consented to and agreed upon between the employer and the concerned employees consistent with the rule on non-diminution of benefits.

Employer-Issued Financial Assistance

As an exercise of its management prerogative, employers may also grant additional monetary benefits to employees who did not render any service during the ECQ period as a form of financial assistance. This benefit, considered as a gratuity, can likewise be unilaterally withdrawn or reduced by the employer, as an exercise of its management prerogative. The reduction of the financial assistance does not violate the rule on non-diminution of benefits because it has not ripened into a company practice, which in turn must be proven by substantial evidence to have been: (a) done over a long period of time; and (b) made consistently and deliberately.

Payment of 13th Month Pay

There is no legal requirement for employers to advance the whole or pro-rated 13th month pay of its employees in light of the COVID-19 pandemic. Nonetheless, and consistent with the recent public statements of President of the Philippines, employers may, as an exercise of their management prerogative, grant its employees' 13th month pay in advance, whether in whole or pro-rated, as a means for mitigating the effects of the COVID-19 pandemic.

Government Financial Assistance

In the event that employees experience a reduction in their wages on account of either (a) the adoption of FWAs or (b) the temporary closure or suspension of operations of a company, the Philippine government, through the DOLE, offers financial assistance to employees through the COVID-19 Adjustment Measures Program ("CAMP").

Under the CAMP, the DOLE may provide qualified employees with financial support in the form of a one-time, lump sum, financial assistance package equivalent to Five Thousand Pesos (PhP5,000.00), regardless of employment status. The pertinent regulations place the responsibility of applying for CAMP benefits upon the employer. While employers are not specifically required to apply for the CAMP benefit, the employees are unable to receive such financial assistance without the employer's application. Notably, the DOLE has also clarified in recent public statements that while large establishments are covered by CAMP, priority will be given to Micro, Small, and Medium Enterprises, or establishments with less than two hundred (200) employees.

Through a strong grasp of the fundamentals affecting employment relations during the ECQ, employers are best equipped to address the changing regulations affecting employment as the government response to the COVID-19 pandemic continues to evolve from day to day.

Originally published at Lexology by the International Law Office (17 April 2020).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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