Work in the time of COVID-19: Is it legal to put employees on “floating status?”

Is your company forced to halt operations because of the COVID-19 crisis? What does it mean to put employees on floating status during this time? Does the law protect you from choosing this course of action?

If you are an employee, what does this mean for your long-term employment status? In what ways does this difficult situation work in your benefit?

This brief but informative article aims to provide answers to all of your relevant questions.

What does “floating status” mean for employees?

A business can temporarily suspend its operations—thus forcing its employees to go on leave—in order to navigate and survive periods of economic difficulty. This state is also known as “temporary off-detail” or simply “off-detailing.”

The renumbered Labor Code of the Philippines provides the legal basis for this course of action. Article 301 (formerly Article 289) describes the “bona-fide suspension of the operation of a business or undertaking.”

Under these conditions, there is no termination of employment involved. Employees are only considered displaced on a temporary basis.

For business owners, putting employees on floating status is a valid and lawful management exercise. It is also an option for individual employees who need to miss time from work in order to fulfill a military or civic duty.

When does the bona fide suspension of business apply?

Companies can exercise a bona fide suspension of business during periods of economic recession, seasonal fluctuations, and other circumstances where significant business losses are expected and inevitable. In 2014, the Supreme Court case of Crispin B. Lopez vs. Irvine Construction Corp. and Tomas Sy Santos (GR 207253) demonstrated the legality of this course of action.

In the said case, Associate Justice Estela Perlas-Bernabe defined lay-off “as the severance of employment, through no fault of and without prejudice to the employee, resorted to by management during the periods of business recession, industrial depression, or seasonal fluctuations, or during lulls caused by lack of orders, shortage of materials, conversion of the plant to a new production program or the introduction of new methods or more efficient machinery, or of automation.”

In this scenario, it was clearly stated that because the lay-off was only temporary, “the employment status of the employee is not deemed terminated, but merely suspended.”

Based on this definition, the current public health crisis caused by COVID-19 is another valid circumstance where such temporary lay-offs may apply.

With the Philippine government mandating the stoppage of non-essential business operations, area-wide lockdowns, and suspension of public transportation services, companies have due cause to impose the suspension of their operations.

Is the suspension of wages of an employee on floating status justified?

Yes. This follows the basic labor principle of “no work, no pay.”

If so, how does being put in floating status benefit the employee?

While being placed on floating status would mean immediate inconvenience and financial insecurity for many employees, it is a viable and practical alternative because it enables companies to retain its employees for the long term.

By suspending work operations now, companies can cut losses earlier and put themselves in a better position to rebound with a full complement of staff when it resumes operation.

In light of the COVID-19 pandemic, placing employees on floating status is also a way for companies to protect the health and welfare of its employees and their families.

The employees placed on floating status, on the other hand, enjoy the security of going back to work, without losing their previous employment status and seniority rights once the company becomes operational again.

What are the limitations that employers must observe when placing employees on floating status?

Employers are allowed temporary retrenchment of their business for up to six (6) months only. After this period, employees must be reinstated without loss of seniority rights.

On their part, the affected employees must indicate their desire to resume their work not later than one (1) month from the resumption of the company’s operations or from the conclusion of their military or civic duty.

Should an employer decide to permanently terminate the employment of an employee after the 6-month hiatus, they must do so through the proper procedures. Violating this rule will make the employer liable for dismissing the employee in question.

Does your business need legal advice or assistance to make necessary changes to cope with the coronavirus outbreak? Talk to the experts at Duran & Duran-Schulze Law. Call us today at (+632) 478 5826 or send an email to info@duranschulze.com for more information.