Would you fire your employees due to COVID19?

Companies are suffering from substantial financial losses due to the lockdown, are on the verge of closures, insolvency, and ultimate bankruptcy.

Is firing the right solution?

Answer is no. The term “firing” is used only for dishonorable dismissal due to just causes, like serious misconduct, insubordination, gross and habitual neglect of duty, fraud or loss of trust and confidence, crimes or offenses against the person of the employer, his family or his authorized representative, and all other analogous causes. But when the underlying reason is financial losses, an employment may be terminated by “separation” not “firing”. These are authorized by the Labor Code, like retrenchments, redundancies, labor-saving devices and closures, whether total or partial.

If all other measures to save money have been tried and found inadequate, when foreign travels and seminars have been prohibited, when new hiring has been ordered stopped, when orders for new tools, equipment, machinery, and supplies have been set aside, then, as the last option to save the company, employees may be separated. There must be an audited financial statement checked by an external and independent auditor, certified public accountants, attesting to the clear and present danger of insolvency, or an imminent danger thereof. Losses should be actual and substantive, not merely “de minimis.”

Then clear and objective criteria must be adopted in choosing who among the total number of personnel should be affected. There are lazy companies that adopt the LIFO or Last In, First Out criteria, which means that the less senior in terms of dates of hiring should be the ones to be separated. But we don’t recommend this because there are many new hires who are more productive and disciplined. We recommend a combination of the following criteria:

• Performance,
• Qualifications,
• Behavior, and
• Seniority

each with a weighted value of 25%. There shall be an objective team composed of HR, legal and line management to evaluate all employees.

A 30-day advanced notice should be sent to the employees concerned as well as to the regional office of DOLE. Then a separation pay should be paid to the employees, that is one-half month for every year of service for retrenchment and closures due to financial losses, or one-month pay for every year of service for redundancy and installation of labor-saving device. They should be paid their proportionate 13th month pay for the year and encashment of leave credits, if any. If they have already served for at least five years, and they have reached the age of 60, the employee may choose optional retirement if the rate is higher than the separation pay.

What matters most is that when employment is terminated, the dignity of the person should be respected. He must be given an exit interview by a human behaviorist who knows human psychology. He must be aided in facing the anxieties, pain, and anger of being deprived of one’s livelihood. He must not be dropped like a hot potato after all the years of his faithful services. It is not enough that the action is legal. It must be humane above all else.