Labor Laws in the Philippines allow employers to terminate employees.  The termination, however, must not be based on mere whim or caprice of the employer against his employee.  It must stand on reasonable ground for the termination to be considered legal.  These grounds are called the Authorized Causes of Termination.

Differentiated from the Just Causes of Termination, Authorized causes are those which do not arise from fault or negligence of the employee.  These authorized causes are attributable to the employer and are anchored on management prerogative.  Enumerated as the authorized c1auses are: 1) Installation of Labor-Saving Devices, 2) Redundancy, 3) Retrenchment to Prevent Losses, 4) Closure or Cessation of Operation and 5) Disease.

Installation of labor-saving devices concerns the introduction of machinery or automation processes in the work system in order to improve productivity.

Redundancy happens when there is an overlap of the services rendered by employees than what is required in the business.  This may result from decreased volume of business or the dropping of a product or service previously offered by the company.

Retrenchment to prevent losses involves the preemptive cutting of costs in salaries and wages in order to avoid perceivable business losses.  The losses perceived must be serious, actual and real.

Closure or cessation of business points to the actual shutting down of a business.  The closure may be total or partial, as when only a department ceases its operations.  The cessation of business is essential to thwart the establishment’s further financial drain.

Lastly, an employee may be terminated because of the affliction of a disease.  The continued employment of the sick person must be prejudicial to his health and his co-workers.  The disease must also be one that is not curable within 6 months even with proper medical treatment.

Proper due process must be observed when dismissing employees due to authorized causes.  If the basis is installation of labor-saving devices, redundancy, retrenchment to prevent losses and closure or cessation of operations, the employer is mandated to serve written notice to both the employee and the concerned Regional Office of the Department of Labor at least 30 days before the effectivity of the termination.

In addition, the termination for an authorized cause must be attended with good faith.  There must also be a fair and reasonable criteria in the selection of employee termination.  In the appropriate cases, separation pay must be paid to the employee at the time of his dismissal from work.