Temporary layoff

Dear Atty. Peachy,

I have been employed at a small retail business for nearly seven years. Recently, our employer informed us that, due to “decreasing sales,” several employees, including myself, would be placed under one-month “floating status” without pay. Now, almost three months have passed and we have neither returned to work nor received formal termination.

I’m uncertain about my rights in this scenario. Is it permissible for the company to keep us in floating status for such a lengthy period? When can we consider ourselves constructively dismissed, and are we entitled to any severance pay or benefits?

Wilma

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Dear Wilma,

According to Philippine labor law, placing employees in “floating status” (also known as temporary layoff) is permissible under specific conditions. However, this is regulated by certain limitations.

The main rule is that floating status cannot exceed six months. This principle is derived from Article 301 [formerly Article 286] of the Labor Code, which allows for temporary suspension of employment for legitimate business reasons. During this time, the employer is not obligated to pay wages, provided the suspension is justified.

If the floating status exceeds six months, it is regarded as constructive dismissal under the law. In that case, the employer must either:

1. Recall the employee back to work, or

2. Formally terminate the employment and fulfill legal obligations, including separation pay where applicable.

In your situation, since you have been in floating status for about three months, the company is still within the permitted six-month timeframe. However, the employer must act in good faith and not exploit this situation to evade responsibilities indefinitely.

For now, stay vigilant and proactive in your discussions with your employer. Ask your employer for a written clarification regarding your status and anticipated return to work. Keep detailed records of all communications and notices you receive.

Should the six-month limit pass without a recall or proper termination, you may then have grounds for claiming constructive dismissal, which could entitle you to back pay and severance benefits.

Best regards.

Atty. Peachy Selda-Gregorio