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Automation and Superfluous Employment: Authorized Causes of Termination (Part 1)

Christian Andrew Labitoria Gallardo[1] and Atty Juan Miguel de Leon[2]

We all had to make hard decisions in life. Mr Krabs had to spend his beloved first dollar on a soda during a hot summer day to avoid dehydration. Mowgli had to leave the jungle to be with his fellow humans, including his mother. On a personal note, I had to decline the very tempting offer of a Tudor Big Rose as I have to prioritize my legal studies.

Similarly, in an organizational setting, employers sometimes have to let go of employees even those that are doing well in their work due to business necessity; either because of financial constraints, automation or simply because the job function is already being phased out due to unexpected changes in the market. Now the question is: Is it legal, especially if the employee is thriving well in the workplace?

The DOLE Department Order No. 147-15, in relation to the Labor Code of the Philippines, provides that an employer may terminate of an employee for causes brought by the necessity and exigencies of business, changing economic conditions and illness of an employee. There “authorized causes” of termination may be broken down into five (5) causes, and we shall discuss them one by one in this Article.

Installation of Labor Saving Devices

This refers to the reduction of workers due to the introduction of machineries and devices which replace manual work.[3] In order to be a valid cause for termination, the introduction of the machinery, device or equipment must be made in good faith and for a valid purpose, such as to save on cost, enhance efficiency or other justifiable economic reasons, after having been left without any option but to do so in order to make the business more efficient or effective. Moreover, there must be a reasonable criteria in selecting the employees to be retained.[4]

The classic slogan of Seiko watches that “Some day, all watches will be made this way” reflects the modernization of the watchmaking industry which started with the invention of the quartz technology and later culminated with the use of robots and machines in watchmaking. It must be remembered that prior to the 1960s, Swiss brands dominated the watchmaking industry with their mini-masterpiece manual watches. With the advent of Quartz technology, Japanese brands such as Seiko and Citizen started to produce equally precise and reliable watches at an affordable price as they replaced the use of skilled manpower with that of machines capable of mass-producing the same movement. This is a good example of the implementation of modernization program through introduction of high-speed machines, resulting in termination of employees.[5]


This refers to the reduction of employees due to the fact that their function is rendered superfluous due to external circumstance, or when they are in excess of what is reasonably demanded by the business.[6] In order to justify termination however, it must be made in good faith, after a clear showing that the position or service is in excess of what is reasonably demanded by the business to operate in an efficient and economic manner, such as, but not limited to, a new staffing pattern, feasibility studies or proposal, and a duly approved restructuring scheme. While evidence of losses is not required, the burden of proof still rests on the employer to prove that the job function of the employee is already redundant and that there is a reasonable criterion as to who among the employees occupying the redundant role shall be terminated.[7] Note however that the elimination of worst performers and the so-called “undesirables” through redundancy is not, by itself, an indication of bad faith as they may have failed the criteria adopted by the employer.[8] However, advertising on hiring for new position similar to the alleged redundant position is evidence that the position is not, in fact, redundant hence, an indication of bad faith on the part of the employer..[9]

So far we have covered two of the authorized causes for termination. There are however three more, two of which is very timely in this time of rapid economic decline and uncertainty: retrenchment due to substantial business losses and closure or cessation of business operations. Stay tuned for the second part to learn about these. Meanwhile, join our facebook group Business Labor Forum for free legal advice and updates.

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[1]Christian Andrew Labitoria Gallardo is a recent graduate of the Ateneo School of Law with a Juris Doctor degree, and is currently an associate of the Sangalan and Gaerlan, Business Lawyers, a law firm specializing in labor, corporate and business law. You may reach him through a phone call or message (09157042132) or via email ( [2]Atty. Juan Miguel E. De Leon is a graduate of the Far Eastern University - Institute of Law. A member of the Tau Kappa Phi fraternity of FEU-Law and the Knights of Rizal, a civic and patriotic organization duly established under Republic Act No. 646. He is currently a Senior Associate Lawyer of of the Sangalang and Gaerlan, Business Lawyers, a law firm specializing in labor, corporate and business law. You may reach him at [3] Section 4 (m), DO 147-15 [4] Section 5.4 (a), DO 147-15. [5] Abapo v CA, G.R. No. 142405 (2004). [6] Section 4 (q), DO 147-15. [7] Sebuguero v NLRC, G.R. No. 115394 (1995). [8] Dole Philippines Inc v NLC, G.R. No. 120009 (2001). [9] SPI Technologies Inc v Mapua, G.R. No. 191154 (2014).


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