Validity of Retrenchment

The Court of Appeals ruled that there was no valid cause for retrenchment. The Court of Appeals noted that while Plastimer claimed financial losses from 2001 to 2004, records showed an improvement of its finances in 2003.

We do not agree.

The Court of Appeals acknowledged that an independent auditor confirmed petitioners’ losses for the years 2001 and 2002.14 The fact that there was a net income in 2003 does not justify the Court of Appeals’ ruling that there was no valid reason for the retrenchment. Records showed that the net income of P6,185,707.05 for 2003 was not even enough for petitioners to recover from the P52,904,297.88 loss in 2002.15 Article 283 of the Labor Code recognizes retrenchment to prevent losses as a right of the management to meet clear and continuing economic threats or during periods of economic recession to prevent losses.16 There is no need for the employer to wait for substantial losses to materialize before exercising ultimate and drastic option to prevent such losses.17

About Erineus

Born on December 28, 1965, Surallah, South Cotabato, Southern Mindanao, Philippines.
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