,

This refers to your query on whether or not employees are

entitled to separation pay in case there is total closure of business
because of financial losses.

Upon researching on the matter I would opine that such

employees are not entitled to separation pay. Under the law and
Philippine jurisprudence, employees will only be entitled to
separation pay if the closure is not due to serious business losses but
in our case since the closure of the business was due to financial
losses, which is considered as closure due to serious business losses,
then the employees are not entitled to separation pay. They are not
entitled to anything as long as the closure was done in good faith
because the closure of a business is a management prerogative.

In one case the SC has ruled “Closure of a business or

undertaking due to business losses is the reversal of fortune of the
employer whereby there is a complete cessation of business
operations to prevent further financial drain upon an employer
who cannot pay anymore his employees since business has already
stopped. One of the prerogatives of management is the decision to
close the entire establishment or to close or abolish a department or
section thereof for economic reasons, such as to minimize expenses
and reduce capitalization. While the Labor Code provides for the
payment of separation package in case of retrenchment to prevent
losses, it does not obligate the employer for the payment thereof if
there is closure of business due to serious losses.”1

Respectfully submitted,

1 Manila Polo Club Employees’ Union v. Manila Polo Club, Inc., G.R. No. 172846, July 24, 2013