Termination of Employment for Authorized Cause

With the current financial crunch being experienced by the United States, a number of US companies, particularly those in the electronics sector, have shut down their operations in our country. With this in mind, it is important that we discuss the rights to which an employee is entitled in case his employment is terminated.

What are the authorized causes for termination?

The authorized cause involves measures taken by the employer due to business reasons. Thus, if the employer believes that it their company would incur less expense and more profit if there were less employees, they may as a result remove a number of employees or laborers in order to achieve this business plan.

These causes are automation, redundancy and retrenchment.

What is automation?

This involves the installation of labor saving devices. Thus if Company ABC installed a new machine which can perform the work of 100 laborers, Company ABC may terminate the employment of these 100 laborers in order to save the Company some money.

What is redundancy?

There is redundancy when the services of an employee or laborer are in excess of what the company needs. There are several factors that may contribute to the existence of redundancy. One of these is the over hiring of employees. For example, if there are 2 employees to do a single task and only 1 employee is enough to do such task, then the employer can dismiss the other employee. Second factor that may contribute to redundancy is the decrease in the volume of business. For example if Store Q orders 1000 bags every day from Company XYZ. The latter has a workforce of 20 to finish the job. But later Store Q reduced its order to just 500 bags per day, then Company XYZ may dismiss half of its employees because their work can already be finished by 10 employees.

What is retrenchment?

Retrenchment is the termination of an employee by the employer in order to prevent losses or due to the closing or cessation of operation of the establishment or the establishment or undertaking.

Author: Atty. James Biron
Atty. James S. Biron is a corporate lawyer specializing in foreign investments, trade, mergers and acquisitions, planning and financing of projects and capital raising. Clients served include real estate, construction, energy, information technology, agriculture, education, medical and casino gaming companies.

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