Installation of Labor-Saving Devices

What is the concept of installation of labor-saving devices?

The law authorizes an employer to terminate the employment of any employee due to the installation of labor saving devices. The installation of these devices is a management prerogative, and the courts will not interfere with its exercise in the absence of abuse of discretion, arbitrariness, or maliciousness on the part of management. (Magnolia Dairy Products Corporation vs. NLRC, G.R. No. 114952, January 29, 1996)

The installation of labor-saving devices contemplates the installation of machinery to effect economy and efficiency in the method of production.

What are the requisites for the ground of installation of labor-saving devices?

In order to validly invoke this ground, the following requisites must concur:

1. The introduction of the machinery, equipment or other devices must be done in good faith;

2. The purpose for such introduction must be valid such as to save on cost, enhance efficiency and other justifiable economic reasons;

3 There is no other option available to the employer than the introduction of the machinery, equipment or device and the consequent termination of employment of those affected thereby;

4. Written notice on the worker and the DOLE at least one (1) month before the intended date of termination;

5. There should be reasonable and fair standards or criteria in selecting who to terminate such as nature of work, status of the employee (whether casual, temporary or regular), experience, efficiency rating and seniority, among other considerations; and

6. Separation pay under the law or company policy or Collective Bargaining Agreement or similar contract, when appropriate, must be paid to the affected employees.

Distinguished from Retrenchment

The institution of “new methods or more efficient machinery, or of automation” is technically a ground for termination of employment by reason of installation of labor-saving devices but where the introduction of these methods is resorted to not merely to effect greater efficiency in the operations of the business but principally because of serious business reverses and to avert further losses, the device could then verily be considered one of retrenchment. (Edge Apparel vs. NLRC, G.R. No. 121314, February 12, 1998)

Modernization program through introduction of machines.

In the 2004 case of Abapo vs. CA, [G. R. No. 142405, Sept. 30, 2004], the company (San Miguel Corporation) conducted a viability study of its business operations and adopted a modernization program. It then brought into its Mandaue plant high-speed machines to be used in the manufacture of its beer. The Supreme Court held that the installation of labor-saving devices at its Mandaue plant was a proper ground for terminating employment.

Installation of machines for more economy and efficiency.

In Philippine Sheet Metal Workers Union vs. CIR, [83 Phil. 433], the termination of employment of the affected employees due to the introduction of machinery in the manufacture of its products for purposes of effecting more economy and efficiency, was declared valid.

Proof of losses, not required.

As earlier mentioned, in installation of labor-saving devices, there is no need for the employer to show proof of losses or imminent losses.