Extension of Forced Leave for Employees Due to Lack of Work

I. Conceptual Framework and Distinctions

In Philippine labor practice, “forced leave due to lack of work” can refer to any of the following arrangements, and the legality of extending it depends on which exact arrangement the employer is implementing:

1. Temporary suspension of operations / temporary lay-off (floating status) under Article 286 [now Article 301] of the Labor Code – no pay.
2. Forced utilization of earned vacation leave credits (with pay, but against the will of the employee).
3. Forced utilization of sick leave credits (almost always illegal).
4. Unilateral “no work, no pay” arrangement without invoking Article 286 (illegal).
5. Rotation of employees or reduction of workdays/weeks under a valid flexible work arrangement (allowed only with agreement or under DOLE-approved schemes).

Only the first category (Article 286 temporary suspension/floating status) legally permits the employer to place regular employees on non-paid forced leave due to lack of work, and even this is strictly limited to a maximum of six (6) months.

II. Legal Basis and Maximum Duration Under Normal Circumstances

Article 286 of the Labor Code (as amended and renumbered to Article 301 by RA 10151 and DOLE DO 174-17) provides:

“The bona-fide suspension of the operation of a business or undertaking for a period not exceeding six (6) months … shall not terminate employment.”

Jurisprudential rule (repeatedly affirmed by the Supreme Court since the 1990s up to the 2024-2025 decisions):

• The six-month period is the maximum tolerable period of floating status or temporary lay-off for regular employees.
• After the lapse of six (6) months without recall and without payment of separation pay, the continued refusal to reinstate constitutes constructive dismissal (illegal dismissal).
• Leading cases:
  • Mayon Hotel & Restaurant v. Adana, G.R. No. 157634, May 16, 2005 (and its progeny)
  • Airborne Maintenance v. Egos, G.R. No. 222748, April 3, 2019
  • Superstar Security Agency v. NLRC, G.R. No. 104389, March 16, 1996 (security guards – longer floating allowed only because of the nature of the industry)
  • Philippine Airlines v. NLRC (various cases 2018-2023) – even PAL cabin crew floating status beyond 6 months was declared illegal once normal operations resumed.

Therefore, under ordinary circumstances, extension beyond six (6) months is illegal.

III. Exceptional Circumstances That Have Allowed Extension Beyond Six Months

1. COVID-19 Pandemic (2020-2023)

   • DOLE Labor Advisory No. 09-2020, 14-2020, 17-2020, and Department Order No. 213-2020 explicitly stated that “due to the continuing crisis brought about by the COVID-19 pandemic, the placement of employees on floating status may exceed six (6) months without being considered as dismissal.”
   • This was upheld by the Supreme Court in a number of 2021-2023 cases involving hotels, airlines, restaurants, and BPOs (e.g., Sitel Philippines v. Del Rosario, G.R. No. 256201, June 28, 2023).
   • The exception effectively ended when the state of public health emergency was lifted on July 2023 and DOLE ceased issuing new advisories extending the period.

2. Typhoons, natural calamities, and force majeure

   • When the lack of work is clearly caused by a fortuitous event, courts have occasionally tolerated periods slightly longer than six months (7–9 months) provided the employer proves it exerted diligent efforts to resume operations (Indophil Textile Mills v. Adviento, G.R. No. 171212, August 4, 2010, and similar cases).

3. Seasonal industries or project employment

   • Employees whose contracts contemplate off-season periods (e.g., sugar mill workers, Christmas décor manufacturers) may be placed on floating status longer than six months without it being illegal, because the nature of the employment is not continuous.

Outside the above exceptions, extension beyond six months is illegal as of 2025.

IV. Consequences of Unauthorized Extension Beyond Six Months

1. Constructive illegal dismissal is deemed to have occurred on the day following the expiration of the sixth month.
2. Monetary awards (if the employee wins the illegal dismissal case):
   • Full backwages from the day after the 6th month until finality of decision
   • Separation pay in lieu of reinstatement (1 month per year of service or ½ month, whichever is higher, unless the employee opts for reinstatement)
   • Moral and exemplary damages (if bad faith is proven)
   • 10% attorney’s fees
3. The employer may no longer invoke retrenchment or redundancy later to avoid paying backwages; the dismissal is already illegal.

V. What the Employer Must Do If the Lack of Work Will Last Longer Than Six Months

The employer has only two legal options:

Option A – Resume operations and recall the employees before or on the 6th month.

Option B – Permanently terminate via retrenchment/redundancy under Article 283 [now Article 298]:

• Written notice to affected employees and DOLE at least one (1) month before intended date of termination
• Payment of separation pay (1 month or ½ month per year of service, whichever is higher)
• Proof of actual or imminent substantial losses or redundancy (audited financial statements required)
• Fair and reasonable criteria in selecting who will be retrenched
• Good faith

Any attempt to “extend forced leave” instead of choosing one of the two options above is illegal.

VI. Forced Use of Vacation/Sick Leave Credits as Substitute for Floating Status

Many employers, especially during economic slowdowns, force employees to exhaust their earned vacation leave (and sometimes sick leave) credits instead of placing them on no-pay floating status.

Supreme Court and DOLE position (consolidated since 2004 up to 2024):

• An employer may not unilaterally force employees to go on vacation leave or sick leave to avoid payment of wages or to circumvent the six-month rule (DOLE Explanatory Bulletin on Holiday Pay and Leave Benefits, 1994; Sentinel Security Agency v. NLRC, G.R. No. 122468, November 25, 1999; Imbuido v. NLRC, G.R. No. 114734, March 31, 2000; and numerous 2020-2024 pandemic-related cases).
• The only exceptions are:
  • When the company shutdown is during the Christmas/New Year break and the employer has a long-standing practice of compulsory offset of leaves.
  • When the employee voluntarily agrees in writing.
• Forcing consumption of leave credits to cope with lack of work is considered badge of bad faith and strengthens the employee’s claim for illegal dismissal and damages.

VII. Employee Remedies When Forced Leave Is Illegally Extended

1. File a complaint for illegal (constructive) dismissal at the NLRC Regional Arbitration Branch within four (4) years from the accrual of the cause of action.
2. Request immediate issuance of reinstatement order (pendente lite) – the employer will be ordered to reinstate with full backwages even while the case is ongoing (Article 229 [223] Labor Code; Pioneer Texturizing Corp. v. NLRC, 1997 rule).
3. If the employer refuses payroll reinstatement, the employee is entitled to accrued wages during the pendency of the case.
4. File money claims for unpaid 13th-month pay, SIL conversion, holiday pay, etc., that accrued during the floating period.

VIII. Practical Checklist for Employers Who Want to Avoid Liability

1. If lack of work will be ≤6 months → send individual letters placing employees on temporary lay-off with clear start and expected end dates + file Report of Suspension of Operations with DOLE Regional Office (within 1 week).
2. If lack of work will exceed 6 months → implement retrenchment/redundancy procedure at least 1 month before the 6th month ends.
3. Never force consumption of leave credits without written employee consent.
4. Never use vague terms like “extended forced leave” or “indefinite leave.”
5. Document all business losses (AFS, sales reports, cancelled contracts) because these will be scrutinized in the event of a case.

IX. Conclusion

Under Philippine law in 2025, there is no general legal mechanism to extend forced leave due to lack of work beyond six (6) months for regular employees. The only lawful paths are (a) recall within six months or (b) valid retrenchment with separation pay. Any other arrangement – whether called “extended forced leave,” “temporary no-work no-pay,” or forced exhaustion of leave credits – is illegal and exposes the employer to full illegal dismissal liabilities.

Employees who have been on floating status for more than six months without recall or separation pay have a strong cause of action for constructive dismissal and should immediately seek legal assistance.