Requirements for Placing Employees on “Floating Status”
— A Comprehensive Guide under Philippine Labor Law (2025 edition)
1. Concept and Purpose
“Floating status” (often called temporary off‑detail, no‑assignment, or temporary suspension of employment) is the employer’s lawful recourse to keep an employment relationship alive during a bona‑fide, short‑term lull in business instead of permanently dismissing people. It recognizes that:
- the employer currently has no available work or must suspend its operations; and
- the employee is kept on the roster so that, when operations normalize, the employer can simply recall the worker instead of rehiring afresh.
This mechanism balances management’s need for flexibility with labor’s constitutionally protected security of tenure.
2. Statutory Foundation
| Authority | Key text / rule |
|---|---|
| Article 301 [formerly 286] of the Labor Code | Allows a “bona fide suspension of business operations or undertaking of the employer for a period not exceeding six (6) months.” |
| Book VI, Rule I, Sec. 12, Omnibus Rules Implementing the Labor Code | Mirrors Art. 301 and clarifies that employment is not deemed terminated within the six‑month period. |
| DOLE Labor Advisory No. 17‑20 & DOLE Department Order (D.O.) No. 215‑20 | During calamity/pandemic, employers may extend suspension beyond six months subject to DOLE approval and monthly reporting. |
| D.O. 174‑17 (Service Contractors) | If a contractor cannot give a new assignment within three (3) months, the worker may opt for separation with benefits. |
| R.A. 5487 & D.O. No. 150‑16 (Private Security Industry) | Recognize “off‑detail” status for security guards; require reassignment within six months and grant at least 50 % of the basic wage for the first 30 days. |
3. Requisites for a Valid Floating Status
Bona‑fide Business Reason
- Temporary closure, lack of orders, shortage of raw materials, compliance with a regulatory order, force majeure, loss of client (for contractors/security agencies), etc.
Duration: Maximum of 6 Months
- Day 1 counts from the actual work stoppage (not from the announcement).
- Extension is allowed only under D.O. 215‑20 or similarly issued DOLE issuances in times of national emergency, and even then the employer must file an Establishment Report (RKS Form 5) every month.
Good Faith and Fair Dealing
- Employer must intend to resume operations; floating status cannot be used to defeat union activity, avoid regularization, or discriminate.
Proper Notice & Reporting
- Written memo to each affected employee stating facts and the exact start date.
- Establishment report to the DOLE Field/Provincial Office within 30 days from effectivity (or earlier if a D.O./Advisory requires).
Recall/Re‑assignment Priority
- Employees on float have priority over new hires once work becomes available.
No Partial or Selective Implementation
- Criteria in selecting who will float must be reasonable and objective (e.g., first‐in‑last‑out, skill fit, etc.) to avoid unfair labor practice.
4. Procedural Road‑Map
| Phase | Employer Action | DOLE Interaction | Employee Rights |
|---|---|---|---|
| A. Pre‑float | Issue memo; explain cause, timeline, and benefits. | File establishment report (RKS‑5) if mandated. | Ask clarifications; refuse illegal float. |
| B. Floating period (< 6 months) | Maintain roster; optionally subsidize SSS/PhilHealth/Pag‑IBIG premiums. | Update DOLE if resumption earlier than planned. | Remain available; cannot unreasonably refuse recall. |
| C. Recall | Serve written notice; specify report‑back date/place. | None. | Report back; seniority preserved. |
| D. Non‑Recall at 6 months | Decide: • Retrench/Redundancy • Permanent Closure • Allow constructive dismissal | Send 30‑day twin notices to DOLE + employee if terminating. | Claim separation pay & backwages if illegally dismissed. |
5. Compensation & Benefits While on Float
- “No Work, No Pay”. The Labor Code permits suspension of wage obligation.
- 13th‑Month Pay: Amount is pro‑rated based on actual wage earned in the calendar year; if no wage, no 13th‑month accrues, but any earned portion before float remains due.
- Leave Credits: Can be “used” only by mutual agreement; employer cannot unilaterally force consumption.
- Government Contributions: Employer remains a “partner‑payor” but, by practice, many opt to shoulder the entire amount to keep coverage active.
- Health Insurance / HMO: Check company policy; floating status is not termination, so coverage usually continues unless premiums are time‑bound.
6. Sector‑Specific Tweaks
Security Agencies
- D.O. 150‑16: Off‑detail guards get at least 50 % of the basic wage for 30 days (non‑waivable).
- Must file a Notice of Temporary Off‑Detail (NOTOD) within 48 hours to DOLE, PNP‑SOSIA, SSS, and PhilHealth.
Contractors/BPO/Manpower Agencies
- D.O. 174‑17 gives employees the option to terminate after 3 months of no assignment with separation pay of at least one‑half (½) month pay per year of service.
Seafarers
- POEA contract uses “waiting time” concept; after a finished contract, employment ends, but while awaiting embarkation under an agency‐approved employment contract, the six‑month rule analogously applies.
Construction
- D.O. 19‑13 allows project employees to remain on float between phases provided it is within the project timetable; for regular (core) employees, the standard six‑month rule controls.
7. Jurisprudential Landmarks
| Case | G.R. No. / Date | Doctrine |
|---|---|---|
| Manila Hotel Corp. v. NLRC | 120077, Oct. 13 1999 | Six‑month limit; beyond that = constructive dismissal. |
| Sebastian & Jardin Security Agency v. NLRC | 122341, Jun 23 1998 | Off‑detail guards illegally dismissed after 6 months w/o valid authorized‑cause termination. |
| Abbott Laboratories v. Alcaraz | 192571, Jul 23 2013 | Good faith and fair criteria in placing managerial employee on temporary layoff. |
| Lopez Sugar Corp. v. F. Federation of Free Workers | L‑49015, Nov 16 1988 | Suspension must be bona‑fide; otherwise considered illegal lockout. |
| Lambert Pawnbrokers v. Balbastro | 170464, Mar 12 2014 | Constructive dismissal arises the moment six months lapse without reinstatement or authorized‑cause separation. |
| BPI Employees Union v. Bank of the Philippine Islands | 164301, Oct 19 2011 | Floating status not a defense when employer’s problem is solvable by assigning to another branch. |
8. Consequences of Non‑Compliance
| Lapse | Legal Effect | Remedies |
|---|---|---|
| Exceeds 6‑month cap without recall/authorized‑cause termination | Constructive dismissal | • Reinstatement with full back‑wages or separation pay in lieu + back‑wages |
| No bona‑fide business reason | Illegal dismissal | • Same as above + possible moral/exemplary damages |
| Failure to notify DOLE (if mandated) | Compliance order / administrative fine | • Penalty of ₱10,000–₱100,000; may affect renewal of permits |
| Off‑detail guards not given 30‑day pay | Money claim under NLRC | • 50 % wage + legal interest |
9. Practical Compliance Checklist for Employers
- Document the Business Reason (financial statements, client termination letter, government closure order, etc.).
- Prepare Written Memos (clear, dated, signed; keep proof of receipt).
- File DOLE Establishment Report electronically or in person.
- Mark the Calendar—6‑month deadline is strict (e.g., float start = 1 Aug 2025 ⇒ recall/terminate by 31 Jan 2026).
- Maintain Open Lines—Monthly updates reassure employees and show good faith.
- Study Sector Rules—Security, construction, contracting each has extra steps.
- Budget for Either Outcome—If business fails to recover, you must be ready to pay separation pay or back‑wages for constructive dismissal.
10. Rights and Options of Employees
- Accept Recall on the specified date; refusal without just cause may constitute abandonment.
- Resign any time (with conventional 30‑day notice) and claim final pay of accrued benefits.
- File Complaint for constructive dismissal after 6 months if not recalled or lawfully separated.
- Seek Preventive Remedies (e.g., SEnA mediation) even during the floating period if they sense bad faith.
11. Frequently Misunderstood Points
- Floating ≠ Forced Leave. Floating is suspension of work; forced leave still assumes work exists but can’t be delivered (e.g., due to employee’s quarantine).
- Six Months = Calendar, Not Working Days. Count consecutive calendar months.
- No Automatic Separation Pay at Start of Float. Pay is due only upon authorized‑cause termination or constructive dismissal.
- Union Representation Continues. Pausing union dues is negotiable but membership and CBA coverage persist.
- SSS Unemployment Benefit may be claimed only after actual termination, not during the floating period.
12. Conclusion
Floating status is a narrowly tailored, time‑bound measure that lets Philippine employers survive temporary downturns without severing the employment bond. Complying with Article 301, DOLE regulations, and evolving jurisprudence protects businesses from liabilities and secures workers’ rights. As economic cycles and crises (e.g., pandemics, supply‑chain shocks) recur, mastering the technical and procedural fine points outlined above is now an essential facet of Philippine human‑capital governance.