What does it mean when an employee is on floating status?
When an employee is on floating status, he is temporarily laid-off. The employment status of the employee is not deemed terminated but merely suspended.
Is it legal for an employer to place an employee on floating status?
Yes, it is legal. In one case, the Supreme Court (SC) said that this is a valid exercise of management prerogative.
What is the legal basis for this practice?
The basis may be found in Article 301 of the Labor Code, which provides that:
Art. 301. When Employment not Deemed Terminated.
The bona-fide suspension of the operation of a business or undertaking for a period not exceeding six (6) months, or the fulfillment by the employee of a military or civic duty shall not terminate employment. In all such cases, the employer shall reinstate the employee to his former position without loss of seniority rights if he indicates his desire to resume his work not later than one (1) month from the resumption of operations of his employer or from his relief from the military or civic duty.
For how long can an employee be placed on floating status?
In Innodata Knowledge Services, Inc. v. Inting, the SC said the following:
The law [referring to Art. 301, Labor Code] set six (6) months as the period where the operation of a business or undertaking may be suspended, thereby also suspending the employment of the employees concerned. The resulting temporary lay-off, wherein the employees likewise cease to work, should also not last longer than six (6) months.
What happens after the period of six (6) months?
Still in Innodata Knowledge Services, Inc. v. Inting, the SC had the occasion to say that, after the period of six (6) months, the employees should either then be recalled to work or permanently retrenched following the requirements of the law. Failure to comply with this requirement would be tantamount to dismissing the employees, making the employer responsible for such dismissal.
When the floating status lasts for more than six (6) months, the employee may be considered to have been constructively dismissed.
 Innodata Knowledge Services, Inc. v. Inting, G.R. No. 211892, December 6, 2017.