Labor Law: Book VI; Title I Termination of Employment (Arts. 293

Book VI

Labor Relations

Title I

Termination of Employment

Arts. 293 - 301

What employees are entitled to security of tenure?
What is project employment? For how long may a project employment last? Is a project employee entitled to separation pay when his employment ends?
Is the probationary period necessarily six months?
What kind of misconduct is sufficient reason to dismiss an employee?
May a clerical employee be dismissed on ground of loss of confidence?

Art. 293. Coverage.

The provisions of this Title shall apply to all establishments or undertakings, whether for profit or not.

Art. 294. Security of tenure.

In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

Notes

Security of Tenure

"Tenure" is the duration, the time period, of holding a job.

Security of tenure is one of the rights of workers that the Constitution guarantees in Section 3, Article XIII.

In plain language, security of tenure means the right not to be removed from one's job except for a valid reason and through proper procedure.

The Civil Code (Art. 1710) states that "dismissal of laborers shall be subject to the supervision of the Government, under special laws."
The valid reasons and the proper procedure are detailed in the Labor Code and court decisions.

When a person has no property, his job may possibly be his only possession or means of livelihood.

Therefore, he should be protected against any arbitrary deprivation of his job.

Article 294 of the Labor Code has construed security of tenure as meaning that: the employer shall not terminate the services of an employee except for a just cause or when authorized by the Code. (Rance, June 30, 1988)
Even managerial employees are entitled to security of tenure.

While an employer has its own interests to protect, and pursuant thereto, it may terminate managerial employee for just cause, such prerogative to dismiss or lay-off an employee must be exercised without abuse of discretion.
Its implementation should be tempered with compassion and understanding.
The employer should bear in mind that in the execution of said prerogative, what is at stake is not only the employee's position but his livelihood.
The fact that one is a managerial employee does not by itself exclude him from the protection of the constitutional guarantee of security of tenure. (Maglutac, September 21, 1990)

Article 294 tells an employer not to terminate the services of an employee except for a just cause or as authorized by law.

But the Article specifies "regular employment."
In cases of non-regular employment, it seems that the Article allows the employer to terminate the employment even without just cause. This is not true.
Even in case of non-regular employment, such as fixed-period employment, the employer cannot lawfully terminate it before the end of the agreed period unless there is just cause to do so.
Similarly, if the agreed project employment, for instance, is six months, it cannot be terminated, say, on the fourth month without a just and valid reason.
Even a probationary employee cannot be discharged without valid cause.

A valid cause is therefore needed in terminating a regular or non-regular employment.

The unwavering rule is indeed straightforward; The dismissal of any employee requires a valid, legal cause.

EAW (Employment-at-will) Not Allowed in the Philippines

The preceding comments lead us to reemphasize that employment-at-will (EAW) finds no room in Philippine jurisdiction.
Under EAW, the employment can be altered or terminated at any time, for good reason, no reason, or even ammoral reason.

This mode, though strongly being assailed, is still prevalent in the U.S.
But in the Philippines EAW cannot be valid because it contradicts the Constitution's guarantee of security of tenure to workers.

But in Book 1 of this Code, in comments under Article 20 about employment tenure of OFWs, we have seen an apparent exception.

The Supreme Court upheld an EAW contract of an OFW working for a foreign employer in a foreign land:

where EAW was valid and
where the OFW knowingly executed the EAW contract.

If such EAW contract were executed in the Philippines, it would most probably be declared invalid.

Since Article 294 speaks of "regular employment," it is of first importance to ask what is regular employment and what is not.

The answer found in Article 295 and court rulings.

Art. 295. Regular and casual employment.

The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists.

Notes

Regular Employment

The law provides for two kinds of regular employees, namely:

those who are engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer; and
those who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are employed.

In other words, regular status arises from either:

the nature of work of the employee or
the duration of his employment.

Temporary Employment

Under the Labor Code, an employment may only be said to be "temporary" where it has been fixed for a specific undertaking, the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season.

Determining Regularity of Employment

What determines regularity or casualness is not the employment contract written or otherwise, but the nature of the job.

If the job is usually necessary or desirable to the main business of the employer, then employment is regular. (A.M. Oreta, August 10, 1989)

The primary standard of determining a regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer.

The test is whether the former is usually necessary or desirable in the usual business or trade of the employer.
The connection can be determined by considering the nature of the work performed and in relation to the scheme of the particular business or trade in its entirety.

Also, if the employee has been performing the job for at least one year, even if the performance is not continuous or merely intermittent the law deems the repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business.

Hence, the employment is also considered regular, but only with respect to such activity and while such activity exists. (De Leon, August 21, 1989)

Even handicapped persons, employed for humanitarian reasons, may become regular employees if they are doing necessary or desirable jobs (e.g. counting and sorting money in a bank) and their employment has exceeded six months through renewals of the initial appointment.

The renewals show that they are qualified for their positions and therefore should be treated like other qualified able-bodied employees. (Bernardo, July 12, 1999)

Church Policy Requiring Yearly Submission of Resignation

A church requires its pastors or ministers to tender a courtesy resignation every year.
Is this policy legal?
Does NLRC have jurisdiction over the case?
There is no question among the parties in this case that our constitutionally protected policy is non-interference by the State in matters that are purely ecclesiastical.
Our sole concern here is whether or not the matter at hand is an ecclesiastic matter over which our labor tribunals are deprived of jurisdiction.
In Pastor Austria v. NLRC, as reiterated in United Church of Christ in the Philippines, Inc. v. Bradford United Church of Christ, Inc., we already defined which matters are outside the jurisdiction of civil courts and tribunals. Thus:

An ecclesiastical affair is one that concerns doctrine, creed, or form [of] worship of the church, or the adoption and enforcement within a religious association of needful laws and regulations for the government of the membership, and the power of excluding from such associations those deemed unworthy of membership. Based on this definition, an ecclesiastical affair involves the relationship between the church and its members and relate to matters of faith, religious doctrines, worship and governance of the congregation To be concrete, examples of this so-called ecclesiastical affairs to which the State cannot meddle are proceedings for excommunication, ordinations of religious ministers, administration of sacraments and other activities x x x attached [with] religious significance. (Emphasis supplied, citation omitted)
At the center of the present controversy is the enforcement of a religious denomination's internal rules in the governance of its member churches.

Petitioners' contention that there was no dismissal to speak of and the matter concerns their right to transfer or reassign one of their licensed ministers is well taken.
We find the claimed right to be infused with religious color because it bears down on the relationship of a church and its members in faith-based matters.
If a church or religious association has the sole prerogative to exclude members perceived to be unworthy in light of its doctrinal standards, all the more does it have sole prerogative in determining who are best fit to minister to its members in activities attached with religious significance

As a licensed minister of CAMACOP, Benito was aware of this policy requiring annual courtesy resignations that give its local church a free hand in assigning reassigning or transferring pastors and ministers, subject to reasonable guidelines and supervision.

We cannot interfere with the implementation of the policy, much less subject religious congregation to a minister in whom it appears to have lost confidence. (Pasay City Alliance Church /CARGO v. Benito, G.R. No. 226908, November 28, 2019)

Project Employment; Contrast with Regular Employment

A project employee is one whose employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of the engagement of the employee.

The principal test for determining whether particular employees are "project employees" as distinguished from "regular employees," is whether or not the "project employees" were assigned to carry out a "specific project or undertaking, the duration (and scope) of which were specified at the time the employees were engaged for that project.

Project employment is coterminous with the project for which the employee was hired.

It may be terminated when the project (or phase thereof) ends or is completed.

In contrast, regular or permanent employment continues until it is terminated by one or another of the recognized causes under the Labor Code.
One exists for a definite, predefined period, the other exists tor an indefinite length of time.

The difference is in the period of existence, not as to whether the project is integral the employer's business.

In business, in relation to employment tenure, there are two broad types of projects:

a particular job or undertaking that is within the regular or usual business of the employer but which is distinct, and identifiable as such, from the other undertakings of the company, such project begins and ends at determined or determinable times;

example: a construction project of construction company;

a particular job or undertaking that is not within the regular regular business business of the corporation, separate and distinct from the operations of the employer, and begins and ends at determined or determinable times;

example: a steel-making company undertaking the breeding of fish or cultivation of vegetables. (ALU-TUCP 234 SCRA 678 [1994])

A common basic requisite is that:

the designation of named employees as "project employees" and
their assignment to a specific project are effected and implemented in good faith and not merely as a means of evading otherwise applicable requirements of labor laws.

Since the services of project employees are coterminous with the project, has no obligation to pay them separation pay.

Regular employees, in contrast, are legally entitled to separation pay, except, as a rules, in dismissed because of any "just cause" under Article 297. (See Fernandez v. NLRC, 203 SCRA 460 [1991].)

The Court stresses the rule in Cartagenas vs. Romago Electric Co., G.R. No. 82973, September 15, 1989 that contract workers are not considered regular employees, their services being needed only when there are projects to be undertaken.

The rationale of this rule is that if a project has already been completed, it would be unjust to require the employer to maintain them in the payroll while they are doing absolutely nothing except waiting until another project is begun, if at all.
In effect, these standby workers would be enjoying the status of privileged retainers, collecting payment for work not done, to be disbursed by the employer from profits not earned.
This is not fair by any standard and can only lead to a coddling of labor at the expense of management. (Ocampo, June 6, 1990)

However, members of a work pool from which a construction company draws its project employees, if considered employees of the construction company while in the work pool, are non-project employees or employees for an indefinite period.

If they are employed in a particular project the completion of the project or any phase thereof will not mean severance of employer-employee relationship (Policy Instructions No. 20). (Philippine National Construction, June 20, 1989)

Extension

Nonetheless, where the employment of project employees is extended long after the supposed project has been finished, the employees are removed from the scope of project employment and are considered regular employees.
While length of time may not be a controlling test for project employment, it can be a strong factor in determining whether the employee was hired for a specific undertaking or in fact tasked to perform functions which are vital, necessary and indispensable to the usual business or trade of the employer.

Continuous Rehiring

A project employee or a member of a work pool may acquire the status of a regular employee when the following concur:

There is a continuous rehiring of project employees even after cessation of a project; and
The tasks performed by the alleged "project employee" are vital, necessary and indispensable to the usual business or trade of the employer.

However, the length of time during which the employee was continuously re-hired is not controlling, but merely serves as a badge of regular employment. (Maraguinot and Enero, January 22, 1998)

Project Employment; Contrast with Fixed-term Employment

In a significant 2017 decision in E. Ganzon, Inc. vs. F. Ando, G.R. No 214183, February 20, 2017, the Supreme Court cautions against possible confusion, thus:

Project employment should not be confused and interchanged with fixed-term employment:

x x x While the former requires a project as restrictively defined above, the duration of a fixed-term employment agreed upon by the parties may be any day certain, which is understood to be "that which must necessarily come although it may not be known when. The decisive determinant in fixed-term employment is not the activity that the employee is called upon to perform but the day certain agreed upon by the parties for the commencement and termination of the employment relationship.

The decisive determinant in project employment is the activity that the employee is called upon to perform and not the day certain agreed upon by the parties for the commencement and termination of the employment relationship.
Indeed, in Filsystems, Inc. vs. Puente, We even ruled that an employment contract that does not mention particular dates that establish the specific duration of the project does not preclude one's classification as a project employee.
In [Ganzon vs. Ando] case, the duration of the specific/identified undertaking for which Ando was engaged was reasonably determinable.
Although the employment contract provided that the stated date may be "extended or shortened depending on the work phasing," it specified the termination of the parties' employment relationship on a "day "day certain," which is " upon completion of the phase of work for which [he was] hired.

A "day" x x x is understood to be that which must necessarily come, although it may not be known exactly when. This means that where the final completion of a project or phase thereof is in fact determinable and the expected completion is made known to the employee, such project employee may not be considered regular, notwithstanding the one year duration of employment in the project or phase thereof or the one year duration of two or more employments in the same project or phase of the project.
The completion of the project or any phase thereof is determined on the date originally agreed upon or on the date indicated in the contract, if the same is extended the date of termination of project extension.

Ando's tenure as a project employee remained definite because there was certainty of completion or termination of the Bahay Pamulinawen and the West Insular Projects.
The project employment contracts sufficiently apprised him that his his security of tenure with EGI would only last as long as the specific projects he was assigned to were subsisting.
When the projects were completed, he was validly terminated from employment since his engagement was coterminous thereto. (E. Ganzon, Inc. vs. F. Ando, G.R. No 214183, February 20, 2017)

Successive Rehiring of Project-Based Construction Worker

The fact that Ando was required to render services necessary or desirable of EGI's business for more than a year does not in any way in the operation impair the validity of his project employment contracts.
Time and again, we have held that the length of service through repeated and successive rehiring is not the controlling determinant of the employment tenure of a project employee.
The rehiring of construction workers on a project-to-project basis does not confer upon them regular employment status as it is only dictated by the practical consideration that experienced construction workers are more preferred.
In Ando's case, he was rehired precisely because of his previous experience working with the other phases of the project. EGI took into account similarity of working environment. Moreover -

x x x It is widely known that in the construction industry, a project employee's work depends on the availability of projects, necessarily the duration of his employment. It is not permanent but coterminous with the work to which he is assigned. It would be extremely burdensome for the employer, who depends on the availability of projects, to carry him as a permanent employee and pay him wages even if there are no projects for him to work on, The rationale behind this is that once the project is completed it would be unjust to require the employer to maintain these employees in their payroll. To do so would make the employee a privileged retainer who collects payment from his employer for work not done. This is extremely unfair to the employers and amounts to labor coddling at the expense of management.

Finally, the second paragraph of Article 295, stating that an employee who has rendered service for at least one (1) year shall be considered a regular employee, is applicable only to a casual employee and not to a project or a regular employee referred to in paragraph one [of Article 295]. (E. Ganzon Inc. vs. Ando, February 20, 2017)

Project-Based Employees Doing Jobs Necessary or Desirable to the Employer's Business

In a decision rendered in 2017, the Court of Appeals declared the complainant employees as "regular" and not "project-based" because they were performing tasks necessary and desirable to the business operation of the employer whose business was shipbuilding and repair of ships and because they were repeatedly hired by the same employer as welder, pipe fitter, expediter and helper.
The Supreme Court disagreed with the CA's ruling.
The SC pointed out that project-based employees may or may not be performing tasks usually necessary or desirable in the usual business or trade of the employer.
"The fact that the job is usually necessary or desirable in the business operation of the employer does not automatically imply regular employment; neither doesit impair the validity of the project employment contract stipulating a fixed duration of employment." (Herma Shipyard us. Oliveros, et al., April 17, 2017)

Termination of Project Employment: Notice to DOLE Required

Prior notice of termination is not part of procedural due process if the termination is brought about by the completion of the contract or phase thereof for which the project employee was engaged.
Such completion automatically terminates the employment and the employer is, under the law, only required to render a report to the Department of Labor and Employment (DOLE) on the termination of employment. (E. Ganzon, Inc. us. Ando, G.R No. 214183, February 20, 2017; see also Herma Shipyard vs. Oliveros, et al., April 17, 2017)

Free Consent

It is crucial that the employees were informed of their status as project employees at the time of hiring and that the period of their employment must be knowingly and voluntarily agreed upon by the parties, without any force, duress, or improper pressure being brought to bear upon the employees or any other circumstances vitiating their consent. (Herma Shipyard, April 17, 2017 citing Jamias vs. NLRC, March 9, 2016)

Work Pool

In practice, construction companies have a "work pool."
A work pool is a group of workers from which an employer draws workers it deploys or assigns to projects or any phase/s thereof.
A "work pool may consist of:

Non-project employees or employees for an indefinite period.

They are considered "regular."
If they are employed in a particular project, the completion of the project or phase thereof will not mean severance of employer-employee relationship

Project employees.

These workers in the work pool are employed in a particular project or phase thereof.
They are considered as project, hence not "regular" employees.

Under established jurisprudence, a project employee who is a member of a work pool, may attain regular status as a project employee.
This kind of employee is is known as "regular project employee."

Four Project Employment Indicators (PEI)

It is not easy to definitely identify project employment in contrast to non-project.
But judicial literature furnishes some leads that may be called "PEI" or "Project Employment Indicators."
If the PEIs arise spontaneously and are not fashioned or purposely appended in records to fit judicial literature, then the PEIs can help forestall disputes.
Consider these PEIs:

Determinable duration
The work should be connected to the project and the worker is available to work for others
Employment termination should be reported to DOLE
Employment contract stipulates a completion bonus

See D.O. No. 19, Series of 1993;
Concrete Solutions v. Cabusas, June 19, 2013;
Hanjin Heavy Industries v. Ibañez, June 26, 2008;
Cocomangas Hotel v Visca, Aug. 29, 2008;
GMA Network v. Pabriga, Nov. 27, 2013.

PEI No. 1: Determinable Duration:

In project employment, the duration of the specific/identified undertaking for which the worker is engaged should be reasonably determinable.
Such duration, as well as the specific work/service lo be performed, is defined in an employment agreement and made clear to the employee at the time of hiring.
For purposes of determining duration, there must be a "day certain" in the project employment contract, the absence of which means the employee is a regular employee.

This is so because a project employee is assigned to a project which begins and ends at determined or determinable times.

Although the employment contract may not state a particular date but if it did specify that the termination of the parties' employment relationship was to be on a "day certain" — the day when the phase of work would be completed — the employee cannot be considered to have been a regular employee. He is a project employee.
The "duration of the project" provided in the contract of project employment should not pertain to the duration of the employment contract but to the duration of the specific project of undertaking which must be reasonably determinable at the time of hiring of the project employee.
The length of service of a project employee is not the controlling test of employment tenure but whether or not the employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of the engagement of the employee.

The simple fact that the employment as project employees has gone beyond one (1) year does not detract from, or legally dissolve, their status as project employees.
The fact that the employees worked for the employer under different project employment contracts for several years cannot be made a basis to consider them as regular employees, for they remain project employees regardless of the number of projects in which they have worked.

A written project employment contract is an indispensable requirement.

In the cases where the Supreme Court ruled that the project employees like construction workers have retained their status as project employees despite their repeated rehiring, the employers were able to produce written employment contracts clearly stipulating that the workers' employment was coterminous' with the project and that they were notified of the scope and duration of the project at the time of their engagement as project employees.
Failure to present contract of project employment may mean that the employee is regular because such a contract, while not conferring regular status by itself, is evidence that the employee was informed of the duration and scope of his work and his status as project employee.

Project employees should be informed of their status as well as the duration and other details of their engagement as such right at the inception of the employment relationship.

The employees should have knowing consent to being engaged as project employees and this must be stipulated in no uncertain terms in the project employment contract.

A contract of employment on a "project-to-project" basis is valid, provided that "the period was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure brought to bear upon the employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former xxx."

PEI No. 2: The work should be connected to the project and the worker is available to work for others.

The work/service performed by the employee is in connection with the particular project or undertaking for which he is engaged, and the employee, while awaiting engagement, is free to offer his services to other employers.
In order to be considered a project employee, the work or service he would perform should be connected with and related to the project or undertaking specified in the contract of employment for which he was engaged.

Assigning him to another project or undertaking not in any way connected with or related to the project or undertaking particularly contemplated to the contract of employment would make him regular and not project employee.
A project employee may acquire the status of a regular employee when the following factors concur:

There is a continuous (as opposed to intermittent) rehiring of the project employee even after cessation of a project for the same tasks or nature of tasks; and
The tasks performed by the alleged "project employee" are vital, necessary and indispensable to the usual business or trade of the employer.

Intervals in the employees' employment contract are significant in that they would bolster the company's position that, indeed, they are project employees.

PEI No. 3: Employment termination should be reported to DOLE

In project employment, the termination of employment in the particular project/undertaking should be reported to the Regional Office of DOLE within thirty (30) days following the date of separation from work, using the prescribed form.
Report to DOLE on termination of project employees is required.
Accordingly, instead of the notice of termination to the affected project employees upon completion of the project or any phase thereof, the law merely requires that the employer should render a report to the DOLE on the termination of their project employment.
The report should be made within thirty (30) days following the date of the project employee's separation from work, using the prescribed form on employees' terminations or dismissals or suspensions.

PEI No. 4: Employment contract stipulates a completion bonus

The employer undertakes in the employment contract to pay completion bonus to the project employee as practiced by construction companies.
D.O. No. 19, Series of 1993, provides that in the absence of an undertaking that the completion bonus will be paid to the employee, the employee may be considered a non-project employee, hence, regular.
The amount of the pro-rata completion bonus maybe based on the industry practice which is at least the employee's 1/2 month salary for every 12 months of service.

Termination of Project Employment

Project employees enjoy security of tenure only during the term of their project employment.
If the project or the phase thereof in which the project employee is working has not yet been completed and his services are terminated without just or authorized cause and there is no showing that his services are unsatisfactory, such termination is considered illegal.

The project employee is entitled to reinstatement to his former position or substantially equivalent position.
If the reinstatement is no longer possible, the employee is entitled to his salaries for the unexpired portion of the project employment agreement.

Project employees are not, by law, entitled to separation pay if their services are terminated as a result of the completion of the project or any phase thereof in which they are employed.

The reason is that their services are deemed coterminous with the project or phase thereof.

Project employees have presumably become regular employees if allowed to work beyond the completion of the project or any phase thereof to which they were assigned or after the "day certain" which they and their employer have mutually agreed for its completion.

Having become regular employees, they can no longer be terminated on the basis of the completion of the project or any phase thereof to which they were deployed but only for just or authorized cause, the absence of which will make their termination illegal.

Advance notice of termination of project employment is not required, hence, failure to serve it upon completion of the project would not violate procedural due process; Consequently, the Agabon doctrine is not applicable thereto.
Burden of proof in termination of project employment rests on the employer.

Seasonal Employment

Court decisions consider seasonal employees as regular employees.
A 1963 ruling, repeated in later cases, said:

Regular seasonal employees are those called to work from time to time. The nature of their relationship with the employer is such that during off season they are temporarily laid off but during summer season they are reemployed, or when their services may be needed. They are not, strictly speaking, separated from the service but are merely considered as on leave of absence without pay until they are reemployed. Their employment relationship is never severed but only suspended. As such those employees can be considered as in the regular employment of the employer. (Manila Hotel, September 30, 1963; Industrial Commercial, March 31, 1966; Tacloban Sagkahan Rice, March 21, 1990)

Seasonal employees are in regular employment because of the nature of their job and not because of the length of time they have worked.

The one-year period in the second paragraph of Article 295 applies only to "casual" employees. (Mercado, Sr, 201 SCRA 332 [1991])
But in Hacienda Fatima, the court ruled that the worker is "seasonal" if the employment is only for the duration of one season. To workers who have been employed doing the same task for several years or for more than one season, the rule on regular employment applies. (Hacienda Fatima, January 28, 2003)

When the company is sold, which event effectively terminated the employment of the seasonal employees, they are entitled to separation pay under Articles 298 and 299 of the Labor Code.

A month's pay here means the average monthly pay during the season they worked, (Abasolo, 346 SCRA 293 [2000])

The oft-repeated ruling that seasonal employees are regular employment is reiterated in Philippine Tobacco Flue-curing, December 10, 1998; also Philippine Fruit and Vegetable Industries, July 20, 1999.

Casual Employment

Under present law, a casual employee is casual only for one year.
His work is neither regular, nor project nor seasonal, but if he has worked for at least one year — whether continuously or not — he becomes a regular employee.
It is not his nature of work but the passage of time that gives him a regular status.

But he is uniquely regular because that status attaches only for the particular activity that he was doing when still a casual.
When that activity recurs, he is the one to be rehired.
In that sense, he becomes a regular casual.
He gains to the right to security of tenure for a particular job, and the employer needs a just or authorized cause to cease rehiring him.

Employment is casual when it is irregular, unpredictable, sporadic and brief in nature, and outside the usual business of the employer.

The work is not permanent nor periodically regular, but occasional or by chance, and not in the usual course of the employer's trade or business. (Moreno's Philippine Law Dictionary, citing cases)

As to the casual's wage and statutory benefits, the pertinent law and regulations apply.
For non-statutory benefits, the company policy or the CBA, if he is included in the CBU, governs.
Book VI, Rule I, Section 5(b) of the Rules Implementing the Code, [as amended by D.O. No. 10, effective 22 June 1997] states that despite the distinction between regular and casual employment, "every employee shall be entitled to the rights and privileges, and shall be subject to the duties and period obligations, as may be granted by law to regular employees during the of their actual employment."

Fixed Period Employment

Employment that will last only for a definite period, as agreed by the parties is not per se illegal or against public policy even if this kind of employment is not mentioned in Article 295 of the Code.
Such kind of employment contract may be justified under the Civil Code.
It can refer to fixed-term employment contracts or those to which the parties by free choice have assigned a specific date of termination.
For this kind of employment contract to be valid, two criteria should be shown:

That the fixed period was knowingly and voluntarily agreed upon by the parties.

There should have been no force, duress or improper pressure brought to bear upon the employee;
neither there be any other circumstance that vitiates the employee's consent.

It should satisfactorily appear that the employer and the employee dealt with each other on more or less equal terms with no moral dominance being exercised by the employer over the employee.

This is the substance of the ruling of the Court in Brent School, February 5, 1990.

In the same case the Court emphasized that fixed-term employment will not be considered valid where, from the circumstances, it is apparent that periods have been imposed to preclude acquisition of tenurial security by the employee.
If it is shown that that is the purpose of the contract, then it will be the declared null and void from the beginning or ab initio. (See also Cielo, January 28, 1991)

"Endo": Arbitrary Period Struck Down

Such periods should be struck down or disregarded as contrary to public policy and morals. (Purefoods Corp. 'vs. NLRC, et al, December 12, 1997)

What Purefoods struck down immediately is the all-too-common practice of hiring operating personnel batch by batch, each batch under a five-month contract.
At the end of the period, the workers will be replaced by the next five-month employees because of "E.O.C." (end of contract or "endo").
Such scheme, said the court, is against public policy.
The Purefoods ruling has the effect (hopefully) of making "5-5-5" and "E.O.C." things of the past in numerous workplaces.

Where the direct-hired employee is doing necessary or desirable job, the three-month fixed term of the employment, renewed several times that exceed one year, establishes his being a regular employee.
Such contractual employment on "as needed" basis contravenes the employee's right to security of tenure. (Philips Semiconductors [Phils. ], Inc, April 14, 2004)
To reiterate, fixed-term employment is not illegal per se or against public policy. (E Ganzon, Inc. v Ando, h:, 806 Phil. 58 [2017])
Nevertheless, before this Court recognizes its validity, the criteria in Brent must first be sufficiently established.

Aware that this form of employment was repeatedly used to circumvent security of tenure, this Court has been consistently circumspect in resolving issues on fixed-term employment.
The validity of a fixed-term employment is an exception, not the general rule.
Here, petitioner failed to show that either of the two criteria present and, quite the contrary, the case records reveal that petitioner and respondent did not this deal with each other in more or less equal terms.
Thus, Court holds that respondent is a regular employee who is entitled to security of tenure. (Claret School of Quezon City vs. M. Sinday, G.R. No. 226358, October 9, 2019)

Regular Employment with a Fixed Term

In Fuji v. Espiritu, the right of a regular employee to opt to have a fixed-term contract has been given judicial imprimatur.
It is therefore not a legal impossibility that an employee can be a regular employee with a fixed-term contract. The decision explains:

"Arlene's contract indicating a fixed term did not automatically mean that she could never be a regular employee. This is precisely what Article 295 [280] seeks to avoid. The ruling in Brent remains as the exception rather than the general rule.
"Further, an employee can be a regular employee with a fixed-term contract. The law does not preclude the possibility that a regular employee may opt to have a fixed-term contract for valid reasons. This was recognized in Brent for as long as it was the employee who requested, or bargained, that the contract have a 'definite date of termination,' or that the fixed-term contract be freely entered into by the employer and the employee, then the validity of the fixed-term contract will be upheld."

It was ruled in Philippine Village Hotel v. NLRC that the fact that private respondents were required to render services necessary or desirable in the operation of petitioner's business for the duration of the one-month dry-run operation period, did not in any way impair the validity of their contracts of employment which specifically stipulated that their employment was only for one month.
An employee is deemed regular if contract failed to state the specific fixed period of employment.

An employee allowed to work beyond fixed term becomes a regular employee.
Also, rendering work beyond one (1) year would result in regular employment.
Successive renewals of fixed-period contracts will result in regular employment.
But in casual employment, the employee may be a regular casual.

In a valid fixed-period employment, lack of notice of termination is of no consequence because when the contract specifies the period of its duration, it terminates on the expiration of such period.

The expiration of the fixed-term contract simply caused the natural cessation of the fixed-term employment.

Employment resulting to regular employment

Employment on a "day-to day basis for of a temporary period" will result in regular employment if it has the purpose circumventing the employee's security of tenure.
Employment on "as the need arises" basis may ripen into regular employment.
Employment on a "por viaje" (per trip) basis may ripen into regular employment by reason of their continuous hiring and performance of tasks necessary and desirable in the usual trade and business of the employer.

Termination prior to lapse of fixed-term contract should be for a just or authorized cause.
Liability for illegal dismissal of fixed-term employee is only for salary for the unexpired portion if the fixed- term contract is otherwise valid.
Once employees has become regular employees, they are entitled to security of tenure which may not be circumvented by mere stipulation in a subsequent contract that their employment is one with a fixed period.

While the Supreme Court has upheld the legality of fixed-term employment, where from the circumstances it is apparent that the periods have been imposed to preclude acquisition of tenurial security by the employee, they should be struck down or disregarded as contrary to public policy or morals.

But contrast this to the next case.

Employees have not attained regular status and they are not illegally terminated if they worked under fixed term employment contracts none of which was extended beyond the initial five-month period, even if they are doing jobs necessary or desirable to the employer's business.
There is nothing essentially contradictory between a definite period of employment and the nature of the employee's duties. This conclusion assumes that the contracts meet the two criteria [mentioned above] as laid down in Brent School vs. Zamora (Pangilinan, et al, July 12, 2004)

Fixed-term employees are akin to project employees.

The period of employment of fixed-term employees has been fixed prior to engagement while the project employees' employment has been fixed for a specific project or understanding, the completion or termination of which has been determined likewise at the time of the engagement. (Risonar vs. Cor Jesu College, September 14, 2016)
For the duration of the project or of the fixed term the employee cannot be dismissed except for a just or authorized cause.

A law dean's appointment for a three-year term, which is not terminated by the end of the third year despite agreement to that effect, is deemed automatically renewed for another three years. (Risonar, September 14, 2016)

Overseas Seafarers

Seafarers are contractual employees.
Their employment is governed by the POEA Standard Employment Contract which they sign every time they are are hired.
Their employment terminates when the contract expires.
When it does, they are not entitled to separation pay since their employment is contractually fixed for a certain period of time. They fall under the exception of Article 280 [now 295]. (Millares, July 29, 2002)
The Supreme Court, despite persistent appeal of seafarers in several cases, has repeatedly reaffirmed the Millares ruling.

See, for instance, the cases of:

Pentagon International Shipping, July 27, 2004;
Gu-Miro, August 20, 2004; and
Ravago, March 14, 2005.

Domestic Seafarers

But note that the Millares ruling applies only to overseas seafarers.
Domestic seafarers are covered by Article 294.
They are entitled to security of tenure.
They can become regular employees. (See D.O. No. 231 issued on June 7, 2013)

Art. 296. Probationary employment.

Probationary employment shall not exceed six (6) months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee.

Purpose and Reason

A probationary employee is one who is on tentative employment during which the employer determines whether he is qualified for permanent employment.
While the employer observes the fitness, propriety, and efficiency of a probationer to ascertain whether he is qualified for permanent employment, the probationer, on the other hand, seeks to prove to the employer that he has the qualifications to meet the reasonable standards for permanent employment. (International Catholic, January 30, 1989)
Equality of rights thus exists.

If the employer can compel the employee to work against the latter's will, this is servitude.
If the employee can compel the employer to give him work against the employer's will, this is oppression. (Pampanga Bus Co., 68 Phil. 541)

Standards

In all cases involving employees engaged on probationary basis, the employer shall make known to the employee at the time he is hired the standards by which he will qualify as a regular employee.
Failure to qualify as regular employee in accordance with the reasonable standards of the employer is a just cause for terminating a probationary employee.
Thus aside from the "just" and "authorized" causes specified in the Labor Code, failure to meet pre-agreed standards is a valid reason to terminate a probationer's employment.(Robinsons Galleria, January 19, 2011; Abbott Laboratories, July 23, 2013)
Where no standards are made known to the employee at the time of engagement, he shall be deemed a regular employee, unless the job is self-descriptive, like maid, cook, driver, or messenger, (Robinsons Galleria, January 19, 2011)
The constitutional policy of providing full protection to labor is not intended to oppress or destroy management.
If no documentary evidence shows that the employee is probationary, he is regular. (ATCI Overseas, August 9, 2001)

Tenure

Although a probationary or temporary employee has a limited tenure, he still enjoys security of tenure.
During his period of employment or before contract expires, he cannot be removed except for cause as provided for by law. (A.M. Oreta, August 10, 1989; also Phil. Federation of Credit Cooperatives, December 11, 1998)
The termination must observe due process, i.e., the cause is valid and adequate, and the procedure conforms to the two-notice rule (to be explained later).
If the employer has its own performance appraisal procedure, such procedure must be observed; otherwise, the dismissal is procedurally infirm, and the employer, despite legality of the dismissal, may be declared liable for nominal damages. (Abbott Laboratories, July 23, 2013)
If the termination is for cause, the termination may be done anytime during the probation; the employer does not have to wait till the probation period is over. (International Catholic Migration Commission, 169 SCRA [1989];See also: Canadian Opportunities, February 6, 2012.)
Thus, there are three limitations to terminating a probationary employment:

it must accord with the requirements of the contract;
the dissatisfaction of the employer is real and in good faith, not feigned to circumvent the law or contract; and
there is no unlawful discrimination against the employee. (Sameer Overseas Placement Agency, 317 SCRA 120 [1999])

Relief

Is reinstatement the proper relief for an illegally dismissed probationary employee?

Article 294, providing for reinstatement, applies even to a probationary employee unjustly dismissed; hence, reinstatement is proper relief.
However, where the relations between the parties are so strained, separation pay in is lieu of reinstatement should be awarded.
Considering that the agreed probation is six months, counted one year, the separation pay is one month's pay.
And as the dismissal is illegal, the employee is likewise entitled to backwages.

But the backwages will not cover the whole time the case was pending.
It should cover only the period from the date she was dismissed up to the last day of the agreed probation period (Robinsons Galleria, January 19 2011)

Duration

Generally, the probationary period of employment is limited to six months.
However, it can exceed six months if that is the agreement of the parties because the job complex enough that the employer needs a longer period to assess the qualifications and fitness of the probationer.

In one case, for instance, the Court sustained a probationary status lasting 18 months because the employer justified the long probation. (See Buiser, July 13, 1984.)

May the employer and the employee validly agree to extend the probationary period beyond six months?

Such an extension may lawfully be agreed upon, despite the restrictive language of Article 296 which states that an employee who is allowed to work after a probationary period "shall be considered a regular employee."

A voluntary agreement extending the original probationary period, at the employee's request, to give the employee second chance to pass the probation standards constitutes a lawful extension of the statutory limit. (Mariwasa, January 26, 1989)

But a double (or multiple) probation is not allowed.

In a case where the employee was on-the job training for three weeks, after which he was hired on probation for six months, the court ruled that the probation exceeded six months and the employee should be considered qualified to be regular. (Holiday Inn, 226 SCRA 417 [1993])

Last Day of Probation

When the probationary period of an employee is six months, when is its last day?

In Mitsubishi Motors vs. Chrysler Phil. Labor Union, G.R. No. 148738, decided on June 29, 2004, the Court explained that "the probationary period of six months means 180 days, in conformity with Article 13 of the Civil Code which provides that "month" undesignated by name is understood to consist of 30 days.
Hence, the formula for "six months" probation is 30 days times six months equals 180 days.

30 days/month x 6 months = 180 days

Using this formula in this case of Mitsubishi, the probation that started on May 27, 1996 ended on November 23, 1996, the 180th day.
Hence, when the employer served the termination letter dated November 25, 1996 on the employee at 3:00 a.m. on November 26, 1996 the employee was, according to the Court, already "regular."

This ruling is different from the ones in CALS Poultry, decided on July 30, 2002 and Alcira, decided on June 9, 2004.

There, the Court said a "six-month" probation ends on the sixth month on the same calendar date the probation started;
If the starting date is March 1, it ends on September l, although this is already the 185th day.

Of the three decisions, Mitsubishi is the latest and, for that reason, the controlling one.

Private School Teachers

For private school teachers, the legal requisites for acquisition of permanent employment or security of tenure, are as follows:

the teacher is a full-time teacher;
the teacher must have rendered three consecutive years of service; and
such service must have been satisfactory. (University of Sto. Tomas, February 15, 1990)

Art. 297. Termination by employer.

An employer may terminate an employment for any of the following causes:

Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;
Gross and habitual neglect by the employee of his duties;
Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;
Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representatives; and
Other causes analogous to the foregoing.

Notes:

The employer cannot be legally compelled to continue with the employment of a person who admittedly is guilty of misfeasance towards his employer and whose continuance in the service of the latter is patently inimical to his interest.
The law in protecting the rights of the laborer authorizes neither oppression nor self-destruction of the employer. (See Filipro, October 16, 1986.)
However, the employer's right to select or discharge his employees is subject to regulation by the State basically in the exercise its paramount police power.
In stinging fashion, through Justice Quisumbing the Supreme Court said:

The employer's power to dismiss must be tempered with the employee's right to security of tenure. Time and again, We have said that the preservation of the lifeblood of the toiling laborer comes before concern for business profits. Employers must be reminded to exercise the power to dismiss with great caution, for the state will not hesitate to come to the succor of workers wrongly dismissed by capricious employers. (Bascon and Cole, February 5, 2004)

Conditional Hiring, Not Illegal Dismissal

In an employment contract, the parties may establish such stipulations as they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy.
When a would-be employer offers a position to an applicant and the latter accepts the offer, perfection or birth of the contract takes place when the parties agree upon the essential elements of the contract.
Nonetheless, when the offer contains conditions to be fulfilled before the applicant may be deemed an employee, the employment subject to a suspensive condition which renders the obligation of the would-be employer conditional.

Article 1181 of the Civil Code the states that of "in conditional obligations, the acquisition of rights as well as the extinguishment or loss of those already acquired shall depend upon the happening of the event which constitutes the condition."

Here, ANZ [the prospective employer] offered Sagun [the applicant] the position of Customer Service Officer, subject to satisfactory results of pre-employment screening, such as bankruptcy checks, reference checks, etc.

When one month after the offer, the background checks turned out unsatisfactory (e.g. he was dismissed from his previous job, he did not resign), ANZ has no obligation to recognize and fully accord Sagun the rights under the employment contract.
In contract with a suspensive condition, if the condition does not happen, the obligation does not come into into effect.
Consequently, no employer-employee relationship has been created.
The complaint of illegal dismissal cannot be sustained. (ANZ Global Services vs. E. Y. Sagun, G.R. No. 220399, August 22, 2016)

Due Process

Any worker to be removed from his job is entitled to "due process."
This is a fundamental right, partaking the nature of human right.
The job is livelihood whose denial is no less equivalent to condemning the worker to a struggle for survival.
Philippine law conceives "due process" in two senses:

substantive due process

the employee's dismissal is justified by a lawful and valid reason

procedural due process

requires ample opportunity for the worker to explain his side before he is dismissed

By present jurisprudence:

absence of substantive due process

makes the dismissal illegal

absence of procedural due process

although similarly illegal, does not invalidate the dismissal but makes the employer liable for monetary penalty

Two Groups of Causes

Composing the substantive due process, the valid causes of dismissal are called:

"just"

under Article 297

"authorized"

under Articles 298 and 299

How do they differ?

In an intrinsic sense they really don't, because a just act has to be deemed authorized and an unjust act cannot be authorized.
Apparently, the two adjectives can be interchanged,

But the differentiation carries some substantive significance.

Reference:

The just causes refer to faults, misdeeds, of the employee;
the authorized causes refer to business or economic reasons,

Separation Pay:

Dismissal for a just cause does not make the employer liable for separation pay except that, based on compassion, financial assistance may be given to a deserving dismissed employee;
In authorized causes, the employer is required by law to pay separation pay to the employee except in case of closure or cessation of operation due to serious business losses duly proved.

Due process:

Due process should be observed in both just and the authorized causes.
In the just causes the due process consists the of notifying and hearing employee;
For the authorized causes no hearing is needed but notices to the employee and to DOLE should be given 30 days before the employee's separation.

Effectivity date:

The effectivity date of dismissal due to a just cause is determined by the employer;
While the separation due to an authorized cause takes effect at least 30 days after the employee received the notice.

(But see under Art, 299 the new ruling in Deoferio vs. Intel)

Just Causes: Serious Misconduct

Misconduct is improper or wrong conduct.

It is the transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment.
The misconduct to be serious within the meaning of the Act must be of such a grave and aggravated character and not merely trivial or unimportant.
Such misconduct, however serious, must, nevertheless, be in connection with the work of the employee to constitute just cause for his separation. (Department of Labor Manual, Sec. 4343.01)

Sexual harassment is serious misconduct.

It is reprehensible enough but more so when inflicted by those with moral ascendancy over their victims.
It is a valid cause of dismissal. (Villarama, September 2, 1994)

The manager's act of fondling the hands, massaging the shoulder and caressing the nape of the secretary constitutes sexual harassment. (Libres, May 28, 1999)
The notes to Article 136 related to sexual harassment are relevant.
Falsification of time card constitutes serious misconduct and dishonesty or fraud, which are just causes for the termination of employment. (Felix, March 28, 2001)

Immorality; Premarital Sexual Relations

Being pregnant but unmarried.
Is this a "serious misconduct that justifies the dismissal of an employee in a catholic school?
The labor arbiter, the NLRC, and the Court of Appeals all said yes.
But the Supreme Court, through Mr. Justice Reyes, said no.
The Court affirmed that "if the conduct does not conform to what society generally views as respectable or moral, then the conduct is considered as disgraceful or immoral," But "it is not religious morality that should determine the prevailing norms of conduct, but rather, the public and secular morality.
The employer school argued that "disgraceful or immoral conduct" is a ground for dismissal under the 1992 Manual of Regulations for Private Schools in addition to the "just causes" under the Labor Code.
But the Court explained that in speaking of disgraceful and immoral conduct, the law refers to those conducts which are proscribed [prohibited] because they are "detrimental to conditions upon which depend the existence and progress of human society."
The Court concluded that the employee's dismissal was illegal. (Leus, January 28, 2015)

Willful Disobedience

In order that willful disobedience by an employee may constitute a just cause for terminating his employment, the orders, regulations, or instructions of the employer or representative must meet three elements:

reasonable and lawful;
sufficiently made known to the employee; and
in connection with the duties which the employee has been engaged to discharge.

Where an order or rule is not reasonable, in view of the terms of the contract of employment and the general rights of the parties, a refusal to obey does not constitute a just cause for the employee's discharge.
What is a reasonable order or rule will depend on the circumstances of each case.
Reasonableness, however, has reference not only to the kind and character of directions and commands, but also to the manner in which they are made.
The employee's disobedience, in order to justify his dismissal under this provision, must relate to substantial matters, not merely to trivial or unimportant matters.
Further, disobedience to be considered willful must be resorted to without regard to its consequences. (Department of Labor Manual, Sec. 4343.01[2])

Is Ignorance an Excuse?

If an employee claims ignorance, i.e., lack of information, of the company policy he violated, the employer should disprove his ignorance otherwise, the employee cannot be punished.
This is the effect of element number two, above.
In the workplace, the employer has the responsibility to inform the workers about company rules, not the workers to look for the rules.
The Civil Code declares that "Ignorance of the law excuses no one from compliance therewith.

This law applies to compliance with the laws of the Republic.
It does not apply to policy or rules issued by and for private enterprise.
To be binding, they ought to be made known to the people meant to be bound.
Failing to do so, the management has itself to blame.

This is a legal reason why, in human resource management, orientation sessions with new employees are extremely important.

Therefore, attendance in orientation sessions must be recorded and the subjects discussed should be properly documented.

Midstream Changing of Company Policy

Is an employee bound by a policy initiated after he was hired?
The court rendered this ruling —
Company policies do not stand still.

The employer may change company policy even after employees have been hired.
Such amended policy becomes an implied contract between the employer and the employees if the latter continues to work while such amended policy is in effect.
The implied contract binds both the employer and the employees. (Abbott Laboratories, July 23, 2013 citing an American case)

New policy requiring deposit and salary deduction needs DOLE permission. (Nina Jewelry, November 28, 2011 quoted in Bluer Than Blue, April 7, 2014)

Prohibited Relationship

A policy prohibiting an employee from having a relationship with an employee of a competitor company, so as to protect the employer's business secrets, is a valid exercise of management prerogative.
The employer has a right to guard its trade secrets, manufacturing formulas, marketing strategies, new products and techniques being developed, and other confidential programs and information.
They have to be shielded from competitors.
Enforcing such protective policy does not amount to illegal dismissal or constructive dismissal. (Duncan Association of Detailmen-PTGWO, September 17, 2004. See also Lope, December 13, 2005)

"Non-compete" Clause; Conflict of Interest; Conflict of Jurisdiction

Some employment contracts prohibit an employee from being employed in a company whose business is competitive to that of the present employer.
This is the essence of a "non-compete clause" which commits the employee not to get employed with a competitor even after he has left his employment.
Is this a legal and enforceable stipulation?

The Court acknowledges the employer's right to protect his trade secrets from being divulged by former employees.
But a "non-compete" clause restricts one's right to follow a trade and exercise a profession.
The Court has ruled that such a clause should be scrutinized.
The employer has prove that the restriction is "reasonable and not greater than necessary to protect the employer's legitimate interests."
The prohibition cannot be universal or perpetual.

There has to be definite boundaries as to time, place, and kind of job or product. (See Rivera, April 19, 2006.)

In one case, the employment contract of a vice president for sales contains a "Confidentiality of Documents and Non-Compete Clause."

The clause prohibits him from disclosing confidential information and from working in any business enterprise in direct competition with his employer while he is employed and for a period of one year, from resignation or termination.
If he violates the prohibition, his "forms of compensation including commission and incentives will be forfeited.
Some eight years later, the employer, having received information that the VP gave competitor information about the company's marketing strategies, required him to explain why he should not be charged with disloyalty, conflict of interest and breach of trust.
In response, the VP resigned and revealed that indeed he had joined another firm, a competitor.
For violating the non-compete clause (among other reasons) he was dismissed and his commissions were deemed forfeited.
The VP filed a complaint for non-payment of commissions and for damages.

The Supreme Court upheld the non-compete clause and ruled that its violation was a just cause to terminate the employment and to forfeit the commissions.

Furthermore, the Court upheld NLRC's jurisdiction over the case as it was a money claim arising from an employer-employee relationship.
By so ruling the High Court disagreed with the Court of Appeals which erred in saying that the case was a civil law dispute because the non-compete clause referred to acts done after the cessation of the employer-employee relationship or the "post-employment relations of the parties."

But, disagreeing, the Supreme Court observed: "As clearly stipulated, the parties wanted to apply said clause during the pendency of [the employee's] employment, and [the employer] correctly invoked the same before the labor tribunals to resist the former's claim for unpaid commissions on account of his breach of the said clause while the employer-employee relationship between them still subsisted. (Century Properties, Inc., July 5, 2016)

But, on this issue of jurisdiction between the labor tribunal or the regular court, this Century Properties decision should be reconciled with that of Portillo vs. Lietz, Inc. G.R. No. 196539, October 10, 2012.

In Portillo vs. Lietz, the Supreme Court had said:

"Simply, the labor tribunal in an employee's claim for unpaid wages is without authority to allow the compensation of such claims against the post-employment claim of the former employer for breach of a post-employment condition.
The labor tribunal does not have jurisdiction over the civil case of breach of contract.
"It is clear therefore that while petitioner's (employee's) claim for unpaid salaries is a money claim that arises out of or in connection with employer-employee relationship, respondent's (employer's) claim against petitioner for violation of the "Goodwill Clause" is a money claim based on an act done after the cessation of the employment relationship.
And while the jurisdiction over [the employee's] claim is vested in the Labor Arbiter, the jurisdiction over [the employer's] claim rests on the regular courts."

These statements in Portillo vs. Lietz are not mentioned at all in the Century Properties decision.

Refusal to Transfer

An employee should, as a rule, obey an employer's order transferring him from one job assignment, or one location, to another.
Inconvenience to the employee does not justify disobedience to the transfer order.

But this rule presupposes that the transfer order itself is lawful and reasonable. (Escobin, April 15, 1998)
The transfer, moreover, should not result in demotion in rank benefits or other privileges (Leonardo, June 16 2000) otherwise, the transfer amounts to constructive dismissal. (Garcia, September 3, 1999; OSS Security, February 9, 2000)

The employer's transfer of an employee from the position of "Appraiser" to "Clerk-Meralco Collection" without change in salary, allowances and other benefits was upheld where the employer was able to prove that the reshuffle of personnel was intended "to familiarize the bank employees with the various phases of operation, and to further strengthen the existing internal control system of the bank."

The court did not find that the transfer was motivated by discrimination or bad faith or that it was done as a punishment or demotion without sufficient cause.
The complainant employee was not dismissed nor constructively dismissed.
It was the employee who, while on extended leave of effect separated himself from the bank's employ by filing the illegal absence, in dismissal complaint.

In upholding the employer's transfer order to the employee, the Court reiterated the "test for determining the validity of transfer" of employees as explained in the 1999 case of Blue Dairy Corp. vs. NLRC, 373 Phil. 179, September 14, 1999. (E. Mendoza vs. Rural Bank of Lucban, G.R. No. 15542, July 7, 2004)

In that Blue Dairy case, the court ruled that the employer must be able to show that the transfer is not unreasonable, inconvenient or prejudicial to the employee;
nor does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits.
Should the employer fail to overcome this burden of proof, the employee's transfer shall be tantamount to constructive dismissal.

An employee cannot be promoted, even if merely as a resuIt of a transfer, without his consent. (Philippine Telegraph and Telephone Corp., September 29, 2003)
But it remains true that promotion is an exercise of management prerogative.

Management determines who deserves promotion and on what basis. (National Federation of Labor Union, 202 SCRA 346 [1991])

Neglect of Duties

In order to warrant the dismissal of the employee for just cause, Article 297 (b) of the Labor Code requires the negligence to be gross and habitual.

Gross negligence is the want of even slight care, acting or omitting to act in a situation where there is duty to act, not inadvertently but willfully and intentionally, with a conscious indifference to consequences insofar as other persons may be affected.
Habitual neglect connotes repeated failure to perform one's duties for a period of time, depending upon the circumstances. Obviously, a single of isolated act negligence does not constitute a just cause for the dismissal of the employee.(Sugarsteel Industrial, Inc., June 6, 2016)

Poor Performance

Poor performance, equivalent to inefficiency under Article 282 of the Labor Code, must amount to gross and habitual neglect of duties to be a just cause for dismissal.

The NLRC clarified that poor performance does not necessarily equate to gross and habitual neglect of duties." (Gutierrez vs. NAWRAS Manpower Services, G.R. No. 234296, Nov. 27, 2019)

To justify the dismissal of an employee for neglect of duties, however, it does not seem necessary that the employer show that he has incurred actual loss, damage, or prejudice by reason of the employee's conduct.

It is sufficient that the gross and habitual neglect by the employee of his duties tends to prejudice the employer's interest since it would be unreasonable to require the employer to wait until he is materially injured before removing the cause of the impending evil. (Department of Labor Manual, Sec. 4343.01[2])

An employer has the right to impose productivity standards for its workers and take action to achieve compliance.

Failure to observe work standards, or to fulfill reasonable work assignments due to inefficiency may constitute just cause for dismissal. (Leonardo, 333 SCRA 589 [2000])

Abandonment of job is form of neglect of duty.
To constitute abandonment, two elements must concur:

the failure to report for work or absence without valid or justifiable reason, and
a clear intention to sever the employer-employee relationship

the second element as the more determinative factor and being manifested by some overt acts.

Mere absence is not sufficient.
The employer has the burden of proof to show a deliberate and unjustified refusal of the employee to resume his employment without any intention of returning. (Labor; et al, September 14, 1993)

Fraud, Loss of Confidence

Fraud has been defined as any act, omission, or concealment which involves a breach of legal duty, trust, or confidence justly reposed, and is injurious to another. (Jesse French Piano Organ Co. v. Gibbon, 180 S.W. 1185)

To constitute a just cause for terminating the employee's services, the fraud must be committed against the employer or representative and in connection with the employee's work.
Thus, the fraud committed by an employee against third persons not in connection with his work and which does not in any way involve his employer is not a ground for the dismissal of the employee.
Furthermore, since fraud implies willfulness or wrongful intent, the innocent non-disclosure of facts by the employee to the employer will not constitute a just cause for the dismissal of the employee. (Department of Labor Manual, Sec. 4343.01[3])

Loss of confidence applies only to cases of employees who occupy positions of trust and confidence, or to those situations where the employee is routinely charged with the care and custody of the employer's money or property.

To be a valid ground for dismissal, it must be based on a willful breach of trust and founded on clearly established or proven facts.
The basic premise for dismissal on the ground of loss of confidence is that the employee concerned holds a position of trust and confidence.
It is the breach of this trust that results in the employer's loss of confidence in the employee. (Quezon Electric, April 12, 1989)

Article [295] of the Labor Code authorizes the employer to dismiss an employee for committing fraud or for willful breach of trust reposed by the employer on the employee.

Loss of confidence, however, is never intended to provide the employer with a blank check for terminating its employees.
"Loss of trust and confidence" should not be loosely applied in justifying the termination of an employee.

Certain guidelines must be observed for the employer to cite loss of trust and confidence as a ground for termination.

Loss of confidence should not be simulated.
It should not be used as a subterfuge for causes which are improper, illegal, or unjustified.
Loss of confidence may not be arbitrarily asserted in the face of over whelming evidence to the contrary.
It must be genuine, not mere afterthought to justify earlier action taken in bad faith.

For loss of trust and confidence to be valid ground for termination, the employer must establish that:

The employee holds a position of trust and confidence;
The act complained against justifies the loss of trust and confidence. (PJ Lhuillier vs. Camacho, February, 22, 2017)

The first requisite mandates that the erring employee must be holding a position of trust and confidence.

Loss of trust and confidence is not a one-size-fits-all cause that can be applied to all employees without distinction on their standing in the work organization.
Distinction yet should be made as to what kind of position of trust is the employee occupying.

The law contemplates two (2) classes of positions of trust.

The first class consists of managerial employees.

They are those who are vested with the power or prerogative to lay down management policies to hire, transfer, suspend, layoff, recall, discharge, assign or discipline employees or effectively recommend such managerial actions.

The second class consists of cashiers, their functions, auditors, property custodians, etc. who, in the normal and routine exercise of regularly handle significant amounts of money or property.

But if the employees are ordinary rank-and-file workers, such as electricians and operators of equipment, there has to he some kind of proof that they are involved in the loss of company property.

Mere accusations by the employer will not suffice. (Lamsan Trading, September 20, 1986)
An assistant cook in a hotel, in-charge of food preparation and custody and release of food supplies, holds a position of trust and confidence. (Concorde Hotel, August 9, 2001)
But a janitor does not fall under this category. (De los Santos, December 20, 2001)

A charge of dishonesty involves serious misconduct on the part of the employee, a breach of the trust reposed by the employer upon him.

The rule that proof beyond reasonable doubt is not required to terminate an employee on the charge of loss of confidence and that it is sufficient that there is some basis for such loss of confidence is not absolute.
The right of an employer to dismiss employees on the ground that it has lost its trust and confidence in him must not be exercised arbitrarily and without just cause.
For loss of trust and confidence to be a valid ground for an employee's dismissal, it must be substantial and not arbitrary, and must be founded on clearly established facts sufficient to warrant the employee's separation from work. (Labur, et al, September 14, 1995)

In the 2017 decision in the Lhuillier case, the Supreme Court, disagreeing with the Court of Appeal, held that the complainant was a managerial employee and that his dismissal on the ground of loss of confidence was valid.

He was an Area Operations Manager, assigned to administer and oversee the operations of the pawnshop branches in Pangasinan, including the custody, handling and protection of the pawnshop company.
The Area Operations Manager admitted that he had committed a breach of trust when he brought along his mother's driver, an unauthorized person, during the QTP operation.
It was a very sensitive and confidential operation involving the pull-out of foreclosed or rematado pawned items for transport and deposit to another location.
Taking along an unauthorized person in the QTP operation was a violation of existing company policies and security protocol.
The act of allowing the presence of an unauthorized person in the confidential operation was a breach of trust, justifying the dismissal of the manager.

Work Handicap: Lack of Working Knowledge of Labor Law

The employer of a company dismissed its corporate human resource director for three reasons summarized as "loss of confidence."
One specific cause was the director's "inefficiency" and "ineptitude" when on two occasions she gave the company's finance department wrong information about paid leave and holiday pay required by the Labor Code.
The wrong information caused confusion among employees in the computation of salaries and wages.
The Supreme Court sustained the validity of the dismissal. The Court declared:

Due to nature of her functions, petitioner [the dismissed HR director] is expected to have strong working knowledge of labor laws and regulations to help shed light on issues and questions regarding the same instead or complicating them.

The complainant's low performance ratings revealed her "work handicap." (Philippine Luen Thai Holdings, July 11, 2012)

Commission of a Crime or Offense

Another just cause of terminating an employment is the employee's commission of a crime or offense against the person of his employer or against any immediate member of the employer's family.
The immediate members of the family referred to are limited to:

spouse
ascendants
descendants, or
legitimate, natural, or adopted brothers or sisters of the employer or
of his relative by affinity in the same degrees, and
those by consanguinity within the fourth civil degree. (See Art. 11, subsection 2, Revised Penal Code.)

Analogous Cases

The determination of whether the cause for terminating employment is analogous to any of those enumerated in Article 296 of the Code will depend on the circumstances of each case.
To be considered analogous to the just causes enumerated, a cause must be due to the voluntary and/or willful act or omission of the employee. (See Nadura, August 24, 1962.)
In one case, the employer (Violago Trucks) could not continue the employment of four of the complainant employees because Petrophil had prohibited them from entering Petrophil's premises as they were suspected of illegally diverting gasoline. (M.F. Violago, 117 SCRA 544 [1982])

This is an example of "analogous cause" as a just reason of dismissal.

D.O. No. 147-15 (September 7, 2015) states that "no act or omission shall be considered as analogous cause unless expressly specified in the company rules and regulations or policies.

It seems to us that this requirement has no basis in law, and DOLE implementing rules cannot legislate it.
It is ultra vires, beyond the province of implementing rules.

Drug Use and HIV/ /AIDS

Being found positive for use of a dangerous drugs is a ground for suspension or termination of an employee.

This is authorized under Section 36 of the Comprehensive Dangerous Drugs Act (R.A. No. 9165) approved on June 2002 which is comprehensive enough to punish various drug-related acts.
The law also requires the conduct of random drug test of officers and employees in public and private offices, in accordance with company rules and regulations.

But totally different is the handling of HIV/AIDS testing and of an employee perceived or suspected to have HIV/AIDS.

Such testing cannot be done without the employee's consent, and positive result of such test is not itself a reason to terminate the employee's employment. (See RA. No. 8504, approved on February 13, 1998.)

Dismissal Procedure

DOLE Department Order No. 147-15 (dated September 7, 2015) provides important details on the subject of employment termination.

The details pertain not only to dismissal procedure, but also to the causes of dismissal.
But, being merely implementing rules, the order cannot change or prevail over substantive provisions of law and court rulings based on established law or principles of equity.

Note that termination disputes are subject to compulsory conciliation-mediation. (See D.O. No. 147-15, Section 8 in the implementing rules of Book VI.)
It is not enough for an employer who wishes to dismiss an employee to charge him with theft or some other wrongdoing.

The validity of the charge must be established in a manner consistent with due process.
Accusation cannot take the place of proof.
A suspicion or belief no matter how sincerely felt cannot substitute for factual findings carefully established through an orderly procedure. (Philippine Associated, etc., June 29, 1989)

The Implementing Rules provide that no worker shall be dismissed except for a just or authorized cause provided by law and after due process.
The two facets of this legal provision are:

the legality of the act of dismissal;

that is, dismissal under the grounds provided for under Article 297 of the Labor Code and

the legality in manner of dismissal. (Shoemart, August 11, 1989)

Due Process in Just Causes; The Two-Notice Rule

If the dismissal is based on a "just cause" under Article 297, the law requires the employer to give the worker two written notices before terminating his employment, namely:

a notice charging the employee of the particular acts or omissions that may cause his dismissal; and
the subsequent notice which informs the employee of the employer's decision.

The first notice informs the employee of the infractions he allegedly committed and requires him to explain in writing why he should not be penalized, or possibly be dismissed, because of those infractions.
The opportunity to explain should be adequate which, according to a court ruling means at least five days from receipt of the notice to explain.
Ample opportunity to be heard further means the right of the employee to detail, supporting verbally or in writing, his answer to the charges and to submit evidence supporting his defense in hearing or other fair and reasonable way.
A face-to-face investigation is not always required, but it becomes compulsory:

if requested by the employee in writing;
if substantial evidentiary dispute exists;
if a company policy or practice requires it; or
if similar circumstances necessitate a formal hearing. (King of Kings Transport, June 29, 2001; Perez, April 7, 2009; see reiteration Claret School of Quezon City vs. Sinday, Oct. 9, 2019)

If the employee voluntarily and expressly admitted his infractions, no formal investigation is needed.

All that is needed is to inform the employee of the findings and the decision of the management (China Banking Corp., October 19, 2004)

The 2014 decision in Deoferio applies also the two-notice rule to an employee to be separated from employment because of disease under Article 299.

Weingarten Right

Is the employee's right to procedural due process violated if the employer denies the employee's request to be assisted by a union representative in an investigatory hearing?
American rulings — original source of Philippine principle of "due process of law" — hold that the denial violated the employee's right to due process. The right to be assisted has gained the name Weingarten right. (NLRB vs. Weingarten, Inc., 43L. Ed. 2d 171 [1975])
Weingarten right protects the workers' freedom of association for purposes of mutual aid and protection.

Further, the right aids to eliminate the inequality of bargaining power between employees and employers.

The 2016 edition of Cox and Bok's Labor Law calls attention to recent rulings (e.g., IBM Corp, 341 NLRB, 1288 [2004]) which apply the Weingarten right precept in unionized workplaces only.

"The Weingarten right does not extend to a workplace where, as here, the employees are not represented by a union."

One of the reasons of this newer ruling is the many changes in the workplace in recent years, including new security concerns raised by incidents of national and workplace violence.

Employer investigations require discretion and confidentiality.
Moreover, a nonunion co-worker has no ''official status and is far less able to "level the playing field" between the employer and the employee.

Due Process in Authorized Causes

If the separation is based on the "authorized causes" under Article 298 or 299, the law requires the employer to give both the worker and the DOLE written notices 30 days ahead of the projected separation.

If a number of employees is affected, the notice should be to each individual employee, not to the group.

Disease is an authorized cause of separation, but due process must be observed.

The medical certificate is a substantive requirement.
Its absence makes the termination unauthorized and illegal.
Moreover, the two-notice rule, required for the just causes under Article 297, is likewise required for Article 299, otherwise the Agabon and the Jaka rulings (explained below) will apply.

Consequence of Violation of Procedural Due Process: Valid Cause But of Invalid Procedure: A Heated Debate

If the separation of the employee is for a valid cause under Articles 297, 298, or 299, but the employer did not observe procedural due process, is the separation legal?
The majority of the Supreme Court justices answered yes in 1989, and this answer still stands.

Validity of the cause validates the dismissal; the employee thus remains dismissed.

But what is the employer's liability for not observing proper procedure?

The standing answer now is: make the employer liable for damages.

But let us review how this current ruling evolved. We see four phases of that evolution.

1989: The Wenphil Doctrine: Dismissal Valid, But Employer Must Pay Indemnity

Where the employer had valid reason to dismiss an employee but the employer disregarded proper dismissal procedure, the dismissal could still be upheld, so the employee would remain dismissed, but the employer would be required to pay certain indemnity.
This was called the Wenphil doctrine because it was first laid down in the case Wenphil Corp. vs. NLRC. The pertinent portion of that ruling reads:

The dismissal of an employee must be for

just or authorized cause and
after due process.

Where the employer committed an infraction of the second requirement, a sanction must be imposed upon such employer for failure to give a formal notice and conduct an investigation as required by law before dismissing the employee from employment, An indemnity of P1,000 may be awarded, The measure of this award depends on the facts of each case and the gravity of the omission committed by the employer. (Wenphil, February 8, 1989)

In 2000: Serrano Modified Wenphil: Dismissal Valid, But Employer Must Pay Full Backwages

Obviously, the Wenphil doctrine was meant to discourage dismissals without due process.

But the purpose had not been achieved, the Supreme Court observed, as many employers did "dismiss now and pay later."
The penalty perhaps was too light. The rule needed revision.

The revision of Wenphil came two years later in Serrano vs. NLRC (January 27, 2000).

For not observing due process, the employer was required to pay, not indemnity, but the employee's full backwages from the time of his dismissal to the finality of the court's decision.
But the dismissal was not declared illegal since it was based on valid reason; hence, the employee remained dismissed.
The dismissal was merely defective; the Court called it "ineffectual" because the dismissal was in effect deferred until affirmed by the court.

In 2004: Agabon Replaces Serrano and Partly Restores Wenphil Dismissal Valid, But Employer Must Pay Higher Indemnity, Not Full Backwages

Four years later, in Agabon vs. NLRC (November 17, 2004), the judicial thinking disfavored Serano and shifted back partly to Wenphil.

This means that since the dismissal is for a valid cause, the dismissal is legal and the employee remains dismissed.
But the employer, for not observing proper procedure, will have to pay the employee an indemnity in the form of nominal damages not full backwages as decreed in Serrano nor a light indemnity as in Wenphil.
In other words, Agabon prefers a middle ground.
Thus, under the present Agabon doctrine, the employer is imposed a "penalty" lighter than full backwages imposed in Serrano but heavier than the indemnity initiated in Wenphil.

The indemnity to be imposed on the employer is not a pre-fixed amount but dependent on the degree of gravity of the employer's disregard of procedural due process.

In Agabon, the Court imposed P30,000.00.
Such effect of not following proper procedure applies to cases under Articles 297, 298, or 299.
If it is one under Article 298 or 299, the employee remains entitled also to separation pay.

In 2005: JAKA Fine-tunes Agabon: Indemnity Varies as to Cause

The Agabon ruling is itself modified or supplemented in JAKA Food Processing Corp. vs. Pacot, et al., (March 28, 2005).
Whereas Agabon's award of nominal damages does not distinguish between terminations under Aricles 297, 298, or 299, JAKA makes a distinction:

If the dismissal is based on a just cause under Article 297 but the employer failed to comply with the notice requirement, the sanction to be imposed upon him should be tempered because the dismissal process was in effect, initiated by an act imputable to the employee;
If the dismissal based on an authorized cause under Article 298 but the employer failed to comply with the notice requirement, the sanction should be stiffer because the dismissal was initiated by the employer's exercise of his management prerogative.

In JAKA, where the complainant-employees were validly separated because of serious business losses but the employer failed to give the required one month notice, the indemnity to each of the complainants was P50,000.00 as nominal damages.
- The JAKA decision is unanimous except that Justice Tinga reserved right to confront again in an appropriate case the question of the validity of dismissal without due process.
- Indeed, the debate on the issue seems far from over.
- But Justice Tinga had already retired.

No More Backwages Under the Agabon Doctrine

The Agabon doctrine has already established that an employee's dismissal is legal and effective if there is adequate valid reason even if the dismissal procedure is not properly observed.
But for that fault the employer will have to pay indemnity or damages to the dismissed employee.
This means that backwages may no longer be awarded in dismissals grounded on a legal and valid reason.

Burden of Proof; Dismissal Not Affected by Acquittal

In any dismissal case, the employer has the burden of proving the lawful cause.

Equipoise is not enough.
The employer must affirmatively show rationally adequate evidence that the dismissal was for justifiable cause. (See Dizon, December 14, 1989.)

Prosecution or conviction in a criminal case is not a prerequisite to dismiss an employee on ground of serious misconduct or breach of trust, or any of the just causes of dismissal.

To convict a criminal, proof beyond reasonable doubt is required.
To separate an employee, substantial evidence is enough.
An employee may be acquitted in a criminal case and yet his dismissal by the employer may remain.
Similarly, the fact that a criminal complaint against the employee has been dropped by the prosecutor is not binding and conclusive upon the labor tribunal. (See: United Tourist Promotion, February 5, 2014; Concepcion, January 24, 2012.)

It is true that in administrative proceedings, the guilt of a party need not be shown by proof "beyond reasonable doubt" required by our penal laws, yet, there must be substantial evidence to support it.
Substantial evidence is more than mere scintilla.

It means such relevant evidence as a reasonable mind might accept adequate to support a conclusion (Ang Tibay vs. CIR, 69 Phil. 635; Anscor Transport, September 28, 1990) or to arrive at a defensible judgment, (Starlite, March 16, 1989)

Preventive Suspension

Preventive suspension is justified where the employee's continued employment poses serious and imminent threat to the life or property of employer or of the co-workers.

Without this kind of threat, preventive suspension is not proper.
The maximum period of suspension is 30 days.
Beyond that the employee becomes entitled to his pay and benefits and the employer may be required to pay indemnity. (RS Business, 1995)

Constructive dismissal sets in when the suspension goes beyond the 30-day maximum period allowed by law. (Hyatt Taxi, June 26, 2001)
Preventive suspension is an incident of investigation.

It is not itself the penalty for the offense, although it may be considered as such after the offense is proved and the appropriate penalty determined.

Appropriate Penalty

The penalty for an infraction does not have to be dismissal.
Although Article 297 allows dismissal for the just causes, court rulings do insist on imposing only an "appropriate" penalty.
The appropriateness depends not only on the lightness or seriousness of the offense but also on diverse factors such as:

the employer's toleration of or laxity in past similar offenses,
the employee's years of service and "clean" record, and
even the amount of money or value involved.

But why consider at all the amount or value involved?

It may be argued that theft is still dishonesty regardless of amount or value involved.
This argument is well-taken as regards the nature of the act.
But the issue is the appropriateness of the penalty.
Theft is still theft — a punishable act — regardless of amount taken.
But there are degrees of theft and corresponding degrees of penalty.
When determining the proper penalty, a manager may punish a theft with dismissal but another theft may be punished only with warning or suspension or sympathetic counseling.
For instance, a manager cannot justify dismissing an employee for the sole act of stealing one kalamansi from the kitchen or for stating a false reason on his sick leave request.

In reviewing the case of an employee dismissed for trying to take out a small can of lighter fluid, the Court found out that the employee had been with the company for about 10 years and that the item taken was worth only eight pesos.

The Court called the dismissal "too harsh" and ordered the employee's reinstatement.
The same result happened in the case of an employee who helped himself out to a burger sandwich and a cone of ice cream.

As if reminding everyone, especially the employers, of the severity of dismissing a worker, the Supreme Court has pronounced these classic terms:

Where a penalty less punitive would suffice, whatever missteps may be committed by labor ought not to be visited with a consequence so severe.
It is not only because of the law's concern for workingmen.
There is, in addition, his family to consider.
Unemployment brings untold hardships and sorrows on those dependent on the wage-earner.
The misery and pain attendant on the loss of jobs jobs then could be avoided if there be acceptance of the view that under all circumstances of a case, the workers should not be deprived of their means of livelihood.
Nor is this condone what had been done by them.
For all this while, since the employer considered them separated from the service, they had not been paid.
From the strictly juridical standpoint, it cannot be too strongly stressed that where a decision may be made to rest on informed judgment rather than rigid rules, all the equities of the case must be accorded their weight.
Labor law determinations should not be only secundum rationem but also secundum caritatem. (Almira, 58 SCRA 120 [1974])
In short, dimissal is a supreme penalty, and if it is at all avoidable, without oppressing the employer, it should be avoided.
Whenever an employee is punished, his dependents are punished too.

Forfeiture of Benefits

It is lawful for a company's code of conduct to impose the penalty of restitution or forfeiture of benefits, apart from other penalties, to an employee who caused loss or damages to the employer. (China Banking Corp., October 19, 2004)

Demotion; Quota

Demotion is allowed as a penalty.

But, always, the demotion must be justified by facts and evidence, including applicable policy or practice.
Demotion may be resorted to because of the employee's failure to meet productivity standards or quota, provided that the quota is fair and reasonable and the management's action is exercised in good faith for the advancement of the employer's interest.
Failure to reach the output quota may meet a penalty more severe than demotion. (Leonardo, June 16, 2000)

The demotion, moreover, must observe due process.
The employee must be given ample opportunity to refute the employer's ground or reason for the impending demotion.

Demotion is like dismissal; it is a punitive action.
It affects the employee's right to continued employment.

Constructive Dismissal

An unwarranted transfer or demotion of an employee, or other unjustified action prejudicial to the employee may give rise to a complaint for constructive dismissal.
This refers to an involuntary resignation resorted to when continued employment becomes impossible, unreasonable or unlikely.
Constructive dismissal also exists when there is:

a demotion in rank or
a diminution in pay, or
when a clear discrimination, insensibility or disdain by an employer becomes unbearable to an employee. (Hyatt Taxi, June 26, 2001)

An employee is likewise deemed constructively dismissed where his status is changed from regular to casual. (Sy, June 21, 1989)
Reduction of work days, the reasons for which were not specifically explained and which was applied only to union officers, was an act that amounted to constructive dismissal and U.L.P. (Unicorn Safety Glass, November 25, 2004)
"Constructive" in the term, "Constructive Dismissal" does not mean creating or constructing something good or helpful to the employee.

It connotes a dismissal hidden behind acts that appear neutral or normal, or even helpful, but it truth are motivated by hidden desire to expel the employee.
It is dismissal in disguise, an act amounting to dismissal but made appear as if it were not. (Uniwide Sales, February 29, 2008; Galang v. Boie, July, 20, 2016.)
The true motive comes to the surface by construing or interpreting the deceivingly harmless acts of the employer.
In "constructive dismissal" concept, the word constructive comes from the word "construe"· (i.e., to interpret).

"Freezing" an employee — not dismissing him but giving him no work at all — is often a form of constructive dismissal.
"Floating status" beyond six months, under Article 301, may also amount to constructive dismissal.
The employer's failure to pay the employee's salary for three months constituted constructive dismissal, even if it was the employee that resigned.

The employee, in this case, clearly said in the resignation letter that the non-payment of salaries was the reason for the resignation. (Dreamland Hotel, March 12, 2014)

Who Has the Burden of Proof?

The employee who is complaining of constructive dismissal because he was "forced to resign " has the burden to prove that the resignation was involuntary.

It is not for the employer to prove the voluntariness of the resignation.

In office parlance, "forced resignation" is different from "graceful exit."

When an employee is proved to have committed an offense grave enough to justify his dismissal, the employer may allow him to resign instead of being officially dismissed.
One purpose is to keep his employment record "clean."
This is not forced resignation; this is a form of graceful exit.
It is not constructive dismissal; it is preferred resignation to skip dismissal.

Shortening from 30 days to 15 days the period required for the resigning employee to notify the employer does not prove forced resignation.

Waiving or shortening such notice period comes within the employer's discretion.
It does not convert resignation to constructive dismissal. (Hechanova, October 16, 2013)

Employee Has to Prove "Constructive Dismissal"

Cokia Industries vs. Bug-os, G.R. No. 236322, November 27, 2019:

The NLRC held that Bug-os was forced to resign because petitioners [her employer] subjected her to "harsh words and treatment. The employer gave his orders in a high-pitched voice, directed her to do something despite being busy working on the payroll, forced her to run when she was given orders, and "made her feel like a slave." Bug-os' act of filing her complaint shows that she had no real intention to give up her office.

Ruling:

Constructive dismissal exists if an act of clear discrimination, insensibility, or disdain by an employer becomes so unbearable on the part of the employee that it could foreclose any choice by him or her except to forego his or her continued employment.

The test for determining if an employee was constructively dismissed is whether a reasonable person in the employee's position would feel compelled to give up his or her employment under the prevailing circumstances.

In contrast, resignation refers to the voluntary act of an employee who is in a situation where one believes that personal reasons cannot be sacrificed in favor of the exigency of the service, and one has no other choice but to dissociate oneself from employment.

The acts of the employee before and after the alleged resignation must be considered in determining whether he or she, in fact, intended to sever his or her employment.

The employer has the burden of proving that an employee voluntarily resigned.

However, an allegation of constructive dismissal must be proven by employee, especially when he or she has given a resignation letter to the employer, as held in the appropriate case Gan v. Galderma Philippines, Inc.

Moreover, strong words from the employer do not necessarily make the working environment unbearable.

When these are uttered "without palpable reason or are expressed only for the purpose degrading the dignity of the employee, then a hostile work environment will be created."
Bug-os did not cite the statements made by the employer that were demeaning to her.
Hence, We cannot say whether George uttered words which made working in CIHMI unbearable for her, or simply expressed his anger over the misappropriation of CIHMI's funds.

Art. 298. Closure of establishment and reduction of personnel.

The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.

Notes

Authorized Causes:

installation of labor-saving devices

separation pay = at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher.

redundancy
retrenchment

separation pay = at least his one (1) month pay or to at least one-half (1/2) month pay for every year of service, whichever is higher.

A written notice must be served to the workers and the DOLE at least one (1) month before the intended date thereof

Authorized Causes

Whereas Article 297 takes up the "just causes" of employment termination.
Articles 298 and 299 deal with the "authorized causes."
The "just" and the "authorized" causes are not intrinsically different because what is "just" can also be authorized and something authorized should not be presumed unjust.

Indeed, the difference in labels is not strictly observed even in judicial statements.

But the differentiation has significance.

Acts

The just causes relate to acts done by the employee.
The authorized causes (except disease) involve measures taken by the employer because of business exigencies.

Separation Pay

The just causes causes generally do not entail payment of separation pay;
The authorized causes generally do entail payment of separation pay.

But Articles 298 and 299 are not a complete listing.

Other authorized causes of employment termination are found in the Code, such as:

total and permanent disability
application of valid union security clause
completion of project
failure in probation,
staging an illegal strike, etc.

Automation

Reduction of the number of workers in a company's factory made necessary by the introduction of machinery in the manufacture of its products is justified.
There can be question as to the right of the manufacturer to use new labor-saving devices production with a view to effecting more economy and efficiency in its method of production. (Philippine Sheet Metal Workers Union vs. CIR, 83 Phil. 433 [1949])

Redundancy

Redundancy, for purposes of our Labor Code, exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise.
Succinctly put, a position is redundant where it is superfluous, and superfluity of a position or positions may be the outcome of a number of factors, such as:

over-hiring of workers
decreased volume of business, or
dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise.

The employer has no legal obligation to keep in its payroll more employees that are necessary for the operation of its business. (Willshire, February 7, 1991)
Management may undertake a reorganization within the company or enter into merger with other companies to meet the demands of the enterprise.

In such cases, the company may abolish managerial and confidential positions or create new ones as necessity for them requires. (Yap, 186 SCRA 664 [1990])

Likewise, management may merge job functions to streamline the company operations to cut costs even if thereby an employee will lose employment. (Pantranco North Express, 314 SCRA 740 [1999])
However, management must show adequate proof that the abolished positions are unnecessary.

It is not enough for a company to merely declare that it has become over-manned. (Golden Thread Knitting, 304 SCRA 568 [1999])

Presentation of new table of organization and certification by the HR Manager to the effect that the position in question has become redundant are inadequate evidence.

More compelling evidence would have been a comparison of the old and new staffing patterns.
If new office is created in place of the "redundant" position, the old and new positions should be described, to show they are dissimilar and incongruous. (SPI Technologies, April 7, 2014)

In other words, redundancy cannot just be alleged; it has to be proved by evidence.

Employer may present new staffing pattern, feasibility studies or proposal, viability of newly created positions.
Moreover, hiring of new employees to do the tasks of the redundant employees negates the claim of redundancy. (General Milling, January 30, 2013)

The employer, to achieve economy and efficiency in its operations, can phase out or abolish positions or group of positions and thereafter engage the services of an independent contractor to do the functions of the abolished positions, unless in a CBA the employer is prohibited from undertaking such cost-saving recourse. (Serrano, January 27, 2000)
The discussion of legitimate contracting under Article 106 is relevant.

The requisites of valid redundancy are:

Written notice served on both the employee and the DOLE at least one month before the intended date of termination
Payment of separation pay
Good faith in abolishing the redundant position
Fair and reasonable criteria in ascertaining what positions are to be declared redundant. (Asian Alcohol Corp. vs. NLRC, 364 Phil 912 [1991])

Retrenchment

Retrenchment is the authorized reduction of personnel because of losses or imminent losses of the business.
Retrenchment may be valid only when the following requisites are met:

It is intended to prevent losses and such losses are proven;
Written notices are served on the workers and the Department of Labor and Employment at least one month before the effective date of retrenchment; and
Separation pay is paid to the affected workers.

The two notices are mandatory.

If the notice to the workers was given later than the notice sent to DOLE, the date of termination should be at least one month from the date of notice to the workers. (Fuentes, January 2 1997; see also Phil. Airlines, June 8, 2016)

Standards of Retrenchment

The Court has enumerated these four standards or justification of retrenchment:

Firstly, the losses expected should be substantial and not merely de minimis in extent.
Secondly, the substantial loss apprehended must be reasonably imminent, and such imminence can be perceived objectively and in good faith by the employer.
Because of the consequential nature of retrenchment, it must, thirdly, be reasonably necessary and likely to effectively prevent the expected losses.

The employer should have taken other measures prior or parallel to retrenchment to forestall losses, i. e., cut other costs than labor costs.

Lasty, but certainly not the least important, the alleged losses if already realized, and the expected imminent losses sought to be forestalled, must be proven by sufficient and convincing evidence. (Lopez Sugar, August 30, 1990)

Bringing down costs by retrenching must be exercised essentially as a measure of last resort, after less drastic means have been tried and found wanting. (Philippine Air Lines, June 8, 2016)

Illegal Retrenchment

The serious business losses should be proved by financial statements duly audited by an independent external auditor.

Even this, however, is not a hard and fast rule as the norm does not compel the court to accept the contents of the documents blindly and without thinking.
A careful examination of financial statements may be resorted to especially if on their face relevant facts appear to have been ignored that will warrant a contrary conclusion. (F.F. Marine Corp., April 8, 2005)

If the ground for retrenchment is not proved, the retrenchment will be declared illegal and of no effect.

If the retrenched employee had signed quitclaims, they may be declared invalid as not voluntarily entered into since the employee's consent was vitiated by mistake or fraud.
Even his acceptance of the retrenchment pay does not amount to estoppel; it does not bar him from contesting his separation.

The employee illegally retrenched is entitled to reinstatement but if reinstatement not feasible, such as where the employee asks for separation pay instead of reinstatement, then separation pay in lieu of reinstatement may be awarded at the rate of one month's pay for every year of service.

In addition, full backwages will have to be paid in view of the illegality of the separation, the retrenchment having been found illegal. (F.F. Marine Corp., April 8, 2005)

Criteria; Who Will Be Retrenched?

There must be fair and reasonable criteria to be used in selecting employees to be dismissed on account of retrenchment, such as:

less preferred status (i.e., temporary employees);
efficiency rating; and
seniority. (Asiaworld, July 23, 1987)

For certain workers, the following may also be considered:

physical fitness
age
financial hardship (Phil. Airlines, June 8, 2016)

When there is need to reduce the workforce, the management has the right to choose whom to lay off, depending on the work still required to be done and the qualities of the workers to be retained. (Almoite, July 10, 1986)
But the employer may not totally disregard seniority in selecting the employees to be retrenched. (Philippine Tuberculosis Society, August 25, 1998)

LIFO Rule

The "last in-first out" (LIFO) rule indicates that of two or more employees affected by a retrenchment program, the last one employed will be the first to go;

Seniority of the ones hired earlier therefore prevails.

Such rule has its merits but its observance is not a statutory duty of the employer.
The employer can adopt valid and equitable grounds as basis for lay-off or separation.
"LIFO" yields to management prerogatives unless a CBA provision states otherwise. (Dela Salle University, 320 SCRA 363 [1999]; But see Maya Farms, December 28 , 1994, cited in D.O. 147-15.)

Closure or Cessation

A firm that faces serious business decline and losses is allowed to close its business in order to avoid further economic loss, and a court has no power to require such firm to continue operating at a loss. (See LVN Pictures Employees, September 30, 1970.)
The preceding ruling does not mean that closure is allowed only in case the business is losing.

If the business is not losing but its owner, for reasons of his own, wants to stop doing business, he in good faith can lawfully do so anytime.
Just as no law forces anyone to go into business, no law compels anybody to stay in business.

Under Article 298 of the Labor Code, closure or cessation of business operation as a valid and authorized ground of employment termination is not limited to those resulting from business losses or reverses.

But separation pay should be paid to employees where the closure is not due to losses. (J.A.T. General Services, G.R. No. 148340, January 26, 2004)

Cessation of business not due to business reverses is subject to three requirements, namely:

service of a written notice to the employees and to the DOLE at least one month before the intended date thereof;
the cessation of or withdrawal from business operations must be bona fide in character, and
payment to the employees of termination pay amounting to at least one-half month pay for each year of service, or one month pay whichever is higher. (Mobil Employees, March 28, 1990)

Should separation pay be paid in case of closure due to serious business losses?

In a ruling involving a bank, the Supreme Court upheld the interpretation of a labor arbiter that even in situations where the business has to close because of serious losses, the employer must still pay separation pay to its employees, applying Article 283 [now 298] of the Code. (Banco Filipino, August 20, 1990)
But the Court has reversed this 1990 ruling.
In 1992, in an en banc decision in three consolidated cases led by State Investment House, Inc. promulgated on February 19, 1992, the Supreme Court agreed with the NLRC in not requiring separation pay for the employees of a business closed down by financial losses. (State Investment House, Inc., February 19, 1992)

In North Davao Mining Corp., March 13, 1996, the Supreme Court en banc, clearly said: "As already stated, Article 283 [now 298] of the Labor Code does not obligate an employer to pay separation benefits when the closure is due to losses.."

Interestingly, the Court noted that North Davao Mining Corporation, owned and managed by the government, incurred "mind-boggling " losses averaging P3,000,000,000.00 per year!

Cessation of operation and separation of employees for alleged financial losses should be based on evidence proving the losses.

The evidence should be presented in the hearings before the Labor Arbiter; it cannot be entertained before the Court of Appeals or the Supreme Court. (Me- Shurn Corp., January 11, 2005)

Other Cases of Cessation

An employer who has to cease operation because of compulsory acquisition by the government of its land for purposes of agrarian reform is not liable to pay separation pay to its affected employees. (National Federation Labor, March 2, 2000)
Relocating the business to a place to which the employees cannot or do not want to transfer (principally because of distance) may be be considered cessation of business.

It is not closure or cessation on account of serious business losses.
Consequently, the employer must pay the the separation pay Article 298 at the rate of one month's employees or required under one-half month's pay per year of service whichever is higher. (Cheniver Deco, February 17, 2000)

Sale in Good Faith; Obligations of Transferee

There is no law which requires the purchaser to absorb the employees of the selling corporation. (MDII Supervisors, 79 SCRA 40 [1977]
As there is no such law, the most that the purchasing company may do, for purposes of public policy and social justice, is to give preference to the qualified separated employees of the selling company who in its judgment are necessary in the continued operation of the business establishment (Ibid.)
However, the termination of the services of employees, though reasonable and done in good faith, will not allow the employer [the selling corporation] to avoid payment of the corresponding separation pay in accordance with law. (Lucena Oil, November 17, 1986; Second Division. Minute Resolution)

Sale of Stocks vs. Sale of Assets

Sale of the majority stocks does not dissolve the company as a corporate being.

The transferee acquires the controlling shares of stock of the corporation, but the corporation, an artificial being, remains as the employer.
The transfer only involves a change in the equity composition of the corporation.

In contrast, in sale of assets (also called sale of business), ownership of the business transfers to the buyer.

The employees may be separated from employment.
The seller, however, is liable for payment of separation pay.
The buyer in good faith is not required to retain the affected employees, nor is it liable for the payment of their claims.

Through the above ruling, the Supreme Court reversed its ruling in Manlimos vs. NLRC, March 2, 1995, because it erroneously applied a doctrine on asset sale to a case of stock sale. (SME Bank, Inc., October 8, 2013, en banc)

Sale in Bad Faith

Although the purchaser of the assets or enterprise is not legally bound to absorb in its employ the employees of the seller of such assets or enterprise, the parties are liable to the employees if the transaction between the parties is colored or clothed with bad faith. (Citing Majestic and Republic Theaters Employees Association vs. CIR, 4 SCRA 457, 460 [1962]; Cruz vs. PAFLU, 42 SCRA 68, 77-78 [1971]; See also Visayan Transportation Co., Inc. vs.. Java, 93 Phil. 962 [1953])
The sale or disposition must be motivated by good faith as an element of exemption from liability to absorb in its employ the employees. (Central Azucarera, 137 SCRA 295 [1985])
Change of corporate name does not create a new corporation.

The renamed corporation remains liable for illegal dismissal committed under the old name.
Under the Corporation Code, amendment of the articles of incorporation is not one of the modes of dissolving a corporation.
The change of name was not a change of the corporate being. (Zuellig Freight Cargo, July 22, 2013)

Merger

Merger of employer firms creates a succession of employment rights and obligations.

Thus, in a case involving merger of two companies, the Court said that although Filport had no contract whatsoever with the complainant employees regarding the services rendered by them prior to the merger, by the fact of the merger, a succession of employment rights and obligations had occurred between Filport and those employees. (Filipinas Port, August 16 1991)
In its ruling, the Court observed that in ordering the merger, the government mandated that Filport should absorb all labor force and necessary personnel complement of the merging operators.
This clearly indicates the intention to continue the employer-employee relationship of the individual companies with their employees through Filport.
Thus, Filport, the resulting corporation, has the obligation not only to absorb the workers of the dissolved companies but also to include the length of service earned by the absorbed employees with their former employers as well
To rule other wise would be manifestly less than fair, certainly, less than just and equitable.

The effect of merger upon the employees arose again when the Bank of the Philippine Islands absorbed the Far East Bank and Trust Company.

After much debate and by way of reconsideration, the Supreme Court reached the conclusion that in a merger, the employment contracts are deemed automatically assumed by the surviving corporation, even in the absence of an express stipulation in the articles of merger, without break in the continuity of employment.
The automatic absorption of the employees of the corporation does not impair, however, the right of the absorbing corporation to terminate the employment of employees for lawful or authorized cause.
Neither does the automatic absorption impair the employees' right to resign, retire, or otherwise sever their employment, whether before or after the merger, subject to existing contractual obligations.
With this ruling the employer's right to choose employees and the prohibition against involuntary servitude are reconciled.
Consequent to the absorption, the employees who are prejudiced by the absorbing corporation are also bound to join the majority union in view of the union security clause in the CBA.
In this BPI case, the FEBTC employees were given at least 30 days to consider joining the union.
Thereafter, the union may request termination of employment but the subject employee must be afforded ample opportunity to explain his failure to join the union. (Bank of the Philippine Islands vs. BPI Employees Union - Davao Chapter Federation of Unions in BPI Unibank, G,R. No. 164301, October 11, 2011)

This ruling is a significant modification of the majority decision rendered in August 2010.

Does the merger justify the employees' (or the union's) demand for separation pay on the ground that there was implied termination of employment?

No, since merger by itself does not terminate employment, the employees (or the union) from the absorbed corporation have no basis for the claim of separation pay.
Petitioner union does not deny that it continued its operation after the merger and that its members, as employees, resumed their work with their tenure, salaries, wages and other benefits intact. (Philippine Geothermal Inc. Employees Union vs. Unocal Phil., G.R. No. 190187, September 18, 2016)

Art. 299. Disease as ground for termination.

An employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his co-employees: Provided, That he is paid separation pay equivalent to at least one (1) month salary or to one-half (1/2) month salary for every year of service, whichever is greater, a fraction of at least six (6) months being considered as one (1) whole year.

Notes:

If the employee suffers from a disease and his continued employment is prohibited by law or prejudicial to his health or to that of his co-employees, the employer shall not terminate his employment unless there is a certification by a competent public health authority that the disease is of such nature or at such a stage that it cannot be cured within a period of six months even with proper medical treatments. (See Book VI, Rule I-A, Rules and Regulations Implementing the Labor Code.)
The company's own physician is not a "competent public health authority." (Cebu Royal Plant [San Miguel Corporation] vs. Deputy Minister of Labor, August 12, 1987)

Hence, a medical certificate issued by him does not suffice as compliance with Article 299.

The two-notice rule applies to employment termination on ground of disease under Article 299 of the Labor Code.

The first notice informs the employee of the ground for which his dismissal is sought;
The second notice apprises the employee of his dismissal after the employee had been given opportunity to explain his side. (Deoferio vs. Intel Technology, June 18, 2014)

If Sick Employee is Not Terminated but Resigns or Dies, Should He Be Paid Separation Pay?

The separation pay requirement in Article 299 presupposes that it is the employer who terminates the services of the sick employee.
The requirement does not apply to a situation where it is the employee who severs his/her employment ties. (Villanueva, June 1, 2011; Padillo, January 21, 2013)
Despite the above rulings in Villanueva and Padillo, we have to note the ruling in Abaquin vs. Atienza which the Bureau of Working Conditions cites to support its opinion that the employee who dies or resigns due to illness, with long years of service, deserves separation pay. We quote key parts of the Opinion dated October 7, 2002:

"While the Labor Code provides for separation pay to an employee who is separated from the service by the employer due to illness or affliction of a disease, it does not specifically provide for one who dies while on active service.
There are, however, instances where it is the employee who terminates his employment due to disease or ill health.
In one such case, the Supreme Court awarded separation pay to the employee who voluntarily resigned due to ill health.

According to the Court, voluntary resignation due to ill health is analogous to those contemplated under Article 284 (disease) of the Labor Code, and further considering that the employee was in the employ of the company for almost a quarter of a century.
Thus, the Court concluded that the employee "deserves the full measure of the law's benevolence" (Abaquin Security Detective Agency vs. Atienza, G.R. No. 72971, October 15, 1990).

Guided by the foregoing ruling of the Supreme Court, it is our opinion that an employee who suffered from cancer and died thereby terminating his employment, as in the case of your husband, is still entitled to separation pay.
He can be similarly situated to an employee who resigns voluntarily, thereby terminating his employment due to ill health.

While the husband was not terminated from employment nor did he resign from the company, the fact is that he died while on active service.

This opinion finds support the principle that all doubts in the implementation and interpretation of the Labor Code including the rules hereof shall be resolved in favor of labor.

Reiteration: Authorized Causes Require Separation Pay and Notices

It bears stressing that the employment termination based on authorized causes requires payment of separation pay and service of notice.

The notice should be served to the individual employee and to DOLE at least 30 days before the effectivity of the separation.

The required 30-day advance written notices cannot be shortened or substituted for by 30 days' pay. (Serrano vs. NLRC and Isetann Department Store, G.R. No. 117040, May 4, 2000; Resolution on Motion for Reconsideration)

In other words, the employee may be paid for 30 days and be excused from coming to work during that period, but still the employment termination should take effect at least 30 days after receipt of the notice.
In short, advance salary does not take the place of the advance notice.

In certain decisions, however, the Court states that previous notice to DOLE is not necessary if the employee consented to his retrenchment or voluntarily applied for retrenchment. (DOLE Philippines, September 13, 2001; Santos vs. Pepsi-Cola, July 5, 2001)
The amount of separation pay varies depending on the applicable authorized cause.

It ranges from one month's pay for at least six months service to half-month or one month's pay for every year of service.

If Service is Less Than Six Months, Is Separation Pay Zero?

To this question, an Opinion officially rendered by the Bureau of Working Conditions, dated August 1, 2001, replies:

This Bureau is of the view that a fraction of the year that is less than six months may be considered in the payment of separation pay on pro rata basis.
It may be noted that the provision of the law on the matter only declares that "fraction of six months is considered one whole year" for the purpose of the computation.
Nowhere in the law did it say that in case a fraction of the length of service is less than six months, no corresponding separation pay should be granted to the worker.
Thus, it may not be appropriate to construe the same automatically in the negative, that is — not to include the same as not being part of separation or retirement benefits.

Finding support in Abella vs. NLRC, 152 SCRA 140 (1987), the BWC Opinion restates:

We opine that the separated or retired employee shall be granted the proportionate separation pay for the portion of the length of service which is less than six months.

Consequences of Termination: Reinstatement

Having examined the valid causes and the proper procedures of employment termination, we may now look into the consequences of their violation.
The normal consequences of a finding that an employee has been illegally dismissed are stated in Article 294.
The employee becomes entitled to:

reinstatement to his former position without loss of seniority rights, and
the payment of backwages. (Santos, September 21, 1987)

Reinstatement restores the employee who was unjustly dismissed to the position from which he was removed.

The grant of backwages allows the same employee to recover from the employer the wages he lost because of his dismissal.

These twin remedies — reinstatement and payment of backwages — make the dismissed employee whole who can then look forward to continued employment.

Thus, these two remedies give meaning and substance the to constitutional right of labor to security of tenure.

The two forms of relief are distinct and separate, one from the other.

Though the grant of reinstatement commonly carries with it an award of backwages, the inappropriateness or non-availability of one does not carry with it the inappropriateness or non-availability of the other.
In other words, there may be reinstatement without backwages, or backwages without reinstatement.
But either reinstatement or backwages presupposes a finding of illegal dismissal.

Where there is reinstatement, there is no break in the length of service of the employee.

The unjustly dismissed employee, says Article 294, is entitled to reinstatement "without loss of seniority rights and other privileges..."

Strained Relations May Bar Reinstatement

Where the charge against the employee has not been substantiated, his dismissal is unwarranted and, therefore, illegal.

Considering, however, that the relationship between the employee and the employer has been severely strained by reason of their respective imputations of bad faith against each other, to order reinstatement would no longer serve any prudent purpose.
In such situation, the Court would order:

payment of backwages and
separation pay instead of reinstatement. (See Hernandez, August 10, 1989.)

But "strained relations" may sometimes be an unjust reason of non reinstatement.

After all, the employee may not be the one to blame for such strained relations.
For these reasons, the Supreme Court has laid down limitations to the application of the strained relations certain principle.
It should be proved, the Court said that "the employee concerned occupies a position where he enjoys the trust and confidence of his employer; and that if reinstated, an atmosphere of antipathy and antagonism may be generated as to adversely affect the the efficiency and productivity of the employee concerned. (Globe-Mackay, March 3, 1992)

Furthermore, strained relations should not be presumed or assumed.

"Strained relations" as a bar to reinstatement of an illegally dismissed employee should be invoked and substantiated before the labor arbiter.
Moreover, the doctrine of "strained relations" should be strictly applied so as not to deprive an illegally dismissed employee of his right to reinstatement. (Phil. Long Distance Co. vs. Tolentino, September 21, 2004; see also. Papertech vs. Katando, January 5, 2020)

Reinstatement Immediately Executory

It should be recalled that under Article 229, third paragraph, the decision of the Labor Arbiter reinstating a dismissed employee is immediately executory even while the case is brought up on appeal.
This provision means that despite a pending appeal, the employee whose reinstatement has been ordered by the labor arbiter shall be admitted back to work under the terms and conditions prevailing prior to his dismissal or separation.

However, instead of doing so, the employer is granted the option to merely reinstate the employee in the payroll.
This would simply mean that although not actually admitted back to work, the employee would nevertheless be included in the payroll and entitled to receive her salary and other benefits as if she were working. (Maranao Hotel, November 16, 1994)

Accordingly, a reinstatement order is effective and should be complied with even without a writ of execution.

To await the issuance of a writ of execution by the labor arbiter would be contrary to the intent of Article 229, third paragraph.
It requires immediate execution of the reinstatement order. (Pioneer Texturizing, October 16, 1997)

But the reinstatement of an illegally dismissed employee will not be insisted upon an employer who, while the illegal dismissal complaint was pending, had to resort to retrenchment due to losses adequately proven.

Instead of being reinstated, the illegally dismissed employees should be paid full backwages from the time of his dismissal up to the time his retrenchment would have taken effect.
He should also be paid separation pay due to retrenchment under Article 298 of the Labor Code. (Mitsubishi Motors, June 29, 2004)

Suppose the employee, who was ordered reinstated, lost in the appeal filed by the employer, must the employee reimburse the salary he received during appeal?

No. (Roquero, April 22, 2003)

Even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher court. On the other hand, if the employee has been reinstated during the appeal period and such reinstatement order is reversed with finality, the employee is not required to reimburse whatever salary he received for he is entitled to such, more so if he actually rendered services during the period.

This is reiterated in Garcia, et al. vs. Phil. Airlines, January 20, 2009.

Backwages in Illegal Terminations

Backwages and reinstatement are two reliefs given to an illegally dismissed employee.

They are separate and distinct from each other.

However, in the event that reinstatement is no longer possible, separation pay is awarded to the employee.
Thus, in this situation, the award of separation pay is in lieu of reinstatement and not of backwages.
In other words, an illegally dismissed employee is entitled to:

either reinstatement, if viable,

or separation pay if reinstatement is no longer viable; and

backwages. (Torillo, May 27, 1991)

"SPIR" (separation pay in lieu of reinstatement) is different and apart from backwages.

Backwages are income recoverable after an illegal dismissal.
SPIR is substitute for reinstatement following an illegal dismissal.
If dismissal is legal, there is no reason for reinstatement and, therefore, no basis for SPIR.

Backwages in general are granted on grounds of equity for earnings which a worker or employee has lost due to his illegal dismissal.
Reinstatement, on the other hand, means restoration to a state of condition from which one had been unjustifiably removed or separated.

Three Year Rule Abandoned

For quite a long time starting in 1974 up to 1989, the Supreme Court had been following the "three-year rule" or the Mercury Drug rule which had fixed at three years salary the amount of backwages recoverable by an illegally dismissed employee.
But in 1989, R.A. No. 6715 required the payment of "full backwages,"

Because of this amendment, the Supreme Court had to abandon the Mercury Drug precedent.
Instead, the Court initiated the rule that an illegally dismissed employee may be paid his backwages, allowances and other benefits for the entire period he was out of work, subject to deduction of any amount which the employee may have earned during the period of his illegal termination. (See Maranaw Hotel, November 6, 1992; Ferrer, July 5, 1993.)

This latter ruling in effect says the backwages should be "full but with deductions."

The ruling appears self-contradictory, if not incomprehensible.
Justice Padilla therefore registered and reiterated a strong dissent.
He believed that the interim earnings should not be deducted from the awarded backwages because backwages with deductions are not "full."
The well-reasoned dissent by the illustrious Justice did not persuade the majority in the Court until 1996.

Bustamante Rule: Full Backwages without Deduction of Interim Earnings

In an en banc resolution penned by Justice Padilla himself in 1996, the Court reconsidered its earlier rulings and declared that "backwages to be awarded to an illegally dismissed employee should not, as a general rule, be diminished or reduced by the earnings derived by him elsewhere during the period of his illegal dismissal.
The full backwages without deductions serve as part of the price or penalty the employer must pay for illegally dismissing the employee.' (Bustamante, November 28, 1996)

What do backwages consist of?

If backwages are awarded, what items should be included?
Only the basic salary?
Or should bonuses be included?
In the computation of backwages and separation pay, account must be taken not only of the basic salary of the employee but also of her transportation and emergency living allowances. (Santos, G.R. No, 76721, September 21, 1987)
An employer is obliged to pay an illegally dismissed employee the whole amount of salaries plus all other benefits and bonus and general increases of which the latter would have been normally entitled. (St. Louis College of Tuguegarao, 177 SCRA 157 [1989])
Thus, living allowances that are mandated by law and the thirteenth month pay are included in the term "backwages." (Equitable Banking Comp. vs. Sadac, G.R. No. 164772, June 8, 2006)

Which Salary Rate?

Are Unreceived CBA Salary Increases Part of the Backwages?

But which salary rate will be the basis of the backwages?
The rate at the time the employee was dismissed?
Or the rate the employee could have been receiving at the time the case was decided?
If there were, for instance, wage increases through wage orders or through the CBA during the pendency of the dismissal case, should those increases be included in computing the backwages recoverable by the employee?
The Supreme Court does not see unreceived wage increases as part of the recoverable backwages.

The law itself does not include those possible wage increases.
"If the intent were to include salary increases as basis in the computation of backwages, the law should have said so."

The Court observed that the law used clear and unambiguous terms in including allowances and other benefit in the backwages.

But there was no clear intent to include also salary increases that the employee missed while his case was being heard. (The Equitable Banking Corp. vs. Sadac, G.R. No. 164772, June 8, 2006)

Court's Discretion

In still another decision, the Court held that awarding of backwages is discretionary upon the court.

Thus, although, generally, an order of reinstatement carries with it an award of backwages, the court may not only mitigate, but also absolve the employer from liability for backwages where good faith is evident. (Durabuilt, July 27, 1987)

May the appellate court award backwages to an employee who did not appeal the NLRC's failure to grant backwages? Yes.

The right of an illegally dismissed employee to be granted backwages is a substantive right that cannot be defeated by mere procedural lapse. (St. Michael's Institute, December 4, 2001)

Recomputation of Awards Appropriate Regardless of Who Delayed the Finality of Decision

The long-standing jurisprudence holds that in the event the aspect of reinstatement is disputed, backwages, including separation pay shall be computed from the time of dismissal until the finality of the decision ordering the separation pay.
But in C.I.C.M. Mission Seminaries vs. Perea, the petitioner employer attempted to vary the rule.

It argued that if the employer caused the delaying in satisfying the judgment award, the computation of the backwages and, separation pay should be up to the finality of the decision, but that if it were the employee's fault the computation should only run until the time actual reinstatement is not longer possible nor practicable.
The Supreme Court rejected the employer's contention with this pronouncement:

"Plainly, it does not matter if the delay caused by an appeal was brought about by the employer or by the employee.
The rule is, if the LA's decision, which granted separation pay in lieu of reinstatement, is appealed by any party, the employer-employee relationship subsists and until such time when decision becomes final and executory, the employee is entitled to all the monetary awards awarded by the LA.
By the nature of an illegal dismissal case, the reliefs continue to add on until full satisfaction thereof.
The recomputation of the awards stemming from an illegal dismissal case does not constitute an alteration or amendment of the final decision being implemented.
The illegal dismissal ruling stands; only the computation of the monetary consequences of the dismissal is affected and this is not a violation of the principle of immutability of final judgments. (C.I.C.M. Mission Seminaries, etc. vs. Perez, January 18, 2017)

Is a Legally Dismissed Employee Entitled to Financial Assistance? Yes, and then a Reversal

The Labor Code requires a valid cause to terminate an employment.

No valid cause, no termination.

If such just cause exists, termination may properlybe done, and no separation pay need be paid.
This is the general rule as regards dismissal for cause. (Omnibus Rules Implementing the Labor Code, Book VI, Rule 1, Sec. 7)
But the Supreme Court, citing compassion and the cause of social justice, ruled in 1988 that separation pay (or financial assistance) might still be required in those instances where the employee was validly dismissed for causes other than serious misconduct or those reflecting on the employee's moral character.

If the reason for the valid dismissal was habitual intoxication, or an offense involving moral turpitude, like theft or illicit sexual relations pay with a fellow worker, the employer might not be required to give separation pay or financial assistance to the dismissed employee.
But if the reason, on the other hand, did not relate to the employee's moral character and due consideration was to be given to the employee's long years of service, his age or his economic straits, then financial assistance would still be appropriate. (See Philippine Distance Telephone Co., August 23, 1988.)

But this 1988 ruling in PLDT caused problems that led to its review.

Some 19 years after the compassionate ruling in PLDT, the High Court probably started getting uncomfortable with it.
Why grant financial assistance to a wrongdoer?

Therefore, in one case after another — Toyota on October 19, 2007; Tirazma, January 20, 2009; Reno Foods, March 15, 2010; and most recently in Bank Philippine Islands, June 18, 2010 — the Court announced essentially a reversal: that is, when a dismissal is based on just cause under Article 282 (now 297) no separation pay or financial assistance can be awarded.

In the BPI ruling in 2010, involving the dismissal of a bank officer because of loss of confidence, the Court pronounced:

[L]abor adjudicatory officials and the Court of Appeals must demur the award of separation pay based on social justice when an employee's dismissal is based on serious misconduct or willful disobedience; gross and habitual neglect of duty; fraud or willful breach of trust; or commission of a crime against the person of the employer or his immediate family — grounds under Article 282 of the Labor Code that sanction dismissals of employees.

The expansion of exclusions has been reiterated in subsequent cases.

For instance, in Manila Water Co. vs. Del Rosario, January 29, 2014, the employee who was dismissed for pilferage of water meters was not given any financial assistance.
Despite Toyota and Manila Water, however, the compassionate grant of FA is not completely disallowed.
In International School vs. International School Alliance, February 5, 2014, (just one week after Manila Water) the Court granted "separation pay" of one-half month per year of service.
The Court upheld the teacher's dismissal on ground of "gross inefficiency" resulting from lack of skills, thereby failing to meet the standards of the employer school.
Nonetheless, the court noted that the teacher's 19 years service was otherwise clean of any infractions. The Court gave financial assistance.

Damages

Moral damages are recoverable in dismissal cases only where the dismissal was attended by bad faith or fraud or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs or public policy.
Exemplary damages in dismissal cases may be awarded only if the dismissal was effected in a wanton, oppressive or malevolent manner. (Garcia, 234 SCRA 632)

Liability

Are the company officials personally liable for wrongful dismissal of employees?
As a rule, company officials cannot be held personally liable for damages for an employee's illegal dismissal.
This is because the employer corporation has a personality separate and distinct from that of its officers who merely act as its agents. (Malayang Samahan ng mga Manggagawa, February 28, 2000)
However, the corporate veil may be pierced — i.e., the corporate officers become personally liable for the corporate obligations — if it is shown that those officers deliberately or maliciously designed to evade the financial obligations of the corporation to its employees, or they indiscriminately stopped its business to perpetrate an illegal act, as vehicle for the evasion of existing obligation. (Reahs Corp., April 15, 1997)

Art. 300. Termination by employee.

An employee may terminate without just cause the employee-employer relationship by serving a written notice on the employer at least one (1) month in advance. The employer upon whom no such notice was served may hold the employee liable for damages.

An employee may put an end to the relationship without serving any notice on the employer for any of the following just causes:

Serious insult by the employer or his representative on the honor and person of the employee;
Inhuman and unbearable treatment accorded the employee by the employer or his representative;
Commission of a crime or offense by the employer or his representative against the person of the employee or any of the immediate members of his family; and
Other causes analogous to any of the foregoing.

Own Notes:

Resignation:

1 month written notice required.
Employer may hold employee liable for damages if no notice given.

Termination without notice (Just Causes):

Serious insult to employee's honor.
Inhuman and unbearable treatment.
Crime against employee or family.
Analogous causes.

Notes:

Voluntary resignation is defined as the act of an employee who finds himself in a situation where he believes that personal reasons cannot be sacrificed in favor of the exigency of the service and he has no other choice but to disassociate himself from his employment," (Habana, November 16, 1998; cited in Philippine Wireless, July 20, 1999)
Resignation is withdrawable even if the employee has called it "irrevocable." (Custodio, July 19, 1990)
But after it is accepted or approved by the employer, its withdrawal needs the employer's consent. (Intertrod Maritime, June 19, 1991)

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.

Notes:

Article 298 speaks of a permanent retrenchment as opposed to a temporary lay-off.

There is no specific provision of law which treats of a temporary retrenchment or lay-off.
To remedy this situation or fill the hiatus, Article 301 may be applied but only by analogy to set a specific period that employees may remain temporarily laid-off or in floating status.

Under Article 301 of the Labor Code, a bona fide suspension of the operation of a business for a period not exceeding six months does not terminate employment and no notice (of termination) need be given to the employee or to DOLE. (J.A.T. General Services, G.R. No. 148340, January 26 2004)
Six months is the period set by law that the operation of a business or undertaking may be suspended thereby suspending the employment of the employees concerned.

The temporary lay-off wherein the employees likewise cease to work should also not last longer than six months.
After six months, the employees should either be recalled to work or permanently retrenched following the requirements of the law.
Failing to comply with this would be tantamount to dismissing the employees and the employer would thus be liable for such dismissal. (Sebuguero, September 27, 1995)

When the floating status" of the employees lasts more than six months, they may be considered to have been constructively dismissed from the service.
Thus, they are entitled to the corresponding benefits for their separation. (Agro Commercial Security, July 31, 1989)

What Justifies "Floating Status"

Placing an employee in "floating status," if unjustified, makes the employer liable for constructive dismissal. (Telus International Phil. vs. H. De Guzman, December 4, 2019)

Call Center Employee

The employer, a call center, placed one of its agents on preventive suspension when his manager charged him with disrespectful behavior.

But it turned out, after the employee submitted his explanation, that no disrespect happened; hence the suspension was immediately lifted.
The employee, however, who was a regular employee with four years service, was not returned to his job.
The manager alleged that there was no account to which the employee could be assigned.
The employee was considered a "floater" who would not get paid till his floating status could be lifted.
Later, he was told to undergo "profile interview" as if he were a new employee or an applicant.
The employee filed a constructive dismissal complaint.
The employer argued, in defense, that the law allows an employer to place an employee on "floating status" as long as that status would not exceed six months.

Is the "floating status" legal? No, the employer committed constructive dismissal.

The Court explained through Justice Ramon Paul Hernando that "placing employees in a valid "floating status" presupposes that there are more employees than work.
In Telus case, the employer did not provide any valid justification or proof that there was indeed a deficit of client accounts that bars the immediate transfer of the employee or that the company was sustaining losses that would justify placing him on floating status.
Hence, the unwarranted acts of the company evidently constitute proof of the constructive dismissal of the employee.
To say that the company merely exercised its rights and that any inconvenience or injury that the complainant may have suffered resulted merely in damnum absque injuria which cannot legally give rise to a cause of action for constructive dismissal, is abhorrent.
The fact is that his being placed on a "floating status" without valid reasons violated his security of tenure and resulted in unfavorable economic consequences to him.
While it may be argued that the nature of the call center business is such that it is subject to seasonal peaks and troughs because of client pullouts, changes in clients' requirements and demands, and a myriad other factors, still the necessity to transfer De Guzman to another practice/account does not depend on Telus' third party-client/contracts.
When the controversy arose, Telus had several clients in its roster to which it can easily assign De Guzman as Quality Analyst without hindrance.
As earlier admitted by Telus, profiling interviews were not a condition precedent to the transfer.
Moreover, as established before the Labor Arbiter, after the lifting of the preventive suspension of De Guzman by Telus, the company had several job vacancy postings for the position of Quality Analysts, the very position previously occupied by De Guzman. (Telus International Phil. Inc.v. H.De Guzman, December 4, 2019)

In the same Telus case, the Court lengthily elaborated on the concept of "floating status, quoting from ICT Marketing Services vs. Sales (769 Phil. 498 [2015]).

Besides, as currently argued by respondent (employee) there is no basis to place her on "floating status" in the first place since petitioner (employer) continued to hire new CSRS/TSRS during the period, as shown by its paid advertisements and placements in leading newspapers seeking to hire new CSRS/TSRS, then surely there is a surplus of work available for its existing employees: there is no need to at all place respondent on floating status.

Security Guard

Placing an employee such as a security guard on on "floating" status (or sometimes called temporary "off-detail" status) is considered a temporary retrenchment measure.
In Exocet v. Serrano, the Court recognized that there is no provision in the Labor Code which treats of a temporary retrenchment or lay-off.

Nevertheless, since an employee cannot be laid-off indefinitely, the Court has applied Article 301 [286] of the Labor Code by analogy to set the specific period of temporary lay-off to maximum of six months.

Applying Article 301 [286] by analogy, the Supreme Court has recognized that security guards may be temporarily sidelined with clients.

This is called the "floating status."
As applied to security guards, this is the period of time when security guards are in between assignments or when they are made to wait after being relieved from a previous post until they are transferred to a new one.

The Supreme Court has recognized the fact that clients of the security agency have the right to request for the removal of any of the security guards supplied by the latter to the former without need to justify the same.

Applicability to Other Employees

While the "floating status" rule is traditionally applicable to security guards, Article 301 [286] has been applied as well to other industries when, as a consequence of the bona-fide suspension of the operation of a business or undertaking, an employer is constrained to put employees on "floating status" for a period not exceeding six months.
Thus, it may also be applied to employees of legitimate contractors or subcontractors under a valid independent contracting or subcontracting arrangement under Article 106 of the Labor Code.
In JPL Marketing Promotions v. CA (July 8, 2005), this principle was applied to merchandisers hired by petitioner company which is engaged in the business of recruitment and placement of workers.

After they were notified of the cancellation of the contract of petitioner with a client where they were assigned and pending their reassignment to other clients, the merchandisers are deemed to have been placed under "floating status" for a period of not exceeding six (6) months under Article 301 [286].
Such notice, according to the Court, should not be treated as notice of termination but a mere note informing them of the termination of the client's service contract with petitioner company and their reassignment to other clients.
The 30-day notice rule under Article 298 [283] does not therefore apply to this case.

This was likewise applied to the case of a bus driver in Valdez v. NLRC (Feb. 9, 1998) who was placed on floating floating status after the the air-conditioning unit of the bus he was driving suffered a mechanical breakdown.
When an employee like like a a security security guard guard is is placed placed on a "floating" status, he is not entitled to any salary, financial benefit or financial assistance provided by law during the 6-month period thereof. (Pido v. NLRC, Feb. 23, 2007)
As a general rule, "floating status" beyond 6 months amounts to illegal/constructive dismissal.

After 6 months, the employee should be recalled for work, or for a new assignment, otherwise, he is deemed terminated. (Emeritus Security and Maintenance Systems, Inc. v. Dailig, April 02, 2014)

The security guard who refused to be re-assigned may be dismissed for insubordination.

Floating Status Differentiated from Preventive Suspension

"Floating status" is distinct from preventive suspension.

In the case of "floating status, the employee is out of work because his employer has no available work or job to assign him to.

He is thus left with no choice but to wait for at least six months before he could claim having been constructively dismissed, should his employer fail to assign him to any work or job within said period.

In the case of preventive suspension, the employee is out of work because he has committed a wrongful act and his continued presence in the company premises poses a serious and imminent threat to the life or property of the employer or of his co-workers.

A complaint filed before the lapse of the 6-month period of floating status is premature.

However, the filing of a complaint for constructive dismissal prior to the lapse of the 6-month period of "floating status" will not be held premature in cases where the intent to terminate the employee is evident even prior to the lapse of said period.

Military Duty

Is an employee on military duty entitled to salary?

Yes, in the situation covered by paragraphs (f) and (g) of P.D. No. 183 (effective May 6, 1973) which provides:
(f) Any employee of any private commercial, industrial, or agricultural firm, with an annual gross volume of business of not less than two hundred and fifty thousand pesos and with a personnel force of at least twenty employees, who is called to undergo refresher training, or a mobilization or assembly test, or annual active duty training in the Armed Forces of the Philippines, shall not loss his position or suffer any loss of pay due to his absence in the fulfillment of his military obligation: Provided, That said firm shall be entitled to claim the salaries paid to such employee during such training period as a deductible item in its income tax return;
(g) The penalty of imprisonment for not more than six months and/or a fine not to exceed one thousand pesos shall be imposed upon any employer or responsible public official who shall prevent the fulfillment by any employee of the latter’s obligation to undergo any military refresher training, mobilization or assembly test or annual active duty training as may be required by law.

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Labor Law: Book VI; Title I Termination of Employment (Arts. 293 - 301)

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