Post-Employment & Final Provisions [Arts.293-317]

Book VI

Post-Employment

Title I

Termination of Employment

Art. 293. Coverage.

All establishments or undertakings, whether for profit or not.

Art. 294. Security of tenure.

Termination of Regular Employment:

Employer cannot terminate the services of an employee in regular employment without:

just cause
authorized cause

Remedy:

Reinstatement without loss of seniority rights and other privileges.
Full backwages, including allowances, and other benefits or their monetary equivalent, computed from the time wages were withheld until actual reinstatement.

Security of Tenure

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

It is the right not to be removed from one's job except for a valid reason and through proper procedure.

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.

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

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.

Exception.:

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.

Art. 295. Regular and casual employment.

Regular Employment:

Employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer.
Exceptions:

Employment fixed for a specific project or undertaking with a determined completion/termination.
Seasonal work with employment for the duration of the season.

Casual Employment:

Employment is considered casual if not covered by the criteria for regular employment.
Exception:

An employee with at least one year of service, whether continuous or broken, is considered a regular employee for the specific activity in which they are employed.
Employment continues as long as the activity exists.

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.

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.

Church Policy Requiring Yearly Submission of Resignation

Does NLRC have jurisdiction over the case?

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.

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.

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 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.

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.

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.

Project Employment; Contrast with Fixed-term Employment

Project employment

requires a project restrictively defined
The decisive determinant is the activity that the employee is called upon to perform

Fixed-term employment:

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 is the day certain agreed upon by the parties for the commencement and termination of the employment relationship.

Successive Rehiring of Project-Based Construction Worker

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.
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].

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

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 does it impair the validity of the project employment contract stipulating a fixed duration of employment."

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.

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.

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.

"Regular project employee"

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

Four Project Employment Indicators (PEI)

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

PEI No. 1: Determinable Duration:

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.
A written project employment contract is an indispensable requirement.

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

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.

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.

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.
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.
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.
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.

Seasonal Employment

Court decisions consider seasonal employees as regular employees.

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.

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.
But 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.

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.

Casual Employment

Under present law, a casual employee is casual only for one year.
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.
Employment is casual when it is irregular, unpredictable, sporadic and brief in nature, and outside the usual business of the employer.
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.

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.
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. (Brent School, February 5, 1990)

"Endo": Arbitrary Period Struck Down

Such periods should be struck down or disregarded as contrary to public policy and morals.
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.
Fixed-term employment is not illegal per se or against public policy. Before this Court recognizes its validity, the criteria in Brent must first be sufficiently established.

Regular Employment with a Fixed Term

It is not a legal impossibility that an employee can be a regular employee with a fixed-term contract. The decision explains:

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."

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.
Fixed-term employees are akin to project employees.

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.

Domestic Seafarers

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.

Art. 296. Probationary employment.

Probationary Employment:

Maximum duration: six months from the date the employee starts working,

Exception: unless an apprenticeship agreement specifies a longer period.

Termination:

just cause or
failure to qualify as a regular employee in accordance with reasonable standards made known during engagement.

Regular Employee:

An employee allowed to work after the probationary period is 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.

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.
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.
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.

Tenure

During his period of employment or before contract expires, he cannot be removed except for cause as provided for by law.
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.
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.

Relief

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

Yes. Reinstatement, applies even to a probationary employee unjustly dismisse
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 covering only the period from the date she was dismissed up to the last day of the agreed probation period.

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

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.

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

Last Day of Probation

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

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

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.

Art. 297. Termination by employer.

Termination by Employer: Just Causes

Serious misconduct or willful disobedience
Gross and habitual neglect of his duties;
Fraud or willful breach of the trust
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;

Analogous causes

Conditional Hiring, Not Illegal Dismissal

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."

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.

Due Process

Any worker to be removed from his job is entitled to "due process."
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

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.

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)

Examples:

Sexual harassment
Falsification of time card constitutes

Immorality; Premarital Sexual Relations

Being pregnant but unmarried is not a "serious misconduct" that justifies the dismissal of an employee in a catholic school.
"It is not religious morality that should determine the prevailing norms of conduct, but rather, the public and secular morality.
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."

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

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.
Disobedience to be considered willful must be resorted to without regard to its consequences.

Is Ignorance an Excuse?

Employer should disprove his ignorance otherwise, the employee cannot be punished.
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.

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.

Midstream Changing of Company Policy

Is an employee bound by a policy initiated after he was hired?

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.

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.

"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.

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.

Conflict of Jurisdiction

"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."

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.
In upholding the employer's transfer order to the employee, the Court reiterated the "test for determining the validity of transfer:"

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.

Neglect of Duties

In order to warrant the dismissal of the employee for just cause, 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.

Poor Performance

Poor performance, equivalent to inefficiency, must amount to gross and habitual neglect of duties to be a just cause for dismissal.

Poor performance does not necessarily equate to gross and habitual neglect of duties.

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.

Failure to observe work standards, or to fulfill reasonable work assignments due to inefficiency may constitute just cause for dismissal.

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.

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.

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.

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

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.

It is the breach of this trust that results in the employer's loss of confidence in the 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.

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.

Work Handicap: Lack of Working Knowledge of Labor Law

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."

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

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.

Drug Use and HIV/ /AIDS

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

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.

Dismissal Procedure

Termination disputes are subject to compulsory conciliation-mediation.
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.

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.
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.

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

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

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.

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

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.

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

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

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.

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

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

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.

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.
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.

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

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.

Constructive dismissal sets in when the suspension goes beyond the 30-day maximum period allowed by law.
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 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?

Where a penalty less punitive would suffice, whatever missteps may be committed by labor ought not to be visited with a consequence so severe.
Labor law determinations should not be only secundum rationem but also secundum caritatem.

Dimissal is a supreme penalty, and if it is at all avoidable, without oppressing the employer, it should be avoided.

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.

Demotion; Quota

Demotion is allowed as a penalty.

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.

The demotion, moreover, must observe due process.

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.
status is changed from regular to casual.
reduction of work days
"freezing" an employee — not dismissing him but giving him no work at all
"floating status" beyond six months,
The employer's failure to pay the employee's salary for three months

"Constructive Dismissal" 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.

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.
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.

Employee Has to Prove "Constructive Dismissal"

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.

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

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

Just Cause v. Authorized Cause

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.

Other authorized causes of employment termination are:

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.

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.
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.
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.

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.

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.

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.

Illegal Retrenchment

The serious business losses should be proved by financial statements duly audited by an independent external auditor.
If the ground for retrenchment is not proved, the retrenchment will be declared illegal and of no effect.
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.

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.

For certain workers, the following may also be considered:

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

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.

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.
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.

Separation pay should be paid to employees where the closure is not due to losses.

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.

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

The Supreme Court agreed with the NLRC in not requiring separation pay for the employees of a business closed down by financial losses.

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.

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.
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 and the employer must pay the the separation pay.

Sale in Good Faith; Obligations of Transferee

There is no law which requires the purchaser to absorb the employees of the selling corporation.
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. (

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.

The sale or disposition must be motivated by good faith as an element of exemption from liability to absorb in its employ the employees.
Change of corporate name does not create a new corporation.

Under the Corporation Code, amendment of the articles of incorporation is not one of the modes of dissolving a corporation.

Merger

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

Thus, in a case involving merger of two companies, all labor force and necessary personnel complement of the merging operators must be absorbed.
This clearly indicates the intention to continue the employer-employee relationship of the individual companies with their employees through Filport.
Thus, 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.

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.

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.

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:

Termination Due to Disease:

Employer can terminate an employee diagnosed with a disease if the continued employment is:

prohibited by law or
poses a health risk to the employee and co-workers.

Separation pay = at least equivalent to

1 month's salary or
1/2 month's salary for every year of service,

whichever is greater, with a fraction of at least six months considered as one whole year.

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.
The company's own physician is not a "competent public health authority.
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.
Exception: If the employee who dies or resigns due to illness, with long years of service, he deserves separation pay, the employee "deserves the full measure of the law's benevolence"

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 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.

Advance salary does not take the place of the advance notice.

Previous notice to DOLE is not necessary if the employee consented to his retrenchment or voluntarily applied for retrenchment.
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?

A fraction of the year that is less than six months may be considered in the payment of separation pay on pro rata basis.

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

The illegally dismissed employee becomes entitled to:

reinstatement to his former position without loss of seniority rights, and
the payment of backwages.

These twin remedies are distinct and separate, one from the other.
Where there is reinstatement, there is no break in the length of service of the employee.

Strained Relations May Bar Reinstatement

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.)

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.

Furthermore, strained relations should not be presumed or assumed.

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

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.

Backwages in Illegal Terminations

In the event that reinstatement is no longer possible, separation pay is awarded to the employee. 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.

"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

R.A. No. 6715 requires the payment of "full backwages,"

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.)

Bustamante Rule: Full Backwages without Deduction of Interim Earnings

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.

What do backwages consist of?

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?

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.
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.

Court's Discretion

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.

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

It does not matter if the delay caused by an appeal was brought about by the employer or by the employee.
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.

Is a Legally Dismissed Employee Entitled to Financial Assistance?

The Labor Code requires a valid cause to terminate an employment. No valid cause, no termination.

Why grant financial assistance to a wrongdoer?

When a dismissal is based on just cause under Article 297 (just cause) no separation pay or financial assistance can be awarded.

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.

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.
Exception: 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.

Art. 300. Termination by employee.

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,"
Resignation is withdrawable even if the employee has called it "irrevocable."
But after it is accepted or approved by the employer, its withdrawal needs the employer's consent.
The employer upon whom no such notice was served may hold the employee liable for damages.

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.

Temporary Suspension or Civic Duty does not terminate employment:

The bona-fide suspension of business operations for up to six months or
Fulfillment of military or civic duty by the employee

In such cases, the employer must reinstate the employee to the former position without loss of seniority rights if the employee expresses the desire to resume work within one month from the resumption of business operations or relief from military/civic duty.

Notes:

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.
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.

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.

When the "floating status" of the employees lasts more than six months, they may be considered to have been constructively dismissed from the service.

What Justifies "Floating Status"

Placing an employee in "floating status," if unjustified, makes the employer liable for constructive dismissal.

Call Center Employee

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.
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.

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.
There is no provision in the Labor Code which treats of a temporary retrenchment or lay-off.

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

Applying Article 301 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 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.
When an employee is 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.
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.
The security guard who refused to be re-assigned may be dismissed for insubordination.

Floating Status Differentiated 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.

Title II

Retirement from Service

Art. 302. Retirement.

Retirement Age:

Retirement age is established in the:

collective bargaining agreement or
other applicable employment contract.

Optional: 60 years old.
Compulsory: 65 years old.
Underground mining employee:

Optional: 50 years old.
Compulsory: 60 years old.

Retirement Benefits:

Employee shall be entitled to receive retirement benefits as he may have earned under:

existing laws and
any collective bargaining agreement and
other agreements

The employee’s retirement benefits under any collective bargaining and other agreements shall not be less than those provided therein.

Retirement Pay:

In absence of specific plans, employees who reach 60-65 years old and have served at least 5 years receive a minimum retirement pay.

Retirement pay: 1/2 a month's salary for each year of service.

Fraction of 6 months = 1 year
includes:

15 days salary
1/12th of the 13th month pay
5 days SIL

Exceptions:

Retail, service and agricultural establishments with not more than 10 employees (10 max)

Penalty:

Violating this article is punishable under Article 288 of the Labor Code.

Effect of CBA or Employment Contract

This Article is subordinate to a binding contract such as:

a CBA or
an individual employment contract.

Such contract may stipulate a retirement package different from what this Article provides.

If the CBA provides for retirement benefits greater than that under the Labor Code, the benefit should be computed according to the CBA formula.
But if the benefits under such contract are lesser than those under this Article, then the employer must pay the difference.

The Court has ruled, however, that restriction in private retirement plan will not prevent the employee from retiring optionally at age 60.

Is compulsory retirement at age below 60 allowable?

If the agreement to this effect is part of a collective bargaining agreement freely entered into and subsequently duly ratified by the employees, such agreement is valid and enforceable.
A CBA may validly stipulate that the employer has the option to retire an employee who has reached a specified age (even below 60) or a specified retirement criterion.

When such option is exercised, there is no need to consult the employee.

Amount of Retirement Pay

The retirement pay under this Article consists of three items:

A = Fifteen days salary based on the latest salary rate
B = Cash equivalent of five days of service incentive leave
C = One-twelfth (1/12) of the thirteenth month pay (1/12 x 365/12 = .083 x 30.41 = 2.5)

These items make a total of 22.5 days' pay, to be multiplied by the retiree's total years of employment, a fraction of at least six months being counted as one year.

Total = (A + B + C) x Years of Employment

The service incentive leave, as part of the required retirement benefit, means five full days, not just a portion of it.

The cash equivalent of the five days service incentive leave (SIL) and one-twelfth of the 13th month pay are specific components of the law for purposes of the computation of the retirement benefits.

It may be pointed out that the SIL provisions under Book III of the Labor Code and the 13th month pay provisions under the 13th Month Pay Law (PD 851) are different from the cash equivalent of the five days service incentive leave (SIL) and the one-twelfth of the 13th month pay referred to under R.A. No. 7641.

This interpretation holds true whether the retiring employee is managerial or not.

Retroaction

The retroaction of R.A. No. 7641 includes services rendered prior to its effectivity by employees in the employ of covered employers at the time the law took effect and who are eligible to benefits under that statute

Part-time Workers

Part-time workers are entitled to retirement pay under this Article after satisfying these conditions for optional retirement:

there is no retirement plan between the employer and the employee, and
the employee should have reached the age of 60 years, and
should have rendered at least five years of service with the employer.

Part-time Employee, Even with Fixed-term Employment Contract, Entitled to Retirement Benefits

Any doubt or question regarding entitlement to retirement benefit of part-time employees has been dispelled by the categorical affirmative ruling of the Supreme Court promulgated on February 13, 2017.
Part-time employees, even of non-permanent status such as those under fixed-term employment contracts, are covered by the retirement law under Article 302 of the Labor Code, as amended by R.A. No. 7641.
The employee must have reached 60 years of age (for optional retirement) or 65 years (for compulsory retirement), and has served at least five years in the employer establishment.
But excluded from this coverage are:

government employees (because they are governed by another law).
employees of retail, service and agricultural establishments/operations regularly employing not more than 10 employees (10 max).

The entitlement of part-timers to retirement benefits has three legal bases:

Article 302 (formerly 287) of the Labor Code
Book VI, Rule II of the Rules Implementing the Labor Code, and
Labor Advisory, dated October 24, 1996, entitled "Guidelines for the Effective Implementation of Republic Act No. 7641" issued by the Secretary of Labor.

Separate Benefit

The retirement pay payable under Article 302, as as amended, is apart from the retirement benefit claimable by the qualified employee under the social security law.

Retirement Benefit = Art. 302 + SSS Law

This has to be so because R.A. No. 7641 in its Section 2 states that "Nothing in this Act shall deprive any employee of benefits to which he may be entitled under existing law or company policies or practices."

Book VII

Transitory and Final Provisions

Title I

Penal Provisions and Liabilities

Art. 303. Penalties.

General violations:

Fine: P1,000 - P10,000
Imprisonment: 3 months - 3 years
Both, at the court's discretion.

Foreign offenders:

Additional penalty of deportation upon completion of service of sentence.

Concurrent jurisdiction:

Municipal/City Courts
Courts of First Instance

Art. 304. Who are liable when committed by other than natural person.

Organizations held accountable:

Corporation
Trust
Firm
Partnership
Associations
Any other entity

Individual responsibility:

Guilty officer(s) responsible for the violation will bear the penalties

Title II

Prescription of Offenses and Claims

Art. 305. Offenses.

Offenses under the Labor Code:

Prescribes in three (3) years.

Unfair labor practices:

Prescribes in one (1) year.

Art. 306. Money claims.

Claims Arising During the Code's Effectivity:

Must be filed within three (3) years from the time the cause of action accrued.

Claims Arising Before the Code's Effectivity:

Must be filed with the appropriate entities within one (1) year from the date of effectivity.

Workmen's Compensation Claims (November 1, 1974 - December 31, 1974):

Must be filed with the Department of Labor's regional offices by March 31, 1975.
Will be processed and adjudicated based on the laws and rules in effect at the time of the claim.

Prescription or prescriptive period

Prescription or prescriptive period refers to the length of time within which an action or complaint can be filed.

It fixes a deadline or expiry date.
After that date the complaint cannot be entertained.

When one is arbitrarily and unjustly deprived of his job or means of livelihood, the action instituted to contest the legality of one's dismissal from employment constitutes, in essence, an action predicated upon an injury to the rights of the plaintiff, as contemplated under Article 1146 of the Civil Code, which must be brought within four years

In other words, the prescriptive period for filing an illegal dismissal complaint is four years, not three.
Illegal Dismissal = Prescribes in four (4) years.

Regarding money claims, an employee who was illegally dismissed is entitled to recover the benefits he lost, such as the value of the service incentive leave.

The recoverable value of the SIL does not have to be limited to three years.
The period should be the date of dismissal to the date of reinstatement even if the period exceeds three years.
However, the commencement cannot be earlier than December 16, 1975, the date the amendatory provision took effect.

Art. 307. Institution of money claims.

General Rule:

Money claims must be filed with the specific entity designated to handle them, independent of any criminal actions that may be pursued in court.
Civil actions based on the same cause of action as a filed money claim cannot be filed in court until the money claim has been fully resolved by the appropriate entity.

Exception:

Employee compensation cases are exempt from this rule and proceed directly through the court system according to the relevant provisions of the Code.

Title III

Transitory and Final Provisions

Art. 308. Application of law enacted prior to this Code.

All actions or claims accruing prior to the effectivity of this Code shall be determined in accordance with the laws in force at the time of their accrual.

Art. 309. Secretary of Labor to initiate integration of maternity leave benefits.

Within six (6) months after this Code takes effect, the Secretary of Labor shall initiate such measures as may be necessary for the integration of maternity leave benefits into the Social Security System, in the case of private employment, and the Government Service Insurance System, in the case of public employment.

Art. 310. Funding of the Overseas Employment Development Board and the National Seamen Board.

The Overseas Employment Development Board and the National Seamen Board

referred to in Articles 17 and 20, respectively, of this Code shall initially be funded out of the unprogrammed fund of the Department of Labor and the National Manpower and Youth Council.

Art. 311. Termination of the workmen’s compensation program.

The Bureau of Workmen’s Compensation, Workmen’s Compensation Commission, and Workmen’s Compensation Units in the regional offices of the Department of Labor shall continue to exercise the functions and the respective jurisdictions over workmen’s compensation cases vested upon them by Act No. 3428, as amended, otherwise known as the Workmen’s Compensation Act until March 31, 1976. Likewise, the term of office of incumbent members of the Workmen’s Compensation Commission, including its Chairman and any commissioner deemed retired as of December 31, 1975, as well as the present employees and officials of the Bureau of Workmen’s Compensation, Workmen’s Compensation Commission and the Workmen’s Compensation Units shall continue up to that date. Thereafter, said offices shall be considered abolished and all officials and personnel thereof shall be transferred to and mandatorily absorbed by the Department of Labor, subject to Presidential Decree No. 6, Letters of Instructions Nos. 14 and 14-A and the Civil Service Law and rules.

Such amount as may be necessary to cover the operational expenses of the Bureau of Workmen’s Compensation and the Workmen’s Compensation Units, including the salaries of incumbent personnel for the period up to March 31, 1976 shall be appropriated from the unprogrammed funds of the Department of Labor.

Art. 312. Continuation of insurance policies and indemnity bonds.

All workmen’s compensation insurance policies and indemnity bonds for self-insured employers existing upon the effectivity of this Code shall remain in force and effect until the expiration dates of such policies or the lapse of the period of such bonds, as the case may be, but in no case beyond December 31, 1974. Claims may be filed against the insurance carriers and/or self-insured employers for causes of action which accrued during the existence of said policies or authority to self-insure.

Art. 313. Abolition of the Court of Industrial Relations and the National Labor Relations Commission.

The Court of Industrial Relations and the National Labor Relations Commission established under Presidential Decree No. 21 are hereby abolished. All unexpended funds, properties, equipment and records of the Court of Industrial Relations, and such of its personnel as may be necessary, are hereby transferred to the Commission and to its regional branches. All unexpended funds, properties and equipment of the National Labor Relations Commission established under Presidential Decree No. 21 are transferred to the Bureau of Labor Relations. Personnel not absorbed by or transferred to the Commission shall enjoy benefits granted under existing laws.

Art. 314. Disposition of pending cases.

All cases pending before the Court of Industrial Relations and the National Labor Relations Commission established under Presidential Decree No. 21 on the date of effectivity of this Code shall be transferred to and processed by the corresponding labor relations divisions or the National Labor Relations Commission created under this Code having cognizance of the same in accordance with the procedure laid down herein and its implementing rules and regulations. Cases on labor relations on appeal with the Secretary of Labor or the Office of the President of the Philippines as of the date of effectivity of this Code shall remain under their respective jurisdictions and shall be decided in accordance with the rules and regulations in force at the time of appeal.

All workmen’s compensation cases pending before the Workmen’s Compensation Units in the regional offices of the Department of Labor and those pending before the Workmen’s Compensation Commission as of March 31, 1975, shall be processed and adjudicated in accordance with the law, rules and procedure existing prior to the effectivity of the Employees Compensation and State Insurance Fund.

Art. 315. Personnel whose services are terminated.

Personnel of agencies or any of their subordinate units whose services are terminated as a result of the implementation of this Code shall enjoy the rights and protection provided in Sections 5 and 6 of Republic Act numbered fifty-four hundred and thirty five and such other pertinent laws, rules and regulations. In any case, no lay-off shall be effected until funds to cover the gratuity and/or retirement benefits of those laid off are duly certified as available.

Art. 316. Separability provisions.

If any provision or part of this Code, or the application thereof to any person or circumstance, is held invalid, the remainder of this code, or the application of such provision or part to other persons or circumstances, shall not be affected thereby.

Art. 317. Repealing clause.

All labor laws not adopted as part of this Code either directly or by reference are hereby repealed. All provisions of existing laws, orders, decrees, rules and regulations inconsistent herewith are likewise repealed.

Done in the City of Manila, this 1st day of May in the year of our Lord, nineteen hundred and seventy four.

Questions

SEPARATION PAY

General Rule on Separation Pay.
Exceptions.
Inclusions of separation pay.

BACKWAGES

Can claims to backwages be waived?
Basis of Computation of Backwages.
Reckoning of Backwages.
Bani Rural Bank v. De Guzman
Pines City ruling
Limitations of Backwages

DISMISSAL WITH VALID CAUSE BUT INVALID PROCEDURE

Wenphil
Serrano
Agabon
Jaka
Industrial Timber

BACKWAGES AND REINSTATEMENT

May an employee lose the right to reinstatement?
May there be an illegal dismissal case without an award of backwages?
May there be an illegal dismissal case without an order of reinstatement?
What is this strained-relations principle.
How much is the Separation Pay in Lieu of Reinstatement of an ordinary employee? How about a seasonal worker?
Rationale of Payroll Reinstatement.
Is there an obligation to reimburse if order of reinstatement was reversed on appeal?
Is an order of reinstatement immediately executory?
Persons liable for wrongful dismissal.
Requisites of an Effectual Quitclaim.

TERMINATION BY EMPLOYEE

Define resignation.
Can a resignation be withdrawn?
Can the employer deny the resignation of an employee?
What is the consequence if employee resigns but does not follow Art. 300?
Define constructive dismissal.
When will a violation of Art. 301 amount to a constructive dismissal?

RETIREMENT

Coverage.
Optional vs compulsory retirement.
Is compulsory retirement below the age of 65 allowed?
Is assent by silence to such retirement scheme allowed?
Can the employer and employee agree on an age above 65 as a compulsory retirement age?
Amount of Retirement Pay.
Retirement Pay of Workers paid by result.
Are retirement benefits and separation pay mutually exclusive?
Insular Hotel Employees Union vs Waterfront.

PRESCRIPTION

Prescriptive Period for Money Claims
Prescriptive Period for Backwages and Damages
Reckoning of the 3-year prescription
Prescription of Action for Reinstatement
When does the period begin?
Promissory Estoppel
Laches

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Post-Employment & Final Provisions [Arts.293-317]

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