1.

Francisco doctrine; 2 tiered

test of employment relationship
Week 4-6 (Labor Standards: September 7-26, 2020)
While the control test may be the most important index to determine the existence of the employer-employee
relationship, however, in certain cases, the control test is not sufficient to give a complete picture of the relationship
between the parties, owing to the complexity of such a relationship where several positions have been held by the
worker. There are instances when, aside from the employer’s power to control the employee with respect to the
means and methods by which the work is to be accomplished, economic realities of the employment relations help
provide a comprehensive analysis of the true classification of the individual, whether as employee, independent
contractor, corporate officer or some other capacity.
Recent jurisprudence adds another test, applied in conjunction with the control test, in determining the existence of
employment relations. This is the two tiered test enunciated in Francisco v. NLRC, which involves an inquiry into the
following:
(1) The putative employer’s power to control the employee with respect to the means and methods by which the work
is to be accomplished [control test]; and
(2) The underlying economic realities of the activity or relationship [economic reality test].
Employment relationship under the control test is determined by asking whether “the person for whom the services
are performed reserves the right to control not only the end to be achieved but also the manner and means to be
used in reaching such end.
The broader economic reality test calls for the determination of the nature of the relationship based on the
circumstances of the whole economic activity. Under this test, the proper standard of economic dependence is
whether the worker is dependent on the alleged employer for his continued employment in that line of business. By
analogy, the benchmark of economic reality in analyzing possible employment relationships for purposes of the Labor
Code ought to be the economic dependence of the worker on his employer.
This two-tiered test provides a framework of analysis which would take into consideration the totality of
circumstances surrounding the true nature of the relationship between the parties. This is especially appropriate in a
case where there is no written agreement or terms of reference to base the relationship on and there exists a
complexity in the relationship based on the various positions and responsibilities given to the worker over the period
of the latter’s employment.
Applying this two-tiered test, the Court ruled that petitioner Angelina Francisco in this case of Francisco, was an
employee of private respondent Kasei Corporation, where she simultaneously held several positions because she
was under the direct control and supervision of Seiji Kamura, the corporation’s Technical Consultant. She reported
for work regularly and served in various capacities as Accountant, Liaison Officer, Technical Consultant, Acting
Manager and Corporate Secretary, with substantially the same job functions, that is, rendering accounting and tax
services to the company and performing functions necessary and desirable for the proper operation of the
corporation, such as securing business permits and other licenses over an indefinite period of engagement. Under
the broader economic reality test, the petitioner can likewise be said to be an employee of respondent corporation
because she had served the company for six years before her dismissal, receiving check vouchers indicating her
salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as deductions and Social Security
contributions from August 1, 1999 to December 18, 2000. When petitioner was designated General Manager,
respondent corporation made a report to the SSS. Petitioner’s membership in the SSS as manifested by a copy of
the SSS specimen signature card which was signed by the President of Kasei Corporation and the inclusion of her
name in the online inquiry system of SSS evinces the existence of an employer-employee relationship between
petitioner and respondent corporation.
Based on the foregoing, it is clear that the two-tiered test gives a complete picture of the relationship between the
parties. Aside from the employer’s power to control the employee, and inquiry into the economic realities of the
relationship helps provide a comprehensive analysis of the true classification of the individual, whether as employee,
independent contractor, corporate officer or some other capacity.
Following the broader economic reality test, the Supreme Court found petitioner in OROZCO, who is a columnist in
the Philippine Daily Inquirer (PDI), not an employee of PDI but an independent contractor. Petitioner’s main
occupation is not as a columnist for respondent but as a women’s rights advocate working in various women’s
organizations. Likewise, she herself admits that shge also contributes articles to other publications. Thus, it cannot be
said that petitioner was dependenton respondent PDI for her continued employment in respondent’s line of business.
The inevitable conclusion is that petitioner was not respondent PDI’s employee but an independent contractor,
engaged to do independent work.

2. Classification of employees
Regular/Permanent Employment
 Regular or Permanent Employment is when an employee performs activities that are necessary or desirable to the
business/trade of the employer. Regular employees enjoy the benefit of tenure and cannot be terminated for causes
other than those provided by law and only after due process.
Most companies in the Philippines require their new employees to undergo probationary employment for a maximum
of six (6) months to evaluate their skills and performance and determine if they are able to meet the reasonable
standards to become permanent employees.
Casual Employment
Casual Employment is when an employee performs work that is usually not necessary or primarily related to the
employer’s business/trade. The period of employment must be made clear to the employee at the time they started
rendering service.
However, employees that have rendered service for at least one (1) year in the same company, whether continuous
or not, shall be considered regular employees with respect to the activities they perform and will continue rendering
service while such activities exist in the company.
Term/Fixed-Term Employment
Term or Fixed-Term Employment is a type of employment that is not determined by the activities that employees are
required to perform but by the commencement and termination of the employment contract. A fixed-term employee
can only render services within the set period of time stipulated in the employment contract and the employer must
terminate his/her employment after such period expires.
Fixed-term employment in the Philippines is highly regulated and subject to the following guidelines:

 be voluntarily agreed upon by the parties without coercion or improper pressure to the employee
 employer and employee dealt with each other on more or less equal terms with no dominance exercised by the
former over the latter

*Not included in the enumeration but recognized by jurisprudence (Brent Case)

Project Employment
Project Employment is when an employee is hired for a specific project and the duration of employment is defined by
the scope of work and/or length of the project. A project employee can acquire the status of a permanent employee if
they are continuously rehired to undertake other projects for the company or the tasks they perform are necessary
and indispensable to the usual operations of the company.
Seasonal Employment
Seasonal Employment is defined when an employment contract is only for a certain time or season of the year. This
is common practice in service industries, such as Retail, Food and Beverage, and Hospitality to increase manpower
and cover labor demand during peak seasons.
Many companies hire “regular seasonal employees” who are only called to work during peak seasons (e.g. Christmas
season) and are temporary suspended during off-seasons. These employees are not separated from service but are
only on Leave of Absence (LOA) without pay until re-employed.

3. Probationary period: 18
months
ILUMINADA VER BUISER, MA. CECILIA RILLOACUÑA and MA. MERCEDES P. INTENGAN, petitioners, vs.
HON. VICENTE LEOGARDO, JR., in his capacity as Deputy Minister of the Ministry of Labor & Employment, and
GENERAL TELEPHONE DIRECTORY, CO., respondents.
Generally, the probationary period of employment is limited to six (6) months. However, the exception to this general
rule is when the parties to an employment contract agreed otherwise, such as when the same is established by
company policy or when the same is required by the nature of work to be performed by the employee.
In the latter case, there is recognition of the exercise of managerial prerogatives in requiring a longer period of
probationary employment, especially where the employee must learn a particular kind of work such as selling, or
when the job requires certain qualifications, skills, experience or training. In the case, it was shown that private
respondent GENERAL TELEPHONE DIRECTORY COMPANY needs at least eighteen (18) months to determine the
character and selling capabilities of the petitioners as sales representatives.
Publication of solicited ads are only made a year after the sale has been made and only then will the company be
able to evaluate the efficiency, conduct, and selling ability of its sales representatives, the evaluation being based on
published ads. Moreover, an eighteen month probationary period is recognized by the Labor Union in their Collective
Bargaining Agreement. Hence, the probationary employment of petitioners set to eighteen (18) months is legal and
valid.
 4. Termination of employment
(er,ee, gov’t, automatic)
Security of tenure. - In cases of regular employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from
work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual reinstatement
Types of Employment Termination
There are two types of employment termination in the Philippines: termination by employer and voluntary
resignation or termination by employee. Employers can dismiss an employee based on just and authorized
causes. Just causes are based on acts attributable to an employee’s own wrongful actions or negligence while
authorized causes refer to lawful grounds for termination which do not arise from fault or negligence of the employee.
Voluntary resignation is defined as a voluntary act committed by employees who knowingly dissociate themselves
from their employment for personal reasons. It does not cover instances where employees are forced to resign with
the use of threats, intimidation, coercion, manipulation, or where dismissal is imposed as a penalty for an offense.
Forced or coerced resignation is illegal and considered “constructive” dismissal – a dismissal in disguise.
Termination by Employer
According to Article 282 of the Labor Code, an employer can terminate an employee for just causes, which could be
any of the following:

 serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative
in connection with his work;
 gross and habitual neglect by the employee of his duties;
 fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representatives;
 commission of a crime or offense by the employee against the person of his employer or any immediate member
of his family or his duly authorized representatives; and
 other similar causes.

Employers can also terminate an employee based on authorized causes like business and health reasons. Art. 283
of the Labor Code states that an employee can be terminated due to business reasons such as:

 installation of labor-saving devices;

 redundancy;
 retrenchment (reduction of costs) to prevent losses; or
 the closing or cessation of operation.

For termination of employment based on health reasons, employers are allowed to terminate employees found
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-workers (Art. 284, Labor Code). The employer must obtain from a competent public
health authority a certification that the employee’s disease is of such a nature and at such a stage that it can no
longer be cured within a period of six (6) months even with medical attention.
Voluntary Resignation
This type of termination is strengthened by the provisions of Art. 285 of the Labor Code which recognizes two kinds
of termination an employee can initiate – without just cause and with just cause. If the resignation is without just
cause, the employee must give a one (1) month advance written notice for resignation (commonly referred to as a
“resignation letter”) to the employer to enable them to look for a replacement and prevent work disruption. If the
employee fails to provide a resignation letter, he or she runs the risk of incurring liability for damages.
If the resignation is with just cause, however, the employee need not serve a resignation notice. Art. 285 indicates
the just causes for resignation as follows:

 serious insult to the honor and person of the employee;

 inhuman and unbearable treatment accorded the employee by the employer or his representative;
 crime committed against the person of the employee or any immediate members of the employee’s family; and
 other similar causes.
 It should be noted that employees who voluntarily resign from work are not entitled to separation pay. Philippine laws
only grant separation pay to those who were dismissed from service not due to their own fault or negligence but for
reasons that are beyond their control, i.e. business closure, cessation of operation, retrenchment (reduction of costs)
to prevent losses, etc. However, there are at least two cases where employees who resign voluntarily may be entitled
to separation pay, and they are as follows:

 when payment of separation pay is provided in the employment contract or Collective Bargaining Agreement
(CBA, for companies with existing bargaining agent or labor union); and
 when it is authorized by established company practice or policy.

Due Process in Termination of Employment

Due process in the context of employment termination is the right of an employee to be notified of the reason for his
or her dismissal and, in case of just causes, to be provided the opportunity to defend himself or herself.
The due process is different for both authorized and just causes. Just cause involves a two-notice rule while
authorized cause requires a 30-day notice. If due process is not accorded to the employee before termination of the
employment or the termination itself is declared illegal, the employee is entitled to receive reinstatement and full
backwages (Art. 279, Labor Code). If reinstatement is no longer possible where the dismissal was unjust, separation
pay may be granted.
Dismissals based on just causes involve the two-notice rule:

1. A written notice, commonly referred to as a notice to explain specifying the grounds for termination and giving the
employee ample opportunity to explain their side;
2. A hearing or conference to allow the employee to respond to the charge/s, present evidence, or rebut the
evidence presented against them; and
3. A notice of decision indicating the justification for termination as well as the corresponding sanctions (if any) after
due consideration of all evidence.

Due Process for Authorized Causes

Dismissals based on authorized causes involve the following:

1. Submission of a written notice of dismissal to the employee specifying the grounds for dismissal at least 30 days
before the date of termination; and
2. A copy of the notice which shall be provided to the Regional Office of the Department of Labor and Employment
(DOLE) where the employer is located.

5. 2-fold due process

requirement
Dismissal of employees requires the observance of the two-fold due process requisites, namely:

1. Substantive aspect which means that the dismissal must be for any of the (1) just causes provided under Article
282 of the Labor Code or the company rules and regulations promulgated by the employer; or (2) authorized
causes under Articles 283 and 284 thereof; and
2. Procedural aspect which means that the employee must be accorded due process, the elements of which are
notice and the opportunity to be heard and to defend himself.

It is now the prevailing rule that it is not the due process provided in the Constitution that is required in termination of
employment but the statutory due process provided under Article 292(b) (2779b)) of the Labor Code
“Constitutional due process” protects the individual from the government and assures him his rights in criminal,
civil or administrative proceedings; while “statutory due process” protects employees from being unjustly
terminated without just cause after notice and hearing. Put differently the Bill of Rights is not meant to be invoked
against acts of private individuals like employers. Private actions, no matter how egregious, cannot violate the
constitutional guarantees.
 6. Abbott Laboratories doctrine
on Contractual due process
Abbott Laboratories, Philippines vs Alcaraz, it was held here that in a situation where there is an existing company
policy enunciating ng procedural due process that must be observed in termination of employment, compliance alone
with the statutory due process, would not suffice. Additionally, there must be compliance too with the company
prescribed due process procedure or the so called contractual due process. Otherwise, the employer will be
penalized with the payment of indemnity in the form of nominal damages in the same amount of P30,000.00 as
awarded in Agabon case.

7. Seven standard situations in

termination cases
The rules on termination of employment in the Labor Code and pertinent jurisprudence are applicable to seven (7)
different situations, namely:

1. The dismissal was for a just cause under Article 297 (282), for an authorized cause under Article 298 (283), or for
health reasons under Article 299 (284), and due process was observed- This termination is
2. The dismissal was without a just or authorized cause but due process was observed- This termination is
3. The dismissal was without a just or authorized cause and due process was not observed- This termination
is ILLEGAL
4. The dismissal was for a just or authorized cause but due process was not observed- This termination is
5. The dismissal was for a non-existent cause- This termination is
6. The dismissal was not supported by any evidence of termination- This termination is NEITHER LEGAL OR
ILLEGAL as there is no dismissal to speak of. Reinstatement is ordered not as a relief for illegal dismissal but
on equitable ground.
7. The dismissal was brought about by the implementation of a law- This termination is LEGAL

Stated otherwise:

1. The dismissal is LEGAL, if it was done with both substantive and procedural due process.
2. The dismissal is ILLEGAL, if it was done without substantive due process although procedural due process was
observed.
3. The dismissal is ILLEGAL, if it was done without substantive and procedural due process.
4. The dismissal is LEGAL, if it was done with substantive due process but without procedural due process.

Wenphil Doctrine (1989): Belated Dismissal Rule.

Where the employer had a valid reason to dismiss an employee but it did not follow the due process requirement, the
dismissal may be UPHELD but the employer will be penalized to pay an indemnity to the employee amounting Php
1000.
Serrano doctrine (2000): Ineffectual Dismissal Rule
The violation by the employer of the notice requirement in termination for just or authorized causes was not a denial
of due process that will nullify the termination. But, the dismissal is declared INEFFECTUAL and the employer must
pay full backwages from the time of termination until it is judicially declared that the dismissal was for just and
authorized cause.
Agabon Doctrine (2004): Statutory Due Process Rule
Abandoned the Serrano Doctrine and reverted to Wenphil Doctrine. Where the dismissal is for just cause, the lack of
statutory due process should not nullify the dismissal nor render it ineffectual. The employee is entitled to nominal
damages amounting to Php 30,000. 
Abbott Laboratories Doctirine (2013): Contractual Due Process
Where there is an existing company policy enunciating the procedural due process ( Contractual Due Process) that
must be observed in termination of an employment, compliance alone with the statutory due process, would not
suffice. Otherwise, the same consequence as in Agabon will ensue, that is, the termination shall be legal but the
employer is liable to the payment of indemnity in the form of nominal damages amounting to Php 30,000.
 8. The Kings of Kings Transport
Doctrine
THE KING OF KINGS TRANSPORT DOCTRINE: PROCEDURAL DUE PROCESS IN JUST CAUSE
Procedural steps.
In just cause termination, the twin-notice requirement applies. More particularly the following procedure in the order
presented below should be followed:

1. Service of written notice;

2. Conduct of hearing; and
3. Service of second written notice.

Based on this doctrine which was enunciated in King of Kings Transport Inc. v. Mamac, the following requirements
should be complied with:
(1) First written notice.
The First written notice to be served on the employee should:
a) Contain the specific causes or grounds for termination against him;
b) Contain a directive that the employee is given the Opportunity to submit his written explanation within the
reasonable period of FIVE (5) CALENDAR DAYS from receipt of the notice:

1. to enable him to prepare adequately for his defense;

2. to study the accusation against him;
3. to consult a union oflicial or lawyer;
4. to gather data and evidence; and
5. to decide on the defenses he will raise against the complaint.

c) Contain a detailed narration of the facts and circumstances that will serve as basis for the charge against the
employee. This is required in order to enable him to intelligently prepare his explanation and defenses. A general
description of the charge will not suffice.
d) Specifically mention which company rules, if any, are violated and/or which among the grounds under Article 297
[282] is being charged against the employee.
(2) Hearing required
After serving the first notice, the employer should schedule and conduct a hearing or conference wherein the
employee will be given the opportunity to:

1. explain and clarify his defenses to the charge/s against him;

2. present evidence in support of his defenses; and
3. rebut the evidence presented against him by the management.

During the hearing or conference, the employee is given the chance to defend himself personally, with the assistance
of a representative or counsel of his choice. Moreover, this conference or hearing could be used by the patties as an
Opportunity to come to an amicable settlement.
(3) Second written notice.
After determining that termination of employment is justified, the employer shall serve the employees a written notice
of termination indicating that:

1. all circumstances involving the charge/s against the employee have been considered; and
2. 2) grounds have been established to justify the severance of his employment.
3. The foregoing rule does not apply in case of abandonment.
 Abandonment is a just cause to terminate employment. It is considered a form of gross neglect of duties under Article
297(b) [282(b)] of the Labor Code. However, the procedural due process is different from the process described
above. For obvious reason, due process in abandonment cases does not involve the conduct of hearing. Compliance
with the following two (2) notices suffices, viz.:

1. First notice asking the employee to explain why he should not be declared as having abandoned his job; and
2. Second notice informing him of the employer’s decision to dismiss him on the ground of abandonment.

The Perez doctrine.

The 2009 Perez doctrine enunciates the new guiding principles on the hearing aspect of procedural due process.
This dramatically modified the concept of hearing in just cause termination.

9. Application of the 2nd notice

requirement
The second written notice (notice of termination) is not applicable in cases of termination due to authorized causes.
Procedural due process in termination due to any of the authorized causes, of installation of labor-saving device,
redundancy, retrenchment and closure of business or establishment is deemed complied with upon the separate and
simultaneous service of a written notice of the intended termination to both:
            1.) the employee to be terminated; and
            2.) the appropriate DOLE Regional Office,
At least one month before the intended date of the termination specifying the ground/s therefor and the undertaking
to pay the separation required under Article 298 [283] of the Labor Code or the employment contract or the CBA,
whichever is higher.

10. Important: Perez Doctrine on

New Guiding Principle on the
Hearing Requirement
The concept of hearing as part of due process has been significantly changed by the Perez doctrine. It enunciates
the new guiding principles on the hearing aspect of procedural due process. It has interpreted the term “ample
opportunity to be heard” in a new light, thus:

1. “Ample opportunity to be heard” means any meaningful opportunity given to the employee to answer the charges
against him and submit evidence in support of his defense, whether in hearing conference or some other fair, just
and reasonable way
2. A formal hearing or conference is no longer mandatory.. It becomes mandatory only under any of the following
circumstances:

 When requested by the employee In writing; or

 When substantial evidentiary disputes exist; or
 When a company rule or practice requires it; or
 When similar circumstances justify it.

3. The “ample opportunity to be heard” standard in the Labor Code prevails over the “hearing or conference”
requirement in its Implementing Rules and Regulations. This is how the Supreme Court resolved the conflict in the
following provisions of the Labor Code and its implementing rules:

 Under Article 292(b) [277(b)] of the Labor Code, the employer is required to afford the employee “ample
opportunity to he heard and to defend himself with the assistance of his representative if he so desires”; while
 Under Section 2(d), Rule 1, Book VI of the Implementing Rules of the Labor Code, the employer is required to
afford to the employee a “hearing or conference during which the employee concerned, with the assistance of
counsel, if he so desires, is given opportunity to respond to the charge, present his evidence or rebut the
evidence presented against him. ”
 The Perez doctrine is now the prevailing rule as shown by a catena of cases which cited it after its promulgation.

11. Reliefs against illegal

dismissal
An illegally dismissed employee is entitled to the following reliefs under Article 294:

1. Reinstatement without loss of seniority rights and other privileges;

2. Full Back Wages, inclusive of allowances; and
3. Other benefits or their monetary equivalent.

Other reliefs not found in Article 294

1. Award of separation pay in lieu of reinstatement.

2. Award of penalty in the form of nominal damages in case of termination due to just or authorized cause but
without observance of procedural due process.
3. For fixed term employees: salaries for the unexpired portion of employment contract.
4. Award for damages and attorney’s fees.
5. Award of financial assistance in cases where employee’s dismissal is declared legal but because of long years of
service, and other considerations, financial assistance is awarded.

Imposition of legal interest on separation pay, backwages and other monetary awards.

12. Strained Relations Rule

The doctrine of “strained relations” or “antipathy and antagonism” or “irretrievable estrangement” applies when
reinstatement will no longer be in the best interest of both employee and employer considering the animosity and
antagonism that exist between them brought about by the filing of the labor case.
Where reinstatement is not feasible, expedient, or practical, as where reinstatement would only exacerbate the
tension and strained relations between the parties, or where the relationship between the employer and employee
has been unduly strained by reason of their irreconcilable differences, particularly where the illegally dismissed
employee held a managerial or key position in the company, it would be more prudent to order payment of separation
pay instead of reinstatement. ( Johnson & Johnson (Phils), Inc., et al. vs Johnson Office & Sales Union-
Federation of Free Workers, et al., G.R. No. 172799, July 6,2007)
The Principle of “strained relations” cannot be applied indiscriminately. Otherwise, reinstatement can never be
possible simply because some hostility is invariably engendered between the parties because of litigation. That is
human nature. (Gabriel vs Bilon, G.R No. 146989, February 7, 2007). Straine relations, to warrant separation pay
in lieu of reinstatement, “must be demonstrated as a matter of fact” (Tower Industrial Sales vs CA, G.R No.
165727, April 19, 2006)
Some Principles on Strained Relations (optional if you will include these in your answer)

1. It must be proved and demonstrated as a fact.

2. Litigation, itself, does not give rise to strained relations that may justify non-reinstatement. The filing of the
complaint for illegal dismissal does not by itself justify the invocation of strained relations.
3. No strained relations should arise from a valid and legal act of asserting one’s right.
4. The nature of position is material in determining the validity of strained relations.
5. Non-settlement of dispute after long period of time is not indicative of strained relations.
6. The refusal of the employee to be reinstated is indicative of strained relations.
7. Criminal prosecution confirms existence of strained relations which would render the employee’s reinstatement
highly undesirable.
8. A managerial employee should not be reinstated if strained relations exist.

 
13. Agabon vs Jaka Doctrines
In Agabon Doctrine, the dismissal of the employee was based on just cause but due process was not observed.
Hence, the employee is entitled to nominal damages amounting to Php 30,000. The sanction imposed upon the
employer is tempered because the employee has committed a wrongful act.
In Jaka Doctrine, the dismissal of the employee was based on authorized cause but due process was not observed.
Hence, the employee is entitled to nominal damages amounting Php 50,000. The sanction imposed upon employer is
stiffer because the employee has not committed any blameworthy act nor any delinquency or culpability.

14. Bustamante Doctrine

In Bustamante vs NLRC, the Supreme Court changed the rule on the reckoning of backwages. Under the
Bustamante doctrine, the term “full backwages” was interpreted to mean exactly that, i.e., without deducting from
backwages the earnings derived elsewhere by the concerned employee during the period of his illegal dismissal. 

15. Cases where SC award

reinstatement without
backwages and reinstatement
with limited backwages
Reinstatement without backwages:
Under the following situations, reinstatement of an illegally dismissed employee is granted without the accompanying
backwages:
When the dismissal is deemed too harsh a penalty;
ALU-TUCP vs NLRC: The penalty of dismissal was reduced to suspension due to mitigating circumstances. The
justification was that the entire period when the employee was out of job because of his dismissal should already be
considered as the period of his suspension; hence, he should no longer be entitled to backwages for the same
period.
Yupangco vs NLRC: The employee was illegally dismissed but at the same time guilty of misconduct. The penalty of
suspension without backwages is proper.
Pepsi-Cola vs NLRC: Employee was absent for 25 days without prior leave. He was ordered reinstated but he was
denied backwages.
When the employer acted in good faith; or
Itogon-Suyoc vs NLRC: “The ends of social and compassionate justice would therefore be served if the private
respondent is reinstated but without backwages in view of petitioner’s good faith.”
Pepsi-Cola vs Molon: Employee was reinstated but without backwages because the penalty of dismissal is too harsh
for his infractions considering that his failure to report to work was clearly prompted by a medical emergency and not
by any intention to defy the return-to-work order.
Integrated Microelectronics, Inc. (IMI) vs Pionella: Backwages was deleted on the grounds that (a) the penalty of
dismissal was too harsh a penalty to be imposed against Pionella fo his infractions and (b) IMI was in good faith
when it dismissed Pionella.
Where there is no evidence that the employer dismissed the employee.
Best Wear Garments vs De Lemos: There being no termination of employment by the employer in this case, the
award of backwages cannot be sustained. It is well settled that backwages may be granted only when there is a
finding of illegal dismissal. In cases where there is no dismissal, the remedy is reinstatement but without backwages.
Leopard vs Quitoy: Reinstatement without backwages was ordered because the petitioners/employers were found
not to have dismissed respondents/security guards and that the latter, for their part, have not abandoned their
employment.
Leonardo vs NLRC: The Court ordered the reinstatement without backwages of the employee who was declared
neither to have abandoned his job nor was he constructively dismissed.
Reinstatement with limited backwages:
 There are instances where backwages were not awarded in full but merely limited for the same reason of good faith
on the part of the employer. Award of backwages was limited to:
1 year;
San Miguel Corporation vs Javate, Jr.: The employer’s liability was mitigated by its evident good faith in terminating
the employee’s services based on the terms of its Health, Welfare and Retirement Plan. The award of backwages
was limited to only one (1) year considering the mitigating circumstance of good faith attributed to the employer.
2 years; or
Dolores vs NLRC: Employee was awarded backwages limited to a period of two (2) years, given that the employer
acted without malice or bad faith in terminating the employee’s services.
5 years.
Victory Liner, Inc. vs Race: The Court reduced and limited the original award of full backwages to five (5) years in the
light of the evident good faith of the employer.

16. Common requisites of

authorized causes under article
298 (283)
There are certain requites that are common to the five (5) grounds in Article 298 [283]. To simplify the discussion, the
following five (5) common requisites are applicable to the said grounds:

1. There is good faith in effecting the termination;

2. The termination is a matter of last resort, there being no other option available to the employer after resorting
to cost-cutting measures;
3. Two (2) separate written notices are served on both the affected employee and the DOLE at least one (1)
month prior to the intended date of termination;
4. Separation pay is paid to the affected employee, to wit:

             (a) If based on (1) installation of labor-saving device, or (2) redundancy. – One (1) month pay or at least (1)
month pay for every year of service, whichever is  higher, a fraction of at least six (6) months shall be considered as
one (1)  whole year;
             (b) If based on one (1) retrenchment, or two (2) closure NOT due serious business losses or financial
reverses. – One (1) month pay or at least one- half (1/2) month pay for every year of service, whichever is higher, or
a fraction of at least six (6) months shall be considered as one (1) whole year.

17. Alabang Country Club and

JAT cases: Retrenchment vs
Closure
Definition in the actual case:
“Retrenchment is the reduction of personnel for the purpose of cutting down on costs of operations in terms of
salaries and wages resorted to by an employer because of losses in operation of a business occasioned by lack of
work and considerable reduction in the volume of business.”
“Closure of a business or undertaking due to business losses is the reversal of fortune of the employer whereby
there is a complete cessation of business operations to prevent further financial drain upon an employer who cannot
pay anymore his employees since business has already stopped.”
One of the prerogatives of management is the decision to close the entire establishment or to close or abolish a
department or section thereof for economic reasons, such as to minimize expenses and reduce capitalization.
While the Labor Code provides for the payment of separation package in case of retrenchment to prevent
losses, it does not obligate the employer for the payment thereof if there is closure of business due to
serious losses. ([G.R. NO. 157611 : August 9, 2005])
Definition in the book of Chan Page 717:
 Closure of a business is the reversal of fortune of the employer whereby there is a complete cessation of business
operations and/or an actual locking up of the doors of the establishment, usually due to financial losses. Closure of
business as an authorized cause for termination of employment aims to prevent further financial drain upon an
employer who cannot pay anymore his employees since business has already stopped.
Retrenchment is a reduction of personnel usually due to poor financial returns as to cut down on costs of operations
in terms of salaries and wages to prevent bankruptcy of the company. It is sometimes referred to as downsizing. It is
an authorized cause for termination of employment which the law accords an employer who is not making good in its
operations in order to cut back on expenses for salaries or wages by laying off some employees.

18. Graceful Exit; on validity of

giving an employee the option to
resign instead of being
dismissed for just or authorized
cause
It is settled that there is nothing reprehensible or illegal when the employer grants the employee a chance to
resign and save face rather than smear the latter's employment record. (Del Rio vs. DPO Philippines, Inc.)
Marin was asked to resign voluntarily or else face the adverse consequences of not being extended regular
employment on account of unsatisfactory work performance; had he resigned voluntarily before the expiry
of the probationary period, he would have brighter prospects of employment with another airline or other
business entities. However, respondent rejected the suggestion and opted to file his complaint with the NLRC. A
decision of petitioner to afford respondent a graceful exit is perfectly within its discretion. (Cathay Pacific Airways v.
Marin)
Respondent Labrador, a call center agent, has committed several infractions which were established by evidence
during the administrative investigation conducted by petitioner. However, instead of being dismissed for just cause,
he requested that he be allowed to resign from the company effective immediately to protect his reputation and his
future employment chances, to which the petitioner accepted. However, he later filed a constructive/illegal dismissal
case against petitioner. Raised was one of the issues was whether his resignation letter was voluntarily executed.
The Supreme Court found such issue moot. Even if Labrador had not submitted his resignation letter, petitioner
could still not be held liable for constructive dismissal given the existing just cause to terminate Labrador’s
employment. (Sutherland Global Services v. Labrador)

19. Significance of Imasen case

SERIOUS MISCONDUCT REQUISITES.
            For misconduct or improper behaviour to be a just cause for dismissal, the following requisites must concur:

1. It must be serious;
2. It must relate to the performance of the employee’s duties;
3. It must show that he has become unfit to continue working for the employer; and
4. It must have been performed with wrongful intent.

NOTE: The 2014 case of Imasen v. Alcon, added the 4th requisite above which, it said, is “equally important and
required.” All the above requisites must concur.
[The 4th requisite was added in Imasen Philippine Manufacturing Corporation v. Alcon, G.R. No. 194884, October 22,
2014.]
 20. Substantial, procedural due
process of disease as a mode to
dismiss an employee
Disease is one of the authorized causes to terminate employment. The following requisites must be complied with
before termination of employment due to disease may be justified:

1. The employee is suffering from a disease;

2. His continued employment is either: prohibited by law; or prejudicial to his health; or prejudicial to the health of his
co-employees;
3. There is a certification by a competent public health authority that the disease is of such nature or at such stage
that it cannot be cured within a period of six (6) months even with proper medical treatment;
4. Notice of termination based on this ground should be separately served both to the employee and the Department
of Labor and Employment at least one (1) month prior to the effectively of the termination; and
5. Separation pay should be paid to the employee in an amount equivalent to at least one (1) month salary or to
one-half (½) 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.

21. Competent public health

authority means
The word "competent" in the legal phrase "competent public health authority" refers to a government doctor whose
medical specialization pertains to the disease being suffered by the employee.

22. Meaning of "any disease"

An employee has been found to be suffering from any disease;
The fact alone that an employee is suffering from a disease is not generally a sufficient ground to terminate his
employment. That a person has a disease does not per se entitle the employer to terminate his or her services.
Termination is the last resort. Even if the disease is a contagious one, like pulmonary tuberculosis (PTB), mere
sufferance thereof by an employee does not ipso facto make him a sure candidate for dismissal.
Points to consider under this ground:

 If the disease or ailment can be cured within the period of six (6) months with proper medical treatment, the
employer should not terminate the employee but merely ask him to take a leave of absence. The employer should
reinstate him to his former position immediately upon the restoration of his normal health.
 In case the employee unreasonably refuses to submit to medical examination or treatment upon being requested
to do so, the employer may terminate his services on the ground of insubordination or willful disobedience of
lawful order.
 A medical certificate issued by a company’s own physician is not an acceptable certificate for purposes of
terminating an employment based on Article 284, it having been issued not by a “competent public health
authority,” the person referred to in the law.
 A “competent public health authority” refers to a government doctor whose medical specialization
pertains to the disease being suffered by the employee. For instance, if the employee suffers from
tuberculosis, the medical certificate should be issued by a government-employed pulmonologist who is competent
to make an opinion thereon. If the employee has cardiac symptoms, the competent physician in this case would
be a cardiologist.
 The medical certificate should be procured by the employer and not by the employee.
 23. Deofiro and Fuji cases on
employee illness
In DEOFIRO it pronounced the rule that due process in termination due to     disease is similar to due process for just
cause termination. Thus the employer must furnish the employee two (2) written notices, namely :

1. The notice to apprise the employee of the ground for which his dismissal is sought
2. The notice informing the employee of his dismissal, to be issued after the employee has been given reasonable
opportunity to answer and to be heard on his defense.

Under the present rule, the employee should be given reasonable opportunity to answer and to be heard on
his defense.
In FUJI it has expounded the rule on due process requirement in termination due to disease by categorically
specifying the right of the ailing employee to present countervailing evidence in form of medical certificates to prove
that his dismissal due to disease is not proper and therefore illegal.
Affording the ailing employee procedural due process in the manner prescribed in DEOFIRO AND FUJI proceeds
from the premise that he is not dismissible solely on the basis of his suffering from disease. He should not be
dismissed out right upon showing that he is suffering from disease. While an employee may have become afflicted
with contagious disease such as pulmonary tuberculosis, and that under ART 299(284), an employer may terminate
the services of uts employee found to be suffering from disease and whose continued employment is prohibited by
law or is prejudicial to his health as well as to that of his co-employees, however, the fact that an employee is
suffering from such disease does not ipso facto make him a sure candidate for dismissal.

24. Three (3) classes of positions

of trust
There are three (3) classes of positions of trust:

1. Managerial positions;
2. Supervisory positions; and
3. Fiduciary rank-and-file positions.

The first class consists of managerial employees or those who, by the nature of their positions, are entrusted with
confidential and delicate matters and from whom greater fidelity to duty is correspondingly expected. Their primary
duty consists of the management of the establishment in which they are employed or of a department or a
subdivision thereof and to other officers or members of the managerial staff.
The second class consists of supervisory employees who, in the interest of the employer, effectively recommend
such managerial actions the exercise of which is not merely routinary or clerical in nature but requires the use of
independent judgment.
The third class is comprised of fiduciary rank-and-file employees, such as cashiers, auditors, property custodians,
or those who, in the normal and routine exercise of their functions, regularly handle significant amounts of the
employer’s money or property. These employees, though rank-and-file, are routinely charged with the custody,
handling or care and protection of the employer’s money or property, or entrusted with confidence on delicate
matters, and are thus classified as occupying positions of trust and confidence.

 Supervisory positions are also reposed with trust and confidence.

Per jurisprudence, only the first and third classifications are generally cited as positions of trust and confidence.
There is, however, a need to include and add the second classification of supervisory employees because while the
Supreme Court has always applied this doctrine to managerial employees, it is likewise well established that
supervisory personnel occupying positions of responsibility and thus reposed with trust and confidence may be
dismissed based on the loss thereof.
For example, in Alvarez v. Golden Tri Bloc, Inc., it was undisputed that at the time of his dismissal, petitioner was an
Outlet Supervisor assigned to three (3) Dunkin Donuts outlets located at San Roque, Cogeo and Super 8, Masinag,
all in Antipolo City. His position is unmistakably one imbued with trust and confidence as he is charged with the
delicate task of overseeing the operations and manpower of three stores owned by respondent GTBI. As a
supervisor, a high degree of honesty and responsibility, as compared with ordinary rank-and-file employees, was
 required and expected of him. The fact that he was not charged with the custody of the company’s money or property
is inconsequential because he belongs to the first class of employees occupying positions of trust and not to the
fiduciary rank-and-file class.

 Two (2) kinds of rank-and-file employees.

For purposes of the application of this doctrine, the general classification of rank-and-file employees should further be
classified into two (2), to wit:

 Fiduciary rank-and-file; and
 Ordinary rank-and-file.

It is only in the 1st class above that this doctrine may be applied because, as mentioned above, this is the 3rd class of
positions reposed with trust and confidence. It is, therefore, clear from the above disquisition that, insofar as the
doctrine of trust and confidence is concerned, its application is limited to the three (3) classes of employees
occupying positions of trust and confidence, namely: (1) managerial; (2) supervisory; and (3) fiduciary rank-and-file.
Consequently, this doctrine has been applied in termination of ordinary rank-and-file employees.
The case of Marina Port Services, Inc. v. NLRC, expounds:
“To be sure, every employee must enjoy some degree of trust and confidence from the employer as that is one
reason why he was employed in the first place. One certainly does not employ a person he distrusts. Indeed, even
lowly janitor must enjoy that trust and confidence in some measure if only because he is the one who opens the
office in the morning and closes it at night and in this sense is entrusted with the care or protection of the employer’s
property. The keys he holds are the symbol of that trust and confidence.
“By the same token, the security guard must also be considered as enjoying the trust and confidence of his employer,
whose property he is safeguarding. Like the janitor, he has access to his property. He too, is charged with its care
and protection.
 “Notably, however, and like the janitor again, he is entrusted only with the physical task of protecting that property.
The employer’s trust and confidence in him is limited to that ministerial function. He is not entrusted, in the Labor
Arbiter’s words, ‘with the duties of safekeeping and safeguarding company policies, management instructions, and
company secrets such as operation devices.’ He is not privy to these confidential matters, which are shared only in
the higher echelons of management. It is the persons on such levels who, because they discharge these sensitive
duties, may be considered holding positions of trust and confidence. The security guard does not belong in such
category.”
It must be emphasized that is it not the job title but the actual work that the employee performs which is material in
determining the issue of whether it is reposed with trust and confidence. For instance, while an employee’s position
was denominated as Sales Clerk, the nature of her work included inventory and cashiering, a function that clearly
falls within the sphere rank-and-file positions imbued with trust and confidence. Given that she had in her care and
custody the store’s property and funds, she is considered as a rank-and-file employee occupying a position of trust
and confidence.

25. Marina Port Services Case

and Marina Jockey Case:trust
and confidence
Marina Port Services vs NLRC
“To be sure, every employee must enjoy some degree of trust and confidence from the employer as that is one
reason why he was employed in the first place. One certainly does not employ a person he distrusts. Indeed, even
the lowly janitor must enjoy that trust and confidence in some measure if only because he is the one who opens the
office in the morning and close it at night and in this sense is entrusted with the case or protection of the employer’s
property. The keys he holds are the symbol of that trust and confidence.
By the same token, the security guard must also be considered as enjoying the trust and confidence of his employer,
whose property he is safeguarding. Like the janitor, he has access to this property. He too, is charged with its care
and protection.
Notably, however, and like the janitor again, he is entrusted only with the physical task of protecting that property.
The employer's trust and confidence in him is limited to that ministerial function. He is not entrusted, in the Labor
Arbiter's words, "with the duties of safekeeping and safeguarding company policies, management instructions, and
company secrets such as operation devices." He is not privy to these confidential matters, which are shared only in
the higher echelons of management. It is the persons on such levels who, because they discharge these sensitive
duties, may be considered holding positions of trust and confidence. The security guard does not belong in such
category.”
 Manila Jockey Club vs Trajano
The Court unavoidably notes that the invocation of loss of trust and confidence as a ground for dismissing
Trajano was made belatedly. In its position paper dated September 2, 1998,34 MJCI invoked the grounds under
Article 282 (a) and (b) of the Labor Code to support its dismissal of her, submitting then that the unauthorized
cancellation of the ticket constituted a serious violation of company policy amounting to dishonesty. The first time that
MJCI invoked breach of trust was in its motion for the reconsideration of the decision of the NLRC.35 MJCI also
thereafter urged the ground of breach of trust in its petition for certiorari in the CA. Such a belated invocation of
loss of confidence broadly hints the ground as a mere afterthought to buttress an otherwise baseless
dismissal of the employee.

26. Preventive suspension v.

suspension as penalty
A preventive suspension is a reasonable and justifiable legal remedy given to an employer for the purpose of
investigating and/or resolving workplace-related incidents that affect his company’s operations. It is important to note
that preventive suspension is not a penalty, but a part of a process to investigate a questioned action of an
employee. And when it is determined that there is no sufficient basis to justify an employee’s preventive suspension,
the latter is entitled to the payment of salaries during the time of preventive suspension.
Whereas, a suspension as a penalty is imposed as an administrative penalty for infractions committed. The
employee is not entitled to the payment of salaries during the suspension because of the infractions committed.

27. Kinds of resignation:

Voluntary & involuntary
resignation
An employee may file a voluntary resignation (without just cause) or invloluntary resignation (with just cause).
The just causes for filing a resignation are as follows:

1. serious insult to the honor and person of the employee;

2. inhuman and unbearable treatment given by the employer;
3. crime committed against the employee or his/her family; or
4. other related causes.

If the resignation is without just cause, the employee must give a one (1) month advance written notice for
resignation (referred to as a resignation letter (Links to an external site.)) to the employer to enable them to look for a
replacement and prevent work delay. The resignation letter should be accepted by the employer in writing. Failure to
file a resignation letter can make the employee incur liability for damages.

28. Involuntary vs forced

resignation; common
denominator
Involuntary resignation is a termination initiated by the employee based on the following just causes:

1. serious insult to the honor and person of the employee;

2. inhuman and unbearable treatment given by the employer;
3. crime committed against the employee or his/her family; or
4. other related causes.
 Forced resignation is where the employee is made to do or perform an involuntary act of submission or tender of
resignation letter meant to validate the action of the employer in inveigling, luring, or influencing, or practically forcing
the employee to effectuate the termination of employment, insted of the employer doing the termination himself.
Common denominator between the two:
involuntary and and forced resignation are embraced within the general concept of constructive dismissal. 
Constructive dismissal is an involuntary resignation resorted to when continued employment becomes impossible,
unreasonable, or unlikely, due to any of the following:

 demotion in rank or a diminution in pay; or

 when a clear discrimination, insensibility, or disdain by an employer becomes unbearable to an employee.

Constructive dismissal is illegal and usually occurs when an employee resigns as a result of unfavorable work
conditions instigated by the employer. It is typically resorted to by employers who do not want to undergo the
procedural due process involved in legally terminating an employee

29. Significance of acceptance of

resignation
Written acceptance of the resignation necessary to make it binding and effective.
Resigning employee may withdraw his resignation anytime before acceptance is made by the employer. Once
accepted it cannot be withdrawn anymore without the consent of the employer.
A duly accepted resignation effectively terminates the employer-employee relationship.
Acceptance of the resignation should be expressed by the employer in no uncertain terms.

30. Hechanova case on

resignation: 30-day period notice
rule
On the 30-day prior written notice rule
                        (1) The 30-day period is for the benefit of the employer and not for the resigning employee. The
employer may thus:
                                    (a) Insist on the full observance by the resigning employee of the entire 30 days; or
                                    (b) Shorten it to such number of days as it may deem appropriate or necessary; or
                                    (c) Waive it completely and make the resignation effective immediately.
The employer has the discretion to waive such period. Its purpose is to afford the employer enough time to hire
another employee if needed and to see to it that there is proper turn-over of the tasks  which the resigning employee
may be handling.
                         (2) The unilateral extension by the employer of the period beyond 30 days is not allowed since the
30-day period is the maximum allowed by law. In order to make the extension valid and legal, the employer should
secure the written consent of the resigning employee to such extension. It is of course different if it is the resigning
employee who voluntarily sets the effectivity of his resignation beyond 30-day period. If the employer  consents to the
prolonged period, the employee cannot be heard to complain later on that he was made to serve against his will, in
violation of the period mentioned in Article 300 [285].
                        (3) The resigning employee is still required to work during the legally mandated 30-day period or such
shorter period as may be unilaterally prescribed by the employer or such extended period as may be mutually agreed
upon by the resigning employee and the employer. Failure on the part of the resigning employee to work during such
period will subject him to damage suit.

31. Test of Constructive

Dismissal
 It is a dismissal in disguise.
The test of constructive dismissal is whether a reasonable person in the employee’s position would have felt
compelled to give up his position under the circumstances. (McMer Corp vs NLRC)
The petitioner was constructively dismissed by BOC not only when the latter has exerted pressure on petitioner to
resign from her work but when the former, while on leave, was replaced by another in her post. (Tuason vs
Bank of Commerce)
Although respondent continued to have the rank of a supervisor, her functions were reduced to a mere
house-to-house sales agent or direct sales agent. This was tantamount to a demotion. She might not have
suffered any diminution in her basic salary but petitioners did not dispute her allegation that she was deprived of all
benefits due to another of her rank and position, benefits which she apparently used to receive. (Globe Telecom vs.
Florendo-Flores)
The fact that Escudero was deprived of office space, was not given further work assignment and was not paid
her salaries until she was left with no choice but stop reporting for work all combine to make out a clear case
of constructive dismissal. (Tan Brothers vs. Escudero)
Petitioner argues that private respondent did not suffer any demotion in rank since he has "retained his rank of Vice
President, continued to work in the same office, and received the same salaries, benefits and
privileges." Constructive dismissal, however, does not always involve such kinds of diminution; an act of
clear discrimination, insensibility, or disdain by an employer may become so unbearable on the part of the
employee that it could foreclose any choice by him except forego his continued employment. (Philippine
Advertising Counselors v. NLRC)
The fact that Francisco continued to report for work does not necessarily suggest that constructive
dismissal has not occurred, nor does it operate as a waiver. Constructive dismissal occurs not when the
employee ceases to report for work, but when the unwarranted acts of the employer are committed to the end that
the employee’s continued employment shall become so intolerable. In these difficult times, an employee may be
left with no choice but to continue with his employment despite abuses committed against him by the
employer, and even during the pendency of a labor dispute between them. This should not be taken against
the employee. Instead, we must share the burden of his plight, ever aware of the precept that necessitous
men are not free men. (The Orchard Golf and Country Club vs. Francisco).

32. Voluntary resignation &

constructive dismissal,
distinguished
Voluntary resignation is defined as a voluntary act committed by employees who knowingly dissociate themselves
from their employment for personal reasons. It does not cover instances where employees are forced to resign with
the use of threats, intimidation, coercion, manipulation, or where dismissal is imposed as a penalty for an offense.
Forced or coerced resignation is illegal and considered “constructive” dismissal – a dismissal in disguise.
Constructive dismissal is an involuntary resignation resorted to when continued employment becomes impossible,
unreasonable, or unlikely, due to any of the following:

 demotion in rank or a diminution in pay; or

 when a clear discrimination, insensibility, or disdain by an employer becomes unbearable to an employee.

Constructive dismissal is illegal and usually occurs when an employee resigns as a result of unfavorable work
conditions instigated by the employer. It is typically resorted to by employers who do not want to undergo the
procedural due process involved in legally terminating an employee.

33. Star Paper Corp. vs. Espiritu:

transfer to province plus 3
conditions that constitute
constructive dismissal.
Conditions when transfer constitutes constructive dismissal
             While transferring an employee from one position to another or from one workplace to another within the
same establishment generally does not amount to constructive dismissal, however, it may be considered constructive
dismissal when any or all of the following conditions concur:

1. When the transfer is unreasonable, inconvenient or prejudicial to the employee;

2. When the transfer involves a demotion in rank or diminution in salaries, benefits and other privileges;
3. When the employer performs a clear act of discrimination, insensibility, or disdain towards the employee, which
forecloses any choice by the latter except to forgo his continued employment.

The case of Star Paper Corp. vs. Espiritu is another good example of transfer amounting to constructive dismissal.
Here, combined circumstances of the immediate transfer of respondents to far- off provinces after their refusal to sign
signature sheer of the document for the ratification of the addendum to the 1995 CBA, and petitioner’s emphasis on
respondents’ alleged previous infractions at work, point to the fact that the transfers are motivated by ill-will on the
part of the petitioner. Petitioner’s order for respondents to report for work in petitioner’s provincial branches on the
very same day that they were served with the Memo of Transfer is extremely unreasonable as the relocation would
unduly inconvenience not only respondents but the respective families. Petitioner therefore failed to sufficiently prove
the respondents’ transfer is for a just and valid cause and not unreasonable, inconvenient, or prejudicial to them,
making it liable for constructive dismissal.

34. Bisig Manggagawa sa Tryco

vs. NLRC: valid transfer, no
constructive dismissal
If transfer is occasioned by government directive, there can be no constructive dismissal to speak of.
Tryco's decision to transfer its production activities to San Rafael, Bulacan, regardless of whether it was made
pursuant to the letter of the Bureau of Animal Industry, was within the scope of its inherent right to control and
manage its enterprise effectively. While the law is solicitous of the welfare of employees, it must also protect the right
of an employer to exercise what are clearly management prerogatives. The free will of management to conduct its
own business affairs to achieve its purpose cannot be denied.
This prerogative extends to the management's right to regulate, according to its own discretion and judgment, all
aspects of employment, including the freedom to transfer and reassign employees according to the requirements of
its business. When the transfer is not unreasonable, or inconvenient, or prejudicial to the employee, and it does not
involve a demotion in rank or diminution of salaries, benefits, and other privileges, the employee may not complain
that it amounts to a constructive dismissal.
Indisputably, in the instant case, the transfer orders do not entail a demotion in rank or diminution of salaries, benefits
and other privileges of the petitioners. Petitioners, therefore, anchor their objection solely on the ground that it would
cause them great inconvenience since they are all residents of Metro Manila and they would incur additional
expenses to travel daily from Manila to Bulacan.
The Court has previously declared that mere incidental inconvenience is not sufficient to warrant a claim of
constructive dismissal. Objection to a transfer that is grounded solely upon the personal inconvenience or hardship
that will be caused to the employee by reason of the transfer is not a valid reason to disobey an order of transfer.

35. Illegal (actual dismissal) vs.

Constructive dismissal
There obviously is a fine distinction between "illegal actual" dismissal on one hand, and "constructive" dismissal on
the other, although, in some cases, teh Supreme Court conjoins the words "illegal constructive" dismissal or "unlawful
constructive" dismissal to underscore the patent illegality of the act.
"Illegal or actual" dismissal is readily shown by the act of the employer in openly and expressly seeking and effecting
the termination of employment of an employee; while in "constructive" dismissal, being dismissal in disguise, is not
readily shown or indicated by any similar act of the employer that would openly and expressly show its desire and
intent to terminate the employment relationship. Notably, constructive dismissal does not always involve forthright
dismissal or even diminution in rank, compensation, benefit and privileges.
More concretely, the employer in illegal dismissal case would normally defend and justify the termination but in
constructive dismissal, there being no express dismissal to speak of, the employer would normally contend that there
was no termination at all.
 36. Retirement; who are eligible;
Optional v. compulsory
RA 7641 Art. 287 provides, “Any employee may be retired upon reaching the retirement age established in the
collective bargaining agreement or other applicable employment contract.
In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment,
an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby
declared the compulsory retirement age, who has served at least five (5) years in the said establishment, may retire
and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as one whole year.
RA 7641 Art. 287 provides, “Any employee may be retired upon reaching the retirement age established in the
collective bargaining agreement or other applicable employment contract.
Optional v. compulsory
In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment,
an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby
declared the compulsory retirement age, who has served at least five (5) years in the said establishment, may retire
and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as one whole year.”
Minimum years of service
The minimum length of service in an establishment or with an employer of at least five (5) years required for
entitlement to retirement pay shall include authorized absences and vacations, regular holidays and mandatory
fulfillment of a military or civic duty.

37. Computation
In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment,
an employee, upon reaching the optional or compulsory retirement age specified in Article 302 [287], shall be entitled
to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least 6
months being considered as one 1 year.
For purposes of determining the minimum retirement pay due an employee, the term “one-half (1/2) month salary”
shall include all of the following:

1. 15 days’ salary of the employee based on his latest salary rate. The term “salary” includes all remunerations paid
by an employer to his employees for services rendered during normal working days and hours, whether such
payments are fixed or ascertained on a time, task, piece or commission basis, or other method of calculating the
same, and includes the fair and reasonable value, as determined by the DOLE Secretary, of food, lodging or
other facilities customarily furnished by the employer to his employees. The term does not include cost-of-living
allowances, profit-sharing payments, and other monetary benefits which are not considered as part of or
integrated into the regular salary of the employees;
2. The cash equivalent of 5 days of service incentive leave;
3. 1/12 of the 13th month pay due the employee; and
4. All other benefits that the employer and employee may agree upon that should be included in the computation of
the employee’s retirement pay.

38. “One-half (1/2) Month Salary”

Means 22.5 Days
To dispel any further confusion on the meaning of “One-half (1/2) Month Salary” provided in Article 302 [287], the
Court, in Capitol Wireless, Inc. v Confesor, simplified its computation by declaring that it means the total of “22.5
days” arrived at after adding 15 days plus 5days of service incentive leave plus 2.5 days representing one-twelfth
(1/12) of the 13th month pay. Evidently, the law expanded the concept of “one-half month salary” from the usual one-
month salary divided by two.
39. Razon vs NLRC and San
Miguel vs Lao: Benefits of
dismissed employees
As a general Rule, management discretion may not be exercised arbitrarily or capriciously especially with regards to
the implementation of the retirement plan.
In Razon vs NLRC, the Supreme Court declared that the employer’s refusal to give the employee his retirement
benefits is based on the retirement plan giving management wide discretion to grant or not retirement benefits, a
prerogative that obviously cannot be exercised arbitrarily or whimsically.
However, in San Miguel vs Lao, the Supreme Court ruled that the retirement plan expressly prohibits the grant of
retirement benefits in case of dismissal for just cause. Hence, the employee is bound by such prohibition.

40. When both retirement pay

and separation pay must be paid
There are cases where both retirement pay and separation pay for authorized cause termination were awarded and
ordered paid.
In Aquino vs NLRC, the Supreme Court ordered the payment to the retrenched employees of both the separation pay
for retrenchment embodied in the CBA as well as the retirement pay provided under a separate Retirement Plan. The
argument of the company that it has more than complied with the mandate of the law on retrenchment by paying
separation pay double that required by the Labor Code was not favorably considered by the Supreme Court because
the employees were not pleading for generosity but demanding their rights embodied in the CBA which was result of
the negotiations between the company and the employees.

41. Jaculbe case and Cercado

case: optional retirement;
consent
For retirement at an earlier age to be valid, it must be voluntarily consented to by the employee.
In Alpha Jaculbe v. Siliman University, the SC ruled that in order for retirement at an earlier age to be valid, it must be
shown that the employee's participation in the plan was voluntary. An employer is free to impose a retirement age of
less than 65 for as long as it has the employee's consent. Stated conversely, employees are free to accept the
employer's offer to lower the retirement age if they feel they can get a better deal with the retirement plan presented
by the employer.
Following Jaculbe, the retirement of petitioner in Lourdes Cercado v. Uniprom, Inc. at the age of 47, after having
served respondent company for 22 years, pursuant to its Employees' Non-Contributory Retirement Plan, which
provides that employees who have rendered at least 20 years of service may be retired at the option of the company,
was declared illegal because it was not shown that she has given her consent thereto.  Not even an iota of voluntary
acquiescence to respondent's early retirement age option is attributable to petitioner. The assailed retirement plan
was not embodied in a CBA or in any employment contract or agreement assented to by petitioner and her co-
employees. On the contrary, it was unilaterally and compulsorily imposed on them.

42. Significance of Pantranco

case
The employer and the employee may mutually agree to grant to the employer the sole and exclusive right to retire an
employee at an earlier age or after rendering a certain period of service. This agreement may be stipulated in an
employment contract or a CBA.
 In Pantranco North Express, Inc. v. NLRC, the Supreme Court upheld the validity of the CBA stipulation that allowed
the employee to be compulsorily retired upon reaching the age of sixty (60) "or upon [25] years of service to
[Pantranco].

43. Management prerogative;

coverage; limitations
Under the doctrine of management prerogative, every employer has the inherent right to regulate, according to his
own discretion and judgment, all aspects of employment, including hiring, work assignments, working methods, the
time, place and manner of work, work supervision, transfer of employees, lay-off of workers, and discipline, dismissal,
and recall of employees. The only limitations to the exercise of this prerogative are those imposed by labor laws and
the principles of equity and substantial justice.
Coverage:
Discipline
The employer’s right to conduct the affairs of his business according to its own discretion and judgment includes the
prerogative to instil discipline among its employees and to impose reasonable penalties, including dismissal, upon
erring employees. This is a management prerogative where the free will of management to conduct its own affairs to
achieve its purpose takes form. The employer cannot be compelled to maintain in his employ the undeserving, if not
undesirable, employees. The only criterion to guide the exercise of its management prerogative to discipline or
dismiss erring employees is that the policies, rules and regulations on work‐related activities of the employees must
always be fair and reasonable and the corresponding penalties, when prescribed, should be commensurate to the
offense involved and to the degree of the infraction.
Transfer of employees
The exercise of the prerogative to transfer or assign employees from one office or area of operation to another is
valid provided there is no demotion in rank or diminution of salary, benefits, and other privileges, and the action is not
motivated by discrimination, made in bad faith, or effected as a form of punishment or demotion without sufficient
cause
Productivity standard
The employer has the prerogative to prescribe the standards of productivity which the employees should comply. The
productivity standards may be used by the employer as: a. an incentive scheme; and/or b. a disciplinary scheme. As
an incentive scheme, employees who surpass the productivity standards or quota are usually given additional
benefits. As a disciplinary scheme, employees may be sanctioned for failure to meet the productivity standards or
quota.
 Grant of Bonus
Bonus, as a general rule, is an amount granted and paid ex gratia to the employee. Its payment constitutes an act of
enlightened generosity and self‐interest on the part of the employer rather than as a demandable or enforceable
obligation. It is an amount granted and paid to an employee for his industry and loyalty which contributed to the
success of the employer’s business and made possible the realization of profits. Its grant is a management
prerogative. It cannot be forced upon the employer who may not be obliged to assume the onerous burden of
granting bonuses or other benefits aside from the employees’ basic salaries or wages.
 Change of working hours
Employers have the freedom and prerogative, according to their discretion and best judgment, to regulate and control
the time when workers should report for work and perform their respective functions.
 Marital discrimination Prerogative to prescribe rule on marriage.
The employer has the prerogative to establish a policy on marriage. Jurisprudence has ruled on the validity/invalidity
of certain policies on marriage.
 Post-employment ban
The employer, in the exercise of its prerogative, may insist on an agreement with the employee for certain
prohibitions to take effect after the termination of their employer‐employee relationship.
 The exercise of management prerogative is subject to the following:
Limitations imposed by:

 law;
 CBA;
 employment contract;
 employer policy;
 employer practice; and
 general principles of fair play and justice.
 It is subject to police power.
Its exercise should be without abuse of discretion.
It should be done in good faith and with due regard to the right of labor. Ineluctably, the exercise of management
prerogatives is not absolute. The prerogatives accorded management cannot defeat the very purpose for which labor
laws exist ‐ to balance the conflicting interests of labor and management, not to tilt the scale in favor of one over the
other, but to guarantee that labor and management stand on equal footing when bargaining in good faith with each
other.

44. Instances when the employer

impose a heavier penalty than
what the company rules
prescribe
The employer has the right to impose a heavier penalty than that prescribed in the company  rules and regulations if
circumstances warrant the imposition thereof. The fact that the offense was committed for the first time or has not
resulted in any prejudice to the company was held not to be a valid excuse. No employer may rationally be expected
to continue in employment a person whose lack of morals, respect and loyalty to his employer, regard for his
employer’s rules, and appreciation of the dignity and responsibility of his office, has so plainly and completely been
bared. Company rules and regulations cannot operate to altogether negate the employer’s prerogative and
responsibility to determine and declare whether or not facts not explicitly set out in the rules may and do constitute
such serious misconduct as to justify the dismissal of the employee or the imposition of sanctions heavier than those
specifically and expressly prescribed therein. This is dictated by logic, otherwise, the rules, literally applied,would
result in absurdity; grave offense, e.g., rape, would be penalized by mere suspension, this, despite the heavier
penalty provided therefor by the Labor Code or otherwise dictated by common sense.
Cruz vs Coca Cola Bottlers
In Cruz vs. Coca-cola Bottlers Phils., Inc., the violation of the company rules committed by petitioner is punishable
with the penalty of suspension for the first offense. However, the Supreme Court affirmed the validity of his dismissal
because respondent company has presented evidence showing that petitioner has a record of other violations from
as far back as 1986

45. When refusal to transfer

valid; When is it not
The refusal of an employee to be transferred may be held justifiable if there is a showing that the transfer was
directed by the employer under questionable circumstances. And the exercise of the prerogative to transfer or assign
employees from one office or area of operation to another is valid provided there is no demotion in rank or diminution
of salary, benefits and other privileges. The transfer should not be motivated by discrimination or made in bad faith or
effected as a form of punishment or demotion without sufficient cause.

46. Difference between non-

demandable or enforceable
bonus and demandable or
enforceable bonus
While bonus does not form part of the wage or salary of the employees, it becomes demandable and enforceable
under any of the following circumstances:

1. When it is stipulated in an employment contract or CBA;

2. When the grant of bonus is a company policy or practice;
3. When it is granted as an additional compensation which the employer agreed to give without any condition such
as success of business or more productive operation and, thus, must be deemed part of wage or salary; hence,
demandable.

It thus becomes a demandable and enforceable obligation only when it is made part of the wage or salary or
compensation. When considered as part of the compensation and, therefore, demandable and enforceable, the
amount is usually fixed. But if the amount of bonus is dependent upon the realization of profits, the bonus
is not demandable and enforceable.

47. Change of Working Hours or

Lunch Break
Employers have the freedom and prerogative, according to their discretion and best judgment, to regulate and control
the time when workers should report for work and perform their respective functions.
ILLUSTRATIVE CASES

 Sime Darby Pilipinas, Inc v. NLRC, where it was held that management retains to prerogative to change the
working hours of its employees whenever exigencies of the service so require.
 Manila Jockey Club Employees Labor Union- PTGWO, v. Manila Jockey Club, Inc, where the validity of the
exercise of the same prerogative to change the working hours was affirmed in this case. It was found that while
Section 1, Article IV of the CBA provides for a 7-hour work schedule from 9:00 a.m to 12:00 noon and from 1:00
p.m to 5:00 p.m from Mondays to Saturdays, Section 2 Article XI thereof expressly reserves to respondent the
prerogative to change existing methods or facilities and to change the schedules of work. Consequently, the
hours of work of regular monthly-paid employees were changed from the original 9:00 a.m to 5:00 p.m schedule
to 1:00 p.m. to 8:00 p.m. schedule for non-race days was, however, retained. Respondent, as employer, cited the
change in the program of horse races as reason for the adjustment of the work schedule. It rationalized that when
the CBA was signed, the horse races started at 10:00 a.m. When the races were moved to 2:00 p.m., there was
no other choice for management but to change the work schedule as there was no work to be done in the
morning. Evidently, the adjustment in the work schedule is justified.

48. Post-employment
Prohibitions
The employer, in the exercise of its prerogative, may insist on an agreement with the employer for certain prohibitions
to take effect after the termination of their employer-employee relationship. The following stipulations in an
employment are illustrative of the prohibitions normally agreed upon by the employer and employee:
Non-Compete Clause
The employer and employee are free to stipulate in an employment contract prohibiting the employee within a certain
period from and after the termination of his employment, from:

1. Starting a similar business, profession, or trade; or

2. Working in an entity that is engaged in a similar business that might compete with the employer

The non-compete clause is agreed upon to prevent the possibility that upon an employee’s termination or
resignation, he might start a business or work for a competitor with the full competitive advantage of knowing and
exploiting confidential and sensitive information, trade secrets, marketing plans, customer/ client lists, business
practices, upcoming products, etc which he acquired and gained from his employment with the former employee.
Confidentiality and Non-Disclosure Clause
The Confidentiality and Non-Disclosure Clause reflects the commitment of the employee that he shall not, either
during the period of his employment with the employer or at any time thereafter, use or disclose to any person, firm or
corporation any information concerning the business or affairs of his employment for his benefit or to the detriment of
the employer. This clause may also cover Former Employer Information and Third Party Information.
Non-Solicitation Clause
To protect the legitimate business interests of the employer, including its business relationships, the employee under
this clause, may, directly or indirectly, be prohibited from soliciting or approaching, or accept any business from any
person or entity who shall, at any time within a fixed period preceding the termination of his employment, have been
(a) a client talent, producer, designer, programmer, distributor, merchandiser, or advertiser of the Company; (b)  party
 or prospective party to an agreement with the employer; (c) a representative or agent of any client, talent, producer,
designer, programmer, distributor, merchandiser, or advertiser of the employer for the purpose of offering to that
person or entity goods or services which are of the same type as or similar to any goods or services supplied by the
employer at termination.
Non-Recruitment or Anti-Piracy Clause
This clause prohibits the recruitment by the employee of personnel or employees of the employer for a certain period
after his termination of employment, either on his own account or in conjunction with or on behalf of any other person.
Inventions Assignment Clause (Intellectual Property Clause)
In industries engaged in research and development and related activities, this clause requires employee, within a
certain period, to disclose in confidence to the employer and its subsidiaries and to assign all inventions,
improvements, designs, original works of authorship, formulas, processes, compositions of matters, computer
software programs, database, mask works and trade secrets, whether or not patentable, copyrightable or protectable
as trade secrets (collectively, the “Inventions”), which the employee may solely or jointly conceive or develop or
reduce to practice, or cause to be conceived or developed or reduced to practice, during the period of his
employment with the employer.

49. Prohibition against Marriage

(PT&T and Duncan cases)
This policy maybe valid if it is based on a bona fide occupational qualification (BFOQ)
In other words, the no-spouse policy could be a valid exercise of management prerogative provided it reflects an
inherent quality reasonably necessary for satisfactory job performance and the employer has the burden to prove the
existence of this reasonable business necessity
To justify BFOQ the employer must prove two factors: 

 that the employment qualification is reasonably related to the essential operation of the job involved; and
 that there is a factual basis for believing that all or substantially all personsmeeting the qualification would be
unable to properly perform the duties of the job.
 In the case of Duncan Association of Detailman-PTGWO and Pedro Tecson v. Glaxo Wellcome Philippines, it
was held that Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other
confidential programs and information from competitors. So the prohibition against personal or marital
relationships with employees of competitor companies upon Glaxo’s employees was considered valid and
reasonable under the circumstances because relationships of that nature might compromise the interests of
Glaxo.

The PT & T Case

In PT and T, the employer invoked concealment of civil status so ground to terminate the private respondent
employee. In the job application form that was furnished the employee, she indicated in the portion for civil status that
she was single although, she had contracted marriage a few months earlier, that is, on May 26, 1991. It appears that
the employee had made the same representation in the two successive reliever agreements which she signed on
June 10, 1991 and July 8, 1991, When petitioner supposedly learned about the same later, its branch supervisor in
Baguio City sent to private respondent a memorandum dated January 15, 1992 requiring her to explain the
discrepancy. In that memorandum, she was reminded about the company’s policy of not accepting married women
for employment. In her reply letter dated January 17, 1992, private respondent stated that she was not aware of
PT&T’s policy regarding married women at the time, and that all along she had not deliberately hidden her true civil
status. Petitioner nonetheless remained unconvinced by her explanations. Private respondent was dismissed from
the company effective January 29, 1992. The Court, in declaring the dismissal of respondent illegal, ratiocinated as
follows:
“In the case at bar, petitioner’s policy of not accepting or considering as disqualified from work any woman worker
who contracts marriage runs afoul of the test of, and the right against, discrimination, afforded all women workers by
our labor laws and by no less that the Constitution. Contrary to petitioner’s assertion that it dismissed  private
respondent from employment on account of her dishonesty, the record discloses clearly that her ties with the
company were dissolved principally because of the company’s policy that married women are not qualified for
employment in PT & T, and not merely because of her supposed acts of dishonesty”
The Duncan Case
In Duncan, the contract of employment expressly prohibited an employee from having a relationship with an
employee of a competitor company. It provides:
“10.  You agree to disclose to management any existing or future relationship you may have, either by consanguinity
or affinity with co-employees or employees of competing drug companies. Should it pose possible conflict of interest
in management discretion, you agree to resign voluntarily from the Company as a matter of Company policy.”
The Supreme Court ruled that this stipulation is a valid exercise of management provocative. The prohibition against
personal or martial relationships with employees of competitor-companies upon its employees is reasonable under
the circumstances because relationships of that nature might compromise the interest of the company. In laying
down the assailed company policy, the employer only aims to protect its interest against the possibility that a
competitor company will gain access to its trade secrets, manufacturing formulas, marketing strategies and other
confidential programs and

50. Prohibition against Marriage

(Simbol and Glaxo cases )
In the case of Duncan Association of Detailman- PTGWO vs. Glaxo Welcome Philippines, Inc., the Supreme Court
passed on the validity of the policy of a pharmaceutical company prohibiting its employees from marrying employees
of any competitor company. It held that Glaxo has a right to guard its trade secrets, manufacturing formulas,
marketing strategies and other confidential programs and information from competitors. It considered the prohibition
against personal or marital relations with employees of competitor companies upon Glaxo’s employees reasonable
under the circumstances because relationships of that nature might compromise the interests of Glaxo. In laying
down the assailed company policy, the Court recognized that Glaxo only aims to protect its interests against the
possibility that a competitor company will gain access to its secrets and procedures.
In the case of Star Paper Corp. vs. Simbol, respondents were hired after they were found fit for the job, but were
asked to resign when they married a co-employee. Petitioner’s failed to how the marriage of Simbol, then a Sheeting
Machine Operator, to Alma Dayrit, then an employee of the Repacking Section, could be detrimental to its business
operations. Neither did petitioners explain how this detriment will happen in the case of Wilfreda Comia, the a
Production Helper in the Selecting Department, who married Howard Comia, then a helper in the cutter-machine. The
policy is premised on the mere fear that employees married to each other will be less efficient. If the questioned rule
is upheld without valid justification, the employer can create policies based on an unproven presumption of a
perceived danger at the expense of an employee’s right to security of tenure.
Petitioners contend that their policy will apply only when one employee marries a co-employee, but they are free to
marry persons other than co-employees. The questioned policy may not facially violate Article 136 of the Labor Code
but it creates a disproportionate effect and under the disparate impact theory, the only way it could pass judicial
scrutiny is a showing that it is reasonable despite the discriminatory, albeit disproportionate, effect. The failure of
petitioners to prove a legitimate business concern in imposing the questioned policy cannot prejudice the employee’s
right to be free from arbitrary discrimination based upon stereotypes of married persons working together in one
company.
Lastly, the absence of a statute expressly prohibiting marital discrimination in our jurisdiction cannot benefit the
petitioners. The protection given to labor in our jurisdiction is vast and extensive that we cannot prudently draw
inferences from the legislature’s silence that married persons are not protected under our Constitution and declare
valid a policy based on a prejudice or stereotype. Thus for failure of petitioners to present undisputed proof of
a reasonable business necessity, the Court ruled that the questioned policy is an invalid exercise of management
prerogative.

51. Non-involvement clause (Tiu

case)
In 2007 case of Daisy B. Tiu vs. Platinum Plans Philippines, Inc., the non-compete clause (called “Non-Involvement
Provision” in this case) in the employment contract stipulates as follows:
“8. NON-INVOLVEMENT PROVISION – The EMPLOYEE further undertakes that during his/her engagement with
EMPLOYER and in case of separation from the Company, whether voluntary or for cause, he/she shall not, for the
next TWO (2) years thereafter, engage in or be involved with any corporation, association or entity, whether directly
or indirectly, engaged in the same business or belonging to the same pre-need industry as the EMPLOYER. Any
breach of the foregoing provision shall render the EMPLOYER liable to the EMPLOYER in the amount of One
Hundred Thousand Pesos (P100.000.00) for and as liquidated damages.”
Starting on January 1, 1993, petitioner worked for respondent as Senior Assistant Vice President and Territorial
Operations Head in charge of its Hongkong and Asean operations under a 5-year contact of employment containing
the non-involvement clause. On September 16. 1995, petitioner stopped reporting for work. In November 1995, she
became the Vice President for Sales of Professional Pension Plans, Inc., a corporation engaged also in the pre-need
industry. Consequently, respondent sued petitioner for damages before the RTC of Pasig City. Respondent alleged
that petitioner’s employment with Professional Pension Plans, Inc. violated the non-involvement clause in her
contract of employment.
Petitioner countered that the non-involvement clause was unenforceable for being against 78public order or public
policy: First, the restraint imposed was much greater than what was necessary to afford respondent a fair and
reasonable protection. Petitioner contented that the transfer to a rival company was an accepted practice in the pre-
need industry. Since the products sold by the companies were more or less the same, there was nothing peculiar or
unique to protect. Second, respondent did not invest in petitioner’s training or improvement. At the time petitioner was
recruited, she already possessed the knowledge and expertise required in the pre-need industry and respondent
benefited tremendously from it. Third, a strict application of the non-involvement clause would amount to a
deprivation of petitioner’s right to engage in the only work she knew.
In upholding the validity of the non-involvement clause, the trial court ruled that a contact in restraint of the trade is
valid provided that there is a limitation upon either time or place. In the case of the pre-need industry, the trial court
found the two-year restriction to be valid and reasonable.
On appeal, the Court of Appeals affirmed the trial court’s ruling. It reasoned that petitioner entered into the contract
on her own will and volition. Thus, she bound herself to fulfill not only what was expressly stipulated in the contract,
but also all its consequences that were not against good faith, usage and law. The appellate court also ruled that the
stipulation prohibiting non-employment for two-years was valid and enforceable considering the nature of
respondent’s business.
In affirming validity of the Non-Involvement Clause, the Supreme Court ruled that a non-involvement clause is not
necessarily void for being in restraint of trade as long as there are reasonable limitations as to time, trade
and place.
In this case, the non-involvement clause has a time limit: two years from the time petitioner’s employment
with respondent ends, It is also limited as to trade, since it only prohibits petitioner from engaging in any
pre-need business akin to repondent’s.
More significantly, since petitioner was the Senior Assistant Vice-President and Territorial Operations Head in charge
of respondent’s Hongkong and Asean operations, she had been privy to confidential and highly sensitive marketing
strategies of respondent’s business. To allow her to engage in a rival business soon after she leaves would make
respondent’s trade secrets vulnerable especially in a highly competitive marketing environment. In sum, the
Supreme Court find the non-involvement clause not contrary to public welfare and not greater than is
necessary to afford a fair and reasonable protection to respondent.

52. Post-employment ban

(Glaiserman, Richard and
Consulta cases)
In G. Martini, Ltd. vs. Glaserman, we also declared a similar stipulation as void for being an unreasonable restraint of
trade. There, the employee was prohibited from engaging in any business similar to that of his employer for a period
of one year. Since the employee was employed only in connection with the purchase and export of abaca, among the
many businesses of the employer, the Court considered the restraint too broad since it effectively prevented the
employee from working in any other business similar to his employer even if his employment was limited only to one
of its multifarious business activities.
However in Del Castillo vs. Richmond, we upheld a similar situation as legal, reasonable, and not contrary to public
policy. In the said case, the employee was restricted from opening, owning or having any connection with any other
drugstore within a radius of four miles from the employer’s place of business during the time the employer was
operating his drugstore. We said that a contract in restraint of trade is valid provided there is a limitation upon either
time or place and the restraint upon one party is not greater that the protection the other party requires.
Finally, in Consulta vs. Court of Appeals, we considered a non-involvement clause in accordance with Article 1306 of
the Civil Code. While the complainant in that case was an independent agent and not an employee, she was
prohibited for one year from engaging directly or indirectly in activities if other companies that compete with the
business of her principal. We noted therein that the restriction did not prohibit the agent from engaging in any other
business, or from being connected with any other company, for as long as the business or company did not compete
with the principal’s business. Further, the prohibition applied only for one year after the termination of the agent’s
contract and was therefore a reasonable restriction designed to prevent acts prejudicial to the employer.

53. Other post-employment

prohibition
Non-disclosure of Company Information and/or Documents
A mandatory obligation that all the records and documents and all information pertaining to employer’s business or
affairs or any of its affiliated companies are confidential and no unauthorized disclosure or reproduction shall be
made by an employee any time during or after employment. To enforce such confidentiality clause and in order to
ensure strict compliance of the confidentiality clause, the employer may insert a provision allowing the latter to
enforce liability for damages and forfeiture of forms of compensation including commissions and incentives, against
the erring employee in the event of breach.
Reasonable Restraint of Trade
Another allowable post-employment ban is a “non-compete clause”.
A non-compete clause provides that an employee shall not work or engage in work for whatsoever capacity, either as
an employee, agent or consultant with any person whose business is in direct competition with the company for a
reasonable period from date of resignation or termination. Most of the employment contracts or agreements, has
non-compete clause mandatory to resigned or terminated employees for a period of one (1) to two (2) years from
separation.
Such clause may also come with it a penalty for its strict enforcement which involves acknowledgement of the erring
employee that he or she will be liable for damages, and in case damages may not be an adequate remedy, in
addition to any other remedies available to the employer at law or in equity, the employer may file a legal suit to
enforce its rights by way of injunction, restraining order or other relief to enjoin any breach or default of the contract