TERMINATION OF EMPLOYMENT

(Book VI – Art. 293 to 302)

SECURITY OF TENURE
The right to security of tenure means that a regular employee shall remain employed unless his
or her services are terminated for just or authorized cause and after observance of procedural
due process. It protects an employee against unjust termination by the employer.

1. Categories of employment as to tenure

A. Regular Employment
Regular or permanent employees are those whose work are necessary or desirable in the usual
business or trade of the employer.

The primary standard to determine regular employment is the reasonable connection between
the job performed by the employee in relation to the business or trade of employer. Regular
employees typically would have rendered at least one year of service. It is common to be put
under probationary terms before transiting into regular or permanent employment in the
company.

Right to Security of tenure: They cannot be terminated from employment except for just and/or
authorized causes determined by law. (Art. 294)

B. Casual Employment (2nd paragraph of Art. 295)

Casual employment is defined where an employee is engaged to perform a job insignificant to
the core business of the employer or are merely occasional and incidental. Although related to
and connected with the regular business of the employer, nevertheless, is not within the usual
course of trade, business, profession or occupation.

The work must be a definite period made known to both parties at the time of engagement.

Once they have worked for at least a year, whether continuously or not, they transition into a
regular employee with respect to the employed position. (Art. 295)
C. Probationary Employment (Art. 296)

Probationary employees in Philippines are those made to go on a stipulated trial period before
transiting to a regular employee. During this crucial period, employees on probation are
scrutinized and assessed on their ability to perform on the job. Good performing candidates will
be allowed to successfully transit into a regular employee while non-performers will normally be
asked to leave. This probationary period typically lasts not more than 6 months.

The employer shall make known to the employee the standards under which he will qualify as a
regular employee at the time of his engagement. Where no standards are made known to the
employee at that time, he shall be deemed a regular employee. (Sec. 6 (d), IRR Book VI, Rule VII-
A)

Right to Security of tenure: They enjoy security of tenure during probationary period and may not
be dismissed except for just or authorized case or when they fail to qualify as regular employees.

D. Project Employment

A project employee is an employment for a specific project or undertaking. The duration of

project will be set and determined and the employment of the employees is co-terminus with
the said project.

There must also be a clear agreement on the completion or terminated of the project at the time
of employment. Predetermining the duration of project employment is important in determining
if employee is a project employee or not.

E. Seasonal Employment

Employees on seasonal employment will only work for the duration of the season.

They are mostly part-time or temporary workers that help with increased work demands for that
period.

REGULAR SEASONAL WORKERS – These are workers who are regularly hired for work on a
season. These workers will be temporarily laid off during off season but re-employed when their
services are needed. The employee relationship is never severed but only suspended.

Regular seasonal employment requires at least 2 years or seasons to make a seasonal employee
into a regular seasonal employee.
 F. Fixed Term Employment
Fixed term employees are engaged to perform a job, work or service for a pre-determined date
of completion, or where the employment has a specific date of termination.

The case of Pure Foods Corporation v. NLRC (347 Phil. 434, 1997) laid down the criteria of a valid
fixed-term employment, to wit:

1. The fixed period of employment was knowingly and voluntarily agreed upon by
the parties without any force, duress, or improper pressure being brought to bear
upon the employee and absent any other circumstances vitiating his consent; or
2. It satisfactorily appears that the employer and the employee dealt with each other
on more or less equal terms with no moral dominance exercised by the former or
the latter.”

G. Work-pool Employees

Employees who are part of work pool are tap by the employer for engagement in projects
that it has or may have, depending on the supply of manpower and the qualifications and skills
of the employees. (Ruben Carpio vs. Modair Manila Co. Ltd., Inc., G.R. No. 239622, June 21,
20121)

The idea of work pool is of the same set-up from that of regular seasonal employees insofar as
the effect of temporary cessation of work is concerned.

A worker in the pool do not receive salaries and are free to seek other employment during
temporary breaks in the business, provided that the worker shall be available when called to
report for a project. (G.R. No. 116781)

TOPIC: CATEGORIES OF EMPLOYMENT AS TO TENURE

OBJECTIVE QUESTION: On what category of employment does a Part-time employee belong? (Are they
a seasonal employee? Or a casual or project employee?)

ANSWER: When we say Part-time employees, these are the workers/employees who render
service under the standard 8 hours a day work schedule. It should be borne in mind that a part-
time employee may be a regular despite the shorter working schedule. To be clear, a regular
employee may be a full-time regular or a part-time regular. They can also fall under the other
categories of employment (such as casual, seasonal, project, so on) as an employee who work
on a shorter work schedule. Part-time employees enjoy security of tenure.
2. LEGITIMATE SUBCONTRACTING VS. LABOR-ONLY CONTRACTING (Art. 106-109)
The case of Petron Corporation vs. ARMZ CABARETE et. Al (G.R. No. 182255, June 15,
2015) discussed the difference between Job Contracting vs. Labor-only Contracting:

Legitimate job contracting or subcontracting refers to an arrangement whereby a principal

agrees to put out or farm out with the contractor or subcontractor the performance or
completion of a specific job, work, or service within a definite or predetermined period,
regardless of whether such job, work, or service is to be performed or completed within or
outside the premises of the principal. (Employees under agency)

Labor-only contracting, on the other hand, is defined under Article 106 of the Labor Code. It
refers to an arrangement where the contractor, who does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among others, supplies
workers to an employer and the workers recruited are performing activities which are directly
related to the principal business of such employer.

It shall also likewise be deemed a Labor-only Contracting if the contractor does not exercise the
right to control over the performance of the work of the employee. (Section 5(b), D.O. No. 174)

ELEMENTS OF LEGITIMATE JOB CONTRACTING:

A person is considered engaged in legitimate job contracting or subcontracting if the following

conditions concur: (Section 8, D.O. No. 174)

a. the contractor carries on a distinct and independent business and partakes the
contract work on his account under his own responsibility according to his own
manner and method,
b. the contractual workers are free from the control and direction of the principal
in all matters connected with the performance of his work except as to its result;
c. the contractor has substantial capital or investment; and
d. the agreement between the principal and the contractor or subcontractor
assures the contractual employees’ entitlement to all labor and occupational
safety and health standards, free exercise of the right to self-organization,
security of tenure, and social welfare benefits.

Contractor’s/Subcontractor’s Employees is entitled to the right of security of tenure and all

other rights and privileges provided for in the Labor Code.
TRILATERAL RELATIONSHIP
In a legitimate contracting, there exist a trilateral relationship under which there is a service of
agreement between the principal and the contractor or subcontractor, and a contract of
employment between the contractor or subcontractor and its workers.
There are three parties involved in these arrangements:
(1) Principal – the one who farms out a job or service to a contractor or subcontractor;
(2) Contractor or subcontractor - the one who has the capacity to independently undertake
the performance of the job, work or service;
(3) Contractor’s employees– those who were engaged by the contractor or subcontractor to
accomplish the job, work or service.

SOLIDARY LIABILITY – defined as the liability of the principal pursuant to the provisions of the
Labor Code, as the direct employer together with the contractor for any violation of the
provision of the Labor Code. (D.O. No. 174)

TWO SITUATIONS WHERE SOLIDARY LIABILITY ARISE:

1. In the event of violation of any provision of the Labor Code, including the failure to pay
wages, there exist a solidary liability on the part of the principal and the contractor for
purposes of enforcing the provisions of the Labor Code and other social legislations, to
the extent of the work performed under the employment contract. (Art. 106 & Sec. 9 –
DO 174 Series of 2017)
2. In the event that there is a finding that the contractor or subcontractor is engaged in
labor-only contracting, the principal shall be deemed the direct employer of the
contractor’s or subcontractor’s employees. (Sec. 7, DO 174 Series of 2017)

TOPIC: LEGITIMATE CONTRACTING VS. LABOR-ONLY CONTRACTING

OBJECTIVE QUESTION: Can the principal, being the indirect employer of the contractor’s employees, be
held solidary liable for payment of separation pay and backwages of the contractor’s employees who
were constructively or illegally dismissed by the contractor?

ANSWER: As a general rule, the solidary liability of the principal arises is only when there are
unpaid wages or a finding that the contractor is a labor-only contractor, it does not extend to
the payment of backwages and separation pay of the employees who were constructively or
illegally dismissed by the contractor, EXCEPT when there is a conspiracy between the principal
and the contractor in effecting the wrongful dismissal. (Rosewood Processing Inc. v. NLRC, G.R.
Nos. 116476-84, May 21, 1998)
 TERMINATION BY EMPLOYER
TWO ASPECTS OF DUE PROCESS:

Substantive due process – mandates that an employee may be dismissed based only on just or
authorized causes.

Procedural due process – requires that an employee may be dismissed only after he has been
given an opportunity to be heard.

1. SUBSTANTIVE DUE PROCESS (DEPARTMENT ORDER NO. 147-15) – p. 1093

JUST CAUSES – They are called just causes because the termination of employment is justified
due to an employee’s actions, behavior, or omission, either of which resulted in a serious or grave
violation of the law, employment contract, company policies, collective bargaining agreement,
and any other employment agreement.

Art. 297 (282). Termination by employer. An employer may terminate an employment

for any of the following causes:

a. Serious misconduct or willful disobedience by the employee of the lawful

orders of his employer or representative in connection with his work;
b. Gross and habitual neglect by the employee of his duties;
c. Fraud or willful breach by the employee of the trust reposed in him by his
employer or duly authorized representative;
d. 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
e. Other causes analogous to the foregoing.

A. SERIOUS MISCONDUCT – It is the transgression of some established and definite rule of

action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent
and not mere error in judgment.
ELEMENTS: (a) There must be misconduct of such grave and aggravated character;
(b) It must relate to the performance of the employee’s duties; and
 (c) It must show that the employee has become unfit to continue working
for the employer.
(Coffee Bean and Tea Leaf vs. Arenas, G.R. No. 208908, March 11,2015)

B. WILLFUL DISOBEDIENCE OR INSUBORDINATION – refers to the refusal to obey some order,

which a superior is entitled to give and have obeyed. It is a willful or intentional disregard of
lawful and reasonable instructions of the employer.

REQUISITES:
3. The employee’s assailed conduct must have been willful or intentional. (Willfulness –
characterized by a “wrongful and perverse attitude”)

4. The orders, regulations, or instructions of the employer or representative must be (a)

reasonable and lawful; (b) sufficiently known to the employee; and (c) in connection with
the duties which the employee has engaged to discharge.

C. GROSS AND HABITUAL NEGLIGENCE

- the neglect of duty must not only be gross but also habitual
NEGLECT OF DUTIES:
▪ Gross negligence – the want or absence of or failure to exercise slight care or
diligence, or the entire absence of care.
▪ Habitual neglect – implies repeated failure to perform one’s duties over a period of
time, depending upon the circumstances.
▪ Fraud and willful neglect – imply bad faith on the part of the employee in failing to
perform his job to the detriment of the employer and the latter’s business.

➢ ABANDONMENT of job is a form of neglect of duty.

- To constitute abandonment, there must be clear and deliberate intention to
discontinue one’s employment without any intention of returning back.
- Two-notice rule applies on abandonment for an employer to comply with
procedural due process
ELEMENTS OF ABANDONMENT:
(a) failure to report for work or absence without valid or justifiable reason; and
(b) a clear intention to sever the employee-employer relationship.
 ➢ TARDINESS AND ABSENTEEISM are forms of neglect of duty.
- An employee’s tardiness and absenteeism adversely affect the business of the
employer. As such, when the tardiness or absenteeism becomes frequent
amounting to gross and habitual neglect of duty, it may be a valid ground for
termination of employment.
In the case of R. B. Michael Press v. Nicasio Galit (G.R. No. 153510, February 13, 2008), the
Supreme Court ruled that:

“Habitual tardiness is a form of neglect of duty. Lack of initiative, diligence, and discipline to
come to work on time everyday exhibit the employee’s deportment towards work. Habitual and
excessive tardiness is inimical to the general productivity and business of the employer. This is
especially true when the tardiness and/or absenteeism occurred frequently and repeatedly
within an extensive period of time.”

D. FRAUD OR WILLFUL BREACH OF TRUST

Fraud - implies willfulness or wrongful intent

To be a valid ground for termination, there must be an act, omission or concealment
involves a breach of legal duty, trust, or confidence justly reposed committed against the
employer or representative and in connection with the employee’s work.
Lack of trust or confidence as a ground for termination (under breach of trust):
Applies only to:
(1) Managerial Employee – employees occupying positions of trust and confidence; and
(2) Fiduciary rank-and-file employees – employees who are routinely charged with the care
and custody of the employer’s money or property, such Cashiers, Auditors, Property
custodians, etc.

Requisites [IRR Book VI – Rule 1-A, Sec 5.2(e)]

(1) the employee concerned must be holding a position of trust and confidence;
(2) there must be an act, omission, or concealment that would justify the loss of trust and
confidence;
(3) such loss of trust relates to the employee's performance of duties and should not be simulated;
(4) It should not be used to subterfuge for causes which are improper, illegal, or unjustified; and
(5) It must be genuine and not a mere afterthought to justify an earlier action taken in bad faith.
E. COMMISSION OF A CRIME OR OFFENSE
i. There must be an act or omission punishable or prohibited by law;
ii. Committed against the employer or against any immediate member of the
his/her family or to his representative.
(Immediate family member – refers to spouse, ascendants, descendants, or
legitimate, natural, or adopted brothers or sisters or his relative by affinity
in the same degrees, and those by consanguinity within 4th civil degree.)

TOPIC: JUST CAUSES – ANALOGOUS CAUSE

OBJECTIVE QUESTION: Can an employee’s “attitude problem” be a considered as an analogous

cause under Art. 297? May it be considered as a just cause to dismiss an employee?

ANSWER: Yes, an employee’s attitude problem may be a valid ground for his termination. If such
attitude problem becomes detrimental to the company because the employee cannot get along
with his co-employees, it strains and upset the working environment. Without the necessary
teamwork and synergy, the organization cannot function well. It is a situation analogous to loss of
trust and confidence.

TOPIC: JUST CAUSES – LACK OF CONFIDENCE OR TRUST

OBJECTIVE QUESTION: As discussed, the ground lack of confidence or trust applies only to
managerial employees and fiduciary rank-and-file employees, how about confidential employees?

ANSWER: Although the labor code is silent on the matter, by applying the doctrine of necessary
implication, the just cause lack of confidence or trust as a valid ground for termination of
employment may also apply to confidential employees. Loss of confidence as a just cause for
termination of employment is premised on the fact that the employee concerned holds a position of
responsibility, trust and confidence or that the employee concerned is entrusted with confidence
with respect to delicate matters, such as the handling or care and protection of the property and
assets of the employer. Confidential employees, like managerial employees, cashiers, auditors, and
property custodians acts in fiduciary manner.

AUTHORIZED CAUSES – It is called authorized causes because the employer is authorized to

separate employees from their employment due to a legitimate business reason or a
requirement by law or regulation.

I. Installation of labor-saving devices; (Art. 298)

This refers to the reduction of the number of workers in any workplace made
necessary by the introduction of labor-saving machinery or devices.
 Requirements: [IRR Book VI – Rule 1-A, Sec 5.4(a)]

(1) There must be introduction of machinery, equipment or other devices;

(2) The introduction must be done in good faith;
(3) The purpose for such introduction must be valid such as to save on cost,
enhance efficiency and other justifiable economic reasons;
(4) There is no other option available to the employer that the introduction of
machinery, equipment or device and the consequent termination of
employment of those affected thereby; and
(5) There must be fair and reasonable criteria in selecting employees to be
terminated.

II. Redundancy; (Art. 298)

Redundancy exists where the services of an employee are in excess of what is

reasonably demanded by the actual requirements of the enterprise, which may be
due to a number of factors, such as over hiring of workers, decreased volume of
business, or dropping of a particular product line or service activity previously
manufactured or undertaken by the enterprise. The employer has no legal obligation
to keep in its payroll more employees than are necessary for the operation of its
business.

Requisites: [IRR Book VI – Rule 1-A, Sec 5.4(b)]

1. There must be superfluous positions or services of employee;

2. The positions or services are in excess of what is reasonably demanded by the
actual requirements of the enterprise to operate in an economical and efficient
manner;
3. There must be good faith in abolishing redundant positions;
4. There must be fair and reasonable criteria in selecting the employees to be
terminated; and
5. There must be an adequate proof of redundancy.

III. Retrenchment to prevent losses or downsizing; (Art. 298)

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.

Retrenchment is a management prerogative resorted to avoid or minimize

business losses.
 Requisites: [IRR Book VI – Rule 1-A, Sec 5.4(c)]

1. The retrenchment must be reasonably necessary and likely to prevent business

losses;
2. The losses, if already incurred’ are not merely de minimis, but substantial, serious,
actual and real, or if only expected, are reasonably imminent;
3. The expected or actual losses must be proved by sufficient and convincing
evidence;
4. The retrenchment must be in good faith for the advancement of its interest and
not to defeat or circumvent the employee’s right to security of tenure; and
5. There must be fair and reasonable criteria in ascertaining who would be dismissed
and who would be retained among the employees.

IV. Closure or cessation of business; (Art. 298)

Closure or cessation of business refers to the complete or partial cessation of the

operation and/or shutdown of the establishment of the employer.

Closure or cessation of operations of establishment may either be partial or total;

it may or may not be due to serious business losses or financial reverses.

Requirement: [IRR Book VI – Rule 1-A, Sec 5.4(d)]

(1) There must be a decision to close or cease operation of the operation of the
enterprise by the management;
(2) The decision was made in good faith; and
(3) There is no other option available to the employer except to close or cease
operations.

V. Disease / illness. (Art. 299)

An employer may terminate the services of an employee who has been found to
be suffering from any disease and whose continued employment is prohibited by law
or is prejudicial to his health as well as to the health of his co-employees.

Requirement: [IRR Book VI – Rule 1-A, Sec 5.4(e)]

(1) An employee has been found to be suffering from any disease.

(2) His continued employment is prohibited by law or prejudicial to his health, as
well as to the health of his co-employees.
(3) A competent public health authority certifies that the disease is of such nature
or at such a stage that it cannot be cured within a period of six months.
2. Procedural due process, Two-notice rule (DEPARTMENT ORDER NO. 147-15)

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.

“Agabon Doctrine” – the dismissal of employees for just causes or authorized causes but
without observance of procedural due process will be upheld subject to the employer
being liable for nominal damages. (Agabon v. NLRC, En Banc, G.R. No. 158693, November
17, 2004)

Procedural due process for just causes:

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.

NOTE: Hearing may be dispensed with if the employee has already admitted his guilt/
took responsibility for the act he was accused of.

A trial type/ formal hearing or conference is not mandatory. It becomes

mandatory only when: (1) Requested by the employee in writing; (2) or when substantial
evidentiary disputes exist; (3) when a company rule or practice requires it.
TWIN NOTICE RULE:

First Notice: Notice to Explain

(1) The specific causes or grounds for termination;

(2) Detailed narration of the facts and circumstances that will serve as basis for the charge against
the employee;
(3) A directive that the employee is given opportunity to submit a written explanation within a
reasonable period.

“Reasonable period” – a period of at least five (5) calendar days from receipt of
the notice.

“Ample opportunity to be heard” – means any meaningful opportunity (verbal or

written) given to the employee to answer the charges against him and submit evidence
in support of his defense, whether in a hearing, conference or some other fair, just and
reasonable way.
Second Notice: Notice of Decision/ Notice to terminate or dismiss

(1) Should indicate that all circumstances involving the charge against the employee have been
considered;
(2) the grounds have been established to justify the severance of their employment.

NOTE: Both notices must be served personally to the employee or to the employee’s last known
address. (IRR Book VI Rule 1A, Section 5.1)

Procedural due process for authorized causes:

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.

TOPIC: TWO-NOTICE RULE

SITUATIONAL QUESTION: Mr. Bean’s employer sent him a notice to explain through his declared
official email address on April 10. When he reported back to work at April 20, it was only then that
he had known about the said notice. His employer told him that he had already waived his right to
explain. Is the contention of the employer meritorious? Is the notice sent via email also qualifies
as a “written notice” contemplated under the law?

ANSWER: Under the IRR, the employee is given a reasonable period to respond to the notice to
explain sent to him. And as defined under the IRR, reasonable period shall mean a period of at
least five (5) calendar days from receipt of the notice.

Therefore, the contention of the employer is devoid of merit. Mr. Bean is considered to have
received the notice to explain only when the notice to explain came into his knowledge and was
able to open the email, thus, Mr. Bean has 5 days from April 20.

Also, the notice sent through electronic mail is considered a sufficient compliance of the two-
notice rule required under the law as long as there is a declared official email address in the
employee’s record. (consulted from former law professor)

DISSENTING OPINION: The notice to explain sent through email is not compliant under what the
law requires. Under the IRR, the notice should be served personally to the employee or to the
employee’s last known address. Therefore, a notice to explain sent through email is not a valid
“written notice”. And as such, the employer cannot claim that Mr. Bean has already waived his
right to explain.
Illegal dismissal, reliefs therefrom

I. Reinstatement (Art. 294)

Reinstatement means restoration of the employee to the position from

which they were unjustly removed.

TWO FORMS:

1. Actual reinstatement – re-admission of the employee to work under the same

terms and conditions prevailing prior to his dismissal.
2. Payroll reinstatement – the employer pays wages and other benefits to the
employee without allowing or requiring them to physically report to work.
Reinstatement of the employee in the payroll.

Reinstatement without loss of seniority rights means that the employee, upon
reinstatement, should be treated in matter involving seniority and continuity of
employment as though he or she had not been dismissed from work.

Reinstatement is IMMEDIATE EXECUTORY. (Even pending appeal)

Is it self-executory? (self-executory – means the reinstatement, either actual or through

payroll, should be executed promptly without the need to writ of execution)

➢ Reinstatement ordered by Labor Arbiter = self-executory (Art. 229)

➢ Reinstatement ordered by NLRC = not self-executory (Art. 229 in rel. to Art. 230)

Discussed in the case of Panuncillo vs. CAP Phil., Inc., G.R. No. 161305, February 9, 2007

II. Backwages (Art. 294)

Backwages refers to the earnings that would have accrued to the dismissed
employee during the period between dismissal and reinstatement.

Full backwages refer to all compensations, including allowances and other

benefits with monetary equivalent that should have been earned by the
employee but was not collected because of unjust dismissal. It includes all the
amount they could have earned starting from the date of dismissal up to the time
 of reinstatement (or if reinstatement is not feasible, until the finality of thr
decision).

Generally, an order of reinstatement carries with it an award of

backwages, the court may not only mitigate, but also absolve the employer from
liability for backwages where good faith is evident.

III. Separation pay, Doctrine of Strained Relations

Components of separation pay: (Santos v. NLRC, 238 Phil. 161, 1987)

➢ Basic Salary + Regular Allowances = Separation pay/ year; or

➢ Monthly take-home pay; or
➢ Daily take home pay x working days in a month

FOUR KINDS OF SEPARATION PAY:

1. STATUTORY SEPARATION PAY: Separation Pay applies only to termination

effected by authorized causes. (Art. 298 & 299)

➢ Termination due to the installation of labor-saving devise or redundancy (Art. 298)

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

➢ Termination due to retrenchment to prevent losses or closure or cessation of

operations (Art. 298) or disease (Art. 299)

- The separation pay shall be equivalent to one (1) month pay or at least one-
half (1/2) month pay for every year of service, whichever is higher, a fraction
of at least six (6) months being considered as one (1) whole year.

Note: Separation pay should be paid within 30 days from laying off the workers. (Labor
Advisory No. 06-20 of January 31, 2020)

2. SEPARATION PAY IN LIUE OF REINSTATEMENT:

(1) When reinstatement is not feasible because the position is no longer existing; and
(2) Doctrine of Strained Relations
 Under the doctrine of strained relations, the payment of separation pay is
considered an acceptable alternative to reinstatement when the latter option is no
longer desirable or viable.

In the case of Globe-Mackay Cable and Radio Corp. v. NLRC (G.R. No. 82511,
03 March 1992), the Supreme Court has taken the occasion to provide the requisites
in applying the Doctrine of Strained Relations, as follows:

1. The employee concerned occupies a position where he enjoys the trust and
confidence of his employer; and
2. If reinstated, an atmosphere of antipathy and antagonism may be generated as
to adversely affect the efficiency and productivity of the employee concerned.

GENERAL RULE: An employee whose employment is terminated by reason of just causes is not
entitled to separation pay; as well as to those employees who voluntarily resigned.

EXCEPTIONS:

3. SEPARATION PAY AS EMPLOYMENT BENEFIT - When it is granted under

company policy or CBA;

4. SEPARATION PAY AS FINANCIAL ASSISTANCE - When granted as a financial

assistance on the ground of equity and compassion (social justice);

IV. Damages

• Moral damages – may be awarded to compensate one for diverse injuries such as
mental anguish, besmirched reputation, wounded feelings and social humiliation.

As a rule, moral damages are recoverable only where the dismissal or

suspension of the employee was attended by bad faith or fraud, or constituted
an act oppressive to labor, or was done in a manner contrary to morals, good
customs or public policy. (PAL vs. NLRC, et. Al., G.R. No. 132805, February 2, 1999)

Any award of moral damages is grounded by the Civil Code and not the
Labor Code.

• Exemplary Damages – may be awarded only if the dismissal was shown to have
been effected in a wanton, oppressive, or malevolent manner. (Cocoland
Development Corp. vs. NLRC and J. Mago, G.R. NO. 98458, July 17, 1996)
 Exemplary damages are awarded in addition to moral damages. It seeks to
correct the unlawful behavior of the employer. In the context of an illegal dismissal
case, the behavior sought to be penalized is the lack of due process. The law
rectifies it by imposing a penalty on the employer by way of exemplary damages.

• Nominal damages – are awarded to an employee who was dismissed for valid
cause but due process was not observed. It is for specific non-compliance with
procedural due process. (AGABON DOCTRINE)

It is to vindicate or recognize the violation of the employee’s right.

V. Attorneys’ fees

The Civil Code allows for the recovery of attorney’s fees in various situations
involving employment, primarily grounded under Art. 2208 Nos. 1 and 2. The
limitation for the recovery of attorney’s fees is pegged at 10% as stated in the 2nd
paragraph of Art. 111 of the Labor Code.

In a catena of cases, the Court awarded attorney’s fees in favor of illegally

dismissed employees who were compelled to file an action for the recovery of
their lawful wages, which were withheld by the employer without any valid and
legal basis. (Alva v. High Capacity Security Force, Inc., G.R. No. 203328, November
8, 2017)

The granting of attorney’s fees can also be grounded as an act of social justice.

VI. Liabilities of corporate officers

General Rule: The corporation having a separate and distinct personality is liable
for the liabilities arising from wrongful dismissal. Corporate officers are not held
solidarily liable with the corporation for separation pay because the corporation
is invested by law with a personality separate and distinct from those of the
persons composing it as well as from that of any other legal entity to which it may
be related. (Valentin Lozada v. Magtanggol Mendoza, G. R. No. 196134, October
12, 2016)

Exception: Piercing the Veil of Corporate Fiction

To hold a director or officer personally liable for corporate obligations, two

requisites must concur, to wit:
 (1) the complaint must allege that the director or officer assented to the
patently unlawful acts of the corporation, or that the director or officer
was guilty of gross negligence or bad faith; and
(2) there must be proof that the director or officer acted in bad faith.

In the absence of malice, bad faith, or a specific provision of law making a

corporate officer liable, such corporate officer cannot be made personally liable
for corporate liabilities.

VII. Burden of proof → EMPLOYER (this presupposes that the employee is already
dismissed from employment). If not, the employee must prove first that there was a
dismissal.

In illegal dismissal cases, the burden of proof rest upon the employer to
show that the dismissal was for a just or authorized cause. Failure to do so would
necessarily mean that the dismissal was not justified and therefore, was illegal.

In constructive dismissal, the employer has the burden of proving that the
transfer and demotion of an employee are for just and valid grounds, such as
genuine business necessity. Transfer must not be unreasonable, inconvenient, or
prejudicial to the employee. Should the employer fail to overcome this burden of
proof, the employee’s transfer shall be tantamount to unlawful constructive
dismissal.

The fact of filing a resignation letter alone of the employee does not shift the
burden of proof and it is still incumbent upon the employer to prove that the
employee voluntarily resigned. (ICT Marketing Services Inc. vs.
Mariphil L. Sales, G.R. No. 202090, September 9, 2015)

In cases of floating status, the burden of proof lies with the employer that
there are no posts available to which the employee temporarily out of work can
be assigned.

TERMINATION BY EMPLOYEE

a. Resignation versus constructive dismissal

Resignation is the voluntary act of an employee who “finds himself in a situation

where he believes that personal reason cannot be sacrificed in favor of the exigency
 of the service, then he has no other choice but to dissociate himself from his
employment.” (Pascua v. Bank Wise Inc., G.R. No. 191460, January 31, 2018)

Process:

GENERAL RULE: Under Art. 300, a worker can resign for any, as long as he serves a
written notice to his employer atleast 30 days in advance.

EXCEPTIONS: No notice required in the following: (Art. 300)

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

An employee who voluntarily resigned is not entitled to separation pay, unless granted
under CBA or company policy.

Constructive dismissal refers to an involuntary resignation resorted to when

continued employment becomes impossible, unreasonable or unlikely; when there is
a demotion in rank or a diminution in pay; or when a clear discrimination, insensibility
or disdain by an employer becomes unbearable to an employee or an unwarranted
transfer or demotion of an employee, or other unjustified action prejudicial to the
employee. (Uniwide Sales Warehouse Club v. Kawada, 570 Phil. 535, 2008 )

TEST OF CONSTRUCTIVE DISMISSAL: Whether a reasonable person in the employee’s

position would have felt compelled to give up his position under the circumstances. It is an act
amounting to dismissal but made to appear as if tit were not.

TOPIC: CONSTRUCTIVE DISMISSAL

SITUATIONAL QUESTION: At the height of retrenchment program, the worker argued with his
boss. Since then, they never saw eye to eye. Not long after, the worker was transferred to the
Engineering Office and to another position. Due to these incidents, the worker resigned. Is the
worker a victim of constructive dismissal?

ANSWER: No, the resignation of the worker was voluntary. The employer did not dismiss the
worker despite their strained relationship and even though the company is implementing a
retrenchment program. If the employer intended to dismissed the employee, he should have been
included to those workers who had been retrenched, instead, the worker was transferred.
 b. Abandonment

Abandonment of work has been construed as a “clear and deliberate intent to

discontinue one’s employment without any intention of returning back.” It constitutes
neglect of duty and is a just cause for termination of employment.

➢ ABANDONMENT of job is a form of neglect of duty.

Two-notice rule applies on abandonment for an employer to comply with
procedural due process.
ELEMENTS OF ABANDONMENT:
1. failure to report for work or absence without valid or justifiable reason;
and
2. a clear intention to sever the employee-employer relationship.

c. Preventive Suspension (IRR, Book V, Rule XXIII, Sec. 8)

Preventive suspension is a disciplinary measure for the protection of the

company’s property pending investigation of any alleged malfeasance or misfeasance
committed by the employee. The employer may place the worker concerned under
preventive suspension if his continued employment poses a serious and imminent
threat to the life or property of the employer or of his co-workers. (Gatbonton vs.
NLRC (G.R. No. 146779, January 23, 2006)

Requisites:

b. The employer may place the worker concerned under preventive suspension if
his continued employment poses a serious and imminent threat to the life or
property of the employer or of his co-workers.
b. The preventive suspension shall NOT last longer than thirty (30) days. (General
Rule)

In Construction Industry, the preventive suspension cannot be longer

than 15 days. (Section 4, Department Order No. 19, series of 1993)

Exception: The preventive suspension may be extended by the employer,

provided that during the extended period of suspension, he pays the wages and
other benefits due to the worker.
 TOPIC: PREVENTIVE SUSPENSION

SITUATIONAL QUESTION: A worker brawled with his co-union officers. The employer placed him
under 30 days preventive suspension. But, after the worker’s 30 days preventive suspension, the
employer is requiring him to drop the criminal case he filed against those who brawled with him
before he is readmitted to work. So, the worker filed a labor case for constructive dismissal before
the NLRC. Is the worker right in filing for a case of constructive dismissal?

ANSWER: Yes, the worker is correct. Once the 30 days preventive suspension has passed, the
worker must be allowed to go back to work. If the preventive suspension exceeds 30 days, it will
amount to constructive dismissal, unless if employer pays him with his wages and benefits on the
said extended suspension.

d. Floating status (Art. 301)

- A bona fide suspension of the operation of a business or undertaking for a

period not exceeding six (6) months, or the fulfillment by the employee of a
military or civic shall not terminate employment.

Beyond this period, floating status becomes illegal/constructive dismissal which

entitles the employee to separation pay.

To avoid constructive dismissal: (1) Re-assign security guard in 6 months; (2) a

bona fide report to work order; (3) otherwise, layoff the security guard.

LEGITIMATE FLOATING STATUS:

1.) A bona fide suspension of operations;

2.) Done in good faith; or
3.) Worker serving under mandatory civic or military duty;
4.) Not more than 6 months.

Jurisprudence has set that, to validly suspend operation, the employer should
notify the DOLE and affected employee, at least one month prior to the intended
date of suspension business operations.

However, under D.O. 215 series of 2020, the DOLE allows employers to extend the
suspension of the employees under floating status for a year IN CASE OF DECLARATION OF
WAR, PANDEMIC AND SIMILAR NATIONAL EMERGENCIES.
WAGES DURING FLOATING STATUS:

➢ An employee in floating status rendering civic or military service shall be entitled to be

paid his wages if: [Presidential Decree No. 183, paragraph (f)]

a. His employer is in the private sector;

b. The business has gross annual volume of at least P250.000;
c. Employs at least 20 workers.

➢ An employee in floating status due to suspension of operations (temporary closure of

the plant, department, machine or the entire business): “No work, No Pay” except when
granted otherwise under CBA or company policy.

e. Retirement (Art. 302)

- Defined as a withdrawal from office, public station, business, occupation, or

public duty. It is the result of a bilateral employee whereby the latter, after
reaching a certain age, agrees and/or consents to sever his employment with
the former.

TWO KINDS (under Labor Code): (at the option of the employee)
(1) Compulsory/ Mandatory Retirement – takes place at age 65
(2) Optional/Early Retirement – at 60 years of age or as determined by the
collective bargaining agreement or employment contract
R.A. No. 10757: For Underground and surface mill workers;
▪ Compulsory retirement age – 60 years old
▪ Optional retirement age – 50 years old

Retirement Pay = ½ month salary per year of service

½ month salary shall mean 15 days plus one-twelfth (1/12) of 13th month pay and
cash equivalent of 5 days service incentive leave = 22.5 days salary per year of
service (Art. 302)
 Retirement benefits are intended to help the employee enjoy the remaining
years of his life, lessening the burden of worrying for his financial support, and are form
of reward for his loyalty and service to the employer. (De La Salle Araneta University v.
Bernardo, G.R. No., February 13, 2017)
The provisions of Article 302 of the Labor Code are applicable when:
(a) There is no CBA or other applicable agreement providing for retirement
benefits to employees; or
(b) There is a CBA or other applicable agreement providing for retirement
benefits to employees but it is below the requirement set by law.
Retirement benefits provided under the Labor Code requires that the covered
employee should have rendered at least five (5) years of service in the establishment.
Covered employees of Retirement pay under the Labor Code:
GENERAL RULE: The benefit applies to all employees
EXCEPT:
(1) Government Employees;
(2) Domestic helpers; and
(3) Employees of retail, service and agricultural establishments regularly
employing not more than 10 employees
If there exist a retirement plan or agreement providing for a superior or more
beneficial retirement benefits in the establishment, such retirement plan will prevail over
the provisions under Art. 302. Retirement plan approved by the BIR to be exempted to
tax is at the compulsory age of 50 and should have rendered at least 10 years of service.