2022 BAR REVIEW LABOR LAW

Handout No. 51
TERMINATION OF EMPLOYMENT
& MANAGEMENT PREROGATIVE

TERMINATION OF EMPLOYMENT

The control test is commonly regarded as the most important indicator of the presence or
absence of an employer-employee relationship.

Anent the nature of Concepcion’s engagement, based on case law, the presence of the following
elements evince the existence of an employer-employee relationship: (a) the power to hire, i.e.,
the selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employer’s power to control the employee’s conduct, or the so called
“control test.” xxx Under this test, an employer-employee relationship exists where the person
for whom the services are performed reserves the right to control not only the end achieved, but
also the manner and means to be used in reaching that end. Century Properties, Inc. vs. Babiano,
795 SCRA 671, G.R. No. 220978 July 5, 2016; see also Felicilda vs. Uy, 803 SCRA 296, G.R. No.
221241 September 14, 2016

The employment status of a person is defined and prescribed by law and not by what the parties
say it should be.

Equally important to consider is that a contract of employment is impressed with public interest
such that labor contracts must yield to the common good. Thus, provisions of applicable statutes
are deemed written into the contract, and the parties are never at liberty to insulate themselves
and their relationships from the impact of labor laws and regulations by simply entering into
contracts with each other. Innodata Knowledge Services, Inc. vs. Socorro D’Marie T. Inting, et
al., G.R. No. 211892, December 6, 2017

Article 295 of the Labor Code contemplates four (4) kinds of employees: (1) regular employees
or those who have been engaged to perform activities which are usually necessary or desirable
in the usual business or trade of the employer; (2) project employees or those whose
employment has been fixed for a specific project or undertaking, the completion or termination
of which has been determined at the time of the engagement of the employee; (3) seasonal
employees or those who work or perform services which are seasonal in nature, and the
employment is for the duration of the season; and (4) casual employees or those who are not
regular, project, or seasonal employees. Jurisprudence later added a fifth (5th) kind, the fixed-
term employee.

Based on Article 295, the law determines the nature of the employment, regardless of any
agreement expressing otherwise. The supremacy of the law over the nomenclature of the

Legal Edge Bar Review 0942 – 949 91 76

legaledge8@gmail.com
0917 – 894 53 56
Page 1 of 15
 2022 BAR REVIEW LABOR LAW
Handout No. 51
TERMINATION OF EMPLOYMENT
& MANAGEMENT PREROGATIVE

contract and its pacts and conditions is to bring life to the policy enshrined in the Constitution to
afford full protection to labor. Thus, labor contracts are placed on a higher plane than ordinary
contracts since these are imbued with public interest and, therefore, subject to the police power
of the State. Innodata Knowledge Services, Inc. vs. Socorro D’Marie T. Inting, et al., G.R. No.
211892, December 6, 2017

Regular employee

A regular employee is an employee who is: 1) engaged to perform tasks usually necessary or
desirable in the usual business or trade of the employer, unless the employment is one for a
specific project or undertaking or where the work is seasonal and for the duration of a season;
or 2) has rendered at least one (1) year of service, whether such service is continuous or broken,
with respect to the activity for which he is employed and his employment continues as long as
such activity exists. Mario A. Abuda, et al., vs. L. Natividad Poultry Farms, et al., G.R. No.
200712, July 4, 2018

The law provides for two (2) types of regular employees, namely: (a) those who are engaged to
perform activities which are usually necessary or desirable in the usual business or trade of the
employer (first category); and (b) those who have rendered at least one (1) year of service,
whether continuous or broken, with respect to the activity in which they are employed (second
category).

In Universal Robina Corporation v. Catapang, 473 SCRA 189 (2005), citing Abasolo v. NLRC, 346
SCRA 293 (2000), the Court laid down the test in determining whether one is a regular employee,
to wit: The primary standard, therefore, of determining regular employment is the reasonable
connection between the particular activity performed by the employee in relation to the usual
trade or business of the employer. The test is whether the former is usually necessary or desirable
in the usual business or trade of the employer. The connection can be determined by considering
the nature of work performed and its relation to the scheme of the particular business or trade
in its entirety. Also, if the employee has been performing the job for at least a year, even if the
performance is not continuous and merely intermittent, the law deems repeated and continuing
need for its performance as sufficient evidence of the necessity if not indispensability of that
activity to the business. Hence, the employment is considered regular, but only with respect to
such activity and while such activity exists. University of Santo Tomas (UST) vs. Samahang
Manggagawa ng UST, 824 SCRA 52, G.R. No. 184262 April 24, 2017

Legal Edge Bar Review 0942 – 949 91 76

legaledge8@gmail.com
0917 – 894 53 56
Page 2 of 15
 2022 BAR REVIEW LABOR LAW
Handout No. 51
TERMINATION OF EMPLOYMENT
& MANAGEMENT PREROGATIVE

Project employment contracts, which fix the employment for a specific project or undertaking,
are valid under the law.

By entering into such a contract, an employee is deemed to understand that his employment is
coterminous with the project. He may no longer be employed after the completion of the project
for which he was hired. But project employment contracts are not lopsided agreements in favor
of only one party. The employer’s interest is equally important as that of the employees’. While
it may be true that it is the employer who drafts project employment contracts with its business
interest as overriding consideration, such contracts must not prejudice the employee. Innodata
Knowledge Services, Inc. vs. Socorro D’Marie T. Inting, et al., G.R. No. 211892, December 6,
2017

According to jurisprudence, the principal test for determining whether particular employees
are properly characterized as “project-based employees” as distinguished from “regular
employees,” is whether or not the employees were assigned to carry out a “specific project or
undertaking,” the duration (and scope) of which were specified at the time they were engaged
for that project.

Article 294 of the Labor Code, as amended, distinguishes a project-based employee from a
regular employee as follows: Art. 294. Regular and casual employment.—The provisions of
written agreement to the contrary notwithstanding and regardless of the oral agreement of the
parties, an employment shall be deemed to be regular where the employee has been engaged
to perform activities which are usually necessary or desirable in the usual business or trade of
the employer, except where the employment has been fixed for a specific project or undertaking
the completion or termination of which has been determined at the time of the engagement of
the employee or where the work or services to be performed is seasonal in nature and the
employment is for the duration of the season. x x x x (Emphasis and underscoring supplied)

In Omni Hauling Services, Inc. v. Bon, 734 SCRA 270 (2014), the Court extensively discussed how
to determine whether an employee may be properly deemed project-based or regular, to wit: A
project employee is assigned to a project which begins and ends at determined or determinable
times. Unlike regular employees who may only be dismissed for just and/or authorized causes
under the Labor Code, the services of employees who are hired as “project[-based] employees”
may be lawfully terminated at the completion of the project. According to jurisprudence, the
principal test for determining whether particular employees are properly characterized as
“project[-based] employees” as distinguished from “regular employees,” is whether or not the
employees were assigned to carry out a “specific project or undertaking,” the duration (and
scope) of which were specified at the time they were engaged for that project.

Legal Edge Bar Review 0942 – 949 91 76

legaledge8@gmail.com
0917 – 894 53 56
Page 3 of 15
 2022 BAR REVIEW LABOR LAW
Handout No. 51
TERMINATION OF EMPLOYMENT
& MANAGEMENT PREROGATIVE

The project could either be (1) a particular job or undertaking that is within the regular or usual
business of the employer company, but which is distinct and separate, and identifiable as such,
from the other undertakings of the company; or (2) a particular job or undertaking that is not
within the regular business of the corporation.

In order to safeguard the rights of workers against the arbitrary use of the word “project” to
prevent employees from attaining a regular status, employers claiming that their workers are
project[-based] employees should not only prove that the duration and scope of the employment
was specified at the time they were engaged, but also, that there was indeed a project. Gadia vs.
Sykes Asia, Inc., 748 SCRA 633, G.R. No. 209499 January 28, 2015; see also University of Santo
Tomas (UST) vs. Samahang Manggagawa ng UST, 824 SCRA 52, G.R. No. 184262 April 24, 2017;
Dacles vs. Millenium Erectors Corporation, 762 SCRA 420, G.R. No. 209822 July 8, 2015; Quebral
vs. Angbus Construction, Inc., 807 SCRA 176, G.R. No. 221897 November 7, 2016

Regular Seasonal Employees

When the “seasonal” workers are continuously and repeatedly hired to perform the same tasks
or activities for several seasons or even after the cessation of the season, this length of time may
likewise serve as badge of regular employment. Even though denominated as “seasonal
workers,” if these workers are called to work from time to time and are only temporarily laid off
during the off-season, the law does not consider them separated from the service during the off-
season period. The law simply considers these seasonal workers on leave until re-employed.
Universal Robina Sugar Milling Corporation vs. Acibo, G.R. No. 186439, January 15, 2014

Regularized Casual Employees

Accordingly, they cannot be terminated from employment without any just and/or authorized
cause, which unfortunately, petitioner was guilty of doing in this case. Hence, Pontesor, et al.
must be reinstated to their former or equivalent positions, with full backwages and without loss
of seniority rights. As pointed out by the LA, the NLRC Computation & Examination Unit should
be directed to compute the monetary awards that petitioner should be ordered to pay Pontesor,
et al. as a consequence of this ruling. University of Santo Tomas (UST) vs. Samahang
Manggagawa ng UST, 824 SCRA 52, G.R. No. 184262 April 24, 2017

Legal Edge Bar Review 0942 – 949 91 76

legaledge8@gmail.com
0917 – 894 53 56
Page 4 of 15
 2022 BAR REVIEW LABOR LAW
Handout No. 51
TERMINATION OF EMPLOYMENT
& MANAGEMENT PREROGATIVE

The decisive determinant in fixed-term employment is not the activity that the employee is
called upon to perform but the day certain agreed upon by the parties for the commencement
and termination of the employment relationship.

Project employment and fixed-term employment are not the same. While the former requires a
particular project, the duration of a fixed-term employment agreed upon by the parties may be
any day certain, which is understood to be “that which must necessarily come although it may
not be known when.” The decisive determinant in fixed-term employment is not the activity that
the employee is called upon to perform but the day certain agreed upon by the parties for the
commencement and termination of the employment relationship. The Court has previously
recognized the validity of fixed-term employment contracts, but it has consistently held that this
is more of an exception rather than the general rule. Aware of the possibility of abuse in the
utilization of fixed-term employment contracts, the Court has declared that where from the
circumstances it is apparent that the periods have been imposed to preclude acquisition of
tenurial security by the employee, they should be struck down as contrary to public policy or
morals. Innodata Knowledge Services, Inc. vs. Socorro D’Marie T. Inting, et al., G.R. No. 211892,
December 6, 2017

A probationary employee or probationer is one who is on trial for an employer, during which
the latter determines whether or not the former is qualified for permanent employment.

During this period, the employer, on the one hand, is given the opportunity to observe the fitness
of an employee while at work in order to ascertain the latter’s efficiency and productivity; on the
other hand, the employee seeks to prove to his employer that he has the qualifications to meet
the reasonable standards for permanent employment. As used to describe such phase of
employment, the word “probationary” implies the purpose of such term or period, and not
necessarily its length. Indeed, the employer has the right, or is at liberty, to choose who will be
hired and who will be declined. As a component of this right to select his employees, the
employer may set or fix a probationary period within which the latter may test and observe the
conduct of the former before hiring him permanently. Notably, the exercise of such right is
regulated by law insofar as it sets a maximum allowable period within which the employer may
subject an employee to a probationary period. As a general rule, such limit is set under Article
296 of the Labor Code, as amended. De La Salle Araneta University, Inc. vs. Magdurulang, 845
SCRA 274, G.R. No. 224319 November 20, 2017

Legal Edge Bar Review 0942 – 949 91 76

legaledge8@gmail.com
0917 – 894 53 56
Page 5 of 15
 2022 BAR REVIEW LABOR LAW
Handout No. 51
TERMINATION OF EMPLOYMENT
& MANAGEMENT PREROGATIVE

While the period of probation may be reduced if the employer voluntarily extends a permanent
appointment even before the end of such period, it must be pointed out that absent
circumstances which unmistakably show that an abbreviated probationary period has been
agreed upon, the default probationary term still governs.

The Court finds the NLRC’s conclusion that respondent’s probationary period was effectively
shortened when the Acting Assistant Dean recommended her for a permanent appointment
effective the second semester of SY 2009-2010 to be untenable. Suffice it to say that while there
was indeed such recommendation and that the University President was initially inclined to
approve the same, the latter ended up not going through with such recommendation and instead
renewed respondent’s appointment for both semesters of SY 2010-2011. De La Salle Araneta
University, Inc. vs. Magdurulang, 845 SCRA 274, G.R. No. 224319 November 20, 2017

As a probationary employee, respondent still enjoys limited security of tenure during the period
of her probation — that is, she cannot be terminated except for just or authorized causes, or if
she fails to qualify in accordance with reasonable standards prescribed by petitioner for the
acquisition of permanent status of its teaching personnel.

Hence, the CA was also correct in ruling that petitioner’s unjustified acts of depriving her of
teaching loads, as well as her functions as BSBA Program Coordinator during the pendency of her
appointment for both semesters of SY 2010-2011, constitute constructive dismissal, for which it
should be made liable to respondent for the latter’s benefits appurtenant thereto. De La Salle
Araneta University, Inc. vs. Magdurulang, 845 SCRA 274, G.R. No. 224319 November 20, 2017

Job contracting or subcontracting is the one allowed and permitted by law.

It is 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.

To determine its existence, these conditions must concur:

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, free from the control and direction of his employer or principal in all matters
connected with the performance of his work except as to the results thereof;

Legal Edge Bar Review 0942 – 949 91 76

legaledge8@gmail.com
0917 – 894 53 56
Page 6 of 15
 2022 BAR REVIEW LABOR LAW
Handout No. 51
TERMINATION OF EMPLOYMENT
& MANAGEMENT PREROGATIVE

b) the contractor has substantial capital or investment; and

c) 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.

Thus, in legitimate job contracting, the employer-employee relationship between the job
contractor and his employees is maintained. While the law creates an employer-employee
relationship between the employer and the contractor’s employees, the same is only for the
purpose of ensuring the payment of the employees’ wages. In short, the employer becomes
jointly and severally liable with the job contractor but only for the payment of the employees’
wages whenever the contractor fails to pay the same. Other than that, the employer is not
responsible for any claim made by the contractor’s employees. San Miguel Foods, Inc. vs.
Hannival V. Rivera, et al., G.R. No. 220103, January 31, 2018

Labor-Only Contracting

Article [106] of the Labor Code defines labor-only contracting as a situation “where the person
supplying workers to an employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, and the workers recruited and
placed by such person are performing activities which are directly related to the principal
business of such employer. Leo V. Mago and Leilanie E. Colobong vs. Sun Power Manufacturing
Limited, G.R. No. 210961, January 24, 2018

Labor-only contracting is a prohibited act and it is not condoned by law. It is an arrangement

where the contractor not having 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. San Miguel Foods, Inc. vs. Hannival V. Rivera, et al., G.R. No. 220103, January
31, 2018

In order to become a legitimate contractor, the contractor must have substantial capital or
investment, and must carry a distinct and independent business free from the control of the
principal.

In addition, the Court requires the agreement between the principal and the contractor or
subcontractor to assure the contractual employees’ entitlement to all labor and occupational

Legal Edge Bar Review 0942 – 949 91 76

legaledge8@gmail.com
0917 – 894 53 56
Page 7 of 15
 2022 BAR REVIEW LABOR LAW
Handout No. 51
TERMINATION OF EMPLOYMENT
& MANAGEMENT PREROGATIVE

safety and health standards, free exercise of the right to self-organization, security of tenure, and
social welfare benefits. Furthermore, the Court considers job contracting or subcontracting as
permissible when the principal agrees to farm out the performance of a specific job, work or
service to the contractor, for a definite or predetermined period of time, regardless of whether
such job, work, or service is to be performed or completed within or outside the premises of the
principal. Ordinarily, a contractor is presumed to be a labor-only contractor, unless the contractor
is able to discharge the burden of overcoming this presumption. In cases when it’s the principal
claiming the legitimacy of the contractor, then the burden is borne by the principal. Leo V. Mago
and Leilanie E. Colobong vs. Sun Power Manufacturing Limited, G.R. No. 210961, January 24,
2018

Substantial Capital or Investment, defined

Substantial capital or investment was defined in Department of Labor and Employment

Department Order (DOLE DO) No. 18-02 as “capital stocks and subscribed capitalization in the
case of corporations, tools, equipment, implements, machineries and work premises, actually
and directly used by the contractor or subcontractor in the performance or completion of the
job, work or service contracted out.” The law and the relevant regulatory rules require the
contractor to have substantial capital or investment, in order to be considered a legitimate and
independent contractor. Leo V. Mago and Leilanie E. Colobong vs. Sun Power Manufacturing
Limited, G.R. No. 210961, January 24, 2018

Substantive due process requires that the dismissal must be pursuant to either a just or an
authorized cause under Articles 297, 298 or 299 (formerly Articles 282, 283, and 284) of the
Labor Code. Procedural due process, on the other hand, mandates that the employer must
observe the twin requirements of notice and hearing before a dismissal can be effected.

It is settled that “for a dismissal to be valid, the rule is that the employer must comply with both
substantive and procedural due process requirements. xxx Thus, to determine the validity of
Puncia’s dismissal, there is a need to discuss whether there was indeed just cause for his
termination. Puncia vs. Toyota Shaw/Pasig, Inc., 795 SCRA 32, G.R. No. 214399 June 28, 2016

Legal Edge Bar Review 0942 – 949 91 76

legaledge8@gmail.com
0917 – 894 53 56
Page 8 of 15
 2022 BAR REVIEW LABOR LAW
Handout No. 51
TERMINATION OF EMPLOYMENT
& MANAGEMENT PREROGATIVE

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.

The Supreme Court (SC) has ruled that reinstatement is no longer viable where, among others,
the relations between the employer and the employee have been so severely strained, that it is
not in the best interest of the parties, nor is it advisable or practical to order reinstatement, or
where the employee decides not to be reinstated. TPG Corporation (formerly The Professional
Group Plans, Inc.) vs. Esperanza B. Pinas, G.R. No. 189714, January 25, 2017

Before the employer must bear the burden of proving that the dismissal was legal, the
employee must first establish by substantial evidence the fact of his dismissal from service.

In this case, the CA ruled that petitioner Reyes was not able to prove by substantial evidence the
fact that he was illegally dismissed. After a review of the records, the Court finds otherwise. It
must be remembered that the degree of proof in labor cases is less than that of criminal cases as
in the former, t is enough that substantial evidence is proven. As aptly found by the Labor Arbiter
and the NLRC, petitioner was able to prove his dismissal from service. Allan John Uy Reyes vs.
Global Beer Below Zero, Inc., G.R. No. 222816, October 4, 2017

Verbal notice of termination can hardly be considered as valid or legal.

To constitute valid dismissal from employment, two requisites must concur: (1) the dismissal
must be for a just or authorized cause; and (2) the employee must be afforded an opportunity to
be heard and to defend himself. Allan John Uy Reyes vs. Global Beer Below Zero, Inc., G.R. No.
222816, October 4, 2017

Backwages and Separation Pay, distinguished

Reinstatement and backwages are two separate reliefs available to an illegally dismissed
employee. Payment of backwages is a form of relief that restores the income that was lost by
reason of unlawful dismissal. Separation pay, on the other hand, is oriented towards the
immediate future, the transitional period the dismissed employee must undergo before locating
a replacement job. In this case, instead of limiting the payment of backwages to just one year

Legal Edge Bar Review 0942 – 949 91 76

legaledge8@gmail.com
0917 – 894 53 56
Page 9 of 15
 2022 BAR REVIEW LABOR LAW
Handout No. 51
TERMINATION OF EMPLOYMENT
& MANAGEMENT PREROGATIVE

and awarding separation pay in lieu of both the reinstatement aspect and the payment of
backwages, the correct award, as is consistent with prevailing jurisprudence, is reinstatement
and the payment of full backwages from the time of dismissal until finality of the decision. It is
however understood that if Nerbes had, in the meantime, been reinstated on payroll and paid
his corresponding salaries, such amounts should be deducted from the award of backwages
consistent with the rule against double recovery. BDO Unionbank, Inc. (formerly Equitable PCI
Bank) vs. Nestor N. Nerbes and Armenia F. Suravilla, G.R. No. 208735, July 19, 2017

Principle of Totality of Infractions

In determining the sanction imposable on an employee, the employer may consider the former’s
past misconduct and previous infractions. Also known as the principle of totality of infractions,
the Court explained such concept in Merin v. National Labor Relations Commission, et al., 569
SCRA 576 (2008), thus: The totality of infractions or the number of violations committed during
the period of employment shall be considered in determining the penalty to be imposed upon an
erring employee. The offenses committed by petitioner should not be taken singly and
separately. Fitness for continued employment cannot be compartmentalized into tight little
cubicles of aspects of character, conduct and ability separate and independent of each other.

While it may be true that petitioner was penalized for his previous infractions, this does not and
should not mean that his employment record would be wiped clean of his infractions. After all,
the record of an employee is a relevant consideration in determining the penalty that should be
meted out since an employee’s past misconduct and present behavior must be taken together in
determining the proper imposable penalty. Despite the sanctions imposed upon petitioner, he
continued to commit misconduct and exhibit undesirable behavior onboard. Indeed, the
employer cannot be compelled to retain a misbehaving employee, or one who is guilty of acts
inimical to its interests. It has the right to dismiss such an employee if only as a measure of self-
protection. Ricardo G. Sy and Henry B. Alix vs. Neat, Inc., et al., G.R. No. 213748, November 27,
2017

Previous offenses may be used as valid justification for dismissal only if they are related to the
subsequent offense upon which the basis of termination is decreed, or if they have a bearing
on the proximate offense warranting dismissal.

Contrary to respondents’ contention, however, the past 3 infractions in 2009 for wearing of
improper uniform can no longer be taken against Sy, because he was already warned and
penalized for them, and he has, in fact, reformed his errors in that regard.

Legal Edge Bar Review 0942 – 949 91 76

legaledge8@gmail.com
0917 – 894 53 56
Page 10 of 15
 2022 BAR REVIEW LABOR LAW
Handout No. 51
TERMINATION OF EMPLOYMENT
& MANAGEMENT PREROGATIVE

Where an employee had already suffered the corresponding penalties for his infraction, to
consider the same offenses as justification for his dismissal would be penalizing the employee
twice for the same offense. Significantly, the infractions of Sy for wearing of improper uniform
are not related to his latest infractions of insubordination and purported poor performance
evaluation. Previous offenses may be used as valid justification for dismissal only if they are
related to the subsequent offense upon which the basis of termination is decreed, or if they have
a bearing on the proximate offense warranting dismissal. Ricardo G. Sy and Henry B. Alix vs.
Neat, Inc., et al., G.R. No. 213748, November 27, 2017

The termination of employment without just cause or due process does not immediately justify
the award of moral and exemplary damages.

Such an award cannot be justified solely upon the premise that the employer fired his employee
without just cause or due process. Additional facts must be pleaded and proved to warrant the
grant of moral damages under the Civil Code. The act of dismissal must be attended with bad
faith, or fraud or was oppressive to labor or done in a manner contrary to morals, good customs
or public policy and, of course, that social humiliation, wounded feelings, or grave anxiety
resulted therefrom. Similarly, exemplary damages are recoverable only when the dismissal was
effected in a wanton, oppressive or malevolent manner.

In this case, Petitioners maintain that their employments were terminated by respondents in an
“oppressive, malicious and unjustified manner,” yet they failed to explain or illustrate how their
dismissal was oppressive, malicious, or unjustified. It is not enough that they were dismissed
without due process. Additional acts of the employers must also be pleaded and proved to show
that their dismissal was tainted with bad faith or fraud, was oppressive to labor, or was done in
a manner contrary to morals, good customs, or public policy. Petitioners failed to allege any acts
by respondents which would justify the award of moral or exemplary damages. Mario A. Abuda,
et al., vs. L. Natividad Poultry Farms, et al., G.R. No. 200712, July 4, 2018

Constructive dismissal arises “when continued employment is rendered impossible,

unreasonable or unlikely; when there is a demotion in rank and/or a diminution in pay; or when
a clear discrimination, insensibility or disdain by an employer becomes unbearable to the
employee.”

In such cases, the impossibility, unreasonableness, or unlikelihood of continued employment

leaves an employee with no other viable recourse but to terminate his or her employment. By
definition, constructive dismissal can happen in any number of ways. At its core, however, is the

Legal Edge Bar Review 0942 – 949 91 76

legaledge8@gmail.com
0917 – 894 53 56
Page 11 of 15
 2022 BAR REVIEW LABOR LAW
Handout No. 51
TERMINATION OF EMPLOYMENT
& MANAGEMENT PREROGATIVE

gratuitous, unjustified, or unwarranted nature of the employer’s action. As it is a question of

whether an employer acted fairly, it is inexorable that any allegation of constructive dismissal be
contrasted with the validity of exercising management prerogative. Based on the facts of this
case, respondents Mancol and Valera were constructively dismissed. The CA, in affirming the
findings of the Labor Arbiter, correctly found that petitioners committed acts that are considered
to be gratuitous, unjustified, unwarranted and unfair on the part of the respondents.

An employee is considered to be constructively dismissed from service if an act of clear

discrimination, insensibility or disdain by an employer has become so unbearable to the
employee as to leave him or her with no option but to forego with his or her continued
employment. St. Paul College, Pasig vs. Anna Liza L. Mancol, G.R. No. 222317, January 24, 2018

When a “lay-off” is permanent, it amounts to dismissal. However, when the same is temporary,
it is regarded as a mere suspension of the employment status of the employee.

When a “lay-off” is permanent, it amounts to dismissal. However, when the same is temporary,
it is regarded as a mere suspension of the employment status of the employee. Notably, while
the Court recognizes lay-off as an exercise of management prerogative, jurisprudence requires
that the same must be attended by good faith and that notice must be given to the employees
concerned and the DOLE at least one (1) month prior to the intended date of lay-off or
retrenchment. Article 286 of the Labor Code, as cited by CBMI, likewise contemplates lay-off,
particularly that which is temporary in nature, and as such must be for a period not exceeding six
months. In which case, apart from causes attributable to the employer, the temporary
suspension of employment may also be on account of the employee’s performance of military or
civic duty. Consolidated Building Maintenance, Inc. vs. Asprec, Jr., 865 SCRA 92, G.R. No. 217301
June 6, 2018

Considering the dire consequences of “lay-off” to an employee, jurisprudence places upon the
employer the burden to prove with sufficient and convincing evidence the justification therefor,
and as well compliance with the parameters set forth by law.

Considering the dire consequences of “lay-off” to an employee, jurisprudence places upon the
employer the burden to prove with sufficient and convincing evidence the justification therefor,
and as well compliance with the parameters set forth by law. On account of CBMI’s failure to
discharge this burden in this case, the Court views that the extended period of suspension is
illegal, which thus entitles the respondents to their money claims. Consolidated Building
Maintenance, Inc. vs. Asprec, Jr., 865 SCRA 92, G.R. No. 217301 June 6, 2018

Legal Edge Bar Review 0942 – 949 91 76

legaledge8@gmail.com
0917 – 894 53 56
Page 12 of 15
 2022 BAR REVIEW LABOR LAW
Handout No. 51
TERMINATION OF EMPLOYMENT
& MANAGEMENT PREROGATIVE

By its express language, the Labor Code permits employers and employees to fix the applicable
retirement age at below sixty (60) years.

Under this provision (Article 287, now Article 302), the retirement age is primarily determined by
the existing agreement or employment contract. By its express language, the Labor Code permits
employers and employees to fix the applicable retirement age at below 60 years. Absent such an
agreement, the retirement age shall be that fixed by law, and the above cited law mandates that
the compulsory retirement age is 65 years, while the minimum age for optional retirement is set
at 60 years. Manila Hotel Corporation vs. Rosita De Leon, G.R. No. 219774, July 23, 2018

An employee in the private sector who did not expressly agree to an early retirement cannot
be retired from the service before he reaches the age of sixty-five (65) years. “Acceptance by
the employee of an early retirement age option must be explicit, voluntary, free and
uncompelled.”

“The law demanded more than a passive acquiescence on the part of the employee, considering
that his early retirement age option involved conceding the constitutional right to security of
tenure.” Thus, the Court has held that “retirement is the result of a bilateral act of the parties, a
voluntary agreement between the employer and the employee whereby the latter, after reaching
a certain age, agrees to sever his or her employment with the former.” In the instant case,
respondent’s early retirement arose not from a bilateral act but a unilateral decision on the part
of petitioner. Respondent’s consent was neither sought nor procured by petitioner in deciding to
prematurely retire her services. For this reason, respondent’s compulsory retirement, as imposed
by petitioner in its June 6, 2011 letter, constitutes illegal dismissal. Manila Hotel Corporation vs.
Rosita De Leon, G.R. No. 219774, July 23, 2018

MANAGEMENT PREROGATIVE

An employer has free reign over every aspect of its business, including the dismissal of its
employees, as long as the exercise of its management prerogative is done reasonably, in good
faith, and in a manner not otherwise intended to defeat or circumvent the rights of workers.

Remarkably, “the law and jurisprudence guarantee to every employee security of tenure. This
textual and the ensuing jurisprudential commitment to the cause and welfare of the working
class proceed from the social justice principles of the Constitution that the Court zealously
implements out of its concern for those with less in life.” However, this constitutional
commitment to the policy of social justice does not mean that every labor dispute shall be

Legal Edge Bar Review 0942 – 949 91 76

legaledge8@gmail.com
0917 – 894 53 56
Page 13 of 15
 2022 BAR REVIEW LABOR LAW
Handout No. 51
TERMINATION OF EMPLOYMENT
& MANAGEMENT PREROGATIVE

automatically decided in favor of labor. It must also be remembered that in protecting the rights
of the workers, the law does not authorize the oppression of the employer. Hence, due regard is
likewise given to the right of an employer to manage its operations according to reasonable
standards and norms of fair play. This means that an employer has free reign over every aspect
of its business, including the dismissal of its employees, as long as the exercise of its management
prerogative is done reasonably, in good faith, and in a manner not otherwise intended to defeat
or circumvent the rights of workers. Mamaril vs. The Red System Company, Inc., 871 SCRA 81,
G.R. No. 229920 July 4, 2018

Although jurisprudence recognizes the validity of the exercise by an employer of its

management prerogative and will ordinarily not interfere with such, this prerogative is not
absolute and is subject to limitations imposed by law, collective bargaining agreement, and
general principles of fair play and justice.

We deem it necessary to remind HSBC of the basic and well-entrenched rule that although
jurisprudence recognizes the validity of the exercise by an employer of its management
prerogative and will ordinarily not interfere with such, this prerogative is not absolute and is
subject to limitations imposed by law, collective bargaining agreement, and general principles of
fair play and justice. Indeed, being a product of said constitutionally-guaranteed right to
participate, the CBA is, therefore, the law between the parties and they are obliged to comply
with its provisions. Hongkong Bank Independent Labor Union (HBILU) vs. Hongkong Shanghai
Banking Corporation Limited, G.R. No. 218390, February 28, 2018

While an employer is free to regulate all aspects of employment, the exercise of management
prerogatives must be in good faith and must not defeat or circumvent the rights of its
employees.

In industries that mainly rely on sales, employers are free to discipline errant employees who
deliberately fail to report for work during a crucial sales period. It would have been reasonable
for respondents to discipline petitioner Nepomuceno had he been a problematic employee who
unceremoniously refused to do his work. However, as found by the Labor Arbiter and the
National Labor Relations Commission, petitioner Nepomuceno turned over all of his pending
work to a reliever before he left for Malaysia. He was able to reach his sales quota and surpass
his sales target even before taking his vacation leave. Respondents did not suffer any financial
damage as a result of his absence. This was also petitioner Nepomuceno’s first infraction in his
nine (9) years of service with respondents. None of these circumstances constitutes a willful
breach of trust on his part. The penalty of dismissal, thus, was too severe for this kind of

Legal Edge Bar Review 0942 – 949 91 76

legaledge8@gmail.com
0917 – 894 53 56
Page 14 of 15
 2022 BAR REVIEW LABOR LAW
Handout No. 51
TERMINATION OF EMPLOYMENT
& MANAGEMENT PREROGATIVE

infraction. Nicanor F. Malcaba, et al. vs. Prohealth Pharma Philippines, Inc., et al., G.R. No.
209085, June 6, 2018

Closure or suspension of operations for economic reasons is recognized as a valid exercise of

management prerogative.

Indeed, closure or suspension of operations for economic reasons is recognized as a valid exercise
of management prerogative. But the burden of proving, with sufficient and convincing evidence,
that said closure or suspension is bona fide falls upon the employer.

Having the right should not be confused with the manner in which that right is exercised; the
employer cannot use it as a subterfuge to run afoul of the employees’ guaranteed right to security
of tenure. The records are bereft of any evidence of actual suspension of IKSI’s business
operations or even of the ACT Project alone. In fact, while IKSI cited Article 301 to support the
temporary layoff of its employees, it never alleged that it had actually suspended the subject
undertaking to justify such layoff. It merely indicated changes in business conditions and client
requirements and specifications as its basis for the implemented forced leave/layoff. Innodata
Knowledge Services, Inc. vs. Socorro D’Marie T. Inting, et al., G.R. No. 211892, December 6,
2017

Legal Edge Bar Review 0942 – 949 91 76

legaledge8@gmail.com
0917 – 894 53 56
Page 15 of 15