Termination-Of-Employment Unlocked

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LAST-MINUTE
NOTES ON THE 2012 BAR EXAMINATION IN LABOR LAW BASED ON THE
SUPREME COURT-PRESCRIBED SYLLABUS
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Prof. Joselito Guianan Chan
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Ch D. TERMINATION OF EMPLOYMENT
[These 8-part Notes discuss all topics/sub-topics in the Supreme Court-prescribed Syllabus for Labor Law]
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TOPICS UNDER THE SYLLABUS
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D. TERMINATION OF EMPLOYMENT
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1. Employer-Employee Relationship
a. Four-fold Test
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b. Probationary Employment
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c. Kinds of Employment n
(1) Regular employment
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(a) Reasonable connection rule

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(2) Project employment
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(a) Indicators of project employment
(3) Seasonal employment
(4) Casual employment
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(5) Fixed term employment

(a) Requisites for validity
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d. Job contracting and Labor-only contracting
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(1) When is there “job contracting”?

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(2) When is there “labor-only contracting”?

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(3) Conditions that must concur in legitimate job contracting
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(4) Effects of finding that there is labor-only contracting

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2. Termination of Employment
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a. Substantive Due Process
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(a) Just Causes

(a) Serious misconduct or willful disobedience
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i. Requisites
(b) Gross and habitual neglect of duties
i. Requisites
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(c) Fraud or willful breach of trust (loss of trust and confidence)
i. Requisites
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(d) Abandonment of employment; Elements that must concur

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(e) Termination of employment pursuant to a Union Security Clause

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(f) Totality of infractions doctrine

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(b) Authorized Causes

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(a) Redundancy, Retrenchment and Closure

i. Procedural steps required
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ii. Requirements for valid retrenchment/redundancy

iii. Criteria in selecting employees for dismissal
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iv. Standards to be followed

(b) Disease or illness
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i. Requisites
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b. Procedural Due Process

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(1) Procedure to be observed in termination cases

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(2) Guiding Principles in connection with the hearing requirements in dismissal cases
(3) Agabon doctrine
c. Reliefs for illegal dismissal
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(1) Reinstatement aspect

(a) Immediately executory
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i. Actual reinstatement
ii. Payroll reinstatement
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(2) Separation pay in lieu of Reinstatement

(a) Strained Relation rule
LABOR LAW: D. TERMINATION OF EMPLOYMENT

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(3) Backwages
(a) Components of the amount of backwages
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(4) Constructive dismissal
(5) Preventive Suspension
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(6) Quitclaims
(7) Termination of employment by employee
3. Retirement Pay Law
a. Coverage
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b. Exclusions from coverage
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c. Components of retirement pay
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d. Retirement pay under RA 7641 vis-à-vis retirement benefits under SSS and GSIS laws
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TOPIC UNDER THE SYLLABUS:
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D. TERMINATION OF EMPLOYMENT n
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a. Four-fold Test
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1. FOUR‐FOLD TEST OF EMPLOYER‐EMPLOYEE RELATIONSHIP.

a. 4‐fold test.
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1. Selection and engagement of the employee;
2. Payment of wages or salaries;
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3. Exercise of the power of dismissal; or
4. Exercise of the power to control the employee’s conduct.1
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These tests, however, are not fool‐proof as they admit of exceptions.
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b. Control test, the controlling test.
The “control test” is the controlling test. It addresses the issue of whether the employer controls or has
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reserved the right to control the employee not only as to the result of the work to be done but also as to the means and
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methods by which the same is to be accomplished.2
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c. Some principles on employer‐employee relationship.
1. Absence of uniform test prescribed by law or jurisprudence.3
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2. The existence of the employer‐employee relationship is essential in that it comprises as the jurisdictional
basis for recovery under the law. Only cases arising from said relationship are cognizable by the labor
courts.4
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3. The relationship of employer and employee is contractual in nature. It may be an oral or written contract. A
written contract is not necessary for the creation and validity of the relationship.5
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4. Stipulation in a contract not controlling in determining existence of the relationship. The employment status
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of a person is defined and prescribed by law and not by what the parties say it should be.6
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5. The mode of paying the salary or compensation of a worker does not preclude existence of employer‐
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employee relationship. Thus, payment by commission7 or on a piece‐rate basis8 or on a “no work, no pay” 9
basis does not affect existence of employment relationship.
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6. Retainer fee arrangement does not give rise to employment relationship.10

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d. Cases where employment relationship exists.
Following the right‐of‐control test, the Supreme Court has found that employment relationship exists in the
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following cases:
1. Dispatchers of a transportation company.11
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2. Persons paid on “boundary system” basis in relation to the transport operator such as jeepney drivers and
conductors,12 taxi drivers,13 auto‐calesa driver,14 and bus driver.15 Under the “boundary system,” the
relationship between the driver and conductor of a bus and the owner thereof is not that of lessee and
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lessor but that of employee and employer.16
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f.
1 Philippine Global Communications, Inc. v. De Vera, G.R. No. 157214, June 7, 2005.
2 Gallego v. Bayer Philippines, Inc., G.R. No. 179807, July 31, 2009, 594 SCRA 736.
3 Caurdanetaan Piece Workers Union v. Laguesma, G.R. No. 113542. Feb. 24, 1998, 286 SCRA 401, 426.
4 Madrigal Shipping Co. v. Melad, G.R. Nos. L-17362 & L-17367-69, Feb. 28, 1963, 7 SCRA 330.
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5 Compania Maritima v. Ernesta Cabagnot Vda. De Hio, G.R. No. L-10675, April 29, 1960, 107 Phil. 873.
6 Chavez v. NLRC, [G.R. No. 146530, January 17, 2005].
7 Lazaro v. Social Security Commission, [G.R. No. 138254, July 30, 2004].
8 Lambo v. NLRC, [G.R. No. 111042, October 26, 1999, 317 SCRA 420].
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9 CRC Agricultural Trading v. NLRC, [G.R. No. 177664, December 23, 2009].
10 Philippine Global Communications, Inc. v. De Vera, [G.R. No. 157214, June 7, 2005].
11 Tiu v. NLRC, G.R. No. 95845, Feb. 21, 1996.
12 National Labor Union v. Dinglasan, 52, O.G. No. 4, p. 1933, 98 Phil 648 [1956]; See also Gabriel v. Bilon, G.R. No. 146989, Feb. 7, 2007; Villamaria, Jr. v. CA, G.R. No. 165881, April 19, 2006.
13 Jardin v. NLRC, G.R. No. 119268, Feb. 23, 2000.
14 Citizens’ League of Freeworkers v. Abbas, G.R. No. L-20946. Sept. 23, 1966, 18 SCRA 71, 73.
15 R. Transport Corporation v. Ejandra, G.R. no. 148508, May 20, 2004.
16 Paguio Transport Corporation v. NLRC, G.R. No. 119500, Aug. 28, 1998.
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3. Musicians employed by a company producing motion pictures for purposes of making music recordings for
title music, background music, musical numbers, finale music and other forms of music without which a
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motion picture is not complete.17
4. Fishermen‐crew who rendered services in various capacities (patron/pilot, master fisherman, second
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fisherman, chief engineer, and fisherman) aboard the fishing vessels of a company engaged in “trawl”
fishing and whose compensation was paid in cash on percent commission basis.18
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5. Stevedores, although supplied to the company by the labor organization composed of various labor unions,
are employees of the company.19
6. Resident physicians. ‐ There is employer‐employee relationship between resident physicians and the
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training hospitals unless:
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a. there is a training agreement between them; and
b. the training program is duly accredited or approved by the appropriate government agency.20
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7. Employees of cooperatives, but not its members unless, the members are also employees thereof.21
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8. Insurance agent.22

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D. TERMINATION OF EMPLOYMENT n
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b. Probationary Employment
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Relevant Provision: Article 281, Labor Code

1. PROBATIONARY EMPLOYMENT.
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a. Nature of probationary employment.
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A probationary employee is one who, for a given period of time, is on observation, evaluation and trial by an
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employer during which the employer determines whether or not he is qualified for permanent employment. During the
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probationary period, the employer is given the opportunity to observe the skill, competence, attitude and fitness of the
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probationary employee while the latter seeks to prove to the employer that he has the qualifications to meet the
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reasonable standards for permanent employment.23
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b. Probationary period.
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As a general rule, it should not exceed six (6) months from the date the employee started working.24 One
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becomes a regular employee upon completion of his six‐month period of probation.25
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c. Exceptions.
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The six‐month period provided in Article 281 admits of certain exceptions such as:
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1. When the employer and the employee agree on a shorter or longer period;
2. When the nature of work to be performed by the employee requires a longer period;
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3. When a longer period is required and established by company policy.
If not one of the exceptional circumstances above is proven, the employee whose employment exceeds six (6)
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months is undoubtedly a regular employee.26
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Buiser v. Hon. Leogardo, [G.R. No. L‐63316, July 31, 1984].
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The probationary period of 18 months was considered valid in the light of the nature of employment of the
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probationary employees. The company here is engaged in the publication of advertisements in PLDT’s Yellow Pages
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Telephone Directories. Solicited ads are published a year after the sale has been made and only then can the company
be able to evaluate the efficiency, conduct and selling ability of the sales representatives, the evaluation being based on
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the published ads.

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d. Probationary period, how reckoned and computed.
The 6‐month probationary period should be reckoned “from the date of appointment up to the same calendar
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date of the 6th month following.”27

e. Distinction between probationary employment and fixed‐term employment.
The intention of the parties (employer and employee) is material. Both involved fixed term or duration of
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employment. However, in probationary employment, the parties intend to make their relationship regular after the
lapse of the period. In fixed‐term employment, no such intention exists and the relationship automatically terminates at
the expiration of the period.
f.
A probationary period cannot be stipulated within the fixed period of employment.28
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17 LVN Pictures, Inc. v. Philippine Musicians Guild, G.R. Nos. L-12582 and L-12598, Jan. 28, 1961, 1 SCRA 132.
18 Ruga v. NLRC, G.R. No. 72654-61, Jan. 22, 1990; See also Teng v. Pahagac, [G.R. No. 169704, November 17, 2010; Mercidar Fishing Corporation v. NLRC, G.R. No. 112574, Oct. 8, 1998, 297 SCRA 440.
19 Visayan Stevedore Transportation Company v. CIR, G.R. No. L-21696, Feb. 25, 1967, 19 SCRA 426.
20 Section 15, Rule X, Book III, Rules to Implement the Labor Code; Felix v. Buenaseda, G.R. No. 109704 Jan. 17, 1995, 240 SCRA 139.
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21 Perpetual Help Credit Cooperative, Inc. v. Faburada, [G.R. No. 121948, October 8, 2001].
22 Investment Planning Corporation v. SSS, [G.R. No. L-19124, November 18, 1967, 21 SCRA 294].
23 De la Cruz, Jr. v. NLRC, G.R. No. 145417, Dec. 11, 2003.
24 Article 281, Labor Code.
25 Voyeur Visage Studio, Inc. v. CA, G.R. No. 144939, March 18, 2005; A’ Prime Security Services, Inc. v. NLRC, G.R. No. 107320, Jan. 19, 2000.
26 San Miguel Corp. v. Del Rosario, G.R. Nos. 168194 & 168603, Dec. 13, 2005.
27 Cebu Royal Plant [SMC] v. Deputy Minister of Labor, [G.R. No. L-58639, August 12, 1987, 153 SCRA 38]; Cals Poultry Supply Corporation v. Roco, [G.R. No. 150660, July 30, 2002].
28 Villanueva v. NLRC, [G. R. No. 127448, September 10, 1998, 356 Phil. 638]; Servidad v. NLRC, [G.R. No. 128682, March 18, 1999, 305 SCRA 49, 55; 364 Phil. 518]; Innodata Philippines, Inc. v. Quejada-Lopez, [G.R. No. 162839, October 12, 2006].
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f. Some principles on probationary employment.
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1. The probationary period may be extended but only upon the mutual agreement by the employer and the
probationary employee.29
2. Purpose and not length of the probationary period is material. 30
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3. An employee who is allowed to work after a probationary period is considered a regular employee.31
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4. Employment is deemed regular if the employment contract has no stipulation on probationary period.32
5. Employee is deemed regular absent any contract to prove probationary employment.33
6. Repetitive rehiring of a probationary employee means he has become a regular employee.34
7. Regular workers of previous owner of business may be hired as probationary employees of new owner.35
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8. Probationary employment cannot be ad infinitum.36
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2. TERMINATION OF PROBATIONARY EMPLOYMENT.
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a. Security of tenure of probationary employees.
Within the limited legal six‐month probationary period, probationary employees are entitled to security of
tenure notwithstanding their limited tenure and non‐permanent status.37 Hence, during their probationary employment,
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they cannot be dismissed except for just or authorized cause or when he fails to qualify as a regular employee.38
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b. Grounds to terminate probationary employment.
Under Article 281, a probationary employee may be terminated only on two (2) grounds, to wit:
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1. For a just cause or authorized cause; or
2. When the probationary employee fails to qualify as a regular employee in accordance with reasonable
standards made known by the employer to the employee at the start of the employment.39
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c. Some principles on termination of employment of probationary employees.
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1. Procedural due process is required only in the case of the first ground (dismissal due to just or authorized
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cause). The second ground (failure to qualify as a regular employee) does not require notice and
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hearing. Due process of law for the second ground consists of making the reasonable standards expected of
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the employee during his probationary period known to him at the time of his probationary employment.40
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2. Termination to be valid must be done prior to lapse of probationary period.41
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3. Termination a few days after lapse of probationary period, cannot be done without due process as he has
already become a regular employee by that time.42
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4. Peremptory and arbitrary termination of probationary employees not allowed.43
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5. No obligation to pay unexpired portion in case of valid termination prior to lapse of probationary period.44
6. Agabon doctrine45 applies if dismissal of probationary employee for a just cause is without due process.
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Thus, the termination is considered legal but the employee will be awarded an indemnity in the form of
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nominal damages of P30,000.00.46
7. Jaka doctrine47 applies if dismissal of probationary employee for an authorized cause is without due
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process. The amount of indemnity is higher: P50,000.00.

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c. Kinds of Employment
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(1) Regular employment

(a) Reasonable connection rule
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1. REGULAR EMPLOYMENT.

a. Three (3) ways of attaining regular employment.
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Under the Labor Code, regular employment may be attained in either of three (3) ways, namely:
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29 Mariwasa Manufacturing, Inc. v. Leogardo, [G.R. No. 74246, January 26, 1989]; Dusit Hotel Nikko v. Gatbonton, [G.R. No. 161654, May 5, 2006].
30 International Catholic Migration Commission v. NLRC, G.R. No. 72222, Jan. 30, 1989.
31 Article 281, Labor Code; Philippine National Bank v. Cabansag, G.R. No. 157010, June 21, 2005; Servidad v. NLRC, G.R. No. 128682, March 18, 1999.
32 ATCI Overseas Corporation v. CA, G.R. No. 143949, Aug. 9, 2001; A. M. Oreta & Co., Inc. v. NLRC, G.R. No. 74004, August 10, 1989.
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33 San Miguel Corp. v. Del Rosario, [G.R. Nos. 168194 and 168603, Dec. 13, 2005].
34 Octaviano, v. NLRC, [G.R. No. 88636, October 3, 1991].
35 Espina v. Hon. CA, [G.R. No. 164582, March 28, 2007].
36 Voyeur Visage Studio, Inc. v. CA, [G.R. No. 144939, March 18, 2005].
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37 Philippine Daily Inquirer, Inc. v. Magtibay, Jr., G.R. No. 164532, July 24, 2007.
38 Lacuesta v. Ateneo de Manila University, G.R. No. 152777, December 9, 2005, 477 SCRA 217, 225.
39 Sections 2 [b] and 6 [c], Rule I, Book VI, Rules to Implement the Labor Code, as amended by Article V, Department Order No. 10, Series of 1997; See also Cathay Pacific Airways, Ltd. v. Marin, G.R. No. 148931, Sept. 12, 2006; Athenna International Manpower Services, Inc. v. Villanos,
G.R. No. 151303, April 15, 2005; Aberdeen Court, Inc. v. Agustin, Jr., G.R. No. 149371, April 13, 2005.
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40 Philippine Daily Inquirer, Inc. v. Magtibay, Jr., G.R. No. 164532, July 24, 2007; Sameer Overseas Placement Agency, Inc. v. NLRC, G.R. No. 132564, Oct. 20, 1999; Woodridge School [now known as Woodridge College, Inc.] v. Benito, [G.R. No. 160240, October 29, 2008].
41 Pasamba v. NLRC, G.R. No. 168421, June 8, 2007; See also Manila Electric Company v. NLRC, G.R. No. 83751, Sept. 29, 1989, 178 SCRA 198, 203.
42 San Miguel Corp. v. Del Rosario, [G.R. Nos. 168194 and 168603, December 13, 2005]; Cebu Royal Plant [San Miguel Corporation] v. Hon. Deputy Minister of Labor, [G.R. No. L-58639, August 12, 1986].
43 Cebu Marine Beach Resort v. NLRC, [G.R. No. 143252, October 23, 2003].
44 International Catholic Migration Commission v. NLRC, [G.R. No. 72222, January 30, 1989].
45 Agabon v. NLRC, [G.R. No. 158693, November 17, 2004].
46 Aberdeen Court, Inc. v. Agustin, Jr., G.R. No. 149371, April 13, 2005.
47 Jaka Food Processing Corporation v. Pacot, [G.R. 151378, March 28, 2005].
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1. By nature of work. The employment is deemed regular when the employee has been engaged to perform
activities which are usually necessary or desirable in the usual business or trade of the employer.48
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2. By period of service. The employment is reckoned as regular when the employee has rendered at least one
(1) year of service, whether such service is continuous or broken, with respect to the activity in which he is
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employed and his employment shall continue while such activity exists.49
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3. By probationary employment. The employment is considered regular when the employee is allowed to
work after a probationary period.50

b. Some principles on regular employment.
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1. Written or oral agreement is immaterial in the determination of regular employment.51
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2. Exception to the rule on regularity of employment in Article 280 is fixed‐period employment. This means
that an employee may validly enter into a fixed‐term employment contract even if the nature of his work is
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directly related to the principal business or trade of his employer.52
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3. Manner or mode of paying the wages of employee does not affect the regularity of his employment. So,
even if an employee is paid on a per‐piece basis53 or on commission basis,54 his becoming a regular
employee is not affected thereby.
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4. TV and radio talents are, as a general rule, not employees but independent contractors.55 They have their
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special skills and talents as tools. But they may become regular employees if they were hired not as talents
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(independent contractors) but as employees.56 Production Assistants are not talents but regular
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employees.57
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5. A newspaper columnist is not an employee of the newspaper publishing the column.58 But regular reporters
are employees of the newspaper.59

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2. REASONABLE CAUSAL CONNECTION RULE.

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a. This rule is used not in connection with regular employment.
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The reasonable causal connection rule is applied in case of conflict of jurisdiction between labor court and
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regular court. It is not used to determine regularity of employment. It is rather a misplaced topic under this topic on
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regular employment.
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In any event, it is well‐recognized that not all claims involving workers and their employers can be resolved
solely by the labor courts.60 However, the present trend is to refer worker‐employer controversies to labor courts, unless
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unmistakably provided by the law to be otherwise.61 Because of this trend, jurisprudence has developed the “reasonable
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causal connection rule.” Under this rule, if there is a reasonable causal connection between the claim asserted and the
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employer‐employee relations, then the case is within the jurisdiction of labor courts.62 In the absence of such nexus, it is
the regular courts that have jurisdiction.63
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(2) Project employment

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(a) Indicators of project employment

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1. PROJECT EMPLOYMENT.
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a. Concept.
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As defined by law, project employees are those hired:
1. for a specific project or undertaking; and
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2. the completion or termination of such project has been determined at the time of their engagement.

b. Principal distinctions between project employment and regular employment.
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1. The services of project employees are coterminous with the project or any phase thereof and may be
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terminated upon the end or completion of the project or phase thereof for which they were hired. Regular employees, in
48 Article 280, Labor Code; Paguio v. NLRC, G.R. No. 147816, May 9, 2003, 403 SCRA 190; Viernes v. NLRC, G.R. No. 108405, April 4, 2003, 400 SCRA 557.
49 Article 280, Labor Code; Conti v. NLRC, G.R. No. 119253, April 10, 1997, 271 SCRA 114; Philippine Fruit & Vegetable Industries, Inc. v. NLRC, G.R. No. 122122, July 20, 1999.
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51 Association of Trade Unions [ATU] v. Abella, G.R. No. 100518, Jan. 24, 2000; San Miguel Corporation v. NLRC, G.R. 125606, Oct. 7, 1998, p. 5.
52 Brent School, Inc. v. Zamora, G.R. No. 48494, Feb. 5, 1990.
53 Labor Congress of the Philippines v. NLRC, G.R. No. 123938, May 21, 1998, 290 SCRA 509; RJL Martinez Fishing Corporation v. NLRC, G.R. Nos. L-63550-51, Jan. 31, 1984, 127 SCRA 454, 462.
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54 Columbus Philippines Bus Corporation v. NLRC, [G.R. Nos. 114858-59, September 7, 2001].
55 Sonza v. ABS-CBN Broadcasting Corp., [G.R. No. 138051, June 10, 2004].
56 ABS-CBN Broadcasting Corporation v. Marquez, [G.R. No. 167638, June 22, 2005, pp. 5-6 (Unsigned Resolution), SC E-Library]; Dumpit-Murillo v. CA, [G.R. No. 164652, June 8, 2007]; Consolidated Broadcasting System, Inc. v. Oberio, [G.R. No. 168424, June 8, 2007].
57 ABS-CBN Broadcasting Corp. v. Nazareno, [G.R. No. 164156, September 26, 2006].
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58 Orozco v. The Fifth Division of the Honorable Court of Appeals, [G.R. No. 155207, August 13, 2008].
59 Id.
60 San Miguel Corporation v. NLRC, G.R. No. 80774, May 31, 1988, 161 SCRA 719, 724.
61 National Federation of Labor v. Eisma, G,R, No. L-61236, Jan. 31, 1984, 127 SCRA 419, 428.
62 Dai-ichi Electronics Manufacturing Corporation v. Villarama, Jr. G.R. No. 112940, Nov. 21, 1994, 238 SCRA 267, 271.
63 San Miguel Corporation v. Etcuban, G. R. No. 127639, Dec. 3, 1999.
64 Article 280, Labor Code; Section 5 [a], Rule I, Book VI, Rules to Implement the Labor Code, as amended by Article IV, Department Order No. 10, Series of 1997; Saberola v. Suarez, G.R. No. 151227, July 14, 2008, 558 SCRA 135, 142; D. M. Consunji, Inc. v. NLRC, G.R. No. 116572,
Dec. 18, 2000; Association of Trade Unions [ATU] v. Abella, G.R. No. 100518, Jan. 24, 2000.
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contrast, enjoy security of tenure and are legally entitled to remain in the service of their employer and to hold on to
their work or position until their services are terminated by any of the modes of termination of service recognized under
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the Labor Code.65
2. Due process likewise varies. In case of project employment, if the termination is brought about by the
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completion of the project or any phase thereof, due process is complied with even if no prior notice of termination is
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served. For termination of regular employment, the due process required would necessarily depend on the ground/s
cited. If the termination is for just cause/s, due process applicable to Article 282 terminations applies. If due to
authorized cause/s, due process applicable to Articles 283 and 284 terminations should be followed.

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2. INDICATORS OF PROJECT EMPLOYMENT.
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a. 6 indicators of project employment.
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Either one or more of the following circumstances, among others, may be considered as indicator/s that an
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employee is a project employee:
1. The duration of the specific/identified undertaking for which the worker is engaged is reasonably
determinable.
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2. Such duration, as well as the specific work/service to be performed, is defined in an employment
agreement and is made clear to the employee at the time of hiring.
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3. The work/service performed by the employee is in connection with the particular project or undertaking for
which he is engaged.
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4. The employee, while not employed and awaiting engagement, is free to offer his services to any other
employer.
5. The termination of his employment in the particular project/undertaking is reported to the Regional Office
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of the Department of Labor and Employment having jurisdiction over the workplace, within thirty (30) days
following the date of his separation from work, using the prescribed form on employees’ terminations or
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dismissals or suspensions.
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6. An undertaking in the employment contract by the employer to pay completion bonus to the project
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employee as practiced by most construction companies.66
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b. Some principles on project employment.
1. Project employees should be informed of their status as such at inception of the employment relationship.67
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2. There must be a written contract of project employment stating the duration of the project employment as
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well as the particular work or service to be performed.68
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3. Failure to present contract of project employment means that employees are regular.69
4. Regular employment is inconsistent with project employment. In other words, a regular employee cannot
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be at the same time project employee.70
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5. Intervals in employment contracts indicate project employment.71
6. Continuous, as opposed to intermittent, rehiring shows that employee is regular.72
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7. “Project‐to‐project” basis of employment held valid.73
8. Length of service not controlling determinant of employment tenure.74
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c. “Work pool” principle.
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As a general rule, employers may or may not form a “work pool.” A “work pool” refers to a group of workers
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from which an employer like a construction company draws the workers it deploys or assigns to its various projects or
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any phase/s thereof. Members of a “work pool” may consist of:
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1. Non‐project employees or employees for an indefinite period. If they are employed in a particular project,
the completion of the project or of any phase thereof will not mean severance of employer‐employee
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relationship.
2. Project employees. These workers in the work pool who are employed in a particular project or in any phase
.J
li
thereof are considered as such if they are free to leave anytime and offer their services to other
employers.75
of
se
Mere membership in a “work pool” does not result in the workers’ becoming regular employees by reason of
that fact alone.76 However, under established jurisprudence, a project employee who is a member of a “work pool,”
may attain regular status as a project employee. This kind of employee is known as “regular project employee.”
Jo

Pr
3. TERMINATION OF PROJECT EMPLOYMENT.

a. Some principles relevant to termination of employment.
o f.
65 Millennium Erectors Corporation v. Magallanes, [G.R. No. 184362, November 15, 2010]; Equipment Technical Services v. Court of Appeals, [G.R. No. 157680, October 08, 2008, 568 SCRA 122, 130].
66 Section 2.2., Department Order No. 19, Series of 1993.
67 Abesco Construction and Development Corp. v. Ramirez, G.R. No. 141168, April 10, 2006.
68 Id.
Pr
69 Hanjin Heavy Industries and Construction Co, Ltd. v. Ibañez, [G.R. No. 170181, June 26, 2008].
70 Magcalas v. NLRC, G.R. No. 100333, March 13, 1997, 269 SCRA 453, 468.
71 Palomares v. NLRC, G.R. No. 120064, Aug. 15, 1997.
72 PLDT v. Ylagan, G.R. No. 155645, Nov. 24, 2006.
73 Salinas v. NLRC, G.R. No. 114671, Nov. 24, 1999.
74 Fabela v. San Miguel Corporation, G.R. No. 150658, Feb. 9, 2007.
75 Under Policy Instructions No. 20; Raycor Aircontrol Systems, Inc. v. NLRC, G. R. No. 114290, Sept. 9, 1996, 261 SCRA 589.
76 Abesco Construction and Development Corp. v. Ramirez, G.R. No. 141168, April 10, 2006.
6

1. Project employees enjoy security of tenure during the term of the project employment.77
2. If the project or the phase of the project the project employee is working on has not yet been completed
n
and his services are terminated without just or authorized cause and there is no showing that his services are
unsatisfactory, such termination is considered illegal, hence, the project employee is entitled to
a
reinstatement with backwages to his former position or substantially equivalent position. If the
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reinstatement is no longer possible, the employee is entitled to his salaries for the unexpired portion of the
agreement.78
3. Project employees are not, by law, entitled to separation pay if their services are terminated as a result of
the completion of the project or any phase thereof in which they are employed. The reason is that their
an
services are deemed coterminous with the project or phase thereof.79
n
4. Project employees have presumably become regular employees if they are allowed to work beyond the
completion of the project or any phase thereof to which they were assigned or after the “day certain” which
na
they and their employer have mutually agreed for its completion. Having become regular employees, they
Ch
can no longer be terminated on the basis of the completion of the project or any phase thereof to which
they were deployed.80
5. Advance notice of termination of project employment, not required.81
ia
6. Report to DOLE on termination of project employees, required.82 Report should be made after every
an
completion of project or phase thereof.83
n
7. Completion bonus as indicator of project employment.84
Gu
8. Burden of proof in termination of project employment rests on the employer.85
na
Ch
==============================
to
ia
n
(3) Seasonal employment
Gu
==============================
li
na

se
1. SEASONAL EMPLOYMENT.

o
ia
a. Concept.
Jo
A “seasonal employee” is one whose work or service to be performed is seasonal in nature and the
an
it
employment is for the duration of the season.86
Gu
b. Regular seasonal employment.
el
Seasonal employees may attain regularity in their employment as such. Once they attained such regularity,
n
they are properly to be called “regular seasonal employees.”
Regular seasonal workers are called to work from time to time, mostly during certain season. The nature of
os
ia
their relationship with the employer is such that during off‐season, they are temporarily laid off but they are re‐
employed during the season or when their services may be needed. They are not, strictly speaking, separated from the
it
Gu
service but are merely considered as on leave of absence without pay until they are re‐employed. Their employment
.J
relationship is never severed but only suspended. As such, they can be considered as being in the regular employment
el
of the employer.87
of
c. Requisites for regularity of employment of seasonal employees.
The case of Hacienda Fatima v. National Federation of Sugarcane Workers ‐ Food and General Trade, [G.R.
os
to
No. 149440, January 28, 2003], enunciates the requisites in order that a seasonal employee may be deemed to have
Pr
attained regularity of employment as such, thus:
1. The seasonal employee should perform work or services that are seasonal in nature; and
.J
li
2. They must have also been employed for more than one (1) season.
Both requisites should concur in order that the employee may be classified as regular seasonal employee. If
of
se
the seasonal worker is engaged only for the duration of one (1) season, then, he does not attain regularity of
employment as a seasonal worker.

Jo

Pr

o f.
77 Tomas Lao Construction, v. NLRC, G.R. No. 116781, Sept. 5, 1997.

78 Filipinas Pre-Fabricated Building Systems [Filsystems], Inc. v. Puente, [G.R. No. 153832, March 18, 2005].
79 Section 3.2., Department Order No. 19, Series of 1993, Guidelines Governing the Employment of Workers in the Construction Industry which supersedes Policy Instructions No. 20 of 1977; Saberola v. Suarez, G.R. No. 151227, July 14, 2008; Salazar v. NLRC, G.R. No. 109210, April 17,
1996, 256 SCRA 273.
Pr
80 See Dacuital v. L.M. Camus Engineering Corp., [G.R. No. 176748, September 1, 2010].
81 Cioco v. C. E. Construction Corporation, G.R. No. 156748, Sept. 8, 2004.
82 Department Order No. 19, [April 1, 1993]; Cioco v. C. E. Construction Corporation, supra; See also PLDT v. Ylagan, G.R. No. 155645, Nov. 24, 2006; Phesco, Inc. v. NLRC, G.R. Nos. 104444-49, Dec. 27, 1994.
83 Dacuital v. L.M. Camus Engineering Corp., G.R. No. 176748, Sept. 1, 2010; Equipment Technical Services v. CA, G.R. No. 157680, Oct. 8, 2008; Goma v. Pamplona Plantation, Inc., G.R. No. 160905, July 4, 2008; Belle Corp. v. Macasusi, G.R. No. 168116, April 22, 2008.
84 Section 3.4. of Department Order No. 19, Series of 1993; Hanjin Heavy Industries and Construction Co, Ltd. v. Ibañez, [G.R. No. 170181, June 26, 2008].
85 Southern Cotabato Development and Construction, Inc. v. NLRC, G.R. No. 121582, Oct. 16, 1997, 280 SCRA 853.
86 Article 280, Labor Code; Section 5, Rule I, Book VI of the Rules to Implement the Labor Code.
87 Abasolo v. NLRC, G.R. No. 118475, Nov. 29, 2000; Bacolod-Murcia Milling Co., Inc. v. NLRC, G.R. No. 84272, Nov. 21, 1991, 204 SCRA 155, 158; Visayan Stevedore Transportation Company v. CIR, No. L-21696, Feb. 25, 1967.
7

==============================
n
a
(4) Casual employment
==============================


1. CASUAL EMPLOYMENT.
Ch

an
a. Meaning of casual employment.
n
There is casual employment where an employee is engaged to perform a job, work or service which is merely
incidental to the business of the employer, and such job, work or service is for a definite period made known to the
na
employee at the time of engagement.88
Ch

b. Some principles on casual employment.
1. Casual employee becomes regular after one year of service by operation of law.89
ia
2. No regular appointment papers necessary for casual employees to become regular.90
an
3. The one (1) year period should be reckoned from the hiring date.91 n
4. Repeated rehiring of a casual employee makes him a regular employee.92
Gu
5. The wages and benefits of a casual employee whose status is converted into regular employment should
na
not be diminished.93
Ch

==============================
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ia
n
Gu
(5) Fixed term employment

li
(a) Requisites for validity na

==============================
se
Relevant Provision: No Labor Code provision on fixed-term employment.94

o
ia

1. FIXED‐TERM EMPLOYMENT.
Jo
an
it
a. Requisites for validity of fixed‐term contracts of employment.
Gu
The two (2) requisites or criteria for the validity of a fixed‐term contract of employment are as follows:
1. The fixed period of employment was knowingly and voluntarily agreed upon by the parties, without any
el
force, duress or improper pressure being brought to bear upon the employee and absent any other
n
circumstances vitiating his consent; or
2. It satisfactorily appears that the employer and employee dealt with each other on more or less equal terms
os
ia
with no moral dominance whatever being exercised by the former on the latter.95
If the foregoing criteria are not present, the fixed‐term contract of employment should be struck down for
it
Gu
being illegal.96
.J

el
b. Some principles on fixed‐term employment.
of
1. Fixed‐term employment is valid even if duties are usually necessary or desirable in the employer’s usual
business or trade.97
os
to
2. Notice of termination not necessary in fixed‐term employment.98
3. Employee is deemed regular if contract failed to state the specific fixed period of employment.99
Pr
4. Charges for misconduct or other wrongful acts or omissions, relevant only in termination prior to expiration
.J
of the term. Not relevant if termination is due to expiration of fixed period.100
li
5. Employees allowed to work beyond fixed term become regular employees.101
6. Rendering work beyond one (1) year would result to regular employment.102
of
se
7. Successive renewals of fixed‐period contracts will result to regular employment.103
8. Hiring of employees on a uniformly fixed 5‐month basis and replacing them upon the expiration of their
contracts with other workers with the same employment status circumvents their right to security of
Jo
Pr
tenure.104
88 Article 280, Labor Code; Section 5 [b], Rule I, Book VI, Rules to Implement the Labor Code, as amended by Article IV, Department Order No. 10, Series of 1997; Conti v. NLRC, G.R. No. 119253, April 10, 1997, 271 SCRA 114.
89 Section 5 [b], Rule I, Book VI, Rules to Implement the Labor Code, as amended by Article IV, Department Order No. 10, Series of 1997; Capule, v. NLRC, G.R. No. 90653, Nov. 12, 1990.
f.
90 Kimberly Independent Labor Union for Solidarity, Activism and Nationalism-Organized Labor Association In Line Industries and Agriculture v. Drilon, G.R. Nos. 77629 and 78791, May 9, 1990, 185 SCRA 190; See also Kay Products, Inc. v. CA, G.R. No. 162472, July 28, 2005; Cebu
Engineering and Development Company, Inc. v. NLRC, G.R. No. 118695, April 22, 1998.
91 Kimberly-Clark [Phils.], Inc. v. Secretary of Labor, [G.R. No. 156668, November 23, 2007].
92 Tan v. Lagrama, G.R. No. 151228, Aug. 15, 2002; Romares v. NLRC, G.R. No. 122327, Aug. 19, 1998.
o
93 Philippine American Management Association, v. CIR, G.R. No. L-37206, April 15, 1988.
94 Brent School, Inc. v. Zamora and Alegre, [G.R. No. 48494, February 5, 1990].
95 Philippine National Oil Company-Energy Development Corporation v. NLRC, [G.R. No. 97747, March 31, 1993]; See also Philips Semiconductors [Phils.], Inc. v. Fadriquela, G.R. No. 141717, April 14, 2004; Labayog v. M.Y. San Biscuits, Inc., G.R. No. 148102, July 11, 2006; Medenilla
v. Philippine Veterans Bank, G.R. No. 127673, March 13, 2000.

Pr
96 Pure Foods Corporation v. NLRC, [G.R. No. 122563, December 12, 1997, 283 SCRA 133].
97 Caparoso v. CA, G.R. No. 155505, February 15, 2007.
98 Pangilinan v. General Milling Corporation, supra; Blancaflor v. NLRC, G.R. No. 101013, Feb. 2, 1993, 218 SCRA 366; New Sunrise Metal Construction v. Pia, G.R. No. 171131, July 10, 2007.
99 Poseidon Fishing v. NLRC, [G.R. No. 168052, February 20, 2006].
100 AMA Computer College, Paranaque, v. Austria, [G.R. No. 164078, November 23, 2007].
101 Viernes v. NLRC, [G.R. No. 108405, April 4, 2003].
102 Megascope General Services v. NLRC, [G.R. No. 109224, June 19, 1997, 274 SCRA 147, 156]; Agusan del Norte Electric Cooperative, Inc. v. Cagampang and Garzon, [G.R. No. 167627, October 10, 2008].
103 Philips Semiconductors [Phils.], Inc. v. Fadriquela, [G.R. No. 141717, April 14, 2004].
8

9. Employment on a “day‐to‐day basis for a temporary period” will result to regular employment.105
10. Termination prior to lapse of fixed‐term contract should be for a just or authorized cause.106
n
11. Liability for illegal dismissal of fixed‐term employee is only for salary for unexpired portion.107

a
2. FIXED‐TERM EMPLOYMENT OF OVERSEAS FILIPINO WORKERS (OFWs).

Ch
a. Some principles on fixed‐term employment of OFWs.
1. OFWs can never acquire regular employment. 108
2. Employment contracts of OFWs for indefinite period, not valid.109
3. OFWs do not become regular employees by reason of nature of work.110
an
4. Series of rehiring of OFWs cannot ripen into regular employment.111
n
5. CBA cannot override the terms and conditions prescribed by the POEA under the Standard Employment
Contract for OFWs.112
na
6. Probationary employment of OFWs, a misnomer.113
Ch
7. The employment of OFWs for a fixed period, not discriminatory.114
8. The contracts of OFWs cease upon expiration thereof.115
9. Hiring of seaman for overseas employment but assigning him to local vessel does not affect his status as an
ia
OFW.116
an
10. Seaman hired for overseas deployment but later assigned to domestic operations after the expiration of his
n
overseas contract ceases to be an OFW.117
Gu

na
Ch
=====================================================
to
ia
d. Job contracting and Labor-only contracting
n
(1) When is there “job contracting”?
Gu
(2) When is there “labor-only contracting”?

li
(3) Conditions that must concur in legitimate job contracting

na
(4) Effects of finding that there is labor-only contracting
=====================================================
se
Relevant Provisions: Articles 106 to 109, Labor Code

o
ia

Jo
1. JOB CONTRACTING AND LABOR‐ONLY CONTRACTING ARRANGEMENT.
an
it

Gu
a. “Contracting” or “subcontracting,” defined.
“Contracting” or “subcontracting” refers to an arrangement whereby a principal or indirect or statutory
el
employer agrees to put out or farm out with a contractor or subcontractor the performance or completion of a specific
n
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.118
os
ia
The terms “contracting” and “subcontracting” are synonymous under Philippine labor law. The term that is
more commonly used, however, is subcontracting.119
it
Gu
b. Trilateral arrangement.
.J
There are three (3) parties involved in these arrangements:
el
(1) The principal who/which farms out a work, job, task, project or service to a contractor or subcontractor;
of
(2) The contractor or subcontractor who/which has the capacity to independently undertake the
performance of the work, job, task, project or service; and
os
to
(3) The contractual workers engaged by the contractor or subcontractor to accomplish the work, job, task,
project or service.120
Pr

.J
1.1. PERMISSIBLE OR LEGITIMATE JOB CONTRACTING ARRANGEMENT.
li
a. Requisites.
of
The following are the requisites for the validity of a job contracting arrangement:
se
(1) The contractor carries on an independent business and undertakes the contract work on his own account
under his own responsibility according to his own manner and method, free from the control and direction
Jo
of his employer or principal (indirect/statutory employer) in all matters connected with the performance
Pr
of the work except as to the results thereof.
104 Pure Foods Corporation v. NLRC, [G.R. No. 122653, December 12, 1997, 283 SCRA 133]; Universal Robina Corp. v. Catapang, [G.R. No. 164736, October 14, 2005].
105 Coca-Cola Bottlers Phils., Inc. v. De la Cruz, [G.R. No. 184977, December 7, 2009]; Pacquing v. Coca-Cola Philippines, Inc., [G.R. No. 157966, January 31, 2008]; Magsalin & Coca-Cola Bottlers Phils., Inc. v. National Organization of Working Men (N.O.W.M.), [G.R. No. 148492, May 9,
f.
2003].
106 Medenilla v. Philippine Veterans Bank, infra; George Anderson v. NLRC, G.R. No. 111212, Jan. 22, 1996, 252 SCRA 116; 322 Phil. 122, 137.
107 New Sunrise Metal Construction v. Pia, [G.R. No. 171131, July 10, 2007].
108 See second 2002 Resolution in Millares v. NLRC, [G.R. No. 110524, July 29, 2002, 385 SCRA 306].
o
109 Pentagon International Shipping, Inc. v. Adelantar, [G.R. No. 157373, July 27, 2004].
110 Gu-Miro v. Adorable, G. R. No. 160952, Aug. 20, 2004.
111 Id.
112 De La Cruz v. Maersk Filipinas Crewing, Inc., [G.R. No. 172038, April 14, 2008].
Pr
113 Millares v. NLRC, [G.R. No. 110524, July 29, 2002, 385 SCRA 306]; See also De La Cruz v. Maersk Filipinas Crewing, Inc., G.R. No. 172038, April 14, 2008.
114 Ravago v. Esso Eastern Marine, Ltd., [G.R. No. 158324, March 14, 2005].
115 Ravago v. Esso Eastern Marine, Ltd., supra; Millares v. NLRC, supra.
116 OSM Shipping Philippines, Inc. v. NLRC, [G.R. No. 138193, March 5, 2003].
117 Delos Santos v. Jebsen Maritime, Inc., [G.R. No. 154185, November 22, 2005].
118 Section 4, Department Order No. 18-02, Series of 2002, [Feb. 21, 2002].
119 No. 1, DOLE Primer on Contracting and Subcontracting, Effects of Department Order No. 3, Series of 2001.
9

(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work
premises, and other materials which are necessary in the conduct of the business.121
n
(3) The agreement between the principal (or indirect/statutory employer) and contractor/ subcontractor
assures the contractual employees entitlement to all labor and occupational safety and health standards,
a
free exercise of the right to self‐organization, security of tenure, and social and welfare benefits.122
Absence of any of the requisites makes it a labor‐only contracting arrangement.123

Ch
b. Other factors indicative of permissible job contracting arrangement.
In order to be considered an independent contractor, it is not enough to show substantial capitalization or
investment in the form of tools, equipment, machinery and work premises. In addition, the following factors need to be
an
considered:
n
(1) Whether the contractor is carrying on an independent business;
(2) The nature and extent of the work;
na
Ch
(3) The skill required;
(4) The term and duration of the relationship;
(5) The right to assign the performance of specified pieces of work;
ia
(6) The control and supervision of the workers;
an
(7) The power of the employer with respect to the hiring, firing and payment of workers of the contractor; n
(8) The control of the premises;
Gu
(9) The duty to supply premises, tools, appliances, materials, and labor; and
na
(10) The mode, manner and terms of payment.124
Ch

1.2. LABOR‐ONLY CONTRACTING.

a. Labor‐only contracting, expressly prohibited by law and the rules.
to
ia
Labor‐only contracting is expressly prohibited under Article 106 of the Labor Code.125
n

b. Labor‐only contracting, meaning.
Gu
Labor‐only contracting refers to an arrangement where the contractor merely recruits, supplies or places
li
workers to perform a work, job, task, project or service for a principal.
na

c. Requisites/Elements of labor‐only contracting.
se
(1) (a) the contractor/subcontractor does not have substantial capital or investment which relates to the job,
o
ia
work or service to be performed and (b) the employees recruited, supplied or placed by such
Jo
contractor/subcontractor are performing activities which are directly related to the main business of the
an
it
principal;126
Gu
OR
el
(2) The contractor/subcontractor does not exercise the right of control over the performance of the work of
n
the contractual employee. (Note: Emphasis and CAPITALIZATION supplied by the Supreme Court in the
same case of Philippine Airlines, Inc. v. Ligan, [G.R. No. 146408, February 29, 2008]).127
os

ia
Even if only one of the two (2) elements above is present, there is labor‐only contracting.

it
d. Effects of a labor‐only contracting arrangement.
Gu
In summary, the following are the effects of a labor‐only contracting arrangement:
.J
1. The labor‐only contractor will be treated as the agent or intermediary of the principal. Since the act of an
el
agent is the act of the principal, representations made by the labor‐only contractor to the employees will
of
bind the principal.
os
to
2. The principal will become the employer as if it directly employed the workers supplied by the labor‐only
contractor to undertake the subcontracted job or service. It will be responsible to them for all their
Pr
entitlements and benefits under labor laws.
3. The principal and the labor‐only contractor will be solidarily treated as the employer.
.J
li
4. The employees will become employees of the principal, subject to the classifications of employees under
Article 280 of the Labor Code.128
of
se
2. TESTS TO DETERMINE THE EXISTENCE OF PERMISSIBLE OR LEGITIMATE JOB CONTRACTING ARRANGEMENT.
To determine the existence of permissible or legitimate job contracting arrangement, the following tests may
be applied:
Jo
Pr
a. “Right of control” test;
b. “Substantial capital or investment” test; and
c. “Legal rights and benefits compliance” test.
f.

o
121 De los Santos v. NLRC, [G.R. No. 121327, December 20, 2001, 423 Phil. 1020, 1032]; See also Manila Electric Company v. Benamira, G.R. No. 145271, July 14, 2005; Manila Water Co., Inc. v. Pena, G.R. No. 158255, July 8, 2004; Corporal, Sr. v. NLRC, G.R. No. 129315, Oct. 2,
2000, 395 Phil. 890.
Pr
122 See also Almeda v. Asahi Glass Philippines, Inc., G.R. No. 177785, Sept. 3, 2008; Acevedo v. Advanstar Co., Inc., G.R. No. 157656, Nov. 11, 2005; Vinoya v. NLRC, G.R. No. 126586, Feb. 2, 2000, 324 SCRA 469.
123 Philippine School of Business Administration [PSBA]-Manila v. NLRC, G.R. No. 114143, Aug. 28, 1996; Tabas v. California Manufacturing Co., Inc., G.R. No. 80680, Jan. 26, 1989, 169 SCRA 497.
124 Wack Wack Golf & Country Club v. NLRC, [G.R. No. 149793, April 15, 2005]; See also San Miguel Corp. v. Semillano, G.R. No. 164257, July 5, 2010.
125 Teng v. Pahagac, G.R. No. 169704, Nov. 17, 2010.
126 Section 5, Rules Implementing Articles 106 to 109 of the Labor Code, as amended by Department Order No. 18-02, [Series of 2002]; Philippine Airlines, Inc. v. Ligan, [G.R. No. 146408, February 29, 2008]; See Babas v. Lorenzo Shipping Corp., G.R. No. 186091, Dec. 15, 2010.
127 See Article 106, Labor Code; No. 9, DOLE Primer on Contracting and Subcontracting, Effects of Department Order No. 3, Series of 2001; See also Almeda v. Asahi Glass Philippines, Inc., G.R. No. 177785, Sept. 3, 2008; Coca-Cola Bottlers Phils., Inc. v. Agito, G.R. No. 179546, Feb.
13, 2009; Manila Water Co., Inc. v. Pena, G.R. No. 158255, July 8, 2004; Sandoval Shipyards, Inc. v. Pepito, G.R. No. 143428, June 25, 2001; Escario v. NLRC, G.R. No. 124055, June 8, 2000.
128 See Manila Electric Company v. Benamira, G.R. No. 145271, July 14, 2005; Also Coca-Cola Bottlers Phils., Inc. v. De la Cruz, [G.R. No. 184977, December 7, 2009]; Teng v. Pahagac, [G.R. No. 169704, November 17, 2010].
10

2.1. RIGHT OF CONTROL TEST.

n
a. Right of control test, how made.
The “right of control” test basically addresses the first of the three (3) elements of permissible job contracting
a
arrangement, that is, whether the contractor carries on an independent business and undertakes the contract work on
his own account under his own responsibility according to his own manner and method, free from the control and
work except as to the results thereof. Ch
direction of his employer or principal (indirect/statutory employer) in all matters connected with the performance of the
If the issue is answered in the affirmative, then the first requisite of permissible job contracting arrangement is
fully satisfied.
an

n
b. Right of control, meaning.
The “right to control” refers to the right reserved to the person for whom the services of the contractual workers are
na
performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that
Ch
end. (Section 5, Department Order No. 18‐02, Series of 2002, [Feb. 21, 2002]).

2.2. SUBSTANTIAL CAPITAL OR INVESTMENT TEST.
ia
an
a. Substantial capital or investment test, how made.
The substantial capital or investment test seeks to address the second of the three (3) elements of permissible
n
Gu
job contracting arrangement, that is, whether the contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are necessary in the conduct of its business.129
na
Ch
If the answer is in the affirmative, the second requisite in permissible job contracting/ subcontracting
arrangement is fully complied with.

b. Substantial capital or investment, meaning.
to
ia
“Substantial capital or investment” refers to the capital stocks and subscribed capitalization in the case of
n
corporations, as well as tools, equipment, implements, machineries and work premises, actually and directly used by the
Gu
contractor/subcontractor in the performance or completion of the job, work or service contracted out.130
li
c. “Substantial capital” and “investment in tools, etc.” are two separate requirements.
na
Jurisprudentially, “substantial capital” and “investment in tools, equipment, implements, machineries and work
se
premises” should be treated as two (2) distinct and separate factors in determining whether permissible job
contracting/subcontracting arrangement exists in a certain case.131
o
ia

Jo
2.3. LEGAL RIGHTS AND BENEFITS COMPLIANCE TEST.
an
it
Gu
a. Element of compliance with contractual employees’ rights and benefits in permissible job
contracting/subcontracting arrangement.
el
The legal rights and benefits compliance test addresses the third of the three (3) elements of permissible job
n
contracting, that is, whether the agreement between the principal (or indirect/statutory employer) and contractor
assures the contractual employees of the latter of their entitlement to all labor and occupational safety and health
os
standards, free exercise of the right to self‐organization, security of tenure, and social and welfare benefits.132
ia
If answered in the positive, the third and last element of permissible job contracting arrangement is fully
it
satisfied and complied with.
Gu

.J
b. Rights of a contractual employee.
el
As an employee of the contractor – his direct employer, a contractual employee is entitled to all the rights and
of
privileges due a regular employee as provided for in the Labor Code. Such rights include the following:
(a) Safe and healthful working conditions;
os
to
(b) Labor standards such as service incentive leave, rest days, overtime pay, holiday pay, 13th‐month pay and
separation pay;
Pr
(c) Social security and welfare benefits;
.J
(d) Self‐organization, collective bargaining and peaceful concerted action; and
li
(e) Security of tenure.133

of
se
3. MAJOR DISTINCTIONS BETWEEN LEGITIMATE JOB CONTRACTING AND LABOR‐ONLY CONTRACTING.

The principal distinctions between legitimate and permissible job contracting, on the one hand, and the
prohibited labor‐only contracting, on the other, may be summed up as follows:
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Pr
1. In the former, no employer‐employee relationship exists between the contractual employees of the job
contractor and the principal; while in the latter, an employer‐employee relationship is created by law
between the principal and the contractual employees of the labor‐only contractor.134
f.
2. In the former, the principal is considered only an “indirect employer,” as this term is understood under
Article 107 of the Labor Code; while in the latter, the principal is considered the “direct employer” of the
contractual employees in accordance with the last paragraph of Article 106 of the Labor Code.135
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129 Manila Electric Company v. Benamira, G.R. No. 145271, July 14, 2005; Manila Water Co., Inc. v. Pena, G.R. No. 158255, July 8, 2004; Corporal, Sr. v. NLRC, G.R. No. 129315, Oct. 2, 2000, 395 Phil. 890.
130 Section 5, Department Order No. 18-02, Series of 2002, [Feb. 21, 2002]; No. 8, DOLE Primer on Contracting and Subcontracting, Effects of Department Order No. 3, Series of 2001.
131 Neri v. NLRC, G.R. Nos. 97008-09, July 23, 1993, 224 SCRA 7171.
132 See also Acevedo v. Advanstar Co., Inc., G.R. No. 157656, Nov. 11, 2005; Vinoya v. NLRC, G.R. No. 126586, Feb. 2, 2000, 324 SCRA 469.
134 PCI Automation Center, Inc. v. NLRC, G.R. No. 115920, Jan. 29, 1996 citing Philippine Bank of Communications v. NLRC, G.R. No. 66598, Dec. 19, 1986, 146 SCRA 347.
135 PCI Automation Center, Inc. v. NLRC, supra.
11

3. In the former, the joint and several obligation of the principal and the legitimate job contractor is only for a
limited purpose, that is, to ensure that the employees are paid their wages. Other than this obligation of
n
paying the wages, the principal is not responsible for any claim made by the contractual employees; while in
the latter, the principal becomes solidarily liable with the labor‐only contractor for all the rightful claims of
a
the contractual employees.136
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4. In the former, the legitimate job contractor/subcontractor undertakes to perform a specific job for the
principal; while in the latter, the labor‐only contractor merely provides the personnel to work for the
principal.137

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4. SOME PRINCIPLES ON LEGITIMATE JOB CONTRACTING AND LABOR‐ONLY CONTRACTING.
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1. Contractor, not the principal, is considered the “direct” employer of the contractual employees.
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2. Principal is deemed direct employer of the contractual employees in any of the following cases:
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(a) Where there is labor‐only contracting; or
(b) Where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions)
thereof.138
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3. Duty to produce copy of the contract devolves upon both the principal and the contractor.139
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4. Performance of the work within or outside the premises of the principal, not material in determining the
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validity of job contracting arrangement.140
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5. The fact that the contractor has only the principal as its single client indicates labor‐only contracting.141
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6. Stipulation in the contract on non‐existence of employment relationship between the principal and the
employees of the contractor, not controlling.142
7. In case of doubt, one must be classified as an employee, not as an independent contractor.143
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Relevant Provisions: Articles 277 [b], 279, 282 and 283, Labor Code

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1. STATUTORY BASiS OF DUE PROCESS.

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a. Due process in termination of employment refers to statutory, and not constitutional, due process.
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144
It is now the prevailing doctrine that it is not the due process provided in the Constitution that is required in
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termination of employment but the statutory due process provided under Article 277 [b] of the Labor Code.
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“Constitutional due process” protects the individual from the government and assures him of his rights in criminal, civil
.J
or administrative proceedings; while “statutory due process” protects employees from being unjustly terminated
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without just cause after notice and hearing. Put differently, the Bill of Rights is not meant to be invoked against acts of
of
private individuals like employers. Private actions, no matter how egregious, cannot violate the constitutional
guarantees.
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b. Other constitutional rights that cannot be invoked in administrative or labor cases.
For the same reason that the due process clause in the Constitution cannot be invoked against the employer,
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the following constitutional rights have no application to administrative or labor cases:
1. Right against self‐incrimination145 except if the case partakes of the character of a criminal proceeding
because of the nature of the penalty that may be imposed for the offense.146
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2. Right to counsel147 because it is meant to protect a suspect in a criminal case who is under custodial
investigation.148 But if the employer failed to inform the employee who is undergoing administrative
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investigation of his right to counsel, it would amount to deprivation of due process.149
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3. Right to equal protection of the laws150 because it is addressed only to the state or those acting under color
of its authority.151
f.
136 Id.; Coca-Cola Bottlers Phils., Inc. v. Agito, G.R. No. 179546, Feb. 13, 2009.
137 PCI Automation Center, Inc. v. NLRC, supra.
138 Section 7, Department Order No. 18-02, Series of 2002, [Feb. 21, 2002]; Aboitiz Haulers, Inc. v. Dimapatol, G.R. No. 148619, Sept. 19, 2006.
139 Section 14, Ibid..
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140 Acevedo v. Advanstar Co., Inc., [G.R. No. 157656, November 11, 2005].
141 Babas v. Lorenzo Shipping Corp., [G.R. No. 186091, December 15, 2010].
142 Lakas sa Industriya ng Kapatirang Haligi ng Alyansa-Pinagbuklod ng Manggagawang Promo ng Burlingame v. Burlingame Corporation, [G.R. No. 162833, June 15, 2007].
143 SSS v. CA, [G.R. No. 100388, December 14, 2000].
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144 Section 1, Article III [Bill of Rights], 1987 Constitution which states that “no person shall be deprived of life, liberty or property without due process of law, nor shall any person be denied the equal protection of the laws.”; Per Agabon v. NLRC, [G.R. No. 158693, November 17,
2004].
145 Section 17, Article III [Bill of Rights], 1987 Constitution.
146 Pascual, Jr. v. Board of Medical Examiners, G.R. No. L-25018, May 26, 1969; Cabal v. Kapunan, Jr., G.R. No. L-19052, Dec. 29, 1962.
148 Manuel v. N. C. Construction Supply, G.R. No. 127553, Nov. 28, 1997, 282 SCRA 326.
149 Punzal v. ETSI Technologies, Inc., [G.R. Nos. 170384-85, March 9, 2007].
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4. Right against unreasonable searches and seizures152 because it does not protect citizens from
unreasonable searches and seizures perpetrated by private individuals like employers.153
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c. Do employers have the right to due process?
a
Yes, for while the intendment of our laws is to favor the employee, however, in no way is it implied that the
employer is not entitled to due process.154

2. SUBSTANTIVE AND PROCEDURAL ASPECTS OF DUE PROCESS.

a. Two‐fold due process requirement.
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The requirement of due process is two‐fold, namely:
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1. Substantive aspect which means that the dismissal must be for any of the just causes provided under
Article 282 of the Labor Code or the company rules and regulations promulgated by the employer or any of
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the authorized causes under Articles 283 and 284 thereof; and
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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.155

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b. Just causes and authorized causes, distinguished.
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A dismissal based on a just cause means that the employee has committed a wrongful act or omission; while a n
dismissal based on an authorized cause means that there exists a ground which the law itself allows to be invoked to
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justify the termination of an employee even if he has not committed any wrongful act or omission such as installation of
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labor‐saving devices, redundancy, retrenchment, closure or cessation of business operations156 or disease.157
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c. Procedural due process varies depending on the ground/s invoked.
Based on law and jurisprudence, it is clear that the procedural due process required to validly terminate an
employee depends on the ground invoked.
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If for just cause, due process means compliance with the requirements of (1) service of first written notice to
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explain, (2) hearing and (3) second written notice of termination.
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If for authorized cause, due process means compliance with the requirement of service of notice to the
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employee to be terminated and notice to the DOLE at least one (1) month prior to the effectivity of the termination. No
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hearing is required.

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(See further discussion on this topic under the heading of “Procedural Due Process” below).
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(a) Just Causes
(a) Serious misconduct or
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willful disobedience
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Relevant Provision: Article 282 [a], Labor Code

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1. SERIOUS MISCONDUCT.
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a. Requisites.
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For misconduct or improper behavior to be a just cause for dismissal, the following requisites must concur:
1. It must be serious;
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2. It must relate to the performance of the employee’s duties; and
3. It must show that the employee has become unfit to continue working for the employer.158
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All the 3 requisistes must concur.159

b. Some principles on serious misconduct.
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1. The charge for serious misconduct must not be a mere afterthought.160
2. Series of irregularities, when put together, may constitute serious misconduct.161
3. Acts destructive of the morale of co‐employees constitute serious misconduct.162
4. Committing libel against an immediate superior constitutes serious misconduct.163
f.
151 Yrasuegui v. Philippine Airlines, Inc., [G.R. No. 168081, October 17, 2008]; Duncan Association of Detailman-PTGWO v. Glaxo Welcome Philippines, Inc., [G.R. No. 162994, September 17, 2004].
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152 Section 2, Article III, 1987 Constitution.

153 Waterous Drug Corporation v. NLRC, G.R. No. 113271, Oct. 16, 1997, 280 SCRA 735.
154 Unicraft Industries International Corporation v. CA, [G.R. No. 134903, March 26, 2001]; EDI-Staffbuilders International, Inc. v. NLRC, [G.R. No. 14558, October 26, 2007]; PLDT v. Honrado, G.R. No. 189366, Dec. 8, 2010.
155 Pascua v. NLRC, G.R. No. 123518, March 13, 1998; Manila Electric Co. [MERALCO] v. NLRC, G.R. No. 153180, Sept. 2, 2005; St. Luke’s Medical Center, Inc. v. Notario, G.R. No. 152166, Oct. 20, 2010; Lima Land, Inc. v. Cuevas, G.R. No. 169523, June 16, 2010.
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158 Roquero v. Philippine Air Lines, Inc., G.R. No. 152329, April 22, 2003.
159 Coca-Cola Bottlers, Phils., Inc. v. Kapisanan ng Malayang Manggagawa sa Coca-Cola-FFW, G.R. No. 148205, Feb. 28, 2005.
160 Coca-Cola Export Corp. v. Gacayan, [G.R. No. 149433, December 15, 2010].
161 Piedad v. Lanao del Norte Electric Cooperative, Inc., G.R. No. 73735, Aug. 31, 1987, 153 SCRA 500; See also Quiambao v. Manila Electric Company, G.R. No. 171023, Dec. 18, 2009.
162 Citibank, N.A. v. NLRC, G.R. No. 159302, Feb. 6, 2008.
163 Torreda v. Toshiba Information Equipment [Phils.], Inc., [G.R. No. 165960, February 8, 2007].
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5. Possession or use of shabu or other drugs, a valid ground to terminate employment.164
6. Immorality, as a general rule, is not a just ground to terminate employment. The exception is when such
n
immoral conduct is prejudicial or detrimental to the interest of the employer .165
7. Immoral act committed beyond office hours is a valid ground to terminate employment.166
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8. Sexual intercourse inside company premises constitutes serious misconduct.167
9. The act of a 30‐year old lady teacher in falling in love with a 16‐year old student, not immoral.168
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10. Fighting is a ground for termination but only the instigator or aggressor and not the victim who was
constrained to defend himself should be dismissed.169
11. Filing of criminal case by an employee does not indicate his innocence.170
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12. Challenging superiors to a fight, a just cause for termination.171
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13. Assaulting another employee, a just cause for termination.172
14. Utterance of obscene, insulting or offensive words constitutes serious misconduct.173
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15. Disrespectful conduct is not serious misconduct if provoked by superior or employer.174
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16. Gambling within company premises, a serious misconduct.175
17. Rendering service to business rival, a just cause to terminate employment.176
18. Selling products of a competitor, a just cause for termination.177
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19. Organizing a credit union by employees in a bank, a serious misconduct.178
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20. Deceiving a customer for personal gain, a just cause for termination.179
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21. Contracting work in competition with employer constitutes serious misconduct.180
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22. Employer need not suffer any damages resulting from a serious misconduct committed by an employee
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against a customer.181
23. Intoxication which interferes with the employee’s work constitutes serious misconduct.182
24. The act of a teacher in pressuring a colleague to change the failing grade of a student is serious
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misconduct.183
25. Sexual harassment is a just ground to dismiss.184
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26. Sleeping while on duty is a ground for termination.185
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27. Dismissal is too harsh a penalty for eating while at work.186
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28. Pilferage or theft of company‐owned property is a just cause to terminate.187
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29. Theft of funds or property not owned by employer, not a ground to terminate.188
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30. Act of falsification, a valid ground to terminate employment.189
31. Punching‐in of time cards of other employees, a just cause for termination.190
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32. Circulating fake meal tickets, a just cause for termination.191
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willful disobedience
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Relevant Provision: Article 282 [a], Labor Code

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1. INSURBORDINATION OR WSILLFUL DISOBEDIENCEE OF THE LAWFUL ORDER OF THE EMPLOYER.
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a. Company rules and regulations, requisites.
Pr
Lawful orders of the employers are usually expressed by way of company rules and regulations (CRR). In order
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that insubordination or willful disobedience by an employee of the orders, regulations or instructions of the employer
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may constitute a just cause for terminating his employment, said orders, regulations, or instructions must be:
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164 Roquero v. Philippine Air Lines, Inc., [G.R. No. 152329, April 22, 2003]; Plantation Bay Resort and Spa v. Dubrico, [G.R. No. 182216, December 4, 2009].
165 Santos, Jr. v. NLRC, G.R. No. 115795, March 6, 1998, 287 SCRA 117.
166 Navarro III v. Damasco, [G.R. No. 101875, July 14, 1995].
167 Stanford Microsystems, Inc. v. NLRC, [G.R. No. L-74187, January 28, 1988].
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168 Chua-Qua v. Clave, [G.R. No. L-49549, August 30, 1990, 189 SCRA 117].
Pr
169 Garcia v. NLRC, G. R. No. 116568, Sept. 3, 1999; Supreme Steel Pipe Corp. v. Bardaje, [G.R. No. 170811, April 24, 2007].
170 Flores v. NLRC, [G.R. No. 109362, May 15, 1996, 256 SCRA 735].
171 Luzon Stevedoring Corporation v. CIR, G.R. No. L-18683, Dec. 31, 1965.
172 Haverton Shipping Ltd. v. NLRC, [G.R. No. 65442, April 15, 1985, 135 SCRA 685].
173 Echeverria v. Venutek Medika, Inc., G.R. No. 169231, Feb. 15, 2007; Solid Development Corporation Workers Association (SDCWA-UWP) v. Solid Development Corporation, [G.R. No. 165995, August 14, 2007].
174 Golden Thread Knitting Industries v. NLRC, G.R. No. 119157, March 11, 1999.
175 Dimalanta v. Secretary of Labor, [G.R. No. 83854, May 24, 1989].
f.
176 ABS-CBN Employees Union v. NLRC, G.R. No. 111211, July 24, 1997, 276 SCRA 123.
177 Elizalde International [Phils.], Inc. v. CA, G.R. No. L-40553, February 26, 1981, 103 SCRA 247.
178 Aboc v. Metropolitan Bank and Trust Company, [G.R. Nos. 170542-43, December 13, 2010].
179 PLDT v. NLRC, [G.R. No. 74562, July 31, 1987].
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180 Lopez v. NLRC, [G.R. No. 167385, December 13, 2005, 477 SCRA 596, 602].
181 Panuncillo v. CAP Philippines, Inc., [G.R. No. 161305, February 9, 2007].
182 Sanyo Travel Corporation v. NLRC, G.R. No. 121449, Oct. 2, 1997; Club Filipino, Inc. v. Sebastian, G.R. No. 85490, July 23, 1992, 211 SCRA 717.
183 Padilla v. NLRC, G.R. No. 114764, June 13, 1997, 273 SCRA 457.
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184 R.A. No. 7877 (Anti-Sexual Harassment Act); Villarama v. NLRC and Golden Donuts, Inc., G.R. No. 106341, Sept. 2, 1994, 236 SCRA 280.
185 First Dominion Resources Corp. v. Peñaranda and Vidal, [G.R. No. 166616, January 27, 2006].
186 Tanduay Distillery Labor Union v. NLRC, G.R. No. 73352, Dec. 06, 1995.
187 Nagkakaisang Lakas ng Manggagawa sa Keihin (NLMK-OLALIA-KMU) v. Keihin Philippines Corp., [G.R. No. 171115, August 9, 2010].
188 Villamor Golf Club v. Pehid, [G.R. No. 166152, October 4, 2005].
189 Ramoran v. Jardine CMG Life Insurance Co., Inc., [G.R. No. 131943, February 22, 2000].
190 San Miguel Corporation v. NLRC, [G.R. No. 82467, June 29, 1989].
191 Ibarrientos v. NLRC, [G.R. No. 75277, July 31, 1989].
14

1. lawful and reasonable;
2. sufficiently known to the employee; and
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3. in connection with the duties for which the employee has been engaged to discharge.192

a
b. Insubordination or willful disobedience; requisites.
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In order for the ground of “willful disobedience” to be considered a just cause to terminate employment, the
following requisites must concur:
1. The employee’s assailed conduct must have been willful or intentional, the willfulness being characterized
by a wrongful and perverse attitude; and
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2. The order violated must have been reasonable and lawful and made known to the employee and must
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pertain to the duties for which he has been engaged to discharge.193

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c. Some principles on insubordination.
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1. Filing of a case questioning validity of rules and policies does not prevent employer from enforcing them.194
2. Making false allegations in complaint does not constitute insubordination.195
3. Failure to answer memo to explain constitutes willful disobedience.196
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4. Another notice is required in case of termination on the ground of failure to answer memo to explain.197
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5. Willfulness of conduct may be deduced from the manner the reply is written.198
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6. Refusal to undergo random drug testing constitutes insubordination.
7. Unauthorized encashment of check is a just cause to terminate.199
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8. Prolonged practice, not an excuse for commission of wrongful acts.200
9. Refusal to render overtime to meet production deadline constitutes insubordination.201
10. Refusal to comply with a lawful transfer constitutes insubordination.202
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(b) Gross and habitual neglect
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Relevant Provision: Article 282 [b], Labor Code

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1. GROSS AND HABITUAL NEGLECT OF DUTIES.
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a. Requisites.
it
1. The negligence must be gross in character which means absence of that diligence that an ordinarily prudent
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203
man would use in his own affairs.
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2. Habituality may be disregarded if negligence is gross or the damage or loss is substantial. 204“Habitual
el
negligence” implies repeated failure to perform one’s duties for a period of time, depending upon the
of
circumstances.205

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b. Test to determine negligence.
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The test to determine the existence of negligence is as follows: Did the employee, in doing the alleged negligent
act, use that reasonable care and caution which an ordinarily prudent person would use in the same situation?206
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c. Some principles on gross and habitual neglect of duties.
1. Simple negligence is not sufficient to terminate employment.207
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2. Negligence is a question of fact.208
3. Absence of any form of negligence, dismissal is illegal.209
4. Actual damage, loss or injury, not an essential requisite.210
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192 Ace Promotion and Marketing Corp. v. Ursabia, G.R. No. 171703, Sept. 22, 2006; Genuino Ice Company, Inc. v. Magpantay, G.R. No. 147790, June 27, 2006.
193 Equitable PCI Bank v. Dompor, G.R. Nos. 163293 & 163297, Dec. 8, 2010; St. Luke’s Medical Center, Incorporated v. Fadrigo, G.R. No. 185933, Nov. 25, 2009, 605 SCRA 728, 738.
194 Alcantara, Jr. v. CA, [G.R. No. 143397, August 6, 2002].
f.
195 Petron Corp. v. NLRC, [G.R. No. 154532, October 27, 2006].
196 Ace Promotion and Marketing Corp. v. Ursabia, [G.R. No. 171703, September 22, 2006].
197 Id.
198 ePacific Global Contact Center, Inc. v. Cabansay, [G.R. No. 167345, November 23, 2007].
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199 Llosa-Tan v. Silahis International Hotel, [G.R. No. 77457, February 5, 1990].
200 Santos v. San Miguel Corporation, [G.R. No. 149416, March 14, 2003].
201 R.B. Michael Press v. Galit, [G.R. No. 153510, February 13, 2008].
202 San Miguel Corp. v. Pontillas, G.R. No. 155178, May 7, 2008; Westin Philippine Plaza Hotel v. NLRC, G.R. No. 121621, May 3, 1999.
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203 Chavez v. NLRC, G.R. No. 146530, Jan. 17, 2005; Union Motor Corporation v. NLRC, G.R. No. 159738, Dec. 9, 2004; Sec. 4343.01[2], Department of Labor Manual.
204 Fuentes v. NLRC, [G.R. No. 75955, October 28, 1988]; Associated Bank v. NLRC, [G.R. No. 86023, June 29, 1989].
205 Premiere Development Bank v. Mantal, G.R. No. 167716, March 23, 2006, 485 SCRA 234, 239.
206 Reyes v. Maxim’s Tea House, [G.R. No. 140853, February 27, 2003].
207 St. Luke’s Medical Center, Inc. v. Notario, G.R. No. 152166, Oct. 20, 2010; Talidano v. Falcon Maritime & Allied Services, Inc., G.R. No. 172031, July 14, 2008.
208 School of the Holy Spirit of Quezon City v. Taguiam, G.R. No. 165565, July 14, 2008; Reyes v. Maxim’s Tea House, G.R. No. 140853, Feb. 27, 2003.
209 St. Luke’s Medical Center, Inc. v. Notario, [supra].
210 Sec. 4343.01[2], Department of Labor Manual.
15

5. Higher degree of diligence in the banking industry.211
6. Gross negligence may result to loss of trust and confidence.212
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7. Absences, if authorized, cannot be cited as a ground to terminate employment.213
8. Tardiness or absenteeism, if not habitual, cannot be cited as a ground to terminate employment.214
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9. Tardiness or absenteeism, if habitual, may be cited as a ground to terminate employment.215
10. Tardiness or absenteeism, if habitual, may be tantamount to serious misconduct.216
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11. Absences or tardiness due to emergency, ailment or fortuitous event are justified.217
12. Mere allegation on absences/tardiness, not sufficient; burden of proof is on the employer.218
13. Unblemished record belies allegation of gross and habitual neglect.219
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14. Unsatisfactory or poor performance, inefficiency or incompetence, considered a just cause for dismissal
n
only if it amounts to gross and habitual neglect of duties.220

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(c) Fraud or willful breach of trust
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(loss of trust and confidence)

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Relevant Provision: Article 282 [c], Labor Code

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1. ARTICLE 282 [c] CONTEMPLATES TWO (2) SEPARATE GROUNDS.

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Article 282 [c] of the Labor Code prescribes two (2) separate and distinct grounds for termination of
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employment, to wit:
li
1. Fraud; or
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2. Willful breach by the employee of the trust reposed in him by his employer or duly authorized
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representative.
Commission of fraud by an employee against the employer will necessarily result in the latter’s loss of trust and
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confidence in the former. On the other hand, the ground of willful breach by the employee of the trust and confidence
Jo
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reposed in him by the employer may not necessarily involve fraud but some other acts that would similarly result in the
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loss of such trust and confidence.

2. FRAUD.
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a. Concept.
The circumstances evidencing fraud and misrepresentation are as varied as the people who perpetrate it, each
os
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assuming different shapes and forms and may be committed in as many different ways. Fraud and misrepresentation
are, therefore, never presumed; it must be proved by clear and convincing evidence and not mere preponderance of
it
evidence.221
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b. Some principles on fraud.
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1. Lack of damage or losses not necessary in fraud cases.222
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2. Restitution does not have absolutory effect.223
3. Failure to deposit collection constitutes fraud.224
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4. Lack of misappropriation or shortage is immaterial in case of unauthorized encashment of personal checks
by teller and cashier.225
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3. WILLFUL BREACH OF TRUST AND CONFIDENCE.
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a. Requisites.
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The following requisites should concur for the doctrine of loss of trust and confidence to apply:
se
1. The loss of confidence must not be simulated;
2. It should not be used as a subterfuge for causes which are illegal, improper or unjustified;
Jo
3. It may not be arbitrarily asserted in the face of overwhelming evidence to the contrary;
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4. It must be genuine, not a mere afterthought, to justify earlier action taken in bad faith; and
5. The employee involved holds a position of trust and confidence.226
f.
211 Dycoco, Jr. v. Equitable PCI Bank (now Banco de Oro), [G.R. No. 188271, August 16, 2010].
212 Id,
213 Oriental Mindoro Electric Cooperative, Inc. v. NLRC, G.R. No. 111905, July 31, 1995; Atlas Consolidated Mining and Development Corporation v. NLRC, G.R. No. 75751, Oct. 17, 1990, 190 SCRA 505.
214 Genuino Ice Company, Inc. v. Magpantay, [G.R. No. 147790, June 27, 2006].
o
215 Valiao v. Hon. CA, [GR. No. 146621, July 30, 2004, 435 SCRA 543]; Philippine Geothermal, Inc. v. NLRC, G.R. No. 106370, Sept. 8, 1994; Sajonas v. NLRC, G.R. No. 49286, March 15, 1990; Manila Electric Company v. NLRC, G.R. No. 114129, Oct. 24, 1996.
216 Quiambao v. Manila Electric Company, [G.R. No. 171023, December 18, 2009].
217 PLDT v. Teves, [G.R. No. 143511, November 15, 2010]; Navarro v. Coca-Cola Bottlers Phils., Inc., [G.R. No. 162583, June 8, 2007].
218 Erector Advertising Sign Group, Inc. v. NLRC, [G.R. No. 167218, July 2, 2010].
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219 Union Motor Corporation v. NLRC, [G.R. No. 159738, December 9, 2004].
220 Miranda v. Carreon, G.R. No. 143540, April 11, 2003, 401 SCRA 303, 309.
221 Solidbank Corporation v. Mindanao Ferroalloy Corporation, G.R. No. 153535, July 28, 2005, 464 SCRA 409, 426.
222 Villanueva v. NLRC, G. R. No. 129413, July 27, 1998; Diamond Motors Corporation v. CA, [G.R. No. 151981, December 1, 2003].
223 Gonzales v. NLRC and Pepsi-Cola Products, Phils., Inc., [G.R. No. 131653, March 26, 2001].
224 Aldeguer & Co., Inc./Loalde Boutique v. Tomboc, [G.R. No. 147633, July 28, 2008].
225 Central Pangasinan Electric Cooperative, Inc. v. Macaraeg, [G.R. No. 145800, January 22, 2003].
226 The Coca-Cola Export Corp. v. Gacayan, G.R. No. 149433, Dec. 15, 2010; Equitable PCI Bank v. Dompor, G.R. Nos. 163293 & 163297, Dec. 8, 2010 ; Rubia v. NLRC, G.R. No. 178621, July 26, 2010.
16

b. Position of trust and confidence, meaning.
“Position of trust and confidence.” is one where a person is “entrusted with confidence on delicate matters,”
n
or with the custody, handling, or care and protection of the employer’s property.227

a
c. Two (2) classes of positions of trust and confidence.
1. Managerial positions.
Ch
2. Non‐managerial positions whose holders thereof regularly handle significant amounts of money or property
in the normal and routine exercise of their functions.228 Some positions so classified are:
a. Supervisor.229
b. Salesman.230
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c. Teller.231
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d. Cashier.232
e. Engineer.233
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Ch
f. Security guard or security officer.234
g. Roomboy or chambermaid.235
h. Assistant Cook or Chief Cook.236
i. Chief Purser.237
ia
an

d. Rules on termination of managerial and supervisory employees different from those applicable to rank‐
n
Gu
and‐file employees.
As a general rule, the doctrine of “trust and confidence” is restricted to managerial employees.238 This means
na
Ch
that the rules on termination of employment applicable to managerial or fiduciary employees are different from those
involving ordinary employees not holding positions of trust and confidence. In the latter case, mere accusations by the
employer will not be sufficient.239 Thus, with respect to rank‐and‐file personnel, loss of trust and confidence as a ground
to
ia
for valid dismissal requires proof of involvement in the alleged events in question and that mere uncorroborated
assertions and accusations by the employer will not be sufficient. But as regards a managerial employee, the mere
n
existence of a basis for believing that such employee has breached the trust of his employer would suffice for his
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dismissal.240
li

na
e. Some principles on the doctrine of loss of trust and confidence.
1. Breach must be willful and without justifiable excuse.241
se
2. Ordinary breach of trust will not suffice.242
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3. Breach must be founded on clearly established facts.243
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4. Breach must be work‐related.244
an
it
5. Loss of confidence must not be a mere afterthought.245
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6. Employee’s position must be reposed with trust and confidence.246
el
7. In termination for loss of trust and confidence, the fact that the employer did not suffer losses is of no
n
moment.247
8. Employer has burden of proof.248
os
9. There must be “some basis” for the loss of trust and confidence which means that there is reasonable
ia
ground to believe if not to entertain the moral conviction that the concerned employee is responsible for
it
the misconduct and that the nature of his participation therein rendered him absolutely unworthy of trust
Gu
and confidence demanded by his position.249
.J
10. Dismissal due to feng shui mismatch, not valid ground to lose trust and confidence.250
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11. Command responsibility of managerial employees, a ground to dismiss.251
of
12. Confidential employee may be dismissed for loss of trust and confidence.252
13. Grant of promotions and bonuses negates loss of trust and confidence.253
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to
14. Long years of service, absence of derogatory record and small amount involved, when deemed
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inconsequential insofar as loss of trust and confidence is concerned.254
15. Dropping of criminal charges or acquittal in a criminal case arising from the same act does not affect
.J
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validity of dismissal based on loss of trust and confidence. 255
of
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227 Lepanto Consolidated Mining Co. v. CA, [G.R. No. L-15171, April 29, 1961, 1 SCRA 1251].
228 Bristol Myers Squibb [Phils.], Inc. v. Baban, [G.R. No. 167449, December 17, 2008]; See also Mabeza v. NLRC, G.R. No. 118506, April 18, 1997, 271 SCRA 670.
229 Coca-Cola Bottlers, Phils., Inc. v. Kapisanan ng Malayang Manggagawa sa Coca-Cola-FFW, G.R. No. 148205, Feb. 28, 2005; Tan vs. NLRC, G. R. No. 128290, Nov. 24, 1998, 299 SCRA 169, 183.
230 Coca-Cola Bottlers, Phils., Inc. vs. Kapisanan ng Malayang Manggagawa sa Coca-Cola-FFW, G. R. No. 148205, Feb. 28, 2005.
231 Central Pangasinan Electric Cooperative, Inc. vs. Macaraeg, [G. R. No. 145800, January 22, 2003].
Jo
232 Central Pangasinan Electric Cooperative, Inc. vs. Macaraeg [supra] and Metro Drug Corporation vs. NLRC, [G.R. No. 72248, July 22, 1986, 143 SCRA 132],
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233 Almoite vs. Pacific Architects, G. R. No. 73680, July 10, 1986.
234 Nasipit Lumber Co., Inc. vs. NLRC, G. R. No. L-54424, Aug. 31, 1989; Cañete vs. NLRC, G. R. No. 130425, Sept. 30, 1999.
235 Manila Midtown Commercial vs. NUWHRAIN [Ramada Chapter], G. R. No. L-57268, March 25, 1988.
236 Concorde Hotel vs. CA, G. R. No. 144089, Aug. 9, 2001.
237 Etcuban, Jr. vs. Sulpicio Lines, Inc., G. R. No. 148410, Jan. 17, 2005.
238 The Coca-Cola Export Corp. v. Gacayan, G.R. No. 149433, Dec. 15, 2010.
239 Lamsan Trading, Inc. v. Leogardo, G.R. No. 73245, Sept. 30, 1986; Metro Drug Corporation v. NLRC, G.R. No. 72248, July 22, 1986; Gonzales v. NLRC and Pepsi-Cola Products, Phils., Inc., G.R. No. 131653, March 26, 2001.
f.
240 Alcantara v. The Philippine Commercial and Industrial Bank, G.R. No. 151349, Oct. 20, 2010; PLDT v. Buna, G.R. No. 143688, Aug. 17, 2007.
241 Baron v. NLRC, G.R. No. 182299, Feb. 22, 2010; St. Lukes Medical Center v. Fadrigo, G.R. No. 185933, Nov. 25, 2009.
242 Salas v. Aboitiz One, Inc., G.R. No. 178236, June 27, 2008, 556 SCRA 374, 388.
243 Asia Pacific Chartering [Phils.], Inc. v. Farolan, G.R. No. 151370, Dec. 4, 2002.
o
244 Alcantara v. The Philippine Commercial and Industrial Bank, G.R. No. 151349, Oct. 20, 2010.
245 Salas v. Aboitiz One, Inc., [G.R. No. 178236, June 27, 2008].
246 Panday v. NLRC, G.R. No. 67664, May 20, 1992, 209 SCRA 122, 125-126.
247 Ang v. Philippine National Bank, [G.R. No. 178762, June 16, 2010].
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248 Felix v. NLRC, G.R. No. 148256, Nov. 17, 2004.

249 Central Pangasinan Electric Cooperative, Inc. v. Macaraeg, G.R. No. 145800, Jan. 22, 2003; See also Sagales v. Rustan’s Commercial Corp., G.R. No. 166554, Nov. 27, 2008.
250 Wensha Spa Center, Inc. v. Yung, [G.R. No. 185122, August 16, 2010].
251 Muaje-Tuazon v. Wenphil Corp., [G.R. No. 162447, December 27, 2006].
252 PLDT v. Buna, [G.R. No. 143688, August 17, 2007].
253 Easycall Communications Phils., Inc. v. King, [G.R. No. 145901, December 15, 2005].
254 Etcuban, Jr. v. Sulpicio Lines, Inc., [G.R. No. 148410, January 17, 2005].
255 Metro Transit Organization, Inc. v. CA, G.R. No. 142133, Nov. 19, 2002.
17

16. Full restitution does not absolve employee of offense which resulted in loss of trust and confidence.256

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a
(a) Just Causes
(d) Abandonment of employment;
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Elements that must concur
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==================================
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Relevant Provision: Article 282 [b], Labor Code

na
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1. ABANDONMENT OF WORK.

a. Concept.
Abandonment is a form of neglect of duty; hence, a just cause for termination of employment under Article 282
ia
[b] of the Labor Code.257
an
n
b. Requisites.
Gu
To constitute abandonment, two (2) elements must concur, namely:
na
1. The employee must have failed to report for work or must have been absent without valid or justifiable
Ch
reason; and
2. There must have been a clear intention on the part of the employee to sever the employer‐employee
relationship manifested by some overt act.258
to
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c. Some principles on abandonment.
n
1. Mere absence is not enough to constitute abandonment.259
Gu
2. Clear intention to sever employment relationship, necessary.260
li
3. An employee who stopped working because of her mistaken belief that she has been dismissed is not guilty
na
of abandonment.261
se
4. Abandonment is a factual issue.262
5. Employer has the burden of proof to prove abandonment.263
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6. There is no abandonment when it was the employer who prevented the workers from reporting for
Jo
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work.264
it
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7. Due process in abandonment cases consists only of the service of 2 notices to the employee, viz.:
a. First notice directing the employee to explain why he should not be declared as having abandoned his
el
job; and
n
b. Second notice to inform him of the employer’s decision to dismiss him on the ground of abandonment.
265

os
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8. No hearing is required to validly dismiss an employee for abandonment.266
9. Notices in abandonment cases must be sent to employee’s last known address.267
it
10. Notices of abandonment of work served after the six‐month period of floating status, not valid.268
Gu
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11. Immediate filing of a complaint for illegal dismissal praying for reinstatement negates abandonment. 269
el
12. Lapse of time between dismissal and filing of a case, not material indication of abandonment. Hence, lapse
of 2 years and 5 months270 or 20 months271 or 9 months272 or 8 months273 before filing the complaint for
of
illegal dismissal is not an indication of abandonment. Under the law, the employee has 4 years within
os
to
which to institute his action for illegal dismissal.274
13. The fact that an employee filed a complaint for illegal dismissal is not by itself sufficient indicator that he
Pr
had no intention of deserting his employment since the totality of his antecedent acts palpably display the
contrary.275
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14. Filing of a case to pre‐empt investigation of case tantamounts to abandonment.276
15. When what is prayed for in the complaint is separation pay and not reinstatement, the filing of complaint
of
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does not negate abandonment.277
Jo
Pr
256 Santos v. San Miguel Corp., [G. R. No. 149416, March 14, 2003, 447 Phil. 264].
257 Forever Security & General Services v. Flores, G.R. No. 147961, Sept. 7, 2007; Remington Industrial Sales Corporation v. Castaneda, G.R. Nos. 169295-96, Nov. 20, 2006.
258 CRC Agricultural Trading v. NLRC, G.R. No. 177664, Dec. 23, 2009; RBC Cable Master System v. Baluyot, G.R. No. 172670, Jan. 20, 2009, 576 SCRA 668.
259 New Ever Marketing, Inc. v. CA, G.R. No. 140555, July 14, 2005.
260 CRC Agricultural Trading v. NLRC, G.R. No. 177664, Dec. 23, 2009.
261 Uniwide Sales Warehouse Club v. NLRC, [G.R. No. 154503, February 29, 2008].
f.
262 Premiere Development Bank v. NLRC, G.R. No. 114695, July 23, 1998.
263 Northwest Tourism Corp. v. Former Special Third Division of the Hon. CA, G.R. No. 150591, June 27, 2005.
264 Pasig Cylinder Mfg., Corp. v. Rollo, [G.R. No. 173631, September 8, 2010].
265 Kingsize Manufacturing Corporation v. NLRC, G.R. Nos. 110452-54, Nov. 24, 1994; Cebu Royal Plant [San Miguel Corporation] v. Hon. Deputy Minister of Labor, G.R. No. 58639, Aug. 12, 1987, 153 SCRA 38 [1987].
o
266 Intertranz Container Lines, Inc. v. Bautista, [G.R. No. 187693, July 13, 2010].
268 Malig-on v. Equitable General Services, Inc., [G.R. No. 185269, June 29, 2010].
269 Pasig Cylinder Mfg., Corp. v. Rollo, G.R. No. 173631, Sept. 8, 2010; Unicorn Safety Glass, Inc. v. Basarte, G.R. No. 154689, Nov. 25, 2004; See also Cosmos Bottling Corp. v. Nagrama, Jr., G.R. No. 164403, March 4, 2008.
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270 Reno Foods, Inc. v. NLRC, G.R. No. 116462, Oct. 18, 1995, 249 SCRA 379, 387.
271 Angeles v. Fernandez, G.R. No. 160213, Jan. 30, 2007.
272 NS Transport Services, Inc. v. Zeta, G.R. No. 158499, April 4, 2007.
273 Padilla Machine Shop v. Javilgas, G.R. No. 175960, Feb. 19, 2008.
274 Pare v. NLRC, G.R. No. 128957, Nov. 16, 1999,
275 Leopard Integrated Services, Inc. v. Macalinao, [G.R. No. 159808, September 30, 2008, 567 SCRA 192]; Philippine Rural Reconstruction Movement [PRRM] v. Pulgar, [G.R. No. 169227, July 5, 2010].
276 Intertranz Container Lines, Inc. and Tumibay v. Ma. Teresa Bautista, [G.R. No. 187693, July 13, 2010].
277 Jo v. NLRC, G.R. No. 121605, Feb. 2, 2000; Bombase v. NLRC, G.R. No. 110889, June 30, 1995, 245 SCRA 496, 500.
18

16. It is abandonment when what is prayed for in the complaint is separation pay, and it was only in the
position paper that reinstatement was prayed for.278
n
17. Employment in another firm coinciding with the filing of complaint does not indicate abandonment.279
18. Offer of reinstatement by employer during proceedings before Labor Arbiter and refusal by employee
a
does not indicate abandonment but more of a symptom of strained relations between the parties.280
19. Subcontracting for another company indicates abandonment.281
Ch
20. An employee may be absolved from the charge of abandonment of work but adjudged guilty of AWOL.282
21. An employee who failed to report for work after the expiration of the duly approved leave of absence is
considered to have abandoned his job.283
an
22. An employee who failed to comply with the order for his reinstatement is deemed to have abandoned his
n
work.284
23. An employee who, after being transferred to a new assignment, did not report for work anymore is
na
deemed to have abandoned his job.285
Ch
24. An employee who deliberately absented from work without leave or permission from his employer for the
purpose of looking for a job elsewhere is deemed to have abandoned his work.286
25. Imprisonment or detention by military does not constitute abandonment.287
ia
26. Absence to evade arrest, not a valid justification.288
an
27. Requesting for a Certificate of Employment, not evidence of abandonment.289
n
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28. Employer’s insistence on commission of wrongful acts by the employees negates the charge of
abandonment.290
na
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29. Employer is liable if the charge for abandonment is not proved by substantial evidence.291

==================================
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(a) Just Causes

na
(e) Termination of employment
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pursuant to a Union Security

Clause
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==================================
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Relevant Provision: Article 248 [e], Labor Code
it
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1. UNION SECURITY CLAUSE.

el
a. Nature of stipulation.
n
The “union security clause” is a stipulation in a CBA292 which allows the parties thereto to enter into an
agreement requiring membership in the exclusive collective bargaining agent which successfully negotiated said CBA as a
os
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condition for continued employment with the exception of employees who are already members of another union at
the time of the signing of the CBA.
it
Gu
b. Effects of the application of the union security clause.
.J
The following are the effects:
el
1. Members of the bargaining agent. They are not allowed to resign or terminate their membership
of
therefrom. Any member of the bargaining agent who resigns or is expelled therefrom may be
recommended to the employer by the bargaining agent for termination of his employment.
os
to
2. Non‐members of the bargaining agent but members of the minority union/s. They are not bound by the
Pr
union security clause if they are members of the minority or other unions at the time of the signing of the
CBA. Hence, they cannot be compelled to resign from their union/s in order to join the bargaining agent.
.J
li
3. Non‐members of the bargaining agent nor of any minority union/s. If not a member of the bargaining agent
or any other unions in the bargaining unit at the time of the signing of the CBA by reason of the fact that he
of
is excepted from the coverage of the bargaining unit, the employee cannot be compelled to join the
se
bargaining agent.
4. New employees hired after the signing of the CBA containing the union security clause. They can be
Jo
compelled to join the bargaining agent. If they refuse, they can be recommended for termination.
Pr
c. Exception to application of the union security clause.
f.
278 Calipay v. NLRC, [G.R. No. 166411, August 3, 2010].

279 Hda. Dapdap I v. NLRC, G.R. No. 120556, Jan. 26, 1998; NS Transport Services, Inc. v. Zeta, G.R. No. 158499, April 4, 2007.
280 Hantex Trading Co., Inc. v. CA, [G.R. No. 148241, September 27, 2002].
o

282 Metro Transit Organization, Inc. v. NLRC, [G.R. No. 119724, May 31, 1999].
283 Ramo v. Elefano, G.R. No. L-55629, July 39, 1981, 106 SCRA 221.
284 East Asiatic v. CIR, G.R. No. L-29068, Aug. 31, 1971, 40 SCRA 521.
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285 Castillo v. CIR, G.R. No. L-26124 and L-32725, May 29, 1971, 39 SCRA 75.
286 Sandoval Shipyard v. Clave, G.R. No. L-49875, Nov. 21, 1979, 94 SCRA 472.
287 Magtoto v. NLRC, [G.R. No. 63370, November 18, 1985]; Pedroso v. Castro, [G.R. No. 70361, January 30, 1986].
288 Camua, Jr. v. NLRC, [G.R. No. 158731, January 25, 2007].
289 City Trucking, Inc. v. Balajadia, [G.R. No. 160769, August 9, 2006].
290 Romy’s Freight Service v. Castro, [G.R. No. 141637, June 8, 2006].
291 Agricultural and Industrial Supplies Corp. v. Siazar, [G.R. No. 177970, August 25, 2010].
292 Based on the second sentence of paragraph [e] of Article 248.
19

Religion is the only ground that may effectively be invoked against the application of the union security
clause.293
n

2. OBSERVANCE OF DUE PROCESS REQUIRED IN CASE OF DISMISSAL BASED ON THE UNION SECURITY CLAUSE.
a

Ch
a. Requisites for valid termination based on union security clause.
The following requisites should be complied with by the employer prior to terminating the employment of an
employee on the ground of violation of the union security clause:
(1) The union security clause is applicable;
an
(2) The union is requesting for the enforcement of the union security provision in the CBA; and
n
(3) There is sufficient evidence to support the union’s decision to expel the employee from the union.
The foregoing requisites constitute a just cause for terminating an employee based on the CBA’s union security
na
provision.294
Ch

b. Some principles on dismissal based on violation of the union security clause.
1. Dismissal effected by the employer pursuant to a labor union’s demand in accordance with a union security
ia
agreement does not constitute an unfair labor practice.295
an
2. Employer is obligated to act upon being demanded by the union to terminate the employment of its errant
n
members.296
Gu
3. Employer should afford due process to the expelled unionist.297
na
Ch
4. The employee sought to be terminated should be afforded an “independent and separate hearing” which
means that the employer is not duty‐bound to immediately implement the recommendation to terminate
made by the union. It has to conduct its own hearing independent and separate from any hearing
to
ia
conducted by the union.298
5. Employer has the liability for reinstatement, full backwages, damages and attorney’s fees in illegal dismissal
n
cases based on the union security clause.299
Gu
6. The employer has the right to be reimbursed for payment of any claims arising out of dismissals made upon
li
demand of the union under the union security clause.300
na

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(a) Just Causes
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(f) Totality of infractions doctrine
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==================================
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1. RELEVANCE OF EMPLOYEE’S RECORD OF PAST VIOLATIONS VIS‐À‐VIS NEW INFRACTIONS.
ia

it
a. Totality of conduct or infractions doctrine.
Gu
Under this doctrine, the employee’s historical records of offenses, malfeasance or misfeasance, as a general
.J
rule, are relevant in the consideration of the gravity of his present violations or transgressions. In the actual imposition
el
by the employer of penalties on erring employees, due consideration must be given to their length of service and the
of
number of violations they have committed during their employ.301
This doctrine dictates that the offenses committed by an employee should not be taken singly and separately
os
to
but in their totality.302
Pr

b. Some principles on this doctrine.
.J
li
1. Past violations may only be used as justification to dismiss an employee for subsequent similar or related
offense. The previous infractions, in other words, may be used if they have a bearing to the proximate
of
offense warranting dismissal.303
se
2. Past infractions for which the employee has already amply explained but without the employer taking any
action thereon can no longer be cited as grounds to dismiss.304
Jo
3. Past infractions for which employee has not yet been penalized can still be cited as basis for administrative
Pr
sanction.305
4. Employer has to prove subsequent offense by substantial evidence.306
f.
293 Victoriano v. Elizalde Rope Workers Union, [G.R. No. L-25246, September 12, 1974, 59 SCRA 54].
294 Picop Resources, Inc. v. Tañeca, [G.R. No. 160828, August 9, 2010]; Alabang Country Club, Inc. v. NLRC, [G.R. No. 170287, February 14, 2008].
o
295 Malayang Samahan ng Manggagawa sa M. Greenfield v. Ramos, [G.R. No. 113907, February 28, 2000].
296 National Union of Workers in Hotels, Restaurants and Allied Industries – Manila Hotel Pavilion Chapter v. NLRC, [G.R. No. 179402, September 30, 2008].
297 Cariño v. NLRC, [G.R. No. 91086, May 8, 1990, 185 SCRA 177]; Del Monte Philippines, Inc. v. Saldivar and Timbal, [G.R. No. 158620, October 11, 2006].
298 Alabang Country Club [supra].
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299 Del Monte Philippines, Inc. v. Saldivar, [G.R. No. 158620, October 11, 2006].
300 Id.
301 Agabon v. NLRC, G.R. No. 158693, Nov. 17, 2004; Cosmos Bottling Corp. v. NLRC, G.R. No. 111155, Oct. 23, 1997, 281 SCRA 146, 153-154.
302 Valiao v. Hon. CA, G.R. No. 146621, July 30, 2004.
303 La Carlota Planters Association, Inc. v. NLRC, [G.R. No. 126689, October 27, 1998]; See also PLDT Co., Inc. v. Balbastro, G.R. No. 157202, March 28, 2007; De Guzman v. NLRC, G.R. No. 130617, Aug. 11, 1999.
304 Felix v. NLRC, [G.R. No. 148256, November 17, 2004].
305 R.B. Michael Press v. Galit, [G.R. No. 153510, February 13, 2008].
306 (Coca-Cola Bottlers Phils., Inc. v. Daniel, G.R. No. 156893, June 21, 2005.
20

====================================================
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a
(a) Redundancy, Retrenchment and Closure
i. Procedural steps required Ch
ii. Requirements for valid retrenchment/redundancy
iii. Criteria in selecting employees for dismissal
an
iv. Standards to be followed
n

====================================================
na
Ch

1. AUTHORIZED CAUSES.
ia
an
n
a. Concept.
Gu
As distinguished from dismissal due to just causes, in termination due to authorized causes, the employee has
na
not committed any wrongful act. It is valid because the law itself authorizes the termination. Sans any provision of law
Ch
authorizing the termination, its validity may be properly questioned.

b. Grounds.
to
ia
The authorized causes are enumerated under Articles 283 as follows:
1. Installation of labor‐saving devices;
n
2. Redundancy;
Gu
3. Retrenchment; and
li
4. Closure or cessation of business operations of an establishment or an undertaking.
na
5. In addition, Article 284 of the Labor Code cites disease as an authorized ground.
se
[NOTE: Installation of labor‐saving device is not included In the Syllabus].
o
ia

c. Exclusivity of grounds.
Jo
an
it
The grounds enumerated as authorized causes under Article 283 are exclusive in nature. No other grounds
Gu
may be invoked by analogy or in lieu or in substitution thereof.

el
2. PROCEDURAL STEPS REQUIRED.
n

To effect valid redundancy, retrenchment or closure, the following procedural steps should be taken prior to
os
ia
termination:
1. The employer must first take cost‐cutting or cost‐reducing measures and exhaust all other lawful means
it
Gu
short of termination of the employees. In other words, there should be no other option available to the
.J
employer except to terminate redundant employees;
el
2. To subserved due process, a written notice of the termination should be served on both the affected
of
employees and the Department of Labor and Employment (DOLE) at least one (1) month prior to the
intended date of termination;
os
to

3. REQUIREMENTS FOR VALID RETRENCHMENT/REDUNDANCY.
Pr
(NOTE: CLOSURE IS NOT INCLUDED IN THE SYLLABUS BUT THE REQUISITES THEREFOR ARE INCLUDED BELOW).
.J
li

a. Requisites for redundancy.
of
The following requisites must be present to validly invoke redundancy:
se
1. There is good faith in abolishing the redundant positions;
2. There is no other option available to the employer except to terminate redundant employees;
Jo
3. Written notice is served on both the affected employees and the Department of Labor and Employment
Pr
at least one (1) month prior to the intended date of termination;
4. Separation pay is paid to the affected employees in such amount equivalent to at least his one (1) month
pay or to at least one (1) month pay for every year of service, whichever is higher, a fraction of at least six
f.
(6) months shall be considered as one (1) whole year. In case the CBA or company policy provides for a
higher separation pay, the same must be followed instead of the one provided in Article 283.
o
5. Fair and reasonable criteria in ascertaining what positions are to be declared redundant and accordingly
abolished.307
Pr

307 Lopez Sugar Corporation v. Franco, G.R. No. 148195, May 16, 2005; See also Caltex [Phils.], Inc. v. NLRC, G.R. No. 159641, Oct. 15, 2007; Asian Alcohol Corporation v. NLRC, G.R. No. 131108, March 25, 1999.
21

b. Requisites for retrenchment.
The following are the requisites for a valid retrenchment:
n
(1) That the retrenchment is reasonably necessary and duly proved and likely to prevent business losses
which, if already incurred, are not merely de minimis but substantial, serious, actual and real or, if only
a
expected, are reasonably imminent as perceived objectively and in good faith by the employer;
Ch
(2) That the employer serves a written notice both to the affected employees and to the Department of Labor
and Employment at least one (1) month prior to the intended date of retrenchment;
(3) That the employer pays the retrenched employees separation pay equivalent to one (1) month pay or at
least one‐half (½) month pay for every year of service, whichever is higher;
an
(4) That the employer exercises its prerogative to retrench employees in good faith for the advancement of its
n
interest and not to defeat or circumvent the employees’ right to security of tenure; and
(5) That the employer uses fair and reasonable criteria in ascertaining who would be dismissed and who
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would be retained among the employees, such as status (i.e., whether they are temporary, casual, regular
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or managerial employees), efficiency, seniority, physical fitness, age, and financial hardship for certain
workers.308

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b. Requisites for closure or cessation of business operations.
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The following are the requisites for a valid closure or cessation of business operations: n
1. The decision to close or cease operations should be made in good faith;
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2. The purpose should not be to circumvent the provisions of Title I (Termination of Employment) of Book Six
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(Post Employment) of the Labor Code;
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3. There is no other option available to the employer except to close or cease its business operations;
4. The notice requirement under Article 283 should be complied with by serving a copy thereof to the affected
employees and to the Department of Labor and Employment at least one (1) month prior to the effectivity
to
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of the termination. This requisite applies irrespective of whether or not the closure or cessation of
n
operations is due to serious business losses or financial reverses; and
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5. When the closure or cessation of business operations is not due to serious business losses or financial
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reverses, the affected employees should be paid a separation pay equivalent to one (1) month pay or at
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least one‐half (½) month pay for every year of service, whichever is higher. A fraction of at least six (6)
months shall be considered one (1) whole year.309
se
If the ground is serious business losses or financial reverses, there should be clear proof thereof since no
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separation pay to the employees is required to be paid.
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4. CRITERIA OR STANDARDS TO BE FOLLOWED IN SELECTING EMPLOYEES TO BE DISMISSED.
Gu
In selecting who to terminate based on any of the authorized causes, there should be reasonable and fair
el
criteria to be followed such as:
n
1. nature of work;
2. status of employment (whether casual, temporary or regular);
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3. experience;
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4. efficiency;
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5. seniority, among other considerations;
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6. dependability;
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7. adaptability;
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8. flexibility;
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9. trainability;
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10. job performance;
11. discipline; and
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12. attitude towards work.310

Failure to follow fair and reasonable criteria in selection would render the termination invalid.311
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5. REDUNDANCY, ADDITIONAL NOTES.
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a. When redundancy exists.
Redundancy exists where the services of an employee are in excess of what is reasonably demanded by the
actual requirements of the enterprise. A position is redundant where it is superfluous, and superfluity of a position or
Jo
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positions may be the outcome of a number of factors, such as over‐hiring of workers, decreased volume of business,
dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise. An
employer has no legal obligation to keep on the payroll employees more than the number needed for the operation of
the business.312
o f.
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308 Flight Attendants and Stewards Association of the Philippines [FASAP] v. Philippine Airlines, Inc., [G.R. No. 178083, July 22, 2008]; See also Shimizu Phils. Contractors, Inc. v. Callanta, G.R. No. 165923, Sept. 29, 2010; Lambert Pawnbrokers and Jewelry Corp. v. Binamira, G.R. No.
170464, July 12, 2010.
309 Catatista v. NLRC, G.R. No. 102422, Aug. 03, 1995; AFP Mutual Benefit Association, Inc. v. AFP-MBAI-EU, G.R. Nos. 39140 and 39145, May 17, 1980, 97 SCRA 715.
310 Philippine Tuberculosis Society, Inc. v. NLRC, [G.R. No. 115414, August 25, 1998].
311 Lambert Pawnbrokers and Jewelry Corp. v. Binamira, G.R. No. 170464, July 12, 2010.
312 Dusit Hotel Nikko v. NUWHRAIN – Dusit Hotel Nikko Chapter, G.R. No. 160391, Aug. 9, 2005.
22

Redundancy may also be validly resorted to as a cost‐cutting measure and to streamline operations so as to
make them more viable. Positions which overlapped each other, or which are in excess of the requirements of the
n
service, may be declared redundant.313

a
b. Some principles on redundancy.
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1. The wisdom, soundness or characterization of service as redundant by the employer is not subject to
review. The only exception is when there is a showing that the same was done in violation of law or
attended with arbitrary and malicious action.314
2. Burden of proof in redundancy rests on the employer.315
an
3. Evidence of losses, not required.316
n
4. Elimination of undesirables, abusers and worst performers through redundancy, not an indication of bad
faith.317
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5. The act of the employer in hiring replacements was not deemed an indication of bad faith since the positions
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have no similar job descriptions.318
6. Redundancy to save on labor costs, held valid.319
7. Redundancy resulting from use of high technology equipment, held valid.320
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8. Abolition of positions or departments, held valid.321
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9. Reorganization through redundancy held valid.322
n
10. Contracting out of abolished positions to independent contractors held valid.323
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11. Hiring of casuals or contractual employees after redundancy, held valid.324
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12. Where two or more persons are performing the same work which may be effectively accomplished by only
one, the employer may terminate the excess personnel and retain only one.325
13. Even if there is a seniority rule, such as the LIFO (Last In, First Out) rule, the nature of work and experience
to
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of the employees should still be taken into account by the employer.326
14. The LIFO or FILO (First In, Last Out) rule has no basis in law.327
n
15. LIFO rule is not controlling as employer has the prerogative to choose who to terminate.328
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6. RETRENCHMENT, ADDITIONAL NOTES.

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a. Retrenchment, meaning.
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Retrenchment has been defined as “the termination of employment initiated by the employer through no fault
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of the employees and without prejudice to the latter, resorted by management during periods of business recession,
industrial depression, or seasonal fluctuations; or during lulls occasioned by lack of work or orders, shortage of materials;
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or considerable reduction in the volume of the employer’s business, conversion of the plant for a new production
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program or the introduction of new methods or more efficient machinery, or of automation.”329
Retrenchment is the only statutory ground in Article 283 which requires proof of losses or possible losses as
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justification for termination of employment. The other grounds, particularly closure or cessation of business operations,
n
may be resorted to with or without losses.330

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b. Standards to determine validity of losses as justification for retrenchment.
ia
The general standards in terms of which the act of an employer in retrenching or reducing the number of its
it
employees must be appraised are as follows:
Gu
Firstly, the losses expected should be substantial and not merely de minimis in extent. If the loss purportedly
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sought to be forestalled by retrenchment is clearly shown to be insubstantial and inconsequential in character, the bona‐
el
fide nature of the retrenchment would appear to be seriously in question.
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Secondly, the substantial loss apprehended must be reasonably imminent, as such imminence can be
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perceived objectively and in good faith by the employer. There should, in other words, be a certain degree of urgency
for the retrenchment which is, after all, a drastic recourse with serious consequences for the livelihood of the employees
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retrenched or otherwise laid off.
Thirdly, retrenchment, because of its consequential nature, must be reasonably necessary and likely to
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effectively prevent the expected losses. The employer should have taken other measures prior or parallel to
retrenchment to forestall losses, i.e., cut other costs than labor costs.
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Lastly, but certainly not the least important, the alleged losses, if already realized, and the expected imminent
losses sought to be forestalled, must be proved by sufficient and convincing evidence. The reason for requiring this
quantum of proof is apparent; any less exacting standard of proof would render too easy the abuse of this ground for
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termination of services of employees.331
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313 Maya Farms Employees Organization v. NLRC, G.R. No. 106256, Dec. 28, 1994..
314 Smart Communications, Inc. v. Astorga, G.R. No. 148132, Jan. 28, 2008; Caltex [Phils.], Inc. v. NLRC, G.R. No. 159641, Oct. 15, 2007.
315 Coca-Cola Bottlers Philippines,Inc. v. Del Villar, [G.R. No. 163091, October 6, 2010].
f.
316 Sebuguero v. NLRC, G.R. No. 115394, Sept. 27, 1995; Escareal v. NLRC, G.R. No. 99359, Sept. 2, 1992, 213 SCRA 472.
317 Dole Philippines, Inc. v. NLRC, [G.R. No. 120009, September 13, 2001].
318 Santos v. CA, [G.R. No. 141947, July 5, 2001].
319 De Ocampo v. NLRC, [G.R. No. 101539, September 4, 1992, 213 SCRA 652].
o
320 Soriano, Jr. v. NLRC and PLDT, [G.R. No. 165594, April 23, 2007].
321 San Miguel Corporation v. NLRC, G.R. No. 99266, March 2, 1999; Pantranco North Express, Inc. v. NLRC, G.R. No. 106516, Sept. 21, 1999.
322 International Harvester Macleod, Inc. v. IAC, 149 SCRA 641 [1987]; See also Dole Philippines, Inc. v. NLRC, G.R. No. 120009, Sept. 13, 2001.
323 Serrano v. NLRC, [G.R. No. 117040, January 27, 2000].
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324 Dole Philippines, Inc. v. NLRC, [G.R. No. 120009, September 13, 2001].
325 Wiltshire File Co., Inc. v. NLRC, G.R. No. 82249, Feb. 7, 1991, 193 SCRA 665; See also Becton Dickinson Phils., Inc. v. NLRC, G.R. Nos. 159969 & 160116, Nov. 15, 2005, 475 SCRA 123.
326 Maya Farms Employees Organization v. NLRC, [G.R. No. 106256, December 28, 1994].
327 Asian Alcohol Corporation v. NLRC, G.R. No. 131108, March 25, 1999.
328 De la Salle University v. De la Salle University Employees Association, [G.R. No. 109002, April 12, 2000].
329 F. F. Marine Corporation v. The Hon. Second Division, NLRC, G.R. No. 152039, April 8, 2005; See also Anabe v. Asian Construction, G.R. No. 183233, Dec. 23, 2009.
330 Precision Electronics Corporation v. NLRC, G.R. No. 86657, Oct. 23, 1989.
331 Andrada v. NLRC, G.R. No. 173231, Dec. 28, 2007; Oriental Petroleum and Minerals Corp. v. Fuentes, G.R. No. 151818, Oct. 14, 2005; Clarion Printing House, Inc. v. NLRC, G.R. No. 148372, June 27, 2005.
23


c. Some principles on retrenchment.
n
1. If standards are present, wisdom to retrench cannot be questioned.332
2. The retrenchment must be done in good faith.333
a
3. Notoriety of the employee, a valid criterion.334
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4. The progressive manner of implementing the streamlining of operations and complements downsizing by a
construction company, held valid.335
5. The fact that there has been economic or other crisis besetting a particular sector or the country as a whole
is not sufficient justification for retrenchment.336
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6. Article 283 applies only to permanent retrenchment or lay‐off.337
n
7. Cost‐reduction or cost‐saving measures prior to retrenchment, required.338
8. The phrase “retrenchment to prevent losses” means that retrenchment must be undertaken by the
na
employer before the losses anticipated are actually sustained or realized. The employer need not keep all
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his employees until after his losses shall have materialized. Otherwise, the law could be vulnerable to attack
as undue taking of property for the benefit of another.339
9. Employer bears the burden of proof to show business losses or financial reverses.340
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10. Best evidence of losses ‐ audited financial statements.341
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11. Best evidence of losses in a government‐controlled corporation ‐ financial statements audited by COA.342
n
12. Period covered by financial statements, material.343
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14. Income tax returns, self‐serving documents.344
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15. Mere affidavit on alleged losses, not sufficient.345
16. Mere notice of intention to implement a retrenchment program, not sufficient.346
17. Rehabilitation receivership presupposes existence of losses.347 However, the fact that the employer is
to
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undergoing rehabilitation receivership does not by itself excuse it from submitting to the labor authorities
copies of its audited financial statements to prove the urgency, necessity and extent, of its retrenchment
n
program.348
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18. Audited financial statements should be presented before the Labor Arbiter or the NLRC but not belatedly
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before the Court of Appeals or Supreme Court.349
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19. Retrenchment effected long after business losses, not valid.350
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20. Profitable operations in the past does not affect validity of retrenchment.351
21. Compulsory retirement to prevent further losses, held valid.352
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22. Early Retirement Program (ERP) to prevent further losses and implemented prior to retrenchment, held
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valid.353
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23. Rotation of work may be tantamount to constructive dismissal or retrenchment.354
24. Retrenchment due to liquidity problem, not valid.355
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25. Sharp drop in income, not a ground to justify retrenchment. A mere decline in gross income cannot in any
n
manner be considered as serious business losses. It should be substantial, sustained and real.356
26. Litany of woes, in the absence of any solid evidence that they translated into specific and substantial losses
os
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that would necessitate retrenchment will not suffice to justify retrenchment.357
27. Rehiring of retrenched employees does not necessarily indicate illegality of retrenchment.358
it
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28. In an enterprise which has several branches nationwide, profitable operations in some of them will not
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affect the validity of the retrenchment if overall, the financial condition thereof reflects losses.359
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7. CLOSURE OR CESSATION OF BUSINESS OPERATIONS, ADDITIONAL NOTES.

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to
a. Concept.
Closure or cessation of business is the complete or partial cessation of the operations and/or shutdown of the
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establishment of the employer. It is carried out to either stave off the financial ruin or promote the business interest of
the employer.360
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332 NDC-Guthrie Plantations, Inc. v. NLRC, G. R. No. 110740, Aug. 9, 2001.

333 Sentinel Integrated Services, Inc. v. Remo, [G.R. No. 188223, July 5, 2010].
334 Shimizu Phils. Contractors, Inc. v. Callanta, [G.R. No. 165923, September 29, 2010].
335 Id.
336 Central Azucarera de la Carlota v. NLRC, [G.R. No. 100092, December 29, 1995, 251 SCRA 589].
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337 Sebuguero v. NLRC, [G.R. No. 115394, September 27, 1995].

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338 Lambert Pawnbrokers and Jewelry Corp. v. Binamira, G.R. No. 170464, July 12, 2010.
339 Asian Alcohol Corporation v. NLRC, G.R. No. 131108, March 25, 1999, 305 SCRA 416; TPI Philippines Cement Corp. v. Cajucom VII, G.R. No. 149138, Feb. 28, 2006.
340 Emco Plywood Corporation v. Abelgas, G.R. No. 148532, April 14, 2004.
341 (Danzas Intercontinental, Inc. v. Daguman, G.R. No. 154368, April 15, 2005; Composite Enterprises, Inc. v. Caparoso, G.R. No. 159919, Aug. 8, 2007.
342 NDC-Guthrie Plantations, Inc. v. NLRC, [G.R. No. 110740, August 9, 2001].
343 Flight Attendants and Stewards Association of the Philippines [FASAP] v. Philippine Airlines, Inc., [G.R. No. 178083, July 22, 2008].
344 Casimiro v. Stern Real Estate, Inc., Rembrandt Hotel, G.R. No. 162233, March 10, 2006; Favila v. NLRC, G.R. No. 126768, June 16, 1999, 367 Phil. 584, 595.
f.
345 Polymart Paper Industries, Inc. v. NLRC, G.R. No. 118973, Aug. 12, 1998.
346 Composite Enterprises, Inc. v. Caparoso, [G.R. No. 159919, August 8, 2007].
347 Clarion Printing House, Inc. v. NLRC, [G.R. No. 148372, June 27, 2005].
348 Flight Attendants and Stewards Association of the Philippines [FASAP] v. Philippine Airlines, Inc., [G.R. No. 178083, July 22, 2008].
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349 Id.
350 Taggat Industries, Inc. v. NLRC, [G.R. No. 120971, March 10, 1999].
351 Manatad v. Philippine Telegraph and Telephone Corp., [G.R. No. 172363, March 7, 2008].
352 Lopez Sugar Corporation v. Federation of Free Workers, G.R. Nos. 75700-01, Aug. 30, 1990.
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353 Korean Air Co., Ltd. v. Yuson, [G.R. No. 170369, June 16, 2010].
354 International Hardware, Inc. v. NLRC, G.R. No. 80770, Aug. 10, 1989; See also Unicorn Safety Glass, Inc. v. Basarte, G.R. No. 154689, Nov. 25, 2004.
355 Hernandez v. Philippine Blooming Mills Co., NLRC-NCR Case No. 3-1223-83, July 26, 1985.
356 Lambert Pawnbrokers and Jewelry Corp. v. Binamira, [G.R. No. 170464, July 12, 2010].
357 Central Azucarera de la Carlota v. NLRC, [G.R. No. 100092, December 29, 1995, 251 SCRA 589, 321 Phil. 989, 997].
358 Atlantic Gulf and Pacific Company of Manila, Inc. [AG & P], v. NLRC, [G.R. No. 127516, May 28, 1999].
359 Manatad v. Philippine Telegraph and Telephone Corp., [G.R. No. 172363, March 7, 2008].
360 Eastridge Golf Club, Inc. v. Eastridge Golf Club, Inc. Labor Union – Super, G.R. No. 166760, Aug. 22, 2008; Espina v. CA, G.R. No. 164582, March 28, 2007.
24

b. Some principles on closure.
1. Employer may close its business whether it is suffering from business losses or not; court cannot order
n
employer to continue its business.361
2. Principle of closure under Article 283 applies in cases of both total and partial closure or cessation of
a
business operations. Management may choose to close only a branch, a department, a plant, or a shop.362
Ch
3. Closure of department or section and hiring of workers supplied by independent contractor as
replacements, held valid.363
4. Relocation of business may amount to cessation of operations.364
5. The burden of proving that the closure or cessation of business operations is bona‐fide falls upon the
an
employer.365
n
6. Good faith, test of validity of closure or cessation of business operations.366
7. Closure may constitutes an unfair labor practice act if it is resorted to as a ruse or scheme to get rid of
na
employees on account of their union activities.367
Ch
8. Closure by reason of enactment of a law, held valid.368
9. Closure of business to merge or consolidate with another or to sell or dispose all of its assets, held valid.369
10. Audited financial statements necessary only in closure due to losses.370
ia
an
11. Evidence of losses in a closure case should not be presented for the first time on appeal with the Court of
Appeals or Supreme Court.371
n
12. For closure to be a valid basis, it must be invoked at the time of termination and not after.372
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13. Closure of a department or section due to losses amounts to retrenchment.373
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(b) Disease or illness

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i. Requisites
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=============================
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1. DISEASE AS A GROUND FOR TERMINATION OF EMPLOYMENT.
Gu

a. Requisites.
el
n
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:
os
1. The employee is suffering from a disease;
ia
2. His continued employment is either:
it
a. prohibited by law; or
Gu
b. prejudicial to his health; or
.J
c. prejudicial to the health of his co‐employees;
el
3. There is a certification by a competent public health authority that the disease is of such nature or at such
of
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 served both to the employee and the Department
os
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of Labor and Employment at least one (1) month prior to the effectivity of the termination;374 and
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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)
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months being considered as one (1) whole year.375
b. Some principle on disease.
1. Burden of proof rests on the employer.376
of
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2. 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
Jo
employer should reinstate him to his former position immediately upon the restoration of his normal
Pr
health.377
361 Peñafrancia Tours and Travel Transport, Inc. v. Sarmiento, G.R. No. 178397, Oct. 20, 2010.
f.
362 Edge Apparel, Inc. v. NLRC, G.R. No. 121314, Feb. 12, 1998, 286 SCRA 302; Phil. Engineering Corp. v. CIR, G.R. No. L-27880, Sept. 30, 1971, 41 SCRA 89.
363 Association of Integrated Security Force of Bislig [AISFB] - ALU v. Hon. CA, and PICOP, [G.R. No. 140150, August 22, 2005].
364 Cheniver Deco Print Technics Corporation v. NLRC, [G.R. No. 122876, February 17, 2000].
365 J.A.T. General Services v. NLRC, G.R. No. 148340, Jan. 26, 2004; Industrial Timber Corporation v. NLRC, G. R. Nos. 107302-107306 & 108559-10860, June 10, 1997, 339 Phil. 395, 404.
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366 Mac Adams Metal Engineering Workers Union-Independent v. Mac Adams Metal Engineering, G.R. No. 141625, 24 Oct. 2003, 414 SCRA 411.
367 St. John Colleges, Inc. v. St. John Academy Faculty and Employees Union, [G.R. No. 167892, October 27, 2006].
368 Cornista-Domingo v. NLRC, [G.R. No. 156761, October 17, 2006].
369 Espina v. Hon. CA, [G.R. No. 164582, March 28, 2007].
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370 Danzas Intercontinental, Inc. v. Daguman, [G.R. No. 154368, April 15, 2005].
371 Me-Shurn Corporation v. Me-Shurn Workers Union - FSM, [G.R. No. 156292, January 11, 2005].
372 Sapitan v. JB Line Bicol Express, Inc., [G.R. No. 163775, October 19, 2007].
373 San Miguel Corp. v. Aballa, [G.R. No. 149011, June 28, 2005].
374 Per Agabon v. NLRC, [G.R. No. 158693, November 17, 2004].
375 See also Section 8, Rule I, Book VI, Rules to Implement the Labor Code.
376 Phil. Employ Services and Resources, Inc. v. Paramio, infra; Crayons Processing, Inc. v. Pula, G.R. No. 167727, July 30, 2007; ATCI Overseas Corporation v. CA, [G.R. No. 143949, August 9, 2001, 414 Phil. 883, 893.
377 Section 8, Rule I, Book VI, Rules to Implement the Labor Code; Sevillana v. I.T. [International] Corp., G.R. No. 99047, April 16, 2001.
25

3. In case of death, Article 284 does not apply.378
4. In case the employee unreasonably refuses to submit to medical examination or treatment upon being
n
requested to do so, the employer may terminate his services on the ground of insubordination or willful
disobedience by the employee of the lawful order of his employer or representative in connection with his
a
work.379
Ch
4. Company physician is not a “competent public health authority.”
5. 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.380
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6. A “competent public health authority” refers to a government doctor whose medical specialization pertains
n
to the disease being suffered by the employee. For instance, an employee who is sick of tuberculosis should
consult a government‐employed pulmonologist who is competent to make an opinion thereon. If the
na
employee has cardiac symptoms, the competent physician in this case would be a cardiologist.
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7. Medical certificate, an indispensable requisite.381
8. Medical certificate is the best evidence of illness.382
9. The medical certificate should be procured by the employer.383
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10. Existence of certificate, burden of proof is on the employer.384
an
11. Employee dismissed without the medical certificate is entitled to moral and exemplary damages.385
n
12. Notice of termination to the employee and to the DOLE, necessary.386
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13. Hearing is not required, disease being an authorized cause.
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================================================
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(1) Procedure to be observed in termination cases

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(2) Guiding Principles in connection with the hearing

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requirements in dismissal cases
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(3) Agabon doctrine

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Relevant Provision: Articles 277 [b], Labor Code

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1. PROCEDURE TO BE OBSERVED IN TERMINATION CASES.

a. Procedural due process varies depending on the ground/s invoked.
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There is no uniform procedural due process that should be applied in all cases. The kind of due process will
depend on the ground/s invoked in support of the termination. Due process for just cause termination is different from
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authorized cause termination.
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1.1. PROCEDURE IN JUST CAUSE TERMINATION.
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a. Just cause termination.
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In just cause termination, the twin requirements of notice and hearing apply. More particularly, the following
el
procedure should be followed:
of
1. Service of first written notice;
2. Conduct of hearing; and
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3. Service of second written notice.

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(1) First written notice.
The first written notice to be served on the employee should:
.J
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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
of
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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;
Jo
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3. to consult a union official or lawyer;
4. to gather data and evidence; and
5. to decide on the defenses he will raise against the complaint.
o f.
378 Gomez v. Central Vegetable Oil, G.R. No. L-22702, July 28, 1969, 28 SCRA 845.
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379 Article 282[a], Labor Code.

380 Cebu Royal Plant [San Miguel Corporation] v. Hon. Deputy Minister of Labor, G.R. No. 58639, Aug. 12, 1987, 153 SCRA 38 [1987].
381 Manly Express, Inc. v. Payong, Jr. G.R. No. 167462, Oct. 25, 2005; Cruz v. NLRC, G.R. No. 116384, Feb. 7, 2000.
382 Union Motor Corporation v. NLRC, [G.R. No. 159738, December 9, 2004].
383 Tan v. NLRC, [G.R. No. 116807, April 14, 1997, 271 SCRA 216]; Duterte v. Kingswood Trading Co., Inc., [G.R. No. 160325, October 4, 2007].
384 ATCI Overseas Corporation v. CA, G.R. No. 143949, Aug. 9, 2001; Cebu Royal Plant [San Miguel Corporation] v. Hon. Deputy Minister of Labor, G.R. No. 58639, Aug. 12, 1987, 153 SCRA 38 [1987].
385 Cathay Pacific Airways, Ltd. v. NLRC, [G.R. No. 141702-03, August 2, 2001].
26

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
n
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
a
282 is being charged against the employees.

(2) Hearing required,
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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;
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2. present evidence in support of his defenses; and
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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
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assistance of a representative or counsel of his choice. Moreover, this conference or hearing could be used by the parties
as an opportunity to come to an amicable settlement.

(3) Second written notice.
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After determining that termination of employment is justified, the employers shall serve the employees a
written notice of termination indicating that:
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1. all circumstances involving the charge/s against the employee have been considered; and
2. grounds have been established to justify the severance of his employment.387
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b. Exception in case of abandonment.
Abandonment is a just cause to terminate employment. It is considered a form of gross neglect of duties under
Article 282 [b] of the Labor Code. However, the procedural due process is different from the process described above.
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For obvious reason, due process in abandonment cases does not involve the conduct of hearing. Compliance with the
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following two (2) notices suffices, viz.:
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1. First notice asking the employee to explain why he should not be declared as having abandoned his job; and
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2. Second notice to inform him of the employer’s decision to dismiss him on the ground of abandonment.

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1.2. PROCEDURE IN AUTHORIZED CAUSE TERMINATION.
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Due process is deemed complied with upon the separate and simultaneous service of a written notice of
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the intended termination to both:
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(1) the employee to be terminated; and
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it
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(2) the appropriate DOLE Regional Office,
at least one (1) month before the intended date of the termination specifying the ground/s therefor and the undertaking
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to pay the separation pay required under Article 283 of the Labor Code.
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2. PROCEDURE IN TERMINATION OF DEFINITE‐PERIOD EMPLOYMENTS.

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Due process is not required in termination of the following:
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1. Project employment which automatically terminates upon completion of the project;
it
2. Seasonal employment which automatically terminates upon the end of the season;
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3. Casual employment which automatically terminates upon the lapse of the agreed period.
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4. Fixed‐term employment which automatically terminates upon the expiration of the fixed period.
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3. PROCEDURE IN TERMINATION OF PROBATIONARY EMPLOYMENT.

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Probationary employment may be terminated prior to the lapse of the probationary period fur just or
to
authorized cause. In which case, the appropriate, applicable procedural due process should apply.
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However, if the ground invoked is the failure of the probationary employee to qualify as a regular employee
based on the reasonable standards made known to him at the time of his engagement, no due process is required. it is
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sufficient that a written notice of termination is served to the probationary employee within a reasonable time from the
effective date thereof setting forth the justification of such termination.388
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4. GUIDING PRINCIPLES IN CONNECTION WITH THE HEARING REQUIREMENT IN DISMISSAL CASES.

a. Nature.
It must be stressed that hearing is a requisite only in just cause termination. It is not required in case of
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authorized cause termination.
A just cause dismissal without the benefit of a hearing prior to the employee’s termination violates his right to
due process which requires that the person sought to be dismissed must be given a chance to answer and be heard on
the charges against him before he is dismissed.389
f.
b. Ample opportunity to be heard.
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Due process is satisfied when the employee is afforded fair and reasonable opportunity to explain his side of
the controversy at hand.390
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387 King of Kings Transport, Inc. v. Mamac, [G.R. No. 166208, June 29, 2007]; See also Lima Land, Inc. v. Cuevas, G.R. No. 169523, June 16, 2010; Inguillo v. First Philippine Scales, Inc., G.R. No. 165407, June 5, 2009, 588 SCRA 471, 491.
388 Section 2, Rule I, Book VI, Rules to Implement the Labor Code, as amended by Article III, Department Order No. 10, Series of 1997.
389 Bondoc v. NLRC, G.R. No. 103209, July 28, 1997, 276 SCRA 288; See also Agullano v. Christian Publishing and Pizarro, G.R. No. 164850, Sept. 25, 2008.
390 Gana v. NLRC, G.R. No. 164640, June 13, 2008; Filipino v. Macabuhay, G.R. No. 158960, Nov. 24, 2006, 508 SCRA 50, 58.
27

The essence of due process is simply an opportunity to be heard or, as applied to administrative proceedings,
an opportunity to explain one’s side or an opportunity to seek a reconsideration of the action or ruling complained of.391
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A formal or trial‐type hearing is not at all times and in all instances essential, as the due process requirements
are satisfied where the parties are afforded fair and reasonable opportunity to explain their side of the controversy at
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hand.392
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“Ample opportunity” means every kind of assistance that the employer must accord to the employee to enable
him to prepare adequately for his defense, including legal representation.393
Due process, therefore, is not violated where a person is not heard because he has chosen, for whatever
reason, not to be heard. It should be obvious that if he opts to be silent where he has a right to speak, he cannot later be
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heard to complain that he was unduly silenced.394
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c. Some principles on hearing requirement.
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1. If employee does not answer, hearing should still proceed.395
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2. Outright termination violates due process.396
3. Investigation still required even if incident was witnessed by many.397
4. Meeting, dialogue, consultation or interview is not the hearing required by law. It may not be a substitute
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for the actual holding of a hearing.398
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5. Prior consultation with union, not compliance with due process.399
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6. Cross‐examination or confrontation of witnesses, not necessary in company investigations.400
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7. Co‐conspirator’s confession, not sufficient to merit dismissal.401
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8. If a party was not initially given a chance to be heard at the company level, but later was given full
opportunity to submit position papers or present his case and arguments before the Labor Arbiter, this
defect is cured.402 But if the dismissal is not justified, this principle does not apply.403
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4.1. INSTANCES WHERE HEARING IS NOT REQUIRED.
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Hearing is not required in the following cases:
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1. Termination of project, seasonal, casual or fixed‐term employments.
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2. Termination of probationary employment on the ground of failure of the probationary employee to qualify
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as a regular employee in accordance with reasonable standards made known to him at the start of the
employment, no notice and hearing are required.404
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3. Termination due to abandonment of work.
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4. Termination due to authorized causes under Article 283 (installation of labor‐saving device, redundancy,
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retrenchment or closure of business or cessation of operations). In such cases, there are no allegations
which the employees should refute and defend themselves from.405
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5. Termination due to disease under Article 284.406
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6. Termination by the employee (resignation) under Article 285.
7. Termination after 6 months of bona‐fide suspension of operation in Article 286. For purposes of satisfying
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due process, what is required is simply that the notices provided under Article 283 be served to both the
affected employees and the Department of Labor and Employment at least one (1) month before the
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termination becomes effective.407
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8. Termination due to retirement under Article 287.
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9. Termination due to expiration of tenure made coterminous with lease.408
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10. Termination due to closure or stoppage of work by government authorities when non‐compliance with the
law or implementing rules and regulations poses grave and imminent danger to the health and safety of
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to
workers in the workplace.409
11. Termination due to expiration of contractual employment in a legitimate contracting or subcontracting
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arrangement.410
12. Termination of employee who has admitted his guilt for the offense charged.411
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5. SEVEN (7) STANDARD SITUATIONS IN TERMINATION DISPUTES.
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The rules on termination of employment in the Labor Code and pertinent jurisprudence are applicable to seven
(7) different situations, namely:
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391 Lima Land, Inc. v. Cuevas, G.R. No. 169523, June 16, 2010.
392 Valiao v. Hon. CA, G.R. No. 146621, July 30, 2004; See also Aboc v. Metropolitan Bank and Trust Company, G.R. Nos. 170542-43, Dec. 13, 2010; PLDT v. Honrado, G.R. No. 189366, Dec. 8, 2010; Equitable PCI Bank v. Dompor, G.R. Nos. 163293 & 163297, Dec. 8, 2010.
393 IBM Philippines, Inc. v. NLRC, G.R. No. 117221, April 13, 1999, 305 SCRA 592.
394 Pepsi-Cola Distributors of the Philippines, Inc. v. NLRC, G.R. No. 100686, Aug. 15, 1995; New Puerto Commercial v. Lopez, [G.R. No. 169999, July 26, 2010.
395 Hagonoy Rural Bank, Inc. v. NLRC, G.R. No. 122075, Jan. 28, 1998, 285 SCRA 297.
396 Robusta Agro Marine Products, Inc. v. Gorombalem, G.R. No. 80500, July 5, 1989.
f.
397 Wenphil Corporation v. NLRC, G.R. No. 80587, Feb. 8, 1989.

398 Maneja v. NLRC, G. R. No. 124013, June 5, 1998.
399 Century Textile Mills, Inc. v. NLRC, [G.R. No. 77859, May 25, 1988].
400 Alcantara v. The Philippine Commercial and Industrial Bank, [G.R. No. 151349, October 20, 2010]; PLDT v. Honrado, [G.R. No. 189366, December 8, 2010].
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401 Century Textile Mills, Inc. v. NLRC, G.R. No. 77859, May 25, 1988.
402 Pepsi-Cola Distributors of the Philippines, Inc. v. NLRC, G.R. No. 100686, Aug. 15, 1995.
403 Hellenic Philippine Shipping, Inc. v. Siete, G.R. No. 84082, March 13, 1991.
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404 Philippine Daily Inquirer, Inc. v. Magtibay, Jr., G.R. No. 164532, July 24, 2007.
405 Wiltshire File Co. v. NLRC, G.R. No. 82249, Feb. 7, 1991.
406 Agabon v. NLRC, G.R. No. 158693, Nov. 17, 2004.
407 Sebuguero v. NLRC, GTI Sportswear Corporation, G.R. No. 115394, Sept. 27, 1995.
408 Hilado v. Leogardo, [G.R. No. L-65863, June 11, 1986].
409 Under Article 128 [c] of the Labor Code.
410 Section 5, Rule VIII-A, Book III, Rules to Implement the Labor Code, as amended by Article I, Department Order No. 10, Series of 1997 [30 May 1997].
411 Philippine Pizza, Inc. v. Bungabong, G. R. No. 154315, May 9, 2005; Roche [Philippines] v. NLRC, G.R. No. 83335, Oct. 5, 1989, 178 SCRA 386, 394.
28

1. The dismissal was for a just cause under Article 282, for an authorized cause under Article 283, or for health
reasons under Article 284, and due process was observed – This termination is LEGAL.412
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2. The dismissal was without a just or authorized cause but due process was observed – This termination is
ILLEGAL.413
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3. The dismissal was without a just or authorized cause and due process was not observed – This termination is
ILLEGAL.414
LEGAL.415 Ch
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 ILLEGAL. 416
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6. The dismissal was not supported by any evidence of termination – This termination is NEITHER LEGAL NOR
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ILLEGAL as there is no dismissal to speak of.417
7. The dismissal was brought about by the implementation of a law – This termination is LEGAL. 418
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6. THE AGABON DOCTRINE.

a. Agabon doctrine applies when dismissal is for just or authorized cause but without due process.
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The Agabon doctrine is based on the case of Agabon v. NLRC, [G.R. No. 158693, November 17, 2004], where it
was held that a termination for a just or authorized cause but without affording the employee procedural due process
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should no longer be considered illegal or ineffectual419 but legal.
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Consequently, the employee will not be ordered reinstated but will be awarded an indemnity in the form of
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nominal damages the amount of which will depend on whether the termination is grounded on just cause or authorized
cause, thus:

1. If based on just cause – P30,000.00 (per Agabon).
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2. If based on authorized cause – P50,000.00 (per Jaka Food Processing Corporation v. Pacot, [G.R. 151378,
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March 28, 2005]).
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The indemnity is “stiffer” in case of authorized cause termination because, unlike in the case of just cause
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termination where the employee has committed a wrongful act, an employee dismissed based on authorized cause has
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not committed any blameworthy act and does not imply delinquency or culpability on his part. Instead, the dismissal
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process is initiated by the employer’s exercise of his management prerogative, i.e. when the employer opts to install
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labor saving devices, when he decides to cease business operations or when, as in this case, he undertakes to implement
a retrenchment program
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b. Some principles under the Agabon doctrine.
1. Measure of penalty or indemnity ‐ no longer full backwages but nominal damages.
2. Award of backwages must be deleted and replaced by award of indemnity.420
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3. Amount of nominal damages may be reduced.421 Thus far, a survey of Supreme Court decisions indicates
that there has yet been no decision increasing the indemnity beyond what has been prescribed in Agabon
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and Jaka.
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(1) Reinstatement aspect
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(a) Immediately executory

i. Actual reinstatement
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ii. Payroll reinstatement

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==============================
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Relevant Provisions: Articles 223, 263 [g], 277 [b] and 279, Labor Code
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1. VARIOUS FORMS OF REINSTATEMENT UNDER THE LABOR CODE.

a. Provisions of the Labor Code enunciating the remedy of reinstatement.
Jo
The Labor Code grants the remedy of reinstatement in various forms and situations. Its provisions recognizing
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reinstatement as a remedy are as follows:
1. Article 223 which provides for reinstatement of an employee whose dismissal is declared illegal by the Labor
Arbiter. This form of reinstatement is self‐executory and must be implemented even during the pendency of the appeal
f.
that may be instituted by the employer.
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412 Philippine Airlines, Inc. v. NLRC, G.R. No. 115785, Aug. 4, 2000.
413 ACD Investigation Security Agency, Inc. v. Daquera, G.R. No. 147473, March 30, 2004; Pioneer Texturizing Corporation v. NLRC, G.R. No. 118651, Oct. 16, 1997; Oania v. NLRC, G.R. Nos. 97162-64, June 1, 1995, 244 SCRA 668.
414 Lambert Pawnbrokers and Jewelry Corp. v. Binamira, G.R. No. 170464, July 12, 2010; JGB and Associates, Inc. v. NLRC, G.R. No. 109390, March 7, 1996.
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416 Standard Electric Manufacturing Corporation v. Standard Electric Employees Union-NAFLU-KMU, G.R. No. 166111, August 25, 2005; Magtoto v. NLRC, G.R. No. 63370, Nov. 18, 1985; Pepito v. Secretary of Labor, G.R. No. L-49418, Feb. 29, 1980, 96 SCRA 454; Pedroso v. Castro,
G.R. No. 70361, January 30, 1986.

417 Ledesma, Jr. v. NLRC, [G.R. No. 174585, October 19, 2007].
418 St. Mary’s Academy of Dipolog City v. Palacio, [G.R. No. 164913, September 8, 2010]; St. Luke’s Medical Center Employees Association-AFW and Santos v. NLRC, [G.R. No. 162053, March 7, 2007].
419 Per Serrano v. NLRC, [G.R. No. 117040, January 27, 2000].
420 Electro System Industries Corp. v. NLRC, G.R. No. 165282, Oct. 5, 2005.
421 Business Services of the Future Today, Inc. v. CA, [G.R. No. 157133, January 30, 2006]; Industrial Timber Corp. v. Ababon, [G.R. No. 164518, March 30, 2006].
29

2. Article 263 [g] which provides for automatic return to work of all striking or locked‐out employees, if a strike
or lockout has already taken place, upon the issuance by the Secretary of Labor and Employment of an assumption or
n
certification order. The employer is required to immediately resume operations and readmit all workers under the same
terms and conditions prevailing before the strike or lockout.
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3. Article 277 [b] which empowers the Secretary of Labor and Employment to suspend the effects of
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termination pending the resolution of the termination dispute in the event of a prima facie finding by the appropriate
official of the Department of Labor and Employment before whom such dispute is pending that the termination may
cause a serious labor dispute or is in implementation of a mass lay‐off.
4. Article 279 which grants reinstatement as a relief to an employee whose dismissal is declared as illegal in a
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final and executory judgment.
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5. Article 286 which involves bona‐fide suspension of operation for a period not exceeding six (6) months or the
rendition by an employee of military or civic duty. It is required under this provision that the employer should reinstate
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its employees upon resumption of its operation which should be done before the lapse of said six‐month period of bona‐
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fide suspension of operation or after the rendition by the employees of military or civic duty.

[NOTE: The reinstatement referred to in the Syllabus pertains only to the reinstatement under
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Article 223. Discussion, therefore, will focus on this relief].

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2. REINSTATEMENT ASPECT OF LABOR ARBITER’S DECISION, IMMEDIATELY EXECUTORY EVEN PENDING APPEAL.

na
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a. Concept of reinstatement pending appeal, immediately executory.
The concept of reinstatement under Article 223 is to restore the illegally dismissed employee to a state or
condition from which he has been removed or separated.422
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b. Some principles on reinstatement pending appeal under Article 223.
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1. Reinstatement pending appeal under Article 2223 is constitutional.423
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2. Reinstatement pending appeal, similar to return‐to‐work order.424
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3. Posting of a bond does not stay the execution of immediate reinstatement.425
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4. Reinstatement pending appeal, ministerial duty of Labor Arbiter.426
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5. Award of reinstatement pending appeal is self‐executory, no writ of execution required.427
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6. The employer has only 2 options:
a. Actual reinstatement, i.e., the employee should be reinstated to his position which he occupies prior to
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his illegal dismissal under the same terms and conditions prevailing prior to his dismissal or separation or,
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if no longer available, to a substantially‐equivalent position; or
b. Payroll reinstatement, i.e., reinstatement of the employee in the payroll of the company without
el
requiring him to report back to his work.428
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7. Employer has the obligation to notify employee of his choice of option.429 Under the 2005 Revised NLRC
Rules of Procedure [January 7, 2006], it is required that the employer should submit a report of compliance
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within ten (10) calendar days from receipt of the Labor Arbiter’s decision, disobedience to which clearly
denotes a refusal to reinstate.
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8. The employee need not file a motion for the issuance of the writ of execution since the Labor Arbiter shall
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thereafter motu proprio issue the writ.430
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9. NLRC cannot exercise option of employer by choosing payroll reinstatement pending appeal.431
10. Employer may be cited for contempt for his refusal to comply with the order of reinstatement.432
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11. Employer is liable to pay the salaries for the period that the employee was ordered reinstated pending
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appeal even if his dismissal is later finally found to be legal.433
13. The concept of reinstatement pending appeal under Article 223 contemplates all kinds of illegal dismissal
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cases.434
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13. However, the principle of reinstatement pending appeal as well as the Roquero doctrine (now Garcial
li
doctrine) apply only in case there is a finding of illegality of dismissal by the Labor Arbiter. It does not apply
in case the dismissal is found valid and legal but the Labor Arbiter ordered reinstatement “as a measure of
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equitable and compassionate relief” owing mainly to employees’ prior unblemished employment records,
show of remorse, harshness of the penalty and defective attendance monitoring system of the
employer.435
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14. The rule436 that the payroll‐reinstated employee should refund the salaries he received if his dismissal is
finally found legal on appeal no longer applies. Whether reinstated actually or in the payroll, the employee
f.
422 Composite Enterprises, Inc. v. Caparoso, G.R. No. 159919, Aug. 8, 2007; Pheschem Industrial Corporation v. Moldez, G.R. No. 161158, May 9, 2005, 458 SCRA 339, 346.
423 Aris (Phil.) Inc. v. NLRC, [G.R. No. 90501, August 5, 1991, 200 SCRA 246].
424 Philippine Airlines, Inc. v. NLRC, [G.R. No. 113827, July 5, 1996, 258 SCRA 243].
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425 Article 223, Labor Code; Section 4 [d], NLRC Manual on Execution of Judgment; Pioneer Texturizing Corporation v. NLRC, G.R. No. 118651, Oct. 16, 1997, 280 SCRA 806.
426 Roquero v. Philippine Air Lines, Inc., G.R. No. 152329, April 22, 2003.
427 Pioneer Texturizing Corporation v. NLRC, [G.R. No. 118651, October 16, 1997, 280 SCRA 806].
428 Article 223, Labor Code; Zamboanga City Water District v. Buat, G.R. No. 104389, May 27, 1994, 232 SCRA 587.
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429 Pioneer Texturizing [supra].

430 Garcia and Dumago v. Philippine Airlines, Inc., G.R. No. 164856, January 20, 2009 [En Banc].
431 Maranaw Hotel Resort Corporation [Century Park Sheraton Manila] v. NLRC, [G.R. No. 110027, November 16, 1994].
432 Christian Literature Crusade v. NLRC, G.R. No. 79106, April 10, 1989, 171 SCRA 712; See also Ocampo v. Hon. Carale, G.R. No. 110687, Dec. 15, 1993; Industrial and Transport Equipment, Inc. v. NLRC, G.R. No. 113592, Jan. 15, 1998.
433 Roquero v. Philippine Air Lines, Inc., [G.R. No. 152329, April 22, 2003]; Air Philippines Corp. v. Zamora, [G.R. No. 148247, August 7, 2006]; Torres, Jr. v. NLRC, [G.R. No. 172584, November 28, 2008].
434 C. Alcantara & Sons, Inc. v. CA, [G.R. No. 155109, September 29, 2010].
435 Lansangan v. Amkor Technology Philippines, Inc., [G.R. No. 177026, January 30, 2009].
436 Enunciated in Genuino v. NLRC, [G.R. Nos. 142732-33, December 4, 2007].
30

is not required to refund what he has received even if the decision of the Labor Arbiter is subsequently
reversed on appeal.437
n
15. Entitlement to wages and benefits during the period of payroll reinstatement until reversed by the higher
court includes salary increases and other benefits granted during the payroll reinstatement period. The
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fact that the decision of the Labor Arbiter was reversed on appeal has no controlling significance. The rule
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is that even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the
part of the employer to reinstate and pay the wages of the dismissed employee during the period of
appeal until final reversal by the higher court.438
16. The 2003 Roquero439 and 2007 Genuino440 doctrines have already been modified by the 2009 Garcia441
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doctrine. Thus, after the Labor Arbiter’s decision is reversed by a higher tribunal, the employee may be
n
barred from collecting the accrued wages (i.e., from the time he was ordered reinstated by the Labor
Arbiter until reversed on appeal), if it is shown that the delay in enforcing the reinstatement pending
na
appeal was without fault on the part of the employer.
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17. The test under the Garcia doctrine is 2‐fold:
(a) There must be actual delay or the fact that the order of reinstatement pending appeal was not
executed prior to its reversal; and
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(b) The delay must not be due to the employer’s unjustified act or omission. If the delay is due to the
employer’s unjustified refusal, the employer may still be required to pay the salaries notwithstanding
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the reversal of the Labor Arbiter’s decision.
18. While writ of execution is not required in case reinstatement is ordered by the Labor Arbiter, it is necessary
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in case reinstatement is ordered by the NLRC on appeal.442
19. If reinstatement is ordered not by the Labor Arbiter but by the NLRC on appeal and it was not executed
by writ and the finding of illegal dismissal is later reversed, employer is not liable to pay any backwages.443
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20. Employer may be held liable for backwages despite the fact that the Labor Arbiter failed to issue any writ
to implement the reinstatement order issued by the NLRC on appeal.
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C. Alcantara & Sons, Inc. v. CA, [G.R. No. 155109, September 29, 2010].
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The Labor Arbiter ordered the reinstatement of the union members who were dismissed by reason of their
li
partication in the illegal strike. A motion for execution of their reinstatement was immediately filed but the
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Labor Arbiter failed to issue any writ to enforce the same. Later, the NLRC reversed the Labor Arbiter’s
se
finding of illegality of their dismissal but on certiorari before the Court of Appeals, the Labor Arbiter’s
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order of reinstatement was reinstated. Ruling in the affirmative on the issue of whether the striking
employees are entitled to their backwages reckoned from the time they were ordered reinstated by the
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Labor Arbiter until the reversal thereof by the NLRC, the Supreme Court reasoned that although the Labor
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Arbiter failed to act on the terminated union members’ motion for reinstatement pending appeal, the
company had the duty under Article 223 to immediately reinstate the affected employees even if it
el
intended to appeal from the decision ordaining such reinstatement. The company’s failure to do so made
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it liable for accrued backwages until the eventual reversal of the order of reinstatement by the NLRC on
November 8, 1999, a period of four (4) months and nine (9) days.444
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21. Employment elsewhere does not affect reinstatement order and obligation to pay backwages.445
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22. The failure of the illegally dismissed employee who was ordered reinstated to report back to work does
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not give the employer the right to remove him, especially when there is a reasonable explanation for his
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failure.446
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23. In case of two successive dismissals, the order of reinstatement pending appeal under Article 223 issued in
the first case shall apply only to the first case and should not affect the second dismissal.447
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24. If position is already filled up, the employee ordered reinstated under Article 223 should be admitted back
to work in a substantially equivalent position.448
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25. Reinstatement to a position lower in rank, not proper.449
26. No reinstatement pending appeal should be made when antipathy and antagonism exist.450
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27. If reinstatement is not stated in the Labor Arbiter’s decision (neither in the dispositive portion nor in the
text thereof), reinstatement is not warranted.451
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f.
437 Garcia and Dumago v. Philippine Airlines, Inc., [G.R. No. 164856, January 20, 2009 (En Banc)].
438 Aboc v. Metropolitan Bank and Trust Company, [G.R. Nos. 170542-43, December 13, 2010], citing College of the Immaculate Conception v. NLRC & Atty. Marius F. Carlos, Ph.D., G.R. No. 167563, March 22, 2010.
439 Roquero v. Philippine Air Lines, Inc., [supra].
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440 Genuino v. NLRC, [supra].

441 Garcia and Dumago v. Philippine Airlines, Inc., [supra].
442 Mt. Carmel College v. Resuena, [G.R. No. 173076, October 10, 2007]; Panuncillo v. CAP Philippines, Inc., [G.R. No. 161305, February 9, 2007].
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444 Citing Garcia v. Philippine Airlines, Inc., G.R. No. 164856, Jan. 20, 2009, 576 SCRA 479, 489; See also Triad Security & Allied Services, Inc. v. Ortega, [G.R. No. 160871, February 6, 2006].
445 Triad Security & Allied Services, Inc. v. Ortega, [supra].
446 Buenviaje v. CA, [G.R. No. 147806, November 12, 2002].
447 Sevilla v. NLRC, [G.R. No. 108878, September 20, 1994].
448 Medina v. Consolidated Broadcasting System, G.R. Nos. 99054-56, May 28, 1993, 222 SCRA 707; Pedroso v. Castro, G.R. No. 70361, Jan. 30, 1986, 141 SCRA 252.
450 Equitable Banking Corporation v. NLRC, G.R. No. 102467, June 13, 1997, 273 SCRA 352, 370; Philippine Telegraph & Telephone Corporation v. NLRC, G.R. No. 109281, Dec. 7, 1995, 251 SCRA 21.
451 Filflex Industrial and Manufacturing Corporation v. NLRC, G.R. No. 115395, Feb. 12, 1998, 349 Phil. 913, 924-925; 286 SCRA 245.
31

==============================
n
a
(2) Separation pay in lieu of
reinstatement
(a) Strained Relation rule
==============================
Ch

an
Relevant Provision: Not provided for in the Labor Code
n

1. SEPARATION PAY IN LIEU OF REINSTATEMENT.

na
a. Concept.
Ch
Article 279 is unambiguous insofar as it mandates the reinstatement of the employee in case he is unjustly
dismissed. It does not, however, provide for the payment of separation pay in lieu of reinstatement. That Article 279 is
the basis for such an award is well‐settled.452 It is awarded in instances where the relations between the employer and
ia
the employee have been so severely strained that it is no longer advisable to reinstate the latter. In such events, the
an
employer will instead be ordered to pay separation pay.453 n
Gu
It is, therefore, now well‐settled that if reinstatement is no longer possible, the employer has the alternative of
paying the employee his separation pay in lieu of reinstatement.454
na
Ch

b. Components of separation pay in lieu of reinstatement.
The amount of separation pay that should be paid in lieu of reinstatement is not provided under the Labor
Code. Jurisprudence, however, dictates that the following should be included in its computation:
to
ia
1. The amount equivalent to at least one (1) month salary or to one (1) month salary for every year of service,
whichever is higher, a fraction of at least six (6) months being considered as one (1) whole year.455
n
Gu
2. Allowances that the employee has been receiving on a regular basis.456 The well‐settled rule is that
li
allowances that are regularly received by the employee should be included in the computation of the
separation pay. If not regularly received, the same may not be so included.457
na

se
c. Instances where separation pay in lieu of reinstatement is awarded.
Based on jurisprudence, separation pay in lieu of reinstatement should be paid in the following circumstances:
o
ia
1. In case strained relations exists between the employer and the employee. 458 Absence of strained relations,
Jo
an
payment of separation pay in lieu of reinstatement is not justified.459
it
Gu
2. Where the company has been declared insolvent.460
3. Where the employee’s former position no longer exists at the time of reinstatement for reasons not
el
attributable to the fault of the employer.461
n
4. Where the employee decides not to be reinstated as when he does not pray for reinstatement in his
complaint or position paper.462
os
ia
5. Where the employee expressly prayed for the award of separation pay instead of reinstatement thereby
effectively foreclosing reinstatement as a relief.463
it
6. In case the establishment where the employee is to be reinstated has closed or ceased operations.464
Gu
.J
7. When, by reason of compassionate justice or long years of service or lack of bad records in the past, an
el
employee is granted by the court separation pay in accordance with his entitlement under the law, or under
of
the CBA or company rules or practice, whichever is higher, although there was a finding of legality of
dismissal.465
os
to
8. When there has been long passage of time or due to certain realities of the situation.466
9. When reinstatement proves impracticable, and hardly in the best interest of the parties.467
Pr
10. When reinstatement is rendered moot and academic due to supervening events such as fire.468
.J
11. When there is take over of the business of the employer by another company and there is no agreement
li
regarding assumption of liability by the acquiring company.469
12. When the illegally dismissed employees are over‐aged and their reinstatement would unjustly prejudice
of
se
their employer.470
13. When the general sales agency contract between the employer and its client has been terminated and
reinstatement is no longer feasible.471
Jo
Pr
452 Capili v. NLRC, [G.R. No. 117378, March 26, 1997, 270 SCRA 488].
453 See also Kingsize Manufacturing Corporation v. NLRC, G.R. Nos. 110452-54, Nov. 24, 1994.
454 St. Luke’s Medical Center, Inc. v. Notario, G.R. No. 152166, Oct. 20, 2010.
455 Section 4[b], Rule I, Book VI, Rules to Implement the Labor Code; St. Luke’s Medical Center, Inc. v. Notario, G.R. No. 152166, Oct. 20, 2010; Agricultural and Industrial Supplies Corp. v. Siazar, G.R. No. 177970, Aug. 25, 2010.
f.
456 Planters Products, Inc. v. NLRC, G.R. No. 78524, Jan. 20, 1989.
457 See Millares v. NLRC, G.R. No. 122827, March 29, 1999, 305 SCRA 500.
458 Century Canning Corp. v. Ramil, G.R. No. 171630, Aug. 8, 2010; Coca-Cola Bottlers Phils., Inc. v. Daniel, G.R. No. 156893, June 21, 2005.
459 Golden Donuts, Inc. v. NLRC, [G.R. Nos. 113666-68, January 19, 2000].
o
460 Electruck Asia, Inc. v. Meris, G.R. No. 147031, July 27, 2004.
461 Section 4[b], Rule I, Book VI, Rules to Implement the Labor Code.
462 Labor v. NLRC, G. R. No. 110388, Sept. 14, 1995; Gaco v. The Hon. NLRC, G.R. No. 104690, Feb. 23, 1994.
463 F. F. Marine Corporation v. The Hon. Second Division NLRC, G.R. No. 152039, April 8, 2005.
Pr
464 Section 4[b], Rule I, Book VI, Rules to Implement the Labor Code; Daughson Construction Co. Ltd. v. NLRC, G.R. No. 72945, May 29, 1986; Pizza Inn v. NLRC, G.R. No. 74531, June 28, 1988.
465 Firestone Tire and Rubber Co. of the Philippines v. Lariosa, G.R. No. L-70479, Feb. 27, 1987..
466 Esmalin v. NLRC, G.R. No. 67880, Sept. 15, 1989; See also Sari-Sari Group of Companies, Inc. v. Piglas Kamao [Sari-Sari Chapter], G.R. No. 164624, Aug. 11, 2008.
467 St. Luke’s Medical Center, Inc. v. Notario, G.R. No. 152166, Oct. 20, 2010.
468 Bagong Bayan Corporation v. Ople, G.R. No. 73334, Dec. 8, 1986.
469 Callanta v. Carnation Philippines, G.R. No. 70615, Oct. 28, 1986.
470 Bustamante v. NLRC, G.R. No. 111651, Nov. 28, 1996; Sagales v. Rustan’s Commercial Corp., G.R. No. 166554, Nov. 27, 2008.
471 Asia Pacific Chartering [Phils.], Inc. v. Farolan, G.R. No. 151370, Dec. 4, 2002.
32


d. Some principles on separation pay in lieu of reinstatement.
n
1. Separation pay as a substitute remedy is only proper for reinstatement but not for backwages nor for both
reinstatement and backwages.472
a
2. The law intended reinstatement to be the general rule. It is only when reinstatement is no longer feasible
that payment of separation pay is awarded to an illegally dismissed employee.473
Ch
3. No constructive/illegal dismissal, no separation pay required.474
4. Separation pay in lieu of reinstatement is computed from the commencement of employment up to the
time of termination, including the imputed service for which the employee is entitled to backwages, with
an
the salary rate prevailing at the end of the period of putative service being the basis for computation. 475
n
5. Commissions may or may not be included. As a general rule, commissions should not be included in the
computation of the base figure of the separation pay because the same is dependent on the earnings of the
na
employee through actual marketing transactions taken by him.476 But if commissions are earned from
Ch
actual transactions attributable to the employees like in the case of salesmen, the same should be included
in the monthly salary for purposes of computing the separation pay. Consequently, what should be taken
into account as separation pay is the average commission earned during their last year of employment.477
ia
6. Separation pay in lieu of reinstatement and backwages, not inconsistent with each other.478
an
7. The separation pay in lieu of reinstatement of employees who were constructively dismissed is equivalent to
n
one (1) month salary for every year of service.479
Gu
8. Death of employee during the pendency of the case forestalls award of separation pay in lieu of
na
Ch
reinstatement.480

2. STRAINED RELATIONS RULE.

to
ia
a. Strained relations or antagonism may effectively bar reinstatement.
In a plethora of cases, the Supreme Court has been consistent in its holding that the existence of strained
n
relations between the employer and the illegally dismissed employee may effectively bar reinstatement of the latter.481
Gu
b. Some principles on strained relations.
li
1. Strained relations must be raised before the Labor Arbiter. It must be demonstrated as a fact.482
na
2. Litigation, by itself, does not give rise to strained relations that may justify non‐reinstatement. The filing of
se
the complaint for illegal dismissal does not by itself justify the invocation of the doctrine of strained
relations. 483
o
ia
3. No strained relations should arise from a valid and legal act of asserting one’s right; otherwise, an employee
Jo
an
it
who asserts his right could be easily separated from the service by merely paying his separation pay on the
Gu
pretext that his relationship with his employer had already become strained.484
4. Indeed, if the strained relations engendered as a result of litigation are sufficient to rule out reinstatement,
el
then reinstatement would become the exception rather than the rule in cases of illegal dismissal.485
n
5. Nature of position, material in determining validity of “strained relations.” If the nature of the position
requires that trust and confidence be reposed by the employer upon the employee occupying it as would
os
ia
make reinstatement adversely affect the efficiency, productivity and performance of the latter, strained
relations may be invoked in order to justify non‐reinstatement. Where the employee, however, has no say
it
Gu
in the operation of his employer’s business, invocation of this doctrine is not proper.486
.J
6. Non‐settlement of dispute after long period of time, not indicative of strained relations.487
el
7. Refusal by the employee to be reinstated indicates strained relations.
8. The refusal of an employee to be reinstated is indicative of strained relations.488
of
9. Criminal prosecution confirms the existence of “strained relations” which would render the employee’s
os
to
reinstatement highly undesirable.489
10. A managerial employee should not be reinstated if strained relations exist. 490
Pr
11. In case of new owhership of the establishment, reinstatement is proper if no strained relations exist with
new owner.491
.J
li

of
se

Jo
Pr
472 Colgate-Palmolive Philippines, Inc. v. Ople, G.R. No. L-73681, June 30, 1988.
473 Pheschem Industrial Corporation v. Moldez, G.R. No. 161158, May 9, 2005; Johnson & Johnson [Phils.], Inc. v. Johnson Office & Sales Union – FFW, [G.R. No. 172799, July 6, 2007].
474 Arc-Men Food Industries Corporation v. NLRC, [G.R. No. 127086, August 22, 2002]; JPL Marketing Promotions v. CA, [G.R. No. 151966, July 8, 2005].
475 Masagana Concrete Products v. NLRC, G.R. No. 106916, Sept. 3, 1999; Jardine Davies, Inc. v. NLRC, G.R. No. 76272, July 28, 1999.
f.
476 Soriano v. NLRC, G.R. No. L-75510, Oct. 27, 1987.

477 Songco v. NLRC, G.R. Nos. 50999-51000, March 23, 1990.
478 St. Luke’s Medical Center, Inc. v. Notario, G.R. No. 152166, Oct. 20, 2010; Agricultural and Industrial Supplies Corp. v. Siazar, G.R. No. 177970, Aug. 25, 2010.
479 Pulp and Paper, Inc. v. NLRC, G.R. No. 116593, Sept. 24, 1997, 279 SCRA 408, 420.
o
480 Maxi Security and Detective Agency v. NLRC, [G.R. No. 162850, December 16, 2005].
481 Wensha Spa Center, Inc. v. Yung, G.R. No. 185122, Aug. 16, 2010; Century Canning Corp. v. Ramil, G.R. No. 171630, Aug. 8, 2010; CRC Agricultural Trading v. NLRC, G.R. No. 177664, Dec. 23, 2009.
482 Paguio Transport Corporation v. NLRC, G. R. No. 119500, Aug. 28, 1998.
483 Id.; Capili v. NLRC, G.R. No. 117378, March 26, 1997, 270 SCRA 488, 495.
Pr
484 Globe-Mackay Cable and Radio Corporation v. NLRC, G.R. No. 82511, March 3, 1992, 206 SCRA 701, 709.
485 Procter and Gamble Philippines v. Bondesto, G.R. No. 139847, March 5, 2004.
486 Acesite Corporation v. NLRC, [G. R. No. 152308, January 26, 2005].
487 Palmeria v. NLRC, [G.R. Nos. 113290-91, August 3, 1995].
488 Sentinel Security Agency, Inc. v. NLRC, G.R. No. 122468, Sept. 3, 1998; Philippine American Life Insurance Company v. NLRC, G.R. No. 122716, Sept. 3, 1998.
489 RDS Trucking, v. NLRC, G.R. No. 123941, Aug. 27, 1998; Cabatulan v. Buat, [G.R. No. 147142, February 14, 2005].
490 Golden Donuts, Inc. et al. v. NLRC, [G.R. Nos. 105758-59, February 21, 1994]; See also Wensha Spa Center, Inc. v. Yung, G.R. No. 185122, Aug. 16, 2010.
491 PLDT v. Tolentino, [G.R. No. 143171, September 21, 2004],.
33

===============================
n
a
(3) Backwages
(a) Components of the amount
of backwages
===============================
Ch

an
n

1. BACKWAGES.

na
a. Concept.
Ch
Under Article 279, an employee who is unjustly dismissed is entitled not only to reinstatement, without loss of
seniority rights and other privileges, but also to the payment of his full backwages, inclusive of allowances and other
benefits or their monetary equivalent, computed from the time his compensation was withheld from him (which, as a
ia
rule, is from the time of his illegal dismissal) up to the time of his actual reinstatement.492
an
The raison d’ etre for the payment of backwages is equity. Backwages represent compensation that should n
have been earned by the employee but were lost because of the unjust or illegal dismissal.493
Gu
Simply stated, an employee whose dismissal is found to be illegal is considered not to have left his office so that
na
Ch
he is entitled to all the rights and privileges that accrue to him by virtue of the office that he held.494
But if the dismissal is not illegal, an award of backwages is not proper.495

b. The Bustamante rule [the prevailing doctrine].
to
ia
In 1996, the Supreme Court changed the rule496 on the reckoning of backwages. It announced a new doctrine in
n
the case of Bustamante v. NLRC, [G.R. No. 111651, November 28, 1996, 265 SCRA 61],which is now known as the
Gu
Bustamante rule. Under this rule, the term “full backwages” should mean exactly that, i.e., without deducting from

li
backwages the earnings derived elsewhere by the concerned employee during the period of his illegal dismissal.497

na
2. COMPONENTS OF BACKWAGES.
se
a. Components.
o
ia
The components of backwages are as follows:
Jo
1. Salaries or wages computed on the basis of the wage rate level at the time of the illegal dismissal and not in
an
it
accordance with the latest, current wage level of the employee’s position.498
Gu
2. Allowances and other benefits regularly granted to and received by the employee should be made part of
backwages.499 Examples:
el
n
a. Emergency living allowances and 13th month pay mandated under the law.500
b. Fringe benefits or their monetary equivalent.501
os
c. Transportation and emergency allowances.502
ia
d. Holiday pay, vacation and sick leaves and service incentive leaves.503
e. Just share in the service charges.504
it
Gu
f. Gasoline, car and representation allowances.505
.J
g. Any other regular allowances and benefits or their monetary equivalent.506
el

of
b. Some principles on backwages.
1. The computation of said regularly paid allowances and benefits as part of backwages should be made up to
os
to
the date of reinstatement as provided under Article 279 of the Labor Code or, if reinstatement be not
possible, up to the finality of the decision granting full backwages.507
Pr
2. Salary increases during period of unemployment, not included as component in the computation of
backwages.508
.J
li
3. Dismissed employee’s ability to earn, irrelevant in the award of backwages.509
4. The failure to claim backwages in a complaint for illegal dismissal is a mere procedural lapse which cannot
of
se
defeat a right granted under substantive law. Hence, the illegally dismissed employee may still be awarded
backwages despite said failure.510
Jo
Pr
492 Philippine Journalists, Inc. v. Mosqueda, G.R. No. 141430, May 7, 2004; Rodriguez, Jr. v. NLRC, G.R. No. 153947, Dec. 5, 2002, 393 SCRA 511, 517.
493 PLDT v. NLRC, G.R. No. 106947, Feb. 11, 1999.
494 Buhain v. The Hon. CA, G.R. No. 143709, July 2, 2002.
495 Telefunken Semiconductors Employees Union-FFW v. Court of Appeals, [G.R. Nos. 143013-14, December 18, 2000, 348 SCRA 565, 590].
496 Earlier, there were two (2) rules on backwages. The first is the so-called “Mercury Drug Rule” refers to the rule first enunciated in the case of Mercury Drug Co., Inc. v. CIR, [G.R. No. L-23357, April 30, 1974, 56 SCRA 694, (1974)], which mandates that in case the illegal dismissal of
f.
an employee has lasted for many years, he is entitled to backwages for a fixed period of three (3) years, “without further qualifications or deductions,” The Mercury Drug rule was superseded later by the “Ferrer Doctrine” laid down in the case of Ferrer v. NLRC, [G.R. No. 100898, July
5, 1993, 224 SCRA 410, 423], which granted backwages in full but the employer may deduct any amount which the employee may have earned elsewhere during the period of his illegal termination.
497 See also Kay Products, Inc. v. CA, G. R. No. 162472, July 28, 2005; Traders Royal Bank v. NLRC, G.R. No. 127864, Dec. 22, 1999.
498 See also PLDT v. NLRC, G.R. No. 106947, Feb. 11, 1999; General Baptist Bible Colleges v. NLRC, G.R. No. 85534, March 5, 1993, 219 SCRA 549
o
499 Evangelista v. NLRC, G.R. No. 93915, Oct. 11, 1995; Paramount Vinyl Products Corporation v. NLRC, G.R. No. 81200, Oct. 17, 1990.
500 Espejo v. NLRC, G.R. No. 112678, March 29, 1996, 325 Phil. 753, 760; General Baptist Bible Colleges v. NLRC, G.R. No. 85534, March 5, 1993, 219 SCRA 549.
501 Acesite Corporation v. NLRC, G.R. No. 152308, Jan. 26, 2005.
502 Santos v. NLRC, G.R. No. 76721, Sept. 21, 1987; Soriano v. NLRC, G.R. No. L-75510, Oct. 27, 1987.
Pr
503 St. Louise College of Tuguegarao v. NLRC, G.R. No. 74214, Aug. 31, 1989; On service incentive leave, see Fernandez v. NLRC, G.R. No. 105892, Jan. 28, 1998, 285 SCRA 149.
504 Maranaw Hotels & Resort Corporation v. NLRC, G.R. No. 123880, Feb. 23, 1999.
505 Consolidated Rural Bank [Cagayan Valley], Inc. v. NLRC, G.R. No. 123810, Jan. 20, 1999, 301 SCRA 223.
506 Blue Dairy Corporation v. NLRC, G.R. No. 129843, Sept. 14, 1999.
507 Fernandez v. NLRC, G.R. No. 105892, Jan. 28, 1998, 285 SCRA 149.
508 Equitable Banking Corp. v. Sadac, [G.R. No. 164772, June 8, 2006].
509 Tomas Claudio Memorial College, Inc. v. CA, [G.R. No. 152568, February 16, 2004].
510 Dela Cruz v. NLRC, G.R. No. 121288, Nov. 20, 1998, 299 SCRA 1, 12-13; L. T. Datu & Co., Inc. v. NLRC, G.R. No. 113162. Feb. 9, 1996, 253 SCRA 440, 453.
34

5. When Labor Arbiter or NLRC failed to award any backwages, the same may be corrected on appeal even if
worker did not appeal.511
n
6. In case reinstatement is ordered, full backwages should be reckoned from the time the compensation was
withheld (which, as a rule, is from the time of illegal dismissal) up to the time of reinstatement, whether
a
actual or in the payroll.512
Ch
7. If separation pay is ordered in lieu of reinstatement, full backwages should be computed from the time of
illegal dismissal until the finality of the decision. The justification is that along with the finality of the
Supreme Court’s decision, the issue on the illegality of the dismissal is finally laid to rest.513
8. The rule is different if employment is for a definite period. The illegally dismissed fixed‐term employee is
an
entitled only to the payment of his salaries corresponding to the unexpired portion of his fixed‐term
n
employment contract.514
9. If the illegally dismissed employee has reached 60 years of age, his backwages should only cover the time
na
when he was illegally dismissed up to the time when he reached 60 years. Under Article 287, 60 years is the
Ch
optional retirement age.515
10. If the employee has reached 65 years of age or beyond, his full backwages should be computed only up to
said age. The contention of the employer that backwages should be reckoned only up to age 60 cannot be
ia
sustained.516 In Jaculbe v. Silliman University, [G.R. No. 156934, March 16, 2007], it was declared that
an
since petitioner has already reached seventy‐one (71) years of age at the time the decision was rendered
n
Gu
by the Supreme Court in this case, the award of backwages in her favor must be computed from the time
of her illegal dismissal up to her compulsory retirement age of sixty‐five (65).517
na
Ch
11. If termination was made effective immediately, the backwages should be reckoned from the date of the
termination letter where such was stated.518
12. If employer has already ceased operations, full backwages should be computed only up to the date of the
to
ia
closure. To allow the computation of the backwages to be based on a period beyond that would be an
injustice to the employer.519
n
13. If valid retrenchment supervened during the pendency of the case, full backwages should be computed
Gu
only up to the effectivity date of the retrenchment.520
li
14. In case the employee dies during pendency of the case, his full backwages should be computed from the
na
time of his dismissal up to the time of his death.521
se
15. The period of valid suspension is deductible from backwages.522
16. Backwages should be reckoned from end of valid suspension.523
o
ia
17. Backwages should include period of preventive suspension.524
Jo
an
18. Employer’s offer to reinstate does not forestall payment of full backwages.525
it
Gu
19. Amount received during payroll reinstatement deductible from backwages.526
20. The unjustified refusal of the employer to reinstate an illegally dismissed employee entitles him to
el
payment of his salaries effective from the time the employer failed to reinstate him despite the issuance of
n
a writ of execution.527

os
ia
===============================
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.J
el

(4) Constructive dismissal
of
===============================
os
to

Pr
[NOTE: CONSTRUCTIVE DISMISSAL is classified in the Syllabus under the topic of “Reliefs for Illegal
Dismissal.” It bears noting, however, that constructive dismissal is not a “relief” as this term is understood
.J
li
within the context of Labor Law].

1. CONSTRUCTIVE DISMISSAL.
of
se
a. Concept.
Constructive dismissal contemplates the following:
Jo
1. An involuntary resignation resorted to when continued employment is rendered impossible, unreasonable
Pr
or unlikely;
511 Aurora Land Projects Corporation v. NLRC, [G.R. No. 114733, January 2, 1997, 266 SCRA 48].
f.
512 The Coca-Cola Export Corp. v. Gacayan, G.R. No. 149433, Dec. 15, 2010; Buenviaje v. CA, G.R. No. 147806, 12 Nov. 2002, 391 SCRA 440.
513 CRC Agricultural Trading v. NLRC, G.R. No. 177664, Dec. 23, 2009; Gaco v. NLRC [G.R. No. 104690, 23 February 1994, 230 SCRA 260, 269].
514 Philippine-Singapore Transport Services, Inc. v. NLRC, G.R. No. 95449, Aug. 18, 1997; Orlando Farms Growers Association/Glicerio Anover v. NLRC, G.R. No. 129076, Nov. 25, 1998, 299 SCRA 364.
515 Espejo v. NLRC, G.R. No. 112678, March 29, 1996, 255 SCRA 430, 435.
o
516 St. Michael’s Institute v. Santos, [G.R. No. 145280, December 4, 2001].
517517 See also Intercontinental Broadcasting Corp. v. Benedicto, [G.R. No. 152843, July 20, 2006].
518 RDS Trucking, v. NLRC, G.R. No. 123941, Aug. 27, 1998.
519 Chronicle Securities Corporation v. NLRC, [G.R. No. 157907, November 25, 2004]; See also Price v. Innodata Phils., Inc./Innodata Corp., [G.R. No. 178505, Sept. 30, 2008].
Pr
520 Mitsubishi Motors Philippines Corporation v. Chrysler Philippines Labor Union, [G.R. No. 148738, June 29, 2004].
521 Maxi Security and Detective Agency v. NLRC, [G.R. No. 162850, December 16, 2005].
522 Id., Metro Transit Organization, Inc. v. NLRC, [G.R. No. 119724, May 31, 1999]; PLDT v. Teves, [G.R. No. 143511, November 15, 2010].
523 Quiñones v. NLRC, [G.R. No. 105763, July 14, 1995]; See also Visperas v. Inciong, 119 SCRA 476 [1982].
524 Buhain v. The Hon. CA, [G.R. No. 143709, July 2, 2002].
525 Condo Suite Club Travel, Inc. v. NLRC, [G.R. No. 125671, January 28, 2000].
526 Glory Philippines, Inc. v. Vergara, G.R. No. 176627, Aug. 24, 2007.
527 Medina v. Consolidated Broadcasting System, G.R. Nos. 99054-56, May 28, 1993, 222 SCRA 707.
35

2. A demotion in rank and/or a diminution in pay; or
3. A clear discrimination, insensibility or disdain by an employer which becomes unbearable to the employee
n
that it could foreclose any choice by him except to forego his continued employment.528

a
b. Forced resignation.
Ch
Constructive dismissal includes forced resignation where the employee is made to do or perform an involuntary
act ‐ submission or tender of resignation ‐ meant to validate the action of management in inveigling, luring or influencing
or practically forcing the employee to effectuate the termination of employment, instead of doing the termination
himself.529
an

n
c. Test of constructive dismissal.
The test of constructive dismissal is whether a reasonable person in the employee’s position would have felt
na
compelled to give up his position under the circumstances. It is an act amounting to dismissal but made to appear as if it
Ch
were not. In fact, the employee who is constructively dismissed may be allowed to keep on coming to
work. Constructive dismissal is, therefore, a dismissal in disguise. The law recognizes and resolves this situation in favor
of the employees in order to protect their rights and interests from the coercive acts of the employer.530
ia
an

d. Some principles on constructive dismissal or forced resignation.
n
Gu
1. Mere allegations of threat or force do not constitute evidence to support a finding of forced resignation or
constructive dismissal.531
na
Ch
2. A threat to sue the employee is not unjust and will not amount to forced resignation or constructive
dismissal. For instance, a threat to file estafa case, not being an unjust act, but rather a valid and legal act to
enforce a claim, cannot at all be considered as intimidation. A threat to enforce one’s claim through
to
ia
competent authority, if the claim is just or legal, does not vitiate consent.532
3. Giving the employee the choice or option between resignation and investigation is not illegal.533
n
4. The facts of the case should be considered to determine if there is constructive dismissal.534
Gu
5. Voluntary resignation is different from constructive dismissal. An employee who tendered her voluntary
li
resignation and signed the quitclaim after receiving all the benefits due her for her separation cannot claim
na
that she was constructively dismissed.535
se
6. An employee may be constructively dismissed and at the same time legally dismissed.
o
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Formantes v. Duncan Pharmaceuticals Phils., Inc., [G.R. No. 170661, December 4, 2009].
This is quite a unique case where the employee was held to have been constructively dismissed but at the same
Jo
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it
time, was declared to have been legally dismissed. In this case, petitioner, while still employed with the respondent, was
Gu
compelled to resign and forced to go on leave. After being confronted with the complaint for sexual abuse lodged by a
subordinate female employee and before being required to explain his side, petitioner, the Acting District Manager of
el
respondent for the Ilocos District, was no longer allowed to participate in the activities of respondent company. His
n
salary was no longer remitted to him. His subordinates were directed not to report to him and the company directed
one of its district managers to take over his position and do his functions without prior notice to him. He was required to
os
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explain his side on the issue of sexual abuse as well as the charge of insubordination only after these things have already
been done to him.
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In ruling that he was already constructively dismissed, the High Court observed that these discriminatory acts
.J
were calculated to make petitioner feel that he is no longer welcome nor needed in respondent company − short of
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sending him an actual notice of termination. Despite this holding, however, the Supreme Court declared that his
of
dismissal was valid and legal and, therefore, it is impractical and unjust to reinstate him as there was a just cause for his
dismissal from the service consisting of his sexual abuse of a subordinate female employee which, although not cited in
os
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the Notice of Termination served on him when he was terminated, was duly proved during the trial of the case before
the Labor Arbiter. It must be noted that in this case, petitioner was terminated not on the ground of sexual abuse but
Pr
due to insubordination for his failure to report to the office; failure to submit reports; and failure to file written
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explanations despite repeated instructions and notices. Furthermore, while the dismissal was adjudged as valid, it was
li
found that there was non‐compliance with the twin procedural requirements of notice and hearing for a lawful
dismissal. It was established by evidence that the barrage of letters sent to petitioner, starting from a letter dated April
of
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22, 1994 until his termination on May 19, 1994, was belatedly made and apparently done in an effort to show that
petitioner was accorded the notices required by law in dismissing an employee. As observed by the Labor Arbiter in her
decision, prior to these letters, petitioner was already constructively dismissed. Since the dismissal, although for a valid
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cause, was done without due process of law, the employer was ordered to indemnify petitioner with nominal damages
in the amount of P30,000.00.

f.
e. Instances of constructive dismissal or forced resignation.
The following are examples of constructive dismissal or forced resignation:
o
528 Unicorn Safety Glass, Inc. v. Basarte, G.R. No. 154689, Nov. 25, 2004; See also Formantes v. Duncan Pharmaceuticals, G.R. No. 170661, Dec. 4, 2009; Montederamos v. Tri-Union International Corp., G.R. No. 176700, Sept. 4, 2009, 598 SCRA 370, 376; Norkis Trading Co., Inc. v.
Gnilo, G.R. No. 159730, Feb. 11, 2008, 544 SCRA 279.
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529 Nitto Enterprises v. NLRC, [G.R. No. 114337, September 29, 1995]; Phil. Employ Services and Resources, Inc. v. Paramio, [G.R. No. 144786, April 15, 2004]; Siemens Philippines, Inc. v. Domingo, [G.R. No. 150488, July 28, 2008]; SHS Perforated Materials, Inc. v.
Diaz, [G.R. No. 185814, October 13, 2010].
530 CRC Agricultural Trading v. NLRC, [G.R. No. 177664, December 23, 2009]; Aguilar v. Burger Machine Holdings Corporation, G.R. No. 172062, Oct. 30, 2006, 506 SCRA 266, 273; Globe Telecom, Inc. v. Florendo-Flores, G.R. No. 150092, Oct. 20, 2003, SC E-Library.
531 Mandapat v. Add Force Personnel Services, Inc., G.R. No. 180285, July 6, 2010].
532 Callanta v. NLRC, [G.R. No. 105083, August 20, 1993, 225 SCRA 526].
533 Belaunzaran v. NLRC, [G.R. No. 120038, December 23, 1996, 265 SCRA 800]; Mandapat v. Add Force Personnel Services, Inc., [G.R. No. 180285, July 6, 2010]; Cathay Pacific Airways, Ltd. v. Marin, [G.R. No. 148931, September 12, 2006].
534 Philippine Rural Reconstruction Movement [PRRM] v. Pulgar, [G.R. No. 169227, July 5, 2010].
535 Concrete Aggregates v. NLRC, G.R. No. 82458, Sept. 7, 1989.
36

1. Denying to the workers entry to their work area and placing them on shifts “not by weeks but almost by
month” by reducing their workweek to three days.536
n
2. Barring the employees from entering the premises whenever they would report for work in the morning
without any justifiable reason, and they were made to wait for a certain employee who would arrive in the
a
office at around noon, after they had waited for a long time and had left.537
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3. Instructing the employee to go on indefinite leave and asking him to return to work only after more than
three (3) years from the time he was instructed to go on indefinite leave during which period his salaries
were withheld.538
4. Implementing a rotation plan for reasons other than business necessity.539
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5. Sending to an employee a notice of indefinite suspension which is tantamount to dismissal.540
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6. Demoting a worker or reassigning him involving a demotion in rank or diminution of salaries, benefits and
other privileges.541
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7. Reducing the employee’s functions which were originally supervisory in nature and such reduction is not
Ch
grounded on valid grounds such as genuine business necessity.542
8. Imposing indefinite preventive suspension without actually conducting any investigation. It was only after
almost one (1) year that the employer made known the findings in its investigation which was conducted ex
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parte.543
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9. Threatening a sickly employee with dismissal if he will not retire and promising employment to his son and
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daughter. The employee retired and signed two (2) quitclaims entitled “Receipt and Release” in favor of the
company.544
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10. Forcing the employee to resign with threat that if he will not resign, he will file charges against him that
would adversely affect his chances for new employment.545
11. Asking the employee to choose whether to continue as a faculty member or to withdraw as a lawyer
to
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against the mayor with whom the former owes certain favors, makes the cessation from employment of
said employee not voluntary. Such act is in the nature of a contrivance to effect a dismissal without
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cause.546
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12. Asking the employee to file a resignation on the condition or promise that she would be given priority for
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re‐employment and in consideration of immediately paying her two (2) months vacation which she
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desperately needed then because she was ill. The employer’s refusal in bad faith to reemploy her despite
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its promise to do so amounted to illegal dismissal.547
13. Changing the employee’s status from regular to casual constitutes constructive dismissal.548
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14. Offer made by a labor contractor to reassign its employees to another company but with no guaranteed
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working hours and payment of only the minimum wage. The terms of the redeployment thus became
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unacceptable for said employees and foreclosed any choice but to reject the employer’s offer, involving as
it does a demotion in status and diminution in pay.549
el
15. Preventing the employee from reporting for work by ordering the guards not to let her in. This is clear
n
notice of dismissal.550
16. Transfer of respondent employee from Credit and Collection Manager to Marketing Assistant which
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resulted in demotion as it reduced his duties and responsibilities although there was no corresponding
diminution in his salary. In holding that there was constructive dismissal, the court took note of the fact
it
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that the former position is managerial while the latter is clerical in nature.551
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17. Reducing the number of trips of the drivers and shortening their workdays which resulted in the
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diminution of their pay.552
18. Forcing the employee to tender her resignation letter in exchange for her 13th month pay the reason being
of
that the employee was found by the employer to have violated its no‐employment‐for‐relatives‐within‐
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the‐third‐degree‐policy, she having been impregnated by a married co‐employee.553
19. Transferring unceremoniously the employee from Isabela to Metro Manila and upon his reassignment
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and/or transfer to Metro Manila, he was placed on “floating status,” demoted in rank and directed to
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perform functions not related to his supervisory position. The transfer was held to be economically and
li
emotionally burdensome on his part. He was in fact constrained to maintain two residences – one for
himself in Metro Manila, and the other for his family in Tuguegarao City, Cagayan.554
of
se
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536 Pasig Cylinder Mfg., Corp. v. Rollo, G.R. No. 173631, Sept. 8, 2010.
537 New Ever Marketing, Inc. v. CA, G.R. No. 140555, July 14, 2005.
538 Dynamic Signmaker Outdoor Advertising Services, Inc. v. Potongan, G.R. No. 156589, June 27, 2005.
539 Unicorn Safety Glass, Inc. v. Basarte, G.R. No. 154689, Nov. 25, 2004.
f.
540 Oriental Mindoro Electric Cooperative, Inc. v. NLRC, G.R. No. 111905, July 31, 1995.
541 Garcia v. NLRC, G.R. No. 116568, Sept. 3, 1999; Oscar Ledesma & Company v. NLRC, G.R. No. 110930, July 13, 1995, 246 SCRA 47, 51.
542 Globe Telecoms, Inc. v. Florendo-Flores, G.R. No. 150092, Sept. 27, 2002, 390 SCRA 201.
543 C. Alcantara & Sons, Inc. v. NLRC, G.R. No. 73521, Jan. 5, 1994.
o
544 Zurbano, Sr. v. NLRC, G.R. No. 103679, Dec. 17, 1993.
545545545 Guatson International Travel and Tours, Inc. v. NLRC, G.R. No. 100322, March 9, 1994.
546 Rizal Memorial Colleges Faculty Union v. NLRC, G.R. No. 59012-13, Oct. 12, 1989.
547 Reyes v. NLRC, G.R. No. 78997, Aug. 31, 1989.
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548 Sy v. NLRC, G.R. No. 85365, June 21, 1989.

549 R. P. Dinglasan Construction, Inc. v. Atienza, G.R. No. 156104, June 29, 2004.
550 Litonjua Group of Companies v. Vigan, G.R. No. 143723, June 28, 2001; See also Suldao v. Cimech System Construction, Inc., G.R. No. 171392, Oct. 30, 2006.
551 Norkis Trading Co., Inc. v. Gnilo, G.R. No. 159730, Feb. 11, 2008.
552 Sapitan v. JB Line Bicol Express, Inc., G.R. No. 163775, Oct. 19, 2007.
553 Star Paper Corp. v. Simbol, Comia and Estrella, G.R. No. 164774, April 12, 2006.
554 Westmont Pharmaceuticals, Inc. v. Samaniego, G.R. Nos. 146653-54, Feb. 20, 2006\.
37

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(5) Preventive Suspension
===============================
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Relevant Provisions: Sections 8 and 9, Rules XXIII, Book V, Rules to Implement the Labor Code
[No provision on Preventive Suspension in the Labor Code]
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[NOTE: PREVENTIVE SUSPENSION is classified in the Syllabus under the topic of “Reliefs for Illegal
Dismissal.” It bears stressing, however, that preventive suspension is not a “relief” as this term is understood
na
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within the context of Labor Law].
1. PREVENTIVE SUSPENSION.

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a. Legal basis.
The Labor Code does not contain any provision on preventive suspension. The legal basis for the valid
n
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555
imposition thereof is found in Sections 8 and 9, Rule XXIII, Book V of the Rules to Implement the Labor Code.
na

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b. Purpose and justification for the imposition of preventive suspension.
Preventive suspension may be legally imposed against an errant employee only when his alleged violation is the
subject of an investigation. This remedy may thus be resorted to only while the errant employee is undergoing an
to
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investigation for certain serious offenses. Consequently, its purpose is to prevent him from causing harm or injury to the
company as well as to his fellow employees. It is justified only in cases where the employee’s continued presence in the
n
company premises during the investigation poses a serious and imminent threat to the life or property of the employer
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or of the employee’s co‐workers. Without this threat, preventive suspension is not proper.556
li

na
c. Some principles on preventive suspension.
se
1. An employer has the right to preventively suspend the employee during the pendency of the
administrative case against him as a measure of self‐protection.557
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2. If the basis of the preventive suspension is the employee’s absences and tardiness, the imposition of
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preventive suspension on him is not justified as his presence in the company premises does not pose any
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such serious or imminent threat to the life or property of the employer or of the employee’s co‐workers
simply “by incurring repeated absences and tardiness.”558
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3. The grounds of violation of the school rules and regulations on the wearing of uniform, tardiness or
n
absence, and maliciously spreading false accusations against the school, do not justify the imposition of
preventive suspension.559
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4. The failure by an employee to attend a meeting called by his supervisor will not justify his preventive
suspension.560
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5. Preventive suspension does not mean that due process may be disregarded.561
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6. Preventive suspension is not a penalty.562 Preventive suspension, by itself, does not signify that the
el
company has already adjudged the employee guilty of the charges for which she was asked to answer
of
and explain.563
7. Preventive suspension is not equivalent nor tantamount to dismissal.564
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8. Period of preventive suspension should only be for a maximum period of thirty (30) days. After the lapse
of the 30‐day period, the employer is required to reinstate the worker to his former position or to a
Pr
substantially equivalent position.
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9. Extension of period must be justified. During the 30‐day period of preventive suspension, the employer is
expected to conduct and finish the investigation of the employee’s administrative case. The period of
thirty (30) days may only be extended if the employer failed to complete the hearing or investigation
of
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within said period due to justifiable grounds. No extension thereof can be made based on whimsical,
capricious or unreasonable grounds.
10. If preventive suspension is extended beyond 30 days, employer must pay salary during the period of
Jo
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extension. During the 30‐day preventive suspension, the worker is not entitled to his wages and other
benefits. However, if the employer decides, for a justifiable reason, to extend the period of preventive
suspension beyond said 30‐day period, he is obligated to pay the wages and other benefits due the
f.
worker during said period of extension. In such a case, the worker is not bound to reimburse the amount
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555 As amended by Article 1, Department Order No. 09, Series of 1997.

556 Sections 8 and 9, Rule XXIII, Book V, Rules; Artificio v. NLRC, [G.R. No. 172988, July 26, 2010]; Mandapat v. Add Force Personnel Services, Inc., G.R. No. 180285, July 6, 2010; Bañez v. De La Salle University, G.R. No. 167177, Sept. 27, 2006.
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557 Philippine National Bank v. Velasco, [G.R. No. 166096, September 11, 2008].
558 Valiao v. Hon. CA, G.R. No. 146621, July 30, 2004.
559 Woodridge School [now known as Woodridge College, Inc.] v. Benito, [G.R. No. 160240, October 29, 2008].
560 Maricalum Mining Corp. v. Decorion, [G.R. No. 158637, April 12, 2006].
561 R.B. Michael Press v. Galit, G.R. No. 153510, Feb. 13, 2008; Tanala v. NLRC, G.R. No. 116588, Jan. 24, 1996, 252 SCRA 314, 321.
562 Philippine Airlines, Inc. v. NLRC, [G.R. No. 114307, July 8, 1998, 292 SCRA 40].
563 See also Atlas Fertilizer Corporation v. NLRC, G.R. No. 120030, June 17, 1997, 273 SCRA 549.
564 Jo Cinema Corporation v. Abellana, G.R. No. 132837, June 28, 2001.
38

paid to him during the extension if the employer decides to dismiss him after the completion of the
investigation.565
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11. Preventive suspension lasting longer than 30 days, without the benefit of valid extension, amounts to
constructive dismissal.566
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12. Indefinite preventive suspension amounts to constructive dismissal. 567
13. Failure to state the duration of the preventive suspension in the notice does not mean it is indefinite.568
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14. Salaries should be paid for improperly‐imposed preventive suspension.569
15. Period of preventive suspension of workers in the construction industry, only 15 days.570
16. Preventive suspension different from suspension of operation under Article 286 of the Labor Code.571
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17. Preventive suspension is different from “floating status.”572
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(6) Quitclaims
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Relevant Provisions: Articles 227 and 221, Labor Code

na
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[NOTE: The topic of QUITCLAIMS is classified in the Syllabus under the topic of “Reliefs for Illegal
Dismissal.” It bears underscoring, however, that quitclaims cannot be considered a “relief” as this term is
understood within the context of Labor Law].
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1. COMPROMISE AGREEMENT/AMICABLE SETTLEMENT.
n

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A compromise agreement may be forged at any stage of the proceedings, even after a final judgment has been
li
rendered therein. This rule holds true in all labor proceedings before any labor authority. Neither the Labor Code nor its
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implementing rules as well as the NLRC Rules prohibit the amicable settlement of cases during the pendency of the
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proceedings or after a judgment is issued thereupon.573
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2. QUITCLAIMS.
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a. Concept.
After a compromise agreement has been entered into by the parties to a suit, the employee is required to
el
execute a separate document usually denominated as “Quitclaim and Release” or “Waiver” or “Quitclaim, Release and
n
Waiver” setting forth the fact that he has received the amount of consideration contemplated in the compromise
agreement and that as a consequence thereof, he quits, waives and releases the employer from any claims that he may
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have against the latter by reason of his employment.

it
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b. Requisites for the validity of a quitclaim.
.J
The requisites for a valid quitclaim as follows:
el
(1) There was no fraud or deceit on the part of any of the parties;
of
(2) The quitclaim should be executed freely and voluntarily by the employee;
(3) The consideration for the quitclaim is credible and reasonable;
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(4) The contract is not contrary to law, public order, public policy, morals or good customs or prejudicial to a
third person with a right recognized by law.574
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c. Standards for the validity of a quitclaim and waiver.
The standards for determining the validity of a quitclaim or waiver were enunciated in the leading case of
Periquet v. NLRC, [G.R. No. 91298, June 22, 1990, 186 SCRA 724, 730‐731]. Accordingly, not all waivers and quitclaims
of
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are per se invalid as against public policy. If the agreement was voluntarily entered into and represents a reasonable
settlement, it is binding on the parties and may not later on be disowned simply because of a change of mind. It is only:
Jo
(1) where there is a clear proof that the waiver was wangled from an unsuspecting or gullible person, or
Pr
(2) where the terms of the settlement are unconscionable on their face,
that the law will step in to annul the questionable transaction. But where it is shown that the person making the waiver
did so voluntarily, with full understanding of what he was doing, and the consideration for the quitclaim is credible and
o f.
565 Section 9, Rule XXIII, Book V, Rules to Implement the Labor Code, as amended by Article 1, Department Order No. 09, Series of 1997 [21 June 1997]; See also Philippine Airlines, Inc. v. NLRC, G.R. No. 114307, July 8, 1998, 292 SCRA 40; Rural Bank of San Isidro [N.E.], Inc. v. Paez,
[G.R. No. 158707, November 27, 2006].
566 Hyatt Taxi Services, Inc. v. Catinoy, [G.R. No. 143204, June 26, 2001].
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567 Pepsi-Cola Distributors of the Philippines, Inc. v. NLRC, G.R. No. 106831, May 6, 1997, 272 SCRA 267, 277; C. Pido v. NLRC, G.R. No. 169812, Feb. 23, 2007; Alcantara & Sons, Inc. v. NLRC, G.R. No. 73521, Jan. 5, 1994.
568 Mandapat v. Add Force Personnel Services, Inc., [G.R. No. 180285, July 6, 2010].
569 Progressive Development Corporation - Pizza Hut v. Sarmiento, [G.R. No. 157076, September 7, 2007].
570 Section 4, Department Order No. 19, Series of 1993.
571 Maricalum Mining Corp. v. Decorion, [G.R. No. 158637, April 12, 2006].
572 Pido v. NLRC, [G.R. No. 169812, February 23, 2007].
573 Loyola Security & Detective Agency v. NLRC, G.R. No. 113287, May 9, 1995, 313 Phil. 750, 754.
574 Danzas Intercontinental, Inc. v. Daguman, [G.R. No. 154368, April 15, 2005]l Sime Darby Pilipinas, Inc. v. Arguilla, G.R. No. 143542, June 8, 2006.
39

reasonable, the transaction must be recognized as a valid and binding undertaking.575 Invalid quitclaim and release
agreements are regarded as ineffective to bar the workers from claiming the full measure of their legal rights.576
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d. Requisites for the validity of quitclaims of overseas Filipino workers (OFWs).
a
The Supreme Court enunciated in the 2007 case of EDI‐Staffbuilders International, Inc. v. NLRC, [G.R. No.
Ch
14558, October 26, 2007], the requisites in order for the quitclaims and waivers executed by overseas Filipino workers
(OFWs) to be valid and for purposes of preventing disputes on the validity and enforceability of such quitclaims and
waivers under Philippine laws. Thus, a compromise agreement signed by an OFW is required to contain the following:
1. A fixed amount as full and final compromise settlement;
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2. The benefits of the OFW, if possible, with the corresponding amounts which he is giving up in consideration
n
of the fixed compromise amount;
3. A statement that the employer has clearly explained to the OFW, in English, Filipino, or in the dialect known
na
to him ‐ that by signing the waiver or quitclaim, he is forfeiting or relinquishing his right to receive the
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benefits which are due him under the law; and
4. A statement that the OFW signed and executed the document voluntarily and that he has fully understood
the contents of the document and that his consent was freely given without any threat, violence, duress,
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intimidation or undue influence exerted on his persons.
It is advisable that the stipulations be made in English and Tagalog or in the dialect known to the
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employees. There should be two (2) witnesses to the execution of the quitclaim who must also sign it. The document
should be subscribed and sworn to under oath preferably before any administering official of the Department of Labor
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and Employment or its regional office, the Bureau of Labor Relations, the NLRC or a Labor Attaché in a foreign
country. Such official should assist the parties regarding the execution of the quitclaim and waiver. After complying with
the requisites, the compromise settlement becomes final and binding under Article 227 of the Labor Code.
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It should be made clear, however, that the foregoing rules on quitclaim or waiver should apply only to labor
contracts of OFWs in the absence of proof of the laws of the foreign country agreed upon to govern the
n
same. Otherwise, the foreign laws should apply.
Gu

li
e. Some principles on quitclaims.
na
1. Quitclaims are valid if employees received full measure of benefits.577
se
2. Employer and employee do not stand on equal footing, hence, quitclaims are commonly frowned upon as
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contrary to public policy, and they are ineffective to bar claims for the full measure of the workers’ legal
rights.578
Jo
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3. When the voluntariness of the execution of the quitclaim is put at issue, the claim of the employee may still
Gu
be given due course.579
4. A quitclaim in which the consideration is “scandalously low and inequitable” cannot be an obstacle to the
el
pursuit of a worker’s legitimate claim. It is null and void for being contrary to public policy.580 Examples:
n
a. The settlement of P20,000.00 instead of the Labor Arbiter’s award of P174,379.52 was held shocking to
the mind, unconscionable and contrary to public policy.581
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b. The compromise settlement of only P100,000.00 for the over P2 Million award granted by the Labor
Arbiter is null and void.582
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c. The private respondents’ individual claims ranging from P6,744.20 to P242,626.90, were declared to be
.J
grossly disproportionate to what each of them actually received (ranging from P3,000.00 to P6,000.00)
el
under the Sama‐samang Salaysay sa Pag‐uurong ng Sakdal. The amount of the settlement is indubitably
of
unconscionable; hence, ineffective to bar the workers from claiming the full measure of their legal
583
rights.
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d. The considerations received by the employees were held grossly inadequate considering the length of
time that they were employed in petitioner company. Basarte worked for petitioner company for 21
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years, that is, from 1976 to 1998, while Flores worked from 1991 to 1998. Basarte and Flores only
.J
received P10,000.00 and P3,000.00, respectively. In contrast, Manongsong and Soltura, two workers
li
who opted to settle their respective cases earlier on, both started in 1993 only, but were able to take
home P16,434.00 each after executing their waivers.584
of
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e. The compromise agreement was declared void because the consideration of P150,000.00 was rather
measly when taken in the light of the more than P2.5 million judgment.585
f. The compromise agreement was invalidated because it entitled the worker to receive P12,000.00 in lieu
Jo
Pr
of a monetary judgment of P108,000.00. The amount was held to be palpably inequitable.586
5. “Dire necessity,” “economic difficulties” or “financial crises” may or may not be a basis for the annulment
of a quitclaim and release. “Dire necessity” is not a valid and acceptable ground to annul a quitclaim,
o f.
575 (Mendoza, Jr. v. San Miguel Foods, Inc., G.R. No. 158684, May 16, 2005; See also Cadalin v. Hon. CA, G.R. No. 168923, Nov. 28, 2008; Espina v. Hon. CA, G.R. No. 164582, March 28, 2007.
576 Bogo-Medellin Sugarcane Planters Association, Inc. v. NLRC, G.R. No. 97846, Sept. 25, 1998; Galicia v. NLRC, G.R. No. 119649, July 28, 1997.
577 Magsalin & Coca-Cola Bottlers Phils., Inc. v. National Organization of Working Men [N.O.W.M.), [G.R. No. 148492, May 9, 2003].
578 Marcos v. NLRC, [G.R. No. 111744, September 08, 1995].
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579 Philippine Carpet Employees’ Association v. Philippine Carpet Manufacturing Corporation, G.R. Nos. 140269-70, Sept. 14, 2000; Cadalin v. Hon. CA, G.R. No. 168923, Nov. 28, 2008.
580 Principe v. Philippine Singapore Transport Services, Inc., G.R. No. 80918, Aug. 16, 1989, 176 SCRA 514.
581 Malinao, v. NLRC, [G.R. No. 119492, November 24, 1999].
582 Unicane Workers Union-CLUP v. NLRC, [G.R. No. 107545, September 9, 1996, 261 SCRA 573, 585-586].
583 Mindoro Lumber and Hardware v. Bacay, [G.R. No. 158753, June 8, 2005].
584 Unicorn Safety Glass, Inc. v. Basarte, [G.R. No. 154689, November 25, 2004].
585 Arellano v. Powertech Corp., [G.R. No. 150861, January 22, 2008].
586 Galicia v. NLRC, [G.R. No. 119649, July 28, 1997, 276 SCRA 381].
40

especially when it has not been shown that the employees concerned have been forced to execute it.587 But
“dire necessity” may be validly invoked in certain cases to annul a quitclaim if the acceptance of the
n
separation pay was brought about by the same. By then, such acceptance may not be said to have
amounted to estoppel nor as a waiver of the employees’ right to demand benefits to which they are legally
a
entitled or to contest the legality of their dismissal.588 Thus, the validity of the invocation of the ground of
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“dire necessity” to annul a quitclaim and release should be viewed in the light of the peculiar facts of a case.
The main difference lies on whether there was voluntary acceptance of the agreement and whether the
consideration for the waiver was reasonable. For if the consideration is reasonable and the acceptance
thereof is voluntary, the quitclaim and waiver would be intrinsically valid and binding and the “dire
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necessity” excuse would be immaterial and irrelevant.589
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6. Quitclaims are not valid where consent was vitiated by mistake or fraud or when there is undue pressure or
duress. The mere fact that the employee was not physically coerced or intimidated does not necessarily
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imply that he freely or voluntarily consented to the terms of the quitclaim.590
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7. Absent any evidence that vitiates consent, the quitclaim is valid and binding.591
8. Receipt of separation pay is not a bar to contest the legality of dismissal and the acceptance thereof would
not amount to estoppel.592
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9. A quitclaim is not a bar to pursue claims arising from an unfair labor practice.593
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10. Quitclaims executed by persons who do not need special protection are valid. Examples:
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a. A person who holds a master’s degree in library science and is an instructor in political science at a
university cannot claim that he was merely forced by necessity to accept the separation benefits given
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by his employer and that the quitclaim he executed in favor of his employer was not voluntary. 594
b. A lawyer could not renege on the quitclaim he executed since lawyers are not easily coerced into
signing legal documents.595
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c. The quitclaim executed by the employee who was the Executive Director of petitioner company when
she was allegedly made to sign it cannot be nullified on the basis of her claim that she signed it under
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duress and intimidation. For signing it, she was paid P3,704,517.98 as her voluntary retirement
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package. Further, she is a woman of high educational attainment and qualifications and is thus
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expected to know the import of everything she executes.596
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11. However, there is no nexus between intelligence and position when it concerns pressure exerted by the
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employer upon the free will of the employee. A lowly employee or a sales manager who is confronted with
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the same dilemma of whether signing a quitclaim and accepting what the company offers him, or refusing
to sign and walking out without receiving anything, may do succumb to the same pressure, being very well
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aware that it is going to take quite a while before he can recover whatever he is entitled to, because it is
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only after a protracted legal battle starting from the Labor Arbiter level all the way to the Supreme Court
can he receive anything at all. Such a risk of not receiving anything whatsoever, coupled with the
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probability of not immediately getting any gainful employment or means of livelihood in the meantime,
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constitutes enough pressure upon anyone who is asked to sign a quitclaim in exchange for some amount
of money which may be way below what he may be entitled to based on company practice or policy or by
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law.597
12. Burden of proof on voluntariness of quitclaims lies with the employer.598
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13. Notarization of quitclaims is a prima facie evidence of their due execution.599
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(7) Termination of employment

by employee
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[NOTE: The topic of RESIGNATION (Termination of Employment by Employee) is classified in the Syllabus
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under the topic of “Reliefs for Illegal Dismissal.” It bears noting, however, that resignation cannot be
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considered a “relief” as this term is understood within the framework of Labor Law].
1. TERMINATION OF EMPLOYMENT INITIATED BY THE EMPLOYEE (RESIGNATION).
f.
587 Veloso v. Department of Labor and Employment, G.R. No. 87297, Aug. 5, 1991; Olaybar v. NLRC, G.R. No. 108713, Oct. 28, 1994, 237 SCRA 819; Sicangco v. NLRC, G.R. No. 110261, Aug. 4, 1994, 235 SCRA 96.
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588 Villar v. NLRC, G.R. No. 130935, May 11, 2000, 387 Phil. 706, 717; Pascua v. NLRC, G.R. No. 123518, March 13, 1998, 287 SCRA 554.
589 Galicia v. NLRC, G.R. No. 119649, July 28, 1997, 276 SCRA 381.
590 Philippine Carpet Employees’ Association v. Philippine Carpet Manufacturing Corporation, [G.R. Nos. 140269-70, September 14, 2000].
591 Aklan v. San Miguel Corp., G.R. No. 168537, December 11, 2008.
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592 Sari-Sari Group of Companies, Inc. v. Piglas Kamao [Sari-Sari Chapter], G.R. No. 164624, Aug. 11, 2008.
593 Sari-Sari Group of Companies, Inc. v. Piglas Kamao [Sari-Sari Chapter], G.R. No. 164624, Aug. 11, 2008.
594 Agustilo v. CA, [G.R. No. 142875, September 7, 2001].
595 Sicangco v. NLRC, [G.R. No. 110261, August 4, 1994, 235 SCRA 96].
596 Amkor Technology Philippines, Inc. v. Juangco, [G.R. No. 166507, January 23, 2007],
597 Becton Dickinson Phils., Inc. v. NLRC, [G.R. Nos. 159969 & 160116, November 15, 2005]; See also Universal Robina Sugar Milling Corporation [URSUMCO] vs. Caballeda, [G.R. No. 156644, July 28, 2008].
598 EMCO Plywood Corporation v. Abelgas, G.R. No. 148532, April 14, 2004, 427 SCRA 496, 514.
599 Section 30, Rule 132 of the Rules of Court Alabang Country Club, Inc. v. NLRC, [G.R. No. 157611, August 9, 2005].
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a. Concept.
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Article 285, in recognition of the equality of the parties to an employment relationship, grants to an employee
the right to terminate the employment relationship he has with his employer at any time he wishes and with or without
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just cause. Under Articles 282, 283 and 284, the employer is the one granted such right.
Resignation is the formal pronouncement of relinquishment of an office.600 It is the voluntary act of an
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employee who finds himself in a situation where he believes that personal reasons cannot be sacrificed in favor of the
exigency of the service so much so that he has no other choice but to dissociate himself from his employment.601
To constitute a resignation, it must be unconditional and with the intent to operate as such. There must be an
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intention to relinquish an office accompanied by an act of relinquishment or abandonment.602
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b. Resignation and dismissal, distinguished.
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Termination of employment by the employer is called “dismissal.” If done by the employee, it is called
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“resignation.”

2. TERMINATION OF EMPLOYMENT BY EMPLOYEE WITHOUT JUST CAUSE.
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a. Requisites in termination without just cause.
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In case of termination effected by the employee without just cause, the following requisites must concur:
1. A written (not verbal) notice of the termination (commonly known as “resignation letter”); and
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2. Service of such notice to the employer at least one (1) month in advance.603
If any of the afore‐mentioned requisites is not complied with, the employer may hold the employee liable for
damages. Thus, a resignation letter made effective “immediately” violates the law and may subject the resigning
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employee to damages, if there exists no just cause to warrant the immediate termination of employment by the
employee.
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b. Some principles on resignation without just cause.
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1. The rationale for the one‐month prior notice requirement is to afford the employer the opportunity to find
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replacement for the resigning employee at least within the 30‐day period. The purpose is to avoid any
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undue disruption of work.
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2. The law affords the employee the right to resign regardless of whether the employer has found an able and
competent replacement and whether the operation of the company would be affected provided he serves
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a written notice to the employer at least one (1) month in advance.604
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3. Acceptance by the employer of the resignation is necessary.605 However, such acceptance of a resignation
does not require the conformity of the resigning employee. Such conformity only indicates that the
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employee was forced to resign for which reason her “conformity” was obtained to make it appear as
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voluntary or legal.606
4. A resignation tendered by an employee, irrespective of whether it was made revocable or irrevocable, may
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still be withdrawn anytime before its acceptance by the employer. Once accepted, however, withdrawal
thereof can no longer be made by the resigning employee, except with the consent or agreement of the
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employer.607
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5. If after acceptance of his resignation, the employee changes his mind, he must ask for approval of the
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withdrawal of his resignation from his employer, as if he were re‐applying for the job. It will then be up to
the employer to determine whether or not his services would be continued.608
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6. Acceptance of resignation should be in writing and must be duly communicated to and served upon the
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resigning employee in order to bind him. If not duly informed of such acceptance, the resigning employee
may still validly withdraw his resignation anytime. Thus, the mere receipt by the employer’s personnel
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department of the employee’s resignation letter is not equivalent to acceptance or approval thereof.609
7. Verbal resignation, once accepted, makes resignation effective.610
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8. Acts of the employee before and after his resignation should be considered to determine its validity.611
9. Assumption of new job by employee prior to employer’s acceptance of resignation indicates his intent to
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relinquish his position.612
10. Employment elsewhere during the pendency of a case does not amount to resignation. It should be
expected that the employee would seek other means of income to tide him over during the time that the
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legality of his termination is under litigation. He should not be faulted for seeking employment elsewhere
for his economic survival.613
f.
600 Go v. CA, G.R. No. 158922, May 28, 2004.

601 Shie Jie Corporation v. National Federation of Labor, G.R. No. 153148, July 15, 2005.
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602 Emco Plywood Corporation v. Abelgas, G.R. No. 148532, April 14, 2004; Cheniver Deco Print Technics Corporation v. NLRC, G.R. No. 122876, Feb. 17, 2000.
603 Article 285[a], Labor Code.
604 Phimco Industries, Inc. v. NLRC, G.R. No. 118041, June 11, 1997, 273 SCRA 286.
605 BMG Records [Phils.], Inc. v. Aparecio, G.R. No. 153290, Sept. 5, 2007; Reyes v. CA, G.R. No. 154448, Aug. 15, 2003.
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606 Rase v. NLRC, G.R. No. 110637, Oct. 07, 1994.

607 Custodio v. Ministry of Labor and Employment, G.R. No. 64374, July 19, 1990; Philippines Today, Inc. v. NLRC, G.R. No. 112965, Jan. 30, 1997.
608 Intertrod Maritime, Inc. v. NLRC, G.R. No. 81087, June 19, 1991, 198 SCRA 318.
609 Mora v. Avesco Marketing Corporation, [G.R. No. 177414, November 14, 2008].
610 Villafuerte v. Commerce Advertising Corporation, NLRC Case No. AB-9-12298-81, Jan. 26, 1983.
611 Fortuny Garments v. Castro, G.R. No. 150668, Dec. 15, 2005, 478 SCRA 125, 130.
612 Philippines Today, Inc. v. NLRC, G.R. No. 112965, Jan. 30, 1997, 267 SCRA 202.
613 Great Southern Maritime Services Corporation v. Acuña, [G.R. No. 140189, February 28, 2005].
42

11. A resigned employee who desires to take his job back has to reapply therefor and he shall have the status
of a stranger who cannot unilaterally demand an appointment. He cannot arrogate unto himself the same
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position which he earlier decided to leave.614
12. Once an employee resigns and executes a quitclaim in favor of the employer, he is thereby estopped from
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filing any further money claims against the employer arising from his employment. Such money claims
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may be given due course only when the voluntariness of the execution of the quitclaim is put in issue, or
when it is established that there is an unwritten agreement between the employer and employee which
would entitle the employee to other remuneration or benefits upon his or her resignation.615
13. A resigning employee has the obligation to reimburse the employer for the cost of training him for higher
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position if he has not complied with the conditions imposed on such training such as the rendition of a
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certain number of years after the training.616
14. No weight should be given to the employee’s resignation letter which appears to have been written and
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submitted at the instance of the employer. Its form is of the company’s and its wordings are more of a
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waiver and quitclaim. More so when the supposed resignation was not acknowledged before a notary
public.617
15. Resignation letters which were all prepared by the employer and were substantially similarly worded and
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of the same tenor are waivers or quitclaims which are not sufficient to show valid separation from work or
to bar the employees from assailing their termination. They also constitute evidence of forced resignation
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or that they were summarily dismissed without just cause.618
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16. Voluntariness of resignation may be inferred from its language.619
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17. The burden to prove voluntariness of the resignation lies with the employer.620
18. The employee who alleges that he was coerced into resigning should prove such claim.621
19. The general rule is that the filing of a complaint for illegal dismissal negates resignation.622 However, this
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rule does not apply to a case where the filing of an illegal dismissal case by the employee who resigned
was evidently a mere afterthought. It was filed not because she wanted to return to work but to claim
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separation pay and backwages.623
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20. The filing of a complaint is inconsistent with voluntary repatriation of OFW.624
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22. A resignation letter which contains words of gratitude and appreciation to the employer can hardly come
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from employees who are forced to resign.625
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23. Special Voluntary Resignation (SVR) Program, held valid. Employers may lawfully and effectively reduce
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their personnel by offering resignation benefits through a Voluntary Resignation Program where
employees are afforded the right to voluntarily terminate the employment relationship. If made in good
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faith, such a scheme should be considered a valid form of terminating employment.626
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3. TERMINATION OF EMPLOYMENT BY THE EMPLOYEE FOR JUST CAUSES.
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a. Just causes for termination of employment by employee under Article 285 [b].
An employee may put an end to the employment relationship without need of serving any notice on the
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employer for any of the following just causes:
1. Serious insult by the employer or his representative on the honor and person of the employee;
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2. Inhuman and unbearable treatment accorded the employee by the employer or his representative;
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3. Commission of a crime or offense by the employer or his representative against the person of the employee
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or any of the immediate members of his family; and
4. Other causes analogous to any of the foregoing.627
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b. Written notice not required.
Unlike resignation without just cause under paragraph [a] of Article 285 where the law requires prior written
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notice, the employee may terminate his employment without serving any notice to the employer if such is occasioned by
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any of the just causes mentioned in paragraph [b] of Article 285.
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3.1. SERIOUS INSULT ON THE HONOR AND PERSON OF THE EMPLOYEE.
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a. Requisites.
In order for serious insult to be considered a just cause to warrant the valid termination of employment by the
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employee without notice, the following requisites must concur:
1. The insult must be serious in character;
2. It must be committed by the employer or his representative against the employee; and
f.
614 Philippines Today, Inc. v. NLRC, G.R. No. 112965, Jan. 30, 1997, 267 SCRA 202.
615 Philippine National Construction Corporation v. NLRC, G.R. No. 120961, Oct. 2, 1997, 280 SCRA 116; Talla v. NLRC, G.R. No. L-79913, July 19, 1989, 175 SCRA 479.
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616 Almario v. Philippine Airlines, Inc., [G.R. No. 170928, September 11, 2007].
617 A’ Prime Security Services, Inc. v. NLRC, [G.R. No. 107320, January 19, 2000]; Mobile Protective & Detective Agency v. Ompad, [G.R. No. 159195, May 9, 2005].
618 Great Southern Maritime Services Corporation v. Acuña, G.R. No. 140189, Feb. 28, 2005.
619 Willi Hahn Enterprises, v. Maghuyop, [G.R. No. 160348, December 17, 2004].
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620 Malig-on v. Equitable General Services, Inc., [G.R. No. 185269, June 29, 2010]; Mobile Protective & Detective Agency v. Ompad, [G.R. No. 159195, May 9, 2005, 458 SCRA 308, 323].
621 Willi Hahn Enterprises v. Maghuyop, [supra]; See also Rufina Patis v. Alusitain, G.R. No. 146202, July 14, 2004.
622 (Cheniver Deco Print Technics Corporation v. NLRC, G.R. No. 122876, Feb. 17, 2000; See also Fungo v. Lourdes School of Mandaluyong, G.R. No. 152531, July 27, 2007; Kay Products, Inc. v. CA, G.R. No. 162472, July 28, 2005.
623 Carlos v. CA, [G.R. No. 168096, August 28, 2007]; Fortuny Garments v. Castro, G.R. No. 150668, Dec. 15, 2005; bile Protective & Detective Agency v. Ompad, G.R. No. 159195, May 9, 2005, 458 SCRA 308.
624 Talidano v. Falcon Maritime & Allied Services, Inc., [G.R. No. 172031, July 14, 2008]; See also Oriental Shipmanagement Co., Inc. v. CA, G.R. No. 153750, Jan. 25, 2006, 480 SCRA 100, 110.
625 St. Michael Academy v. NLRC, G.R. No. 119512, July 13, 1998, 292 SCRA 478.
626 Dole Philippines, Inc. v. NLRC, G.R. No. 120009, Sept. 13, 2001.
627 Article 285[b], Labor Code; Section 11, Rule I, Book VI, Rules to Implement the Labor Code.
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3. It must injure the honor and person of the employee.
Conversely, if the insult is not serious or is committed by a co‐employee or a third party like a customer, even if
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injurious to the honor and person of the employee, it is not a just cause under Article 285 [b].

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3.2. INHUMAN AND UNBEARABLE TREATMENT OF THE EMPLOYEE.
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a. Requisites.
This ground may be invoked if the following requisites concur:
1. The treatment is inhuman and unbearable in nature; and
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2. It is perpetrated by the employer or his representative against the employee.
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An example of inhuman treatment is the act of the employer in not providing safety gadgets such as gas masks
or safety attire in hazardous jobs requiring their use. An example of unbearable treatment is when the employer does
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not provide any toilet, necessitating the employees to go out of the workplace to look for toilet elsewhere to heed the
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call of nature.

3.3. COMMISSION OF A CRIME OR OFFENSE AGAINST THE EMPLOYEE OR ANY OF THE IMMEDIATE MEMBERS OF HIS
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FAMILY.

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a. Requisites.
The requisites for this ground are as follows:
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1. A crime or offense is committed by the employer or his representative; and
2. It was perpetrated against the person of the employee or any of the immediate members of his family.
Sexual harassment under Republic Act No. 7877 [Anti‐Sexual Harassment Act of 1995], is an example of a crime
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or offense which may be committed by an employer against his employee.

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3.4. OTHER ANALOGOUS CAUSES ‐ CONSTRUCTIVE DISMISSAL OR INVOLUNTARY OR FORCED RESIGNATION.
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[See discussion on the topic of “Constructive Dismissal” above].
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3. Retirement Pay Law
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a. Coverage
b. Exclusions from coverage
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c. Components of retirement pay
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d. Retirement pay under RA 7641
vis-à-vis retirement benefits
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under SSS and GSIS laws

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Relevant Provision: Article 287 of the Labor Code, as amended by R.A. No. 7641 [January 7, 1993] and
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R.A. No. 8558 [February 26, 1998]

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[NOTE: The entire substantive provisions of R.A. No. 7641 (The Retirement Pay Law) and R.A. No. 7641 (on
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underground mine workers) are now found in Article 287 of the Labor Code. Thus, there is no need to separately
consult these laws in order to learn their provisions. Reference to R.A. No. 7641 in the Syllabus may result in
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confusion as it may give the impression to the untrained eyes that R.A. No. 7641 is separate and distinct from
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Article 287 of the Labor Code].
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1. COVERAGE OF THE RETIREMENT PAY LAW.

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Retirement under Article 287, as amended, applies to:
1. All employees in the private sector, regardless of their position, designation or status and irrespective of the
method by which their wages are paid;628
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2. Part‐time employees;
3. Employees of service and other job contractors;
4. Domestic helpers or persons in the personal service of another;629
3. Underground mine workers;630
f.
4. Employees of government‐owned and/or controlled corporations organized under the Corporation Code
(without original charters).631
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628 Section 1, Rule II, Implementing Rules of the Retirement Pay Law; Labor Advisory on Retirement Pay Law dated Oct. 24, 1996, issued by Secretary Leonardo A. Quisumbing.
629 Labor Advisory on Retirement Pay Law dated Oct. 24, 1996. (Note: Under the original version of the Rules Implementing the New Retirement Pay Law (Republic Act No. 7641), domestic helpers and persons in the personal service of another were declared not covered thereby.
However, they were subsequently included in its coverage by virtue of Department Order No. 20, issued by Secretary Ma. Nieves Roldan Confesor on May 31, 1994. On October 24, 1996, Secretary Leonardo A. Quisumbing issued his Labor Advisory on the Retirement Pay Law
where they have been expressly and categorically included within the coverage of this law).
630 R.A. No. 8558.
631 Postigo, et al., v. Philippine Tuberculosis Society, Inc., [G.R. No. 155146, January 24, 2006]/
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2. EXCLUSIONS FROM COVERAGE.

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Article 287, as amended, does not apply to the following employees:
1. Employees of the national government and its political subdivisions, including government‐owned and/or
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controlled corporations, if they are covered by the Civil Service Law and its regulations.
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2. Employees of retail, service and agricultural establishments or operations regularly employing not more
than ten (10) employees. These terms are defined as follows:
a. “Retail establishment” is one principally engaged in the sale of goods to end‐users for personal or
household use. It shall lose its retail character qualified for exemption if it is engaged in both retail and
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wholesale of goods.
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b. “Service establishment” is one principally engaged in the sale of service to individuals for their own or
household use and is generally recognized as such.
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c. “Agricultural establishment/operation” refers to an employer which is engaged in agriculture. This
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term refers to all farming activities in all branches and includes, among others, the cultivation and
tillage of soil, production, cultivation, growing and harvesting of any agricultural or horticultural
commodities, dairying, raising of livestock or poultry, the culture of fish and other aquatic products in
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farms or ponds, and any activities performed by a farmer or on a farm as an incident to, or in
conjunction with, such farming operations, but does not include the manufacture and/or processing of
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sugar, coconut, abaca, tobacco, pineapple, aquatic or other farm products.632
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3. COMPONENTS OF RETIREMENT PAY.

a. One‐half (½) month salary.
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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 287, shall be
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entitled to retirement pay equivalent to at least one‐half (½) month salary for every year of service, a fraction of at least
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six (6) months being considered as one (1) whole year.633
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b. Components of one‐half (½) month salary.
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For purposes of determining the minimum retirement pay due an employee under Article 287, the term “one‐
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half month salary” shall include all of the following:
(a) Fifteen (15) days salary of the employee based on his latest salary rate. The term “salary” includes all
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remunerations paid by an employer to his employees for services rendered during normal working days
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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
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Secretary of Labor and Employment, of food, lodging or other facilities customarily furnished by the
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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
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the employees;
(b) The cash equivalent of five (5) days of service incentive leave;
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(c) One‐twelfth (1/12) of the 13th month pay due the employee; and
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(d) All other benefits that the employer and employee may agree upon that should be included in the
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computation of the employee’s retirement pay.634
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c. “One‐half (½) month salary” means 22.5 days.
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To dispel any further confusion on the meaning of “one‐half [½] month salary” provided in Article 287, the
Supreme Court, in the case of Capitol Wireless, Inc. v. Confesor, [G.R. No. 117174, November 13, 1996, 264 SCRA 68,
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77], simplified its computation by declaring that it means the total of “22.5 days” arrived at after adding 15 days plus 2.5
days representing one‐twelfth [1/12] of the 13th month pay plus 5 days of service incentive leave.
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Evidently, the law expanded the concept of “one‐half month salary” from the usual one‐month salary divided
by two.635
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d. One‐half month salary of employees who are paid by results.
For covered workers who are paid by results and do not have a fixed monthly rate, the basis for the
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determination of the salary for fifteen (15) days shall be their average daily salary (ADS). The ADS is the average salary for
the last twelve (12) months reckoned from the date of their retirement, divided by the number of actual working days in
that particular period.636
f.

e. Five (5) days of service incentive leave, how reckoned.
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632 Section 2, Rule II, Implementing Rules of the Retirement Pay Law; Labor Advisory on Retirement Pay Law dated Oct. 24, 1996.
633 Article 287, Labor Code; Section 5.1, Rule II, Implementing Rules of the Retirement Pay Law; Labor Advisory on Retirement Pay Law dated Oct. 24, 1996 issued by Secretary Leonardo A. Quisumbing.
634 Article 287, Labor Code; Section 5.2, Rule II, Implementing Rules of the Retirement Pay Law.
635 Labor Advisory on Retirement Pay Law dated Oct. 24, 1996, issued by Secretary Leonardo A. Quisumbing.
636 Section 5.3, Rule II, Ibid..
45

The five (5) days of service incentive leave provided under Article 287 as part of the retirement benefit of one‐
half (½) month salary for every year of service should be paid in full. It should not be computed on the basis of 1/12 of
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the 5‐day service incentive leave (SIL).637

f. 1/12 of 13th month pay and 5 days of service incentive leave (SIL) should not be included if the employee
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was not entitled to 13th month pay and SIL during his employment.
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Supposing the retiring employee, by reason of the nature of his work, was not entitled to 13th month pay or to
the service incentive leave pay pursuant to the exceptions mentioned in the 13th Month Pay Law and the Labor Code,
should he be paid upon retirement, in addition to the salary equivalent to fifteen (15) days, the additional 2.5 days
representing one‐twelfth [1/12] of the 13th month pay as well as the five (5) days representing the service incentive leave
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for a total of 22.5 days?
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This question was answered in the negative in the case of R & E Transport, Inc. v. Latag, [G.R. No. 155214,
February 13, 2004]. The Supreme Court in this case ruled that employees who are not entitled to 13th month pay and
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service incentive leave pay while still working should not be paid the entire “22.5 days” but only the fifteen (15) days
salary. In other words, the additional 2.5 days representing one‐twelfth [1/12] of the 13th month pay and the five (5)
days of service incentive leave should not be included as part of the retirement benefits.
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The employee in this case was a taxi driver who was being paid on the “boundary” system basis. It was
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undisputed that he was entitled to retirement benefits after working for fourteen (14) years with R & E Transport, Inc.
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However, he was not entitled to the 13th month pay since Section 3 of the Rules and Regulations Implementing P. D. N.
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851638 exempts from its coverage employers of those who are paid on purely boundary basis. He was also not entitled to
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the 5‐day service incentive leave pay pursuant to Section 1 of Rule V, Book III of the Rules to Implement the Labor Code
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which expressly excepts field personnel and other employees whose performance is unsupervised by the employer.639

g. Distinction between drivers paid on “boundary system” and conductors paid on commission basis.
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The said R & E Transport case should be distinguished from the 2010 case of Serrano v. Severino Santos
Transit, [G.R. No. 187698, August 9, 2010], which involves a bus conductor (petitioner) who worked for 14 years for
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respondent bus company which did not adopt any retirement scheme. It was held herein that even if petitioner as bus
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conductor was paid on commission basis, he falls within the coverage of R.A. 7641 and its implementing rules. This
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means that his retirement pay should include the cash equivalent of the 5‐day SIL and 1/12 of the 13th month pay for a
total of 22.5 days. The affirmance by the Court of Appeals of the reliance by the NLRC on R & E Transport case was held
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erroneous. For purposes of applying the law on service incentive leave (SIL), as well as on retirement, there is a
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difference between drivers paid under the “boundary system” and conductors who are paid on commission basis. This is
so because in practice, taxi drivers do not receive fixed wages. They retain only those sums in excess of the “boundary”
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or fee they pay to the owners or operators of the vehicles. Conductors, on the other hand, are paid a certain percentage
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of the bus’ earnings for the day. It bears emphasis that under P.D. 851 or the SIL Law, the exclusion from its coverage of
workers who are paid on a purely commission basis is only with respect to field personnel. The more recent case of Auto
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Bus Transport Systems, Inc., v. Bautista, [G.R. No. 156367, May 16, 2005, 458 SCRA 578, 587‐588], clarifies that an
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employee who is paid on purely commission basis is entitled to SIL.

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h. Retirement of part‐time employees.
There can be no question that part‐time workers are also entitled to retirement pay of “one‐half month salary”
it
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for every year of service under Article 287, as amended by Republic Act No. 7641, after satisfying the following
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conditions precedent for optional retirement: (a) there is no retirement plan between the employer and employee; (b)
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the employee should have reached the age of sixty (60) years; and (c) should have rendered at least five (5) years of
of
service with the employer. Meanwhile, the compulsory retirement age under the law is sixty‐five (65) years. (Explanatory
Bulletin on Part‐Time Employment dated Jan. 02, 1996 issued by Acting DOLE Secretary Jose S. Brillantes).
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Applying, therefore, the principles under Republic Act No. 7641, the components of retirement benefits of part‐
time workers may likewise be computed at least in proportion to the salary and related benefits due them.
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4. RETIREMENT PAY UNDER R.A. 7641 VIS‐À‐VIS RETIREMENT BENEFITS UNDER SSS AND GSIS LAWS.
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a. SSS retirement pay is separate and distinct from the retirement pay under the Labor Code, as amended.
The employee’s retirement pay under Article 287 of the Labor Code or under a unilaterally promulgated
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retirement policy or plan of the employer or under a CBA, is separate and distinct from the retirement benefits granted
under Republic Act No. 8282, otherwise known as the “Social Security Act of 1997” (formerly known as the “Social
Security Law” [Republic Act No. 1161, as amended]) which provides, thus:
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“Section 12‐B. Retirement benefits. ‐ (a) A member who has paid at least one hundred

twenty monthly contributions prior to the semester of retirement; and who (1) reached the age of
sixty years and is already separated from employment or has ceased to be self‐employed; or (2) has
f.
reached the age of sixty‐five (65) years, shall be entitled for as long as he lives to the monthly pension:
Provided, That he shall have the option to receive his first eighteen (18) monthly pensions in lump
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sum discounted at a preferential rate of interest to be determined by the SSS.
“(b) A covered member who is sixty (60) years old at retirement and who does not qualify for
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pension benefits under paragraph (a) above, shall be entitled to a lump sum benefit equal to the total
637 Enriquez Security Services, Inc. v. Cabotaje, [G.R. No. 147993, July 21, 2006].
638 Granting the 13th Month Pay.
639 See also Article 82 of the Labor Code.
46

contributions paid by him and on his behalf: Provided, That he is separated from employment and is
not continuing payment of contributions to the SSS on his own.
n
“(c) The monthly pension shall be suspended upon the reemployment or resumption of self‐
employment of a retired member who is less than sixty‐five years old. He shall again be subject to
a
Section Eighteen and his employer to Section Nineteen of this Act.
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“(d) Upon the death of the retired member, his primary beneficiaries as of the date of his
retirement shall be entitled to receive the monthly pension: Provided, That if he has no primary
beneficiaries and he dies within sixty (60) months from the start of his monthly pension, his secondary
beneficiaries shall be entitled to a lump sum benefit equivalent to the total monthly pensions
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corresponding to the balance of the five‐year guaranteed period, excluding the dependents’ pension.
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“(e) The monthly pension of a member who retires after reaching age sixty (60) shall be the
higher of either: (1) the monthly pension computed at the earliest time he could have retired had he
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been separated from employment or ceased to be self‐employed plus all adjustments thereto; or (2)
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the monthly pension computed at the time when he actually retires.”

b. GSIS retirement applies to government employees only.
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For government employees, Republic Act No. 8291, otherwise known as the “Government Service Insurance
an
System Act of 1997” [formerly Presidential Decree No. 1146, otherwise known as “The Revised Government Insurance
n
Act of 1977”], provides for the following retirement benefits:
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“Section 13. Retirement benefits. ‐ (a) Retirement benefits shall be:
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“(1) the lump sum payment as defined in this Act payable at the time of retirement
plus an old‐age pension benefit equal to the basic monthly pension payable
monthly for life, starting upon the expiration of the five‐year (5) guaranteed
to
ia
period covered by the lump sum; or
“(2) cash payment equivalent to eighteen (18) months of his basic monthly pension
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plus monthly pension for life payable immediately with no five‐year (5)
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guarantee.
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na
“(b) Unless the service is extended by appropriate authorities, retirement shall be
compulsory for an employee of sixty‐five (65) years of age with at least fifteen (15) years of service:
se
Provided, That if he has less than fifteen (15) years of service, he may be allowed to continue in the
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ia
service in accordance with existing civil service rules and regulations.
“Section 13‐A. Conditions for entitlement. ‐ A member who retires from the service shall be
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entitled to the retirement benefits enumerated in paragraph (a) of Section 13 hereof: Provided, That:
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“(1) he has rendered at least fifteen (15) years of service;
“(2) he is at least sixty (60) years of age at the time of retirement; and
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“(3) he is not receiving a monthly pension benefit from permanent total disability.
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“Section 14. Periodic pension adjustment. ‐ The monthly pension of all pensioners including
all those receiving survivorship pension benefits shall be periodically adjusted as may be
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recommended by the GSIS actuary and approved by the Board in accordance with the rules and
regulations prescribed by the GSIS.”
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c. Unique case where employees covered by the GSIS law are also entitled to retirement pay under
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the Labor Code.
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Postigo v. Philippine Tuberculosis Society, Inc., [G.R. No. 155146, January 24, 2006], presents quite a unique
of
case. The employees of respondent are covered by the GSIS Law. Upon retirement from the service, some of the
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to
petitioners who were compulsory members of the GSIS obtained retirement benefits from the GSIS. Contending that
respondent is a private sector employer, the retired employees also claimed retirement benefits under Article 287 of the
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Labor Code, as amended by Republic Act No. 7641. Respondent denied their claims on the ground that the
accommodation extended by the GSIS to the petitioners removed them from the coverage of the law. The Supreme
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li
Court, however, affirmed their entitlement to the retirement benefits under the Labor Code since the respondent was
incorporated under the general corporation law and not under a special charter, thus making it a private and not a public
of
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corporation. Further, respondent admitted that although its employees are compulsory members of the GSIS, said
employees are not governed by the Civil Service Law but by the Labor Code. The accommodation under Republic Act
No. 1820 extending GSIS coverage to respondent’s employees did not take away from petitioners the beneficial
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coverage afforded by Republic Act No. 7641. Hence, the retirement pay payable under Article 287 of the Labor Code as
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amended by Republic Act No. 7641 should be considered apart from the retirement benefit claimable by the petitioners
under the social security law or, as in this case, the GSIS Law.
f.
END OF DISCUSSION ON
TOPIC D. TERMINATION OF EMPLOYMENT
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(a) Reasonable connection rule

(5) Fixed term employment

(1) When is there “job contracting”?

(2) When is there “labor-only contracting”?

(4) Effects of finding that there is labor-only contracting

a. Substantive Due Process

(a) Just Causes

(d) Abandonment of employment; Elements that must concur

(e) Termination of employment pursuant to a Union Security Clause

(f) Totality of infractions doctrine

(b) Authorized Causes

(a) Redundancy, Retrenchment and Closure

ii. Requirements for valid retrenchment/redundancy

iv. Standards to be followed

b. Procedural Due Process

(1) Procedure to be observed in termination cases

(1) Reinstatement aspect

(2) Separation pay in lieu of Reinstatement

LABOR LAW: D. TERMINATION OF EMPLOYMENT

LABOR LAW: D. TERMINATION OF EMPLOYMENT

TOPIC UNDER THE SYLLABUS:

LABOR LAW: D. TERMINATION OF EMPLOYMENT

TOPIC UNDER THE SYLLABUS:

Relevant Provision: Article 281, Labor Code

LABOR LAW: D. TERMINATION OF EMPLOYMENT

TOPIC UNDER THE SYLLABUS:

(1) Regular employment

Relevant Provision: Article 280, Labor Code

LABOR LAW: D. TERMINATION OF EMPLOYMENT

(2) Project employment

(a) Indicators of project employment

Relevant Provision: Article 280, Labor Code

50 Article 281, Labor Code.

LABOR LAW: D. TERMINATION OF EMPLOYMENT

LABOR LAW: D. TERMINATION OF EMPLOYMENT

77 Tomas Lao Construction, v. NLRC, G.R. No. 116781, Sept. 5, 1997.

LABOR LAW: D. TERMINATION OF EMPLOYMENT

Relevant Provision: Article 280, Labor Code

(5) Fixed term employment

(a) Requisites for validity na

Relevant Provision: No Labor Code provision on fixed-term employment.94

v. Philippine Veterans Bank, G.R. No. 127673, March 13, 2000.

LABOR LAW: D. TERMINATION OF EMPLOYMENT

(2) When is there “labor-only contracting”?

(3) Conditions that must concur in legitimate job contracting

Relevant Provisions: Articles 106 to 109, Labor Code

LABOR LAW: D. TERMINATION OF EMPLOYMENT

LABOR LAW: D. TERMINATION OF EMPLOYMENT

LABOR LAW: D. TERMINATION OF EMPLOYMENT

(a) Just Causes

b. Procedural Due Process

LABOR LAW: D. TERMINATION OF EMPLOYMENT

TOPIC UNDER THE SYLLABUS:

Relevant Provision: Article 282 [a], Labor Code

152 Section 2, Article III, 1987 Constitution.

156 Article 283, Labor Code.

LABOR LAW: D. TERMINATION OF EMPLOYMENT

Relevant Provision: Article 282 [a], Labor Code

LABOR LAW: D. TERMINATION OF EMPLOYMENT

(a) Just Causes

Relevant Provision: Article 282 [b], Labor Code

LABOR LAW: D. TERMINATION OF EMPLOYMENT