JUST AND AUTHORIZED CAUSE TO TERMINATE EMPLOYMENT

Two Types of Dismissal or Termination

1.   Actual Dismissal
2.   Constructive Dismissal

Authorized Cause for Termination [Art. 297, Labor Code]

1. Serious misconduct;
2. Willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work (work-related)
2.   Gross and Habitual neglect of duty;
3.   Fraud
4.   Willful breach of trust reposed in him by the employer or duly authorized
representative (not mere suspicion)
5.   Commission of a crime or offense by the employee against: a] the person of his
employer or b] any immediate member of his family or c] duly authorized
representative
6.   Other analogous cases

Serious Misconduct or Willful Disobedience [Labor Code, Article 297]

Serious Misconduct = Improper or wrong conduct; the transgression of some

established and definite rule of action, a forbidden act, a dereliction of duty, willful
in character, and implies wrongful intent and not mere error in judgment.

Note: To be considered, the misconduct must be of such grave and aggravated

character and not merely trivial or unimportant. (Villamor Golf Club v. Pehid, G.R. No.
166152)

Elements of Serious Misconduct

1.   There must be misconduct;

2.   The misconduct must be of such grave and aggravated character;
3.   Relates to the performance of the employee’s duties; and
4.   A showing that the employee becomes unfit to continue working for the
employer. (D.O. No. 147-15, Sec. 5.2[a])

Examples

1.   Reckless Driving. The irregularities or infractions committed by the bus driver,

including his tendency to speed up during his trips, his reckless driving, his
picking up passengers in the middle of the road, his racing with other buses and
 his jostling for vantage positions constitute as serious misconduct (Sampaguita
Auto Transport v. NLRC & Sagad, G.R. No. )
2.   The charge of drug abuse inside the company’s premises and during working
hours (Bughaw v. Treasure Island, G.R. No. 173151)
3.   Sexual harassment;
4.   Fighting within company premises;
5.   Accusatory and inflammatory language used by an employee to an employer or
superior (Nissan Motors Phils. v. Angelo, G.R. No. 164181, 2011)
6.   Falsification of time records;
7. Gross immorality;
8. Sexual intercourse inside company premises and during work hours (Imasen
Philippine Manufacturing Corp v. Alcon, G.R. No. 194884)
9. Theft of company property
10. Habitual Infractions, a series of irregularities when put together may constitute
serious misconduct (Gustilo v. Wyeth Phil., G.R. No. 149629) or the totality of
infractions doctrine

Note: In one case, the Court considered the substantial amount of loss caused to the
company in holding that the infraction of the employee constituted serious
misconduct, despite it only being gross and not habitual. (LBC Express v. Mateo, G.R.
No. 168215, 2009)

Elements of Willful Disobedience/Insubordination

1.   There must be disobedience or insubordination;

2.   The disobedience or insubordination must be willful or intentional characterized
by a wrongful and perverse attitude;
3.   The order violated must be reasonable, lawful, and made known to the
employee; and
4.   The order must pertain to the duties which he has been engaged to discharge.
(D.O. No. 147-15)

Note: This ground presupposes an act that is willful in character and implies a
wrongful intent. The wrongful and perverse attitude must be present.

Examples When There Was No Wrongful Intent

In a case, where an employee lent his ID The employee lent his ID to the driver who
forgot his ID, to facilitate entry into the company premises. The court said that there
was no wrongful intent. In fact, the employee who lent his ID to the other worker
was for the benefit of the employer. (Dongon v. Rapid Movers and Forwarders Co., Inc.,
G.R. No. 163431, 2013)
A teacher held various teaching positions in other schools without asking
permission from her superior, which is against the school’s rules. However, it was
ruled that the teacher’s performance was apparently unaffected by her external
teaching engagements, as she was found by the grievance committee to be one of the
better professors and was even offered the Chairmanship of her college. Also, the
fact that the teacher merely wanted to alleviate her family’s poor financial conditions
is a justification that the school failed to refute. (Moreno v. San Sebastian College-
Recoletos, G.R. No. 175283, 2008)

Gross and Habitual Neglect (Labor Code, Article 297[b])

Gross Neglect= An absence of that diligence that an ordinarily prudent man would
use in his own affairs (DOLE Manual, Sec. 4343.01[27])

Habitual Neglect= Implies repeated failure to perform one’s duties over a period of
time (JGB and Associates, Inc. v. NLRC, G.R. no. 109390, 1996)

Elements of Gross and Habitual Neglect:

1. There must be neglect of duty; and

2. The negligence must be both gross and habitual in character. (D.O. No. 147-15, Sec.
5.2[c])

Exception: Where the negligence was gross, but not habitual, the SC still dismissed
the erring employee. The SC agreed that the resultant damage caused by the
employee’s negligence should be considered in the dismissal of the employee. In this
case, the damage went as far as claiming the life of a child. (School of Holy Spirit v.
Taguim, G.R. No. 165565, 2008)

Note: Actual damage, loss, or injury is not an essential requisite (DOLE Manual, Sec.
4343.01[2])

Forms of neglect of duty

1.   Habitual tardiness and absenteeism;

2.   Abandonment of work
3.   Failure to report for work or absence without valid or justifiable reason; and cear
intention to sever EER is manifested by some overt acts (Tamblot Security and
General Services v. Item, G.R. No. 199314, 2015)
Examples

1. Poor performance Previous infractions by the employee should have been acted
upon appropriately by the employer before terminating the former.

As a general concept, “poor performance” is equivalent to inefficiency and

incompetence in the performance of official duties. An unsatisfactory rating can be
just cause for dismissal only if it amounts to gross and habitual neglect of duties.
Thus, the fact that an employee’s performance is found to be poor and
unsatisfactory does not necessarily mean that the employee is grossly and habitually
negligent of his duties. (Universal Staffing Inc. v. NLRC, G.R. No. 177576, 2008)

2. Habitual Tardiness

Habitual tardiness is a form of neglect of duty. When the tardiness and/or

absenteeism occurred frequently and repeatedly within an extensive period of time.
(RB Michael Press v. Galit, G.R. No. 153510, 2008)

3. Gross negligence includes gross inefficiency

Article 290 of the Labor Code provides that one of the just causes for terminating an
employment is the employee's gross and habitual neglect of his duties. This cause
includes gross inefficiency, negligence and carelessness (Century Iron Works, Inc. v.
Bañas, G.R. No. 184116, 2013)

Fraud or Willful Breach of Trust (Labor Code, Article 297

Elements of Fraud or Willful Breach of Trust

1.   There must be an act, omission, or concealment;

2.   The act, omission or concealment involves a breach of legal duty, trust, or
confidence justly reposed;
3.   It must be committed against the employer or his/her representative; and
4.   It must be in connection with the employees’ work. (D.O. No. 147-15, Sec. 5.2[d])

Elements of Loss of Confidence

1.   There must be an act, omission or concealment;

2.   The act, omission or concealment justifies the loss of trust and confidence of the
employer to the employee;
3.   The employee concerned must be holding a position of trust and confidence;
4.   The loss of trust and confidence should not be simulated;
5.   It should not be used as a subterfuge for causes which are improper, illegal, or
unjustified; and
6.   It must be genuine and not a mere afterthought to justify an earlier action taken
in bad faith. (D.O. No. 147-15, Sec. 5.2[e])

Examples

1. A treasury Sales Division Head of a bank personally and actively participated in

the diversion of bank clients' funds to products of other companies that yielded
interests higher than what the employer bank offered. The managerial employee
was found to be dealing with customers in a manner with conflict of interest
(Genuino v. NLRC, G.R. Nos. 142732-33 & 142753-54, 2007)

2. A managerial employee authorized the transfer of funds without the knowledge

or consent of the Board and in direct contravention of the company's Distribution
Rules constitutes valid and legal ground sufficient enough to warrant her dismissal.
The fact that the employee did not use the funds for her personal gain and that the
transfer thereof redounded to the benefit of the company is of no moment. (Gaite v.
Filipino Society of Composers, Authors and Publishers, Inc., G.R. No. 219324, 2018)

Positions of trust and confidence

Managerial employees: Those vested with the powers or prerogatives to lay down
management policies and to hire, transfer, suspend, lay-off, recall, discharge, assign
or discipline employees or effectively recommend such managerial actions.

Fiduciary Rank and file: Those who in the normal and routine exercise of their
functions, regularly handle significant amounts of money or property. Examples are
cashiers, auditors, property custodians, etc. (Prudential Guarantee and Assurance
Employee Labor Union v. NLRC, G.R. No. 185335, 2012)

Confidential employees are those charged with custody and protection of

employer’s property like a cashier (this is different from the “confidential
employees” in labor relations)

Commission of a Crime or Offense: (Labor Code, Article 297

Commission of a crime or offense- refers to an offense by the employee against the

person of his employer or any immediate member of his family or his duly
authorized representative.
Elements

1. There must be an act or omission punishable/ prohibited by law; and

2. The act or omission must be voluntary and/or willful on the part of the
employees. (D.O. No. 147-15, Sec. 5.2[f])

Immediate Members of the Family

1.   Between husband and wife;

2.   Between parents and children;
3.   Among other ascendants and descendants;
4.   Among brothers and sisters, whether of the full or half-blood (see Family Code,
Art. 150)

Past Infractions Rule Previous offenses may be used as justification for dismissal
from work only if the past infractions are related to the subsequent offense upon
which the basis of termination is decreed. (Salas v. Aboitiz One Inc., G.R. No. 178236,
2008)

Past offenses/infractions can be taken into account in determining the appropriate

penalty. If the past infractions have already been penalized, the employer can no
longer punish the employee for the second time for the same offense, otherwise it is
going to be analogous to double jeopardy. (Santos v. Integrated Pharmaceutical, Inc.,
G.R. No. 204620, 2016)

Analogous Cases [Labor Code, Article 297]

Requisites

1.   There must be an act or omission similar to those specified just causes;

2.   The act or omission must be voluntary and/or willful on the part of the
employees (D.O. No. 147-15, Sec. 5.2[g])

Analogous Cases must be due to the voluntary and/or willful act or omission of the
employee. (Cosmos Bottling Corp. v. Fermin, G.R. No. 193676, 2012)

Examples

1.   Abandonment
2.   Violation of safety rules
3.   Gross inefficiency
4.   Wrongful acts of employee against the company
5.   Violation of code of discipline
 6.   Failure to heed an order not to join an illegal picket
7.   Immorality
8.   Sexual harassment

Other Just Causes under other Labor Code provisions

1.   Union officers who, with knowledge, participate in an illegal strike.

2.   Any employee who commits an illegal act during a strike
3.   Strikers who violate orders, prohibitions or injunctions issued by the NLRC, the
Secretary of Labor and Employment or the President
4.   Violation of union security clause in the CBA

AUTHORIZED CAUSE TO TERMINATE EMPLOYMENT

1.   Installation of Labor Saving Devices

Elements of LSD

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

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

Due Process Requirements for Termination Due to Installation of Labor-Saving

Device

1.   The employer served a written notice both to the employees and to the DOLE
at least 30 days prior to the intended date of termination; and
2.   The employer pays the employees separation pay equivalent to one month
pay or at least one month pay for every year of service, whichever is higher, a
fraction of at least six months being considered as one whole year. (Labor
Code, Art. 298)
2.   Redundancy

Elements of Redundancy

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

2.   The positions or services are in excess of what is reasonably demanded by the
actual requirements of the enterprise to operate in an economical and efficient
manner;
3.   There must be good faith in abolishing redundant positions;
4.   There must be fair and reasonable criteria in selecting the employees to be
terminated; and
5.   There must be an adequate proof of redundancy such as but not limited to the
new staffing pattern, feasibility studies/ proposal, on the viability of the
newly created positions, job description and the approval by the management
of the restructuring.

Requisites for Implementation of a Valid Redundancy Program

1.   A written notice served on both the employees and the DOLE at least one month
prior to the intended date of retrenchment
2.   Payment of separation pay equivalent to at least one month pay or at least one
month pay for every year of service, whichever is higher
3.   Good faith in abolishing the redundant positions
4.   Fair and reasonable criteria in ascertaining what positions are to be declared
redundant and accordingly abolished. (Lopez Sugar Corporation v. Franco, G.R. No.
148195, 2005)

3.   Retrenchment

Elements of Retrenchment or Downsizing

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

business losses;
2.   The losses, if already incurred, are not merely de minimis, but substantial,
serious, actual and real, or if only expected, are reasonably imminent.
3.   The expected or actual losses must be proved sufficient and convincing
evidence such as financial statements (audited by an independent firm)
over a span of several years OR some reasonable period of time, and not
merely the actual year of business loss;
4.   The retrenchment must be in good faith for the advancement of its interest
and not to defeat or circumvent the employees’ right to security of tenure;
and
 5.   There must be fair and reasonable criteria in ascertaining who would be
dismissed and who would be retained among the employees, such as
status, efficiency, seniority, physical fitness, age, and financial hardship
for certain workers.

Two kinds of losses to justify retrenchment

1.   Incurred losses which are substantial, serious, actual and real; and
2.   Expected losses – which are reasonably imminent. (Sanoh Fulton Phils. Inc. v.
Bernardo & Tagohoy, G.R. No. 187214, 2013)

Note: The phrase “to prevent losses” means that retrenchment or termination
from the service of some employees is authorized to be undertaken by the
employer sometime before the losses anticipated are actually sustained or
realized. Actual losses need not set in prior to retrenchment (Cajucom VII v. TPI
Phil. Cement Corp., G.R. No. 149090, 2005)

Fair and Reasonable Criteria In selecting employees to be dismissed, fair and

reasonable criteria must be used, such as but not limited to: (a) less preferred
status (e.g., temporary employee), (b) efficiency and (c) seniority.

Example when Criteria was not Used

The employer] demonstrated arbitrariness in the selection of which of its

employees to retrench. By discarding the cabin crew personnel’s previous years
of service and taking into consideration only 1 year’s worth of job performance
for evaluation, PAL virtually did away with the concept of seniority, loyalty and
past efficiency, and treated all cabin attendants as if they were on equal footing.
(FASAP v. Philippine Airlines, Inc., G.R. No. 178083, 2008; G.R. No. 178083, 2009)

“Last In, First Out” Rule (LIFO) When there are two or more employees
occupying the same position in the company affected by the retrenchment
program, the last one employed will necessarily be the first to go (Maya Farms
Employees Organization v. NLRC, G.R. No. 106256, 1994) However: No law
mandates LIFO. A host of relevant factors come into play in determining cost-
efficient measures in choosing the employees who will be retained or separated
to save the company from closing chop. In determining these issues,
management has to enjoy a pre-eminent role. (Asian Alcohol Corp. v. NLRC, G.R.
No. 131108, 1999)
4.   Closure or Cessation of Business

Elements of Closure or Cessation of Operation

1.   There must be a decision to close or cease operation of the enterprise by the

management;
2.   The decision was made in good faith; and
3.   There is no other opinion available to the employer except to close or cease
operations.

Due Process Requirements for Termination Due to Closure or Cessation of

Operation

1.   Service of written notice to the employees and to the DOLE at least one month
before the intended date thereof;
2.   The cessation of or withdrawal from business operations must be bona fide in
character; and
3.   When Closure is not due to losses. Payment to the employees of termination pay
amounting to at least one-half (1/2) month pay for each year of service, or one
month pay, whichever is higher. (Azucena, The Labor Code with Comments and
Cases Volume II-B, 903)
4.   When Closure is due to losses. Article 283 of the Labor Code does not obligate an
employer to pay separation benefits when the closure is due to serious losses. To
require an employer to be generous when it is no longer in a position to do so, in
our view, would be unduly oppressive, unjust, and unfair to the employer.
(GSWU- NAFLU-KMU v. National Labor Relations Commission, G.R. No. 165757,
2006)

Sale or transfer of business

Change of ownership of business, not an authorized cause but may

be treated as closure or cessation of business;
Liability of buyer or transferee;
Obligations to hire employees when provided in contract of sale or
transfer of assets;
Previous owners remains liable to its employees even if there is an
undertaking to assume responsibility as new owner;
New owner is not assignee of CB sale in good faith;
 Merger

The employees of merged companies are deemed absorbed by the

new company;
Surviving or consolidated corporations area liable for all the
liabilities and obligations of each of the constituent corporations in
the same manner as if such surviving or consolidated corporation
had itself incurred such liabilities or obligations;
Transfer of business in case of death of the owner, the heir is not
liable by the labor contracts between the deceased and his
employees, file claims at the intestate proceedings.

5.   Disease

Elements:

1.The employee is suffering from disease;

2. His continued employment is either a) prohibited by law, 2) prejudicial
to his health; 3) prejudicial to the health of his co-employees;
3.The medical certificate should be procured by the employer;
4. Notice to DOLE
5. Separation pay.