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TERMINATION OF EMPLOYMENT
TOPICS PER SYLLABUS
A. Employer-employee relationship
1. Four-fold test
2. Kinds of employment
a. Probationary
b. Regular
c. Project employment
d. Seasonal
e. Casual
f. Fixed-term
3. Job contracting
a. Articles 106 to 109 of the Labor Code
b. Department Order No. 18-A
c. Department Circular No. 01-12
d. Effects of Labor-Only Contracting
e. Trilateral relationship in job contracting
A.
EMPLOYER-EMPLOYEE RELATIONSHIP
1.
Four-Fold Test
1. FOUR-FOLD TEST.
a. Selection and engagement of the employee;
b. Payment of wages or salaries;
c. Exercise of the power of dismissal; or
d. Exercise of the power to control the employees conduct. 1
These tests, however, are not fool-proof as they admit of exceptions.
2. CONTROL TEST, THE CONTROLLING TEST.
The control test is the controlling test. It addresses the issue of whether the
employer controls or has 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 methods by which the
same is to be accomplished.2
3. SOME PRINCIPLES ON EMPLOYER-EMPLOYEE RELATIONSHIP.
a. There is no uniform test prescribed by law or jurisprudence to determine the
existence of employer-employee relationship. 3
b. 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
c. 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
(b) Project employees referring to those whose employment has been fixed for a
specific project or undertaking, the completion or termination of which has been
determined at the time of the engagement of the employee;
(c) Seasonal employees referring to those who work or perform services which are
seasonal in nature, and the employment is for the duration of the season; and
(d) Casualemployees referring to those who are not regular, project, or seasonal
employees.25
A fifth one, fixed-term employees, must be added to the above enumeration. 26 This,
however, is not provided in the Labor Code but recognized only in jurisprudence. 27
2. CLASSIFICATION OF EMPLOYMENT AS TO NATURE OF WORK.
According to the 2013 case ofGMA Network, Inc. v. Pabriga, 28 pursuant to Article
280, another classification may be formed in accordance with the nature of employment, to
wit:
(1) Employees performing activities which are usually necessary or desirable in the
employers usual business or trade can either be regular, project or
seasonal employees; while
(2) Those performing activities not usually necessary or desirable in the employers
usual business or trade are, as a general rule, casualemployees.
The reason for this distinction may not be readily comprehensible to those who
have not carefully studied these provisions; only employers who constantly need the
specified tasks to be performed can be justifiably charged to uphold the constitutionally
protected security of tenure of the corresponding workers. The consequence of the
distinction is found in Article 279 of the Labor Code. 29 With respect to the activities
of projectemployees, they may or may not be usually necessary or desirable in the usual
business or trade of the employer, as discussed by the Court in some cases. 30
a.
PROBATIONARY EMPLOYMENT31
1. NATURE OF PROBATIONARY EMPLOYMENT.
A probationary employee is one who, for a given period of time, is on observation,
evaluation and trial by an employer during which the employer determines whether or not
he is qualified for permanent employment. During the probationary period, the employer is
given the opportunity to observe the skill, competence, attitude and fitness of the
probationary employee while the latter seeks to prove to the employer that he has the
qualifications to meet the reasonable standards for permanent employment. 32
2. PROBATIONARY PERIOD.
As a general rule, it should not exceed six (6) months from the date the employee
started working.33 One becomes a regular employee upon completion of his six-month
period of probation.34
3. EXCEPTIONS.
The 6-month period provided in Article 281 admits of certain exceptions such as:
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;
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) months is undoubtedly a regular employee. 35
Procedural
due
process
is
required
only
in
the
case
of
the first and second grounds (dismissal due to just or authorized cause) .
The thirdground (failure to qualify as a regular employee) does not require notice
and hearing. Due process of law for the third ground consists of making the
reasonable standards expected of the employee during his probationary
employment known to him at the time of his engagement. 50
2. Termination to be valid must be done prior to lapse of probationary period.51
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. 52
4. Peremptory and arbitrary termination of probationary employees is not allowed. 53
5. No obligation to pay unexpired portion in case of valid termination prior to lapse
of probationary period.54
6. Agabon doctrine55 applies if dismissal of probationary employee for a just cause is
without due process. Thus, the termination is considered legal but the employee
will be awarded an indemnity in the form of nominal damages of P30,000.00. 56
7. Jaka doctrine57 applies if dismissal of probationary employee for an authorized
cause is without due process. The amount of indemnity is higher: P50,000.00.
b.
REGULAR EMPLOYMENT58
1. TWO (2) KINDS OF REGULAR EMPLOYEES.
The regular employees under Article 280 consist of the following:
(1) Those engaged to perform activities which are usually necessary or desirable in
the usual business or trade of the employer; and
(2) Those who have rendered at least one (1) year of service, whether such service is
continuous or broken, with respect to the activity in which they are employed. 59
2. THREE (3) WAYS OF ATTAINING REGULAR EMPLOYMENT.
Under the Labor Code, regular employment may be attained in either of three (3)
ways, namely:
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. 60
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 employed and his
employment shall continue while such activity exists. 61
3. By probationary employment. - The employment is considered regular when
the employee is allowed to work after a probationary period. 62
3. SOME PRINCIPLES ON REGULAR EMPLOYMENT.
a.
b.
c.
d.
e.
f.
g.
h.
The act of hiring and re-hiring the employees over a period of time without
considering them as regular employees evidences bad faith on the part of the
employer.73
i.
1. CONCEPT.
Project employees are those hired:
1. for a specific project or undertaking; and
2. the completion or termination of such project has been determined at the time
of their engagement.76
2. TWO (2) CATEGORIES OF PROJECT EMPLOYEES.
In order to safeguard the rights of workers against the arbitrary use of the
word project to prevent employees from attaining the status of regular employees,
employers claiming that their workers are project employees should not only prove that the
duration and scope of the employment was specified at the time they were engaged, but also that
there was indeed a project. 77
The two (2) categories of project employees on the basis of project for which they
have been engaged to perform are as follows:
(1) A particular job or undertaking that is within the regular or usual business of
the employer company, but which is distinct and separate, and identifiable
as such, from the other undertakings of the company ; or
(2) A particular job or undertaking that is not within the regular business of the
corporation. 78
In the realm of business and industry, we note that project could refer to one or
the other of at least two (2) distinguishable types of activities . Firstly, aproject
could refer to a particular job or undertaking that is within the regular or usual
business of the employer company, but which is distinct and separate, and
identifiable as such, from the other undertakings of the company. Such job or
undertaking begins and ends at determined or determinable times. The typical example
of this first type of project is a particular construction job or project of a construction
company. A construction company ordinarily carries out two or more [distinct]
identifiable construction projects: e.g. , a twenty-five-storey hotel in Makati; a residential
condominium building in Baguio City; and a domestic air terminal in Iloilo City.
Employees who are hired for the carrying out of one of these separate projects, the
scope and duration of which has been determined and made known to the employees
at the time of employment, are properly treated as project employees, and their
services may be lawfully terminated at completion of the project.
The term project could also refer to, secondly , a particular job or undertaking
that is not within the regular business of the corporation. Such a job or undertaking
must also be identifiably separate and distinct from the ordinary or regular business
operations of the employer. The job or undertaking also begins and ends at determined
or determinable times.79
applies. If due to authorized cause, due process applicable to Articles 283 and 284
terminations should be followed.
5. INDICATORS OF PROJECT EMPLOYMENT.
a. 6 indicators of project employment.
Either one or more of the following circumstances, among others, may be
considered as indicator/s that an employee is a project employee:
1. The duration of the specific/identified undertaking for which the worker is
engaged is reasonably determinable.
2. Such duration, as well as the specific work/service to be performed, are defined in
an employment agreement and is made clear to the employee at the time of
hiring.
3. The work/service performed by the employee is in connection with the particular
project or undertaking for which he is engaged.
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 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 dismissals or suspensions.
6. An undertaking in the employment contract by the employer to pay completion
bonus to the project employee as practiced by most construction companies. 83
b. Some principles on project employment.
1. Project employees should be informed of their status as such at inception of the
employment relationship.84
2. There must be a written contract of project employment stating the duration of
the project employment as well as the particular work or service to be
performed.85
3. A written project employment contract is an indispensable requirement. 86
4. Failure to present contract of project employment means that employees are
regular.87
5. Regular employment is inconsistent with project employment. In other words, a
regular employee cannot be at the same time a project employee. 88
6. Intervals in employment contracts indicate project employment. 89
7. Continuous, as opposed to intermittent, rehiring shows that employee is regular. 90
8. Project-to-project basis of employment is valid.91
9. Length of service is not a controlling determinant of employment tenure. 92
10. Project employment should not be confused with fixed-term employment to
justify continuous rehiring of so-called project employees. 93
c. Work pool principle.
As a general rule, employers may or may not form a work pool. A work pool refers
to a group of workers from which an employer like a construction company draws the
workers it deploys or assigns to its various projects or any phase/s thereof. Members of
a work pool may consist of:
their services may be needed. They are not, strictly speaking, separated from the service but
are merely considered as on leave of absence without pay until they are re-employed. Their
employment relationship is never severed but only suspended. As such, they can be
considered as being in the regular employment of the employer. 107
3. REQUISITES FOR REGULARITY OF EMPLOYMENT OF SEASONAL EMPLOYEES.
The case of Hacienda Fatima v. National Federation of Sugarcane Workers Food and General Trade, 108 enunciates the requisites in order that a seasonal employee
may be deemed to have attained regularity of employment as such, thus:
1. The seasonal employee should perform work or services that are seasonal in
nature; and
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 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.
e.
CASUAL EMPLOYMENT109
1. MEANING OF CASUAL EMPLOYMENT.
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 employee at the time of engagement. 110
2. SOME PRINCIPLES ON CASUAL EMPLOYMENT.
Casual employee becomes regular after one year of service by operation of law. 111
No regular appointment papers necessary for casual employees to become regular. 112
The one (1) year period should be reckoned from the hiring date. 113
Repeated rehiring of a casual employee makes him a regular employee. 114
The wages and benefits of a casual employee whose status is converted into regular
employment should not be diminished.115
f.
FIXED-TERM EMPLOYMENT116
1. REQUISITES FOR VALIDITY OF FIXED-TERM CONTRACTS OF EMPLOYMENT.
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 force, duress or improper pressure being brought to
bear upon the employee and absent any other circumstances vitiating his
consent; or
2. It satisfactorily appears that the employer and employee dealt with each other on
more or less equal terms with no moral dominance whatever being exercised by
the former on the latter.117
If the foregoing criteria are not present, the fixed-term contract of employment
should be struck down for being illegal. 118
2. SOME PRINCIPLES ON FIXED-TERM EMPLOYMENT.
Fixed-term employment is valid even if duties are usually necessary or desirable in the
employers usual business or trade. 119
Notice of termination not necessary in fixed-term employment. 120
Employee is deemed regular if contract failed to state the specific fixed period of
employment.121
Charges for misconduct or other wrongful acts or omissions are relevant only in
termination prior to expiration of the term. They are not relevant if termination is due to
expiration of fixed period.122
Employees allowed to work beyond fixed term become regular employees. 123
Rendering work beyond one (1) year would result to regular employment. 124
Successive renewals of fixed-period contracts will result to regular employment. 125
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 tenure. 126
Employment on a day-to-day basis for a temporary period will result to regular
employment.127
Termination prior to lapse of fixed-term contract should be for a just or authorized
cause.128
Liability for illegal dismissal of fixed-term employee is only for salary for unexpired
portion.129
3. FIXED-TERM EMPLOYMENT OF OFWs.
OFWs can never acquire regular employment.130
Employment contracts of OFWs for indefinite period are not valid. 131
OFWs do not become regular employees by reason of nature of work. 132
Series of rehiring of OFWs cannot ripen into regular employment. 133
CBA cannot override the terms and conditions prescribed by the POEA under the
Standard Employment Contract (SEC) for OFWs. 134
Probationary employment of OFWs is a misnomer. 135
The employment of OFWs for a fixed period is not discriminatory. 136
The contracts of OFWs cease upon expiration thereof. 137
Hiring of seafarer for overseas employment but assigning him to local vessel does not
affect his status as an OFW. 138
Seafarer hired for overseas deployment but later assigned to domestic operations after
the expiration of his overseas contract ceases to be an OFW. 139
3.
JOB CONTRACTING
1. CONTRACTING OUT OF SERVICES IS A PROPRIETARY RIGHT OF EMPLOYER
EXPRESSLY ALLOWED BY LAW.
Contracting out of services is not illegal per se. It is an exercise of business judgment
or management prerogative. Absent proof that the management acted in a malicious or
arbitrary manner, the Court will not interfere with the exercise of judgment by an
employer.140
2. OUTSOURCING, A UNIVERSALLY ACCEPTED MANAGEMENT PREROGATIVE.
Thus, the DOLE Secretary may, by appropriate regulations, restrict or prohibit the
contracting-out of labor to protect the rights of workers established under the Labor Code.
In so prohibiting or restricting, he may make appropriate distinctions between labor-only
contracting and job contracting as well as differentiations within these types of contracting
and determine who among the parties involved shall be considered the employer for
purposes of the Code, to prevent any violation or circumvention of any provision thereof. 151
3. SPECIFIC ENUMERATION OF COVERED CONTRACTORS.
Department Order No. 18-A, Series of 2011 applies to:
1. All parties of contracting and subcontracting arrangements where employeremployee relationships exist; and
2. Cooperatives engaging in contracting or subcontracting arrangements. 152
The provisions of this Department Order will be discussed jointly with those of
Articles 106 to 109 of the Labor Code and those of other issuances and pieces of
jurisprudence below.
c.
DEPARTMENT CIRCULAR NO. 01-12
1. DEPARTMENT CIRCULAR NO. 01, SERIES OF 2012, CLARIFYING DEPARTMENT
ORDER NO. 18-A.
Department Circular No. 01, Series of 2012, [March 13, 2012], was issued Clarifying
the Applicability of Department Order No. 18-A, Series of 2011 to Business Processing
Outsourcing (BPO) /Knowledge Process Outsourcing (KPO) and the Construction Industry.
The purpose of this Circular is to respond to queries on whether firms or companies
in the Business Process Outsourcing (BPO) or Knowledge Process Outsourcing (KPO) and in
the Construction Industry are covered by Department Order No. 18-A, Series of 2011.
1. On the applicability of D.O. 18-A to BPO, this Circular clarifies as follows:
D.O. 18-A, Series of 2011, clearly speaks of a trilateral relationship that
characterizes the covered contracting/subcontracting arrangement. Thus, vendor-vendee
relationship for entire business processes covered by the applicable provisions of the Civil
Code on Contracts is excluded.153
D.O. 18-A, Series of 2011, contemplates generic or focused singular activity in one
contract between the principal and the contractor (for example, janitorial, security,
merchandising, specific production work) and does not contemplate information
technology-enabled services involving an entire business processes (for example, business
(b) Service Agreement between the principal and the contractor164 containing the
terms and conditions governing the performance or completion of a specific job,
work or service being farmed out for a definite or predetermined period. 165
Governing la w.
The Employment Contract is governed by the Labor Code; while the Service
Agreement is governed by the Civil Code.166
4. EMPLOYMENT CONTRACT.
a. Employer-employee relationship between contractor and its employees.
In legitimate contracting or subcontracting arrangement, there exists an employeremployee relationship between the contractor and the employees it engaged to perform the
specific job, work or service being contracted with the principal. 167
Thus, it is essential that a contract of employment be executed between the
contractor and the contractual employees. This is the first contract required to be executed
in a legitimate contracting arrangement.
b. Contents of the employment contract.
Notwithstanding any oral or written stipulations to the contrary, the employment
contract between the contractor and its employee shall be governed by the provisions of
Articles 279 and 280 of the Labor Code, as amended. It shall include the following terms and
conditions:
1. The specific description of the job, work or service to be performed by the
employee;
2. The place of work and terms and conditions of employment, including a statement
of the wage rate applicable to the individual employee; and
3. The term or duration of employment that must be co-extensive with the Service
Agreement or with the specific phase of work for which the employee is
engaged.168
c. Duty of contractor to inform its employees about the terms of the
employment contract.
The contractor shall inform the employee of the foregoing terms and conditions of
employment in writing on or before the first day of his/her employment. 169
5. SERVICE AGREEMENT.
a. The agreement is between principal and contractor.
A second contract called Service Agreement is required to be executed between
the principal and the contractor whose terms and conditions shall govern the contracting
arrangement between them.
b. Contents of the Service Agreement.
The Service Agreement should embody the following:
1. The specific description of the job, work or service being subcontracted;
2. The place of work and terms and conditions governing the contracting
arrangement, to include the agreed amount of the services to be rendered and
the standard administrative fee of not less than ten percent (10%) of the total
contract cost;
3. Provisions ensuring compliance with all the rights and benefits of the employees
under the Labor Code and the Implementing Rules (D.O. 18-A, Series of 2011) on:
provision for safe and healthful working conditions; labor standards such as,
service incentive leave, rest days, overtime pay, 13 month pay and separation
pay; retirement benefits; contributions and remittance of SSS, Philhealth, Pag-IBIG
Fund, and other welfare benefits; the right to self-organization, collective
bargaining and peaceful concerted action; and the right to security of tenure;
th
(2)
(3)
(4)
which are necessary in the conduct of its business. 183 If the answer is in the affirmative, the
second requisite in legitimate job contracting/subcontracting arrangement is fully complied
with.
Significant points:
The amount of substantial capital is now fixed under the
Rules. Under Department Order No. 18-A, the term "substantial capital"shall now
mean:
1. In the case of corporations, partnerships or cooperatives paid-up capital
stocks/shares of at least Three Million Pesos (P3,000,000.00) ; or
2. In the case of single proprietorship - a net worth of at least Three Million
Pesos (P3,000,000.00) . 184
Unlike in the past implementing rules, Department Order No. 18-A now sets in
very clear terms, the amount which constitutes substantial capital.
Moreover, cooperatives are now mentioned prominently in the enumeration
of the entities which may engage in contracting/subcontracting arrangement.
By clearly specifying the amount that constitutes substantial capital, cases in
the past where this issue was raised should now be qualified by this new
issuance. Cases subsequent to the effectivity of Department Order No. 18-A on
November 14, 2011 should take this specific amounts into account.
Substantial capital and investment in tools, etc. are two separate
requirements.
Substantial capital and investment in tools, equipment, implements, machineries and
work premises should be treated as two (2) distinct and separate requirements in
determining whether there is legitimate job contracting arrangement. 185
(d) On No. 4 Requisite above. - This is the Legal Rights and Benefits Compliance test
which addresses the issue of whether the Service Agreement between the principal and
contractor is compliant with the rights and benefits of workers under labor laws. 186 If
answered in theaffirmative, the contracting arrangement is deemed legitimate.
Rights of contractors employees. - Per Department Order No. 18-A, all
contractor's employees, whether deployed or assigned as reliever, seasonal, weekender, temporary, or promo jobbers, shall be entitled to all the rights and
privileges as provided for in the Labor Code, as amended, to include the following:
(a) Safe and healthful working conditions;
(b) Labor standards such as but not limited to service incentive leave, rest days,
overtime pay, holiday pay, 13 month pay, and separation pay as may be
provided in the Service Agreement or under the Labor Code;
(c) Retirement benefits under the SSS or retirement plans of the contractor, if
there is any;
(d) Social security and welfare benefits;
(e) Self-organization, collective bargaining and peaceful concerted activities; and
(f) Security of tenure.187
th
a. Absolute prohibition.
Code
189
the
2012
case
of Norkis
Trading
Corporation
v.
contracting
business,
the
respondent-workers
it
3) The validity of job contracting arrangement does not depend on whether the
job, work, or service is done within or outside the company premises of the
principal.197
But in the 2010 case ofBabas v. Lorenzo Shipping Corp. , 198 the High Court
cited as additional basis for holding that the contractor, Best Manpower
Services, Inc. (BMSI) , was a labor-only contractor, the fact that petitioners
worked at respondent LSCs premises, and nowhere else. Other than the
provisions of the Agreement between respondent LSC and BMSI, there was no
showing that it was BMSI which established petitioners working procedure
and methods, which supervised petitioners in their work, or which evaluated
the same. There was absolute lack of evidence that BMSI exercised control
over them or their work, except for the fact that petitioners were hired by
BMSI.
4. EFFECTS OF LABOR-ONLY CONTRACTING. 199
In summary, the following are the effects of a labor-only contracting arrangement:
1. The labor-only contractor will be treated as the agent or intermediary of the
principal. Since the act of an agent is the act of the principal, representations
made by the labor-only contractor to the employees will bind the principal.
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 entitlements and benefits under
labor laws.
3. The principal and the labor-only contractor will be solidarily treated as the direct
employer.
4. The employees will become employees of the principal, subject to the
classifications of employees under Article 280 of the Labor Code. 200
5. LEGITIMATE JOB CONTRACTING VS. LABOR-ONLY CONTRACTING.
The chief distinctions between legitimate job contracting, on the one hand, and the
prohibited labor-only contracting, on the other, may be summed up as follows:
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 supplied by the labor-only contractor. 201
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. 202
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 paying the wages, the principal
is not responsible for any claim made by the contractual employees; while in
the latter, the principal becomes jointly and severally or solidarily liable with the
labor-only contractor to the latters employees in the same manner and extent
that the principal is liable to employees directly hired by him/her, as provided in
Article 106 of the Labor Code, as amended. 203
4. In the former, the legitimate job contractor undertakes to perform a specific job
for the principal; while in the latter, the labor-only contractor merely provides,
supplies, recruits and places the personnel to work for the principal. 204
6. PROHIBITIONS OTHER THAN LABOR-ONLY CONTRACTING.
a. Two (2) sets of other prohibitions.
Notwithstanding the prohibition on labor-only contracting, the following are declared
prohibited for being contrary to law or public policy under Department Order No. 18-A, Series
of 2011:
A. Contracting out of jobs, works or services when not done in good faith and
not justified by the exigencies of the business such as the following:
(1) Contracting out of jobs, works or services when the same results in the
termination or reduction of regular employees and reduction of work hours
or reduction or splitting of the bargaining unit.
(2) Contracting out of work with a "Cabo."
(3) Taking undue advantage of the economic situation or lack of bargaining
strength of the contractor's employees, or undermining their security of
tenure or basic rights, or circumventing the provisions of regular
employment, in any of the following instances:
(i) Requiring them to perform functions which are currently being performed
by the regular employees of the principal; and
(ii) Requiring them to sign, as a precondition to employment or continued
employment, an antedated resignation letter; a blank payroll; a waiver of
labor standards including minimum wages and social or welfare benefits;
or a quitclaim releasing the principal, contractor or from any liability as to
payment of future claims.
(4) Contracting out of a job, work or service through an in-house agency.
(5) Contracting out of a job, work or service that is necessary or desirable or
directly related to the business or operation of the principal by reason of a
strike or lockout whether actual or imminent.
(6) Contracting out of a job, work or service being performed by union members
when such will interfere with, restrain or coerce employees in the exercise of
their rights to self-organization as provided in Art. 248 (c) of the Labor Code,
as amended.
(7) Repeated hiring of employees under an employment contract of short
duration or under a Service Agreement of short duration with the same or
different contractors, which circumvents the Labor Code provisions on
Security of Tenure.
(8) Requiring employees under a subcontracting arrangement to sign a contract
fixing the period of employment to a term shorter than the term of the
Service Agreement, unless the contract is divisible into phases for which
substantially different skills are required and this is made known to the
employee at the time of engagement.
(9) Refusal to provide a copy of the Service Agreement and the employment
contracts between the contractor and the employees deployed to work in the
bargaining unit of the principal's certified bargaining agent to the sole and
exclusive bargaining agent (SEBA) .
------------oOo------------
ChapterFour
TERMINATION OF EMPLOYMENT
TOPICS PER SYLLABUS
B. Dismissal from employment
1. Just Causes
2. Authorized Causes
3. Due Process
a) Twin-notice requirement
b) Hearing; meaning of opportunity to be heard
B.
DISMISSAL FROM EMPLOYMENT
1. TWO-FOLD DUE PROCESS REQUIREMENT. 1
Dismissal of employees requires the observance of the two-fold due process
requisites, namely:
1. Substantive aspect which means that the dismissal must be for any of the (1) just
causes provided under Article 282 of the Labor Code or the company rules and
regulations promulgated by the employer; or (2) authorized causes under
Articles 283 and 284 thereof; and
2. Procedural aspect which means that the employee must be accorded due
process, the elements of which are notice and the opportunity to be heard and to
defend himself.2
2. JUST CAUSES VS. AUTHORIZED CAUSES.
A dismissal based on a just cause means that the employee has committed a
wrongful act or omission; while a dismissal based on anauthorized cause means that there
exists a ground which the law itself allows or authorizes to be invoked to justify the
termination of an employee even if he has not committed any wrongful act or omission such
as installation of labor-saving devices, redundancy, retrenchment, closure or cessation of
business operations3 or disease.4
1.
JUST CAUSES
1. JUST CAUSES UNDER THE LABOR CODE.
The just causes in the Labor Code are found in the following provisions
thereof:
(1) Article 282 - (Termination by the Employer) which provides for the
following grounds:
(a) Serious misconduct or willful disobedience by the employee of the lawful
orders of his employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his
employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his
employer or any immediate member of his family or his duly authorized
representatives; and
(e) Other causes analogous to the foregoing.
(2) Article 264(a) - (Prohibited Activities) which provides for the
termination of the following:
(a) Union officers who knowingly participate in an illegal strike and therefore
deemed to have lost their employment status.
(b) Any employee, union officer or ordinary member who knowingly participates
in the commission of illegal acts during a strike (irrespective of whether the
strike is legal or illegal) , is also deemed to have lost his employment status.
(3) Article 263(g) - (National Interest Cases) where strikers who violate orders,
prohibitions and/or injunctions as are issued by the DOLE Secretary or the NLRC,
may be imposed immediate disciplinary action, including dismissal or loss of
employment status.5
(4) Article 248(e) - (Union Security Clause) where violation of the union security
agreement in the CBA may result in termination of employment. Under this
clause, the bargaining union can demand from the employer the dismissal of an
employee who commits a breach of union security arrangement, such as failure
to join the union or to maintain his membership in good standing therein. The
same union can also demand the dismissal of a member who commits an act of
disloyalty against it, such as when the member organizes a rival union. 6
2. JUST CAUSES IN ACCORDANCE WITH PREVAILING JURISPRUDENCE.
In addition to the just causes mentioned in the Labor Code, just causes are also
found in prevailing jurisprudence. 7 The following may be cited as just causes in accordance
with prevailing jurisprudence:
1. Violation of company rules and regulations. 8
2. Theft of property owned by a co-employee 9 as distinguished from companyowned property which is considered serious misconduct.
3. Incompetence, inefficiency or ineptitude. 10
4. Failure to attain work quota.11
5. Failure to comply with weight standards of employer. 12
6. Attitude problem.13
3. DISMISSAL BASED ON COMPANY RULES AND REGULATIONS NOT ILLEGAL.
If the ground cited is based on the Company Rules and Regulations or Code
of Conduct or Code of Discipline, it is to be expected that the same is not to be
found in Article 282 of the Labor Code since the latter merely enumerates the just
causes or grounds in general terms.
In the 2013 case of Sampaguita Auto Transport Corporation v. NLRC, 14 the
Supreme Court pronounced that the Court of Appeals erred in ruling that the dismissal of
private respondent, a bus driver of petitioner, was illegal because the grounds upon which
petitioners based respondents termination from employment, viz: hindi lahat ng schedule
nailalabas,[]mababa ang revenue ng bus, laging kasama an[g] asawa sa byahe and maraming
naririnig na kwento tungkol sa kanya, nag-uutos ng conductor para kumita sa hindi magandang
paraan[,] xxx are not among thoseenumerated under Article 282 of the Labor Code as just
causes for termination of employment. The irregularities or infractions committed by
private respondent in connection with his work as a bus driver constitute serious
misconduct or, at the very least, conduct analogous to serious misconduct, under the abovecited Article 282 of the Labor Code. The requirement in the company rules that: 3. to obey
traffic rules and regulations as well as the company policies. 4. to ensure the safety
of the riding public as well as the other vehicles and motorist (sic) is so fundamental
and so universal that any bus driver is expected to satisfy the requirement whether or not
he has been so informed.
4. DISCUSSION OF THE JUST CAUSES UNDER ARTICLE 282 OF THE LABOR CODE.
The grounds mentioned in Article 282 shall be discussed herein seriatim.
I.
SERIOUS MISCONDUCT 15
1. REQUISITES.
For misconduct or improper behavior to be a just cause for dismissal, the following
requisites must concur:
1. It must be serious; and
2. It must relate to the performance of the employees duties; and
3. It must show that he has become unfit to continue working for the employer.16
II.
INSUBORDINATION
OR WILLFUL DISOBEDIENCE OF LAWFUL ORDERS 52
1. REQUISITES.
One of the fundamental duties of an employee is to obey all reasonable rules,
orders and instructions of the employer. In order to validly invoke this ground, the following
requisites must be complied with, to wit:
1. The employees assailed conduct must have been willful or intentional, the
willfulness being characterized by a wrongful and perverse attitude; and
2. The order violated must be based on a reasonable and lawful company rule,
regulation or policy and made known to the employee and must pertain to the
duties for which he has been engaged to discharge. 53
2. SOME PRINCIPLES ON INSUBORDINATION.
Filing of a case questioning the validity of rules and policies does not prevent employer
from enforcing them.54
Making false allegations in complaint does not constitute insubordination. 55
Failure to answer memo to explain constitutes willful disobedience. 56
Another notice is required in case of termination on the ground of failure to answer
memo to explain.57
Willfulness of conduct may be deduced from the manner the reply is written. 58
Refusal to undergo random drug testing constitutes both serious misconduct and
insubordination.59
Prolonged practice, not an excuse for commission of wrongful acts. 60
Refusal to render overtime to meet production deadline constitutes insubordination. 61
Refusal to comply with a lawful transfer constitutes insubordination. 62
III.
GROSS AND HABITUAL NEGLECT OF DUTIES 63
1. REQUISITES.
The following are the requisites:
(1) There must be negligence which is gross and/or habitual in character; and
(2) It must be work-related as would make him unfit to work for his employer.
2. SOME PRINCIPLES ON GROSS AND HABITUAL NEGLECT OF DUTIES.
Simple negligence is not sufficient to terminate employment. 64
The negligence must be gross in character which means absence of that diligence that
an ordinarily prudent man would use in his own affairs. 65
As a general rule, negligence must be both gross and habitual to be a valid ground to
dismiss.66
Habituality may be disregarded if negligence is gross or the damage or loss is
substantial.67 Habitual negligence implies repeated failure to perform ones duties for a
period of time, depending upon the circumstances. 68
Negligence is a question of fact.69
In the absence of any form of negligence, the dismissal is illegal. 70
Actual damage, loss or injury is not an essential requisite. 71
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 job; and
b. Second notice to inform him of the employers decision to dismiss him on the
ground of abandonment.93
No hearing is required to validly dismiss an employee for abandonment. 94
Notices in abandonment cases must be sent to employees last known address per
record of the company. The employer need not look for the employees current
whereabouts.95
Service of the notices of abandonment of work after the six-month period of floating
status is not valid.96
Immediate filing of a complaint for illegal dismissal praying for reinstatement negates
abandonment. 97
Lapse of time between dismissal and filing of a case is not a material indication of
abandonment. Hence, lapse of 2 years and 5 months 98 or 20 months99 or 9
months100 or 8 months101 before filing the complaint for illegal dismissal is not an
indication of abandonment. Under the law, the employee has a 4-year prescriptive
period within which to institute his action for illegal dismissal. 102
The fact that an employee filed a complaint for illegal dismissal is not by itself sufficient
indicator that he had no intention of deserting his employment if the totality of his
antecedent acts palpably display the contrary. 103
Filing of a case to pre-empt investigation of the administrative case is tantamount to
abandonment.104
When what is prayed for in the complaint is separation pay and not reinstatement, the
filing of complaint does not negate abandonment. 105
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. 106
Employment in another firm coinciding with the filing of complaint does not indicate
abandonment.107
There is no abandonment when it was the employer who prevented the workers from
reporting for work. 108
Offer of reinstatement by employer during proceedings before Labor Arbiter and
refusal by employee does not indicate abandonment but more of a symptom of strained
relations between the parties.109
Subcontracting for another company indicates abandonment. 110
An employee may be absolved from the charge of abandonment of work but adjudged
guilty of AWOL.111 These two grounds are separate and distinct from each other.
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. 112
An employee who failed to comply with the order for his reinstatement is deemed to
have abandoned his work.113
An employee who, after being transferred to a new assignment, did not report for work
anymore is deemed to have abandoned his job. 114
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.115
Imprisonment or detention by military does not constitute abandonment. 116
Absence to evade arrest is not a valid justification. To do so would be to place
an imprimatur on the employees attempt to derail the normal course of the
administration of justice.117
Requesting for a Certificate of Employment is not evidence of abandonment. 118
Employers insistence on commission of wrongful acts like estafa and/or qualified theft
by the employees negates the charge of abandonment.Rather, it strengthens the finding
of petitioners discrimination, insensibility and antagonism towards the employees which
gave no choice to the latter except to forego their employment. 119
V.
FRAUD 120
1. CORRELATION OF FRAUD AND LOSS OF TRUST AND CONFIDENCE.
Fraud is separate and distinct from the other ground provided in the same
paragraph, that is, loss of trust and confidence (willful breach by the employee of the trust
reposed in him by his employer or duly authorized representative) . 121
However, the commission of fraud by an employee against the employer
will necessarily result in the latters loss of trust and confidence in the former. On
the other hand, the ground of willful breach by the employee of the trust and
confidence reposed in him by the employer may not necessarily involve fraud but
some other acts that would similarly result in the loss of such trust and
confidence.
2. REQUISITES.
The following are the requisites of this ground:
1.
The
employee
has
committed
an intentional
deception and
though rank-and-file, are routinely charged with the custody, handling or care and
protection of the employer's money or property, 140 or entrusted with confidence on
delicate matters,141 and are thus classified as occupying positions of trust and
confidence.142
Rules on termination of managerial and supervisory employees different from
those applicable to rank-and-file employees. As a general rule, the doctrine of trust
and confidence is restricted to managerial employees. 143 This means 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.144 Thus, with respect to rank-and-file personnel, loss of trust and confidence
as a ground for valid dismissal requires proof of involvement in the alleged events in
question and that mereuncorroborated assertions and accusations by the employer
will not be sufficient. But as regards a managerial employee, the mere existence of a
basis for believing that he has breached the trust of his employer would suffice for his
dismissal.145
There must be some basis for the loss of trust and confidence which means that
there is reasonable ground to believe, if not to entertain the moral conviction, that the
concerned employee is responsible for the misconduct and that the nature of his
participation therein rendered him absolutely unworthy of trust and confidence
demanded by his position.146
In termination for loss of trust and confidence, the fact that the employer did not suffer
losses is of no moment.147
Employer has burden of proof.148
Dismissal due to feng shui mismatch is not a valid ground to lose trust and
confidence.149
Command responsibility of managerial employees is a ground to dismiss. 150
Confidential employee may be dismissed for loss of trust and confidence. 151
Grant of promotions and bonuses negates loss of trust and confidence. 152
Long years of service, absence of derogatory record and small amount involved are
deemed inconsequential insofar as loss of trust and confidence is concerned. 153
Dropping of criminal charges or acquittal in a criminal case arising from the same act
does not affect the validity of dismissal based on loss of trust and confidence. 154
Full restitution does not absolve employee of offense which resulted in the loss of trust
and confidence.155
VII.
COMMISSION OF CRIME OR OFFENSE 156
1. REQUISITES.
The following are the requisites for the valid invocation of this ground:
1. A crime or offense was committed by the employee;
2. It was committed against any of the following persons:
Under the Labor Code, authorized causes are classified into two (2)
classes, namely:
(1) Business-related causes. Referring to the grounds specifically
mentioned in Article 283, to wit:
a. Installation of labor-saving device;
b. Redundancy;
c. Retrenchment;
d. Closure or cessation of business operations NOT due to serious business
losses or financial reverses; and
e. Closure or cessation of business operations due to serious business losses
and financial reverses.
(2) Health-related causes. Referring to disease covered by Article 284 of the
Labor Code.
2. COMMONALITY OF REQUISITES OF THE AUTHORIZED CAUSES UNDER ARTICLE 283.
Notably, there are certain requisites that are common to the five (5) grounds in
Article 283. To simplify the discussion, the following five (5) common requisites are applicable
to the said grounds:
1. There is good faith in effecting the termination;
2. The termination is a matter of last resort, there being no other option available to
the employer after resorting to cost-cutting measures;
3. Two (2) separate written notices are served on both the affected employees and
the DOLE at least one (1) month prior to the intended date of termination;
4. Separation pay is paid to the affected employees, to wit:
(a) If based on (1) installation of labor-saving device, or (2) redundancy. - One
(1) month pay or at least one (1) month pay for every year of service,
whichever is higher, a fraction of at least six (6) months shall be considered as
one (1) whole year.
(b) If based on (1) retrenchment, or (2) closure NOT due serious business
losses or financial reverses. - One (1) month pay or at least one-half ()
month pay for every year of service, whichever is higher, a fraction of at least
six (6) months shall be considered as one (1) whole year.
(c) If closure is due to serious business losses or financial
reverses, NO separation pay is required to be paid.
(d) 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.
5. Fair and reasonable criteria in ascertaining what positions are to be affected by
the termination, such as, but not limited to: nature of work; status of employment
(whether casual, temporary or regular) ; experience; efficiency; seniority;
dependability; adaptability; flexibility; trainability; job performance; discipline; and
attitude towards work.178 Failure to follow fair and reasonable criteria in selecting
who to terminate would render the termination invalid. 179
I.
INSTALLATION OF LABOR-SAVING DEVICE
1. ADDITIONAL REQUISITE UNIQUE TO THIS GROUND.
In addition to the five (5) common requisites above, the unique requisite for this
ground is that the purpose for such installation must be valid, such as to save on cost,
enhance efficiency and other justifiable economic reasons. 180
2. SOME RELEVANT PRINCIPLES.
The installation of these devices is a management prerogative and the courts will not
interfere with its exercise in the absence of abuse of discretion, arbitrariness, or malice
on the part of management.181
Redundancy results from installation of labor-saving device. The installation of
labor-saving device will result in making the positions being held by employees who will
be adversely affected thereby redundant and unnecessary. 182
Modernization program through introduction of high-speed machines is valid. 183
Proof of losses is not required.
II.
REDUNDANCY
1. ADDITIONAL REQUISITE UNIQUE TO THIS GROUND.
The fact of redundancy must be proved. Redundancy exists under any of the
following circumstances:
(1)
(2)
(3)
(4)
218
Sharp drop in income is not a ground to justify retrenchment. A mere decline in gross
income cannot in any manner be considered as serious business losses. It should be
substantial, sustained and real.230
Litany of woes, in the absence of any solid evidence that they translated into specific
and substantial losses that would necessitate retrenchment, will not suffice to justify
retrenchment.231
Rehiring of retrenched employees does not necessarily indicate illegality of
retrenchment.232
In an enterprise which has several branches nationwide, profitable operations in some
of them will not affect the validity of the retrenchment if overall, the financial condition
thereof reflects losses.233
IV.
CLOSURE OR CESSATION OF BUSINESS OPERATIONS
1. CONCEPT.
Closure or cessation of business is the complete or partial cessation of the
operations and/or shutdown of the establishment of the employer. It is carried out to either
stave off the financial ruin or promote the business interest of the employer. 234
Closure involves two (2) situations:
(a) When NOT due to serious business losses or financial reverses; or
(b) When due to serious business losses or financial reverses
It is only in the first that payment of separation pay is required. No such
requirement is imposed in the second.235
2. SOME PRINCIPLES ON CLOSURE.
Employer may close its business whether it is suffering from business losses or not;
court cannot order employer to continue its business. 236
Principle of closure under Article 283 applies in cases of both total and partial closure
or cessation of business operations. Management may choose to close only a branch,
a department, a plant, or a shop.237
Closure of department or section and hiring of workers supplied by independent
contractor as replacements is valid.238
Relocation of business may amount to cessation of operations. 239
The burden of proving that the closure or cessation of business operations is bonafide falls upon the employer.240
Closure may constitute an unfair labor practice if it is resorted to as a ruse or scheme
to get rid of employees on account of their union activities. 241
Closure by reason of enactment of a law is valid. Example: The closure of the
Philippine Veterans Bank by operation of law (R.A. No. 7169 [An Act to Rehabilitate the
Philippine Veterans Bank Created Under Republic Act 3518, Providing the
Mechanisms Therefor and for other Purposes] 242 or closure of the employers
business because a large portion of its estate was acquired by the Department of
Agrarian Reform pursuant to the Comprehensive Agrarian Reform Program (CARP)
under R.A. No. 6657.243
Closure of business to merge or consolidate with another or to sell or dispose all of its
assets, held valid.244
Audited financial statements necessary only in closure due to losses.
245
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. 246
For closure to be a valid basis, it must be invoked at the time of termination and not
after.247
Closure of a department or section due to losses amounts to retrenchment. 248
V.
DISEASE 249
1. REQUISITES.
Disease is one of the authorized causes to terminate employment. The following
requisites must be complied with before termination of employment due to disease may be
justified:
1. The employee is suffering from a disease;
2. His continued employment is either:
a) prohibited by law; or
b) prejudicial to his health; or
c) prejudicial to the health of his co-employees;
3. There is a certification by a competent public health authority that the disease is
of such nature or at such stage that it cannot be cured within a period of six (6)
months even with proper medical treatment;
4. Notice of termination based on this ground should be separately served both to
the employee and the Department of Labor and Employment at least one (1)
month prior to the effectivity of the termination; 250 and
5. Separation pay should be paid to the employee in an amount equivalent to at
least one (1) month salary or to one-half () month salary for every year of
service, whichever is greater, a fraction of at least six (6) months being considered
as one (1) whole year.251
2. SOME PRINCIPLES ON DISEASE.
Burden of proof rests on the employer. 252
If the disease or ailment can be cured within the period of six (6) months with proper
medical treatment, the employer should not terminate the employee but merely ask
him to take a leave of absence. The employer should reinstate him to his former
position immediately upon the restoration of his normal health. 253
In case of death, Article 284 does not apply. 254
In case the employee unreasonably refuses to submit to medical examination or
treatment upon being requested to do so, the employer may terminate his services on
the ground of insubordination or willful disobedience of lawful order. 255
A medical certificate issued by a companys 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.256
3.
DUE PROCESS263
(a) Twin-Notice Requirement
(b) Hearing; Meaning of Opportunity to be Heard
1. JOINT DISCUSSION.
The foregoing topics will be discussed herein jointly in the light of their close
interrelation.
2. THE AGABON DOCTRINE: DUE PROCESS IN TERMINATION OF EMPLOYMENT REFERS
TO STATUTORY, AND NOT CONSTITUTIONAL, DUE PROCESS.
Per Agabon doctrine,264 it is now the prevailing rule that it is not the due process
provided in the Constitution265 that is required in termination of employment but the
statutory due process provided under Article 277[b] of the Labor Code.
Constitutional due process protects the individual from the government and
assures him of his rights in criminal, civil or administrative proceedings; while statutory due
process protects employees from being unjustly terminated without just cause after notice
and hearing. Put differently, the Bill of Rights is not meant to be invoked against acts of
private individuals like employers. Private actions, no matter how egregious, cannot violate
the constitutional guarantees.
3. THE ABBOTT LABORATORIES DOCTRINE: CONTRACTUAL DUE PROCESS.
a. New doctrine.
The norm since Agabon is that compliance with the statutorily-prescribed procedural
due process under Article 277(b) 266 would suffice. Whether there is an existing company
policy which also enunciates the procedural due process in termination cases need not be
considered nor given any weight in determining the validity of the termination.
However, under the latest doctrinal en banc ruling in the 2013 case of Abbott
Laboratories, Philippines v. Pearlie Ann F. Alcaraz, 267 it is now required that
in addition to compliance with the statutory due process, the employer should still comply
with the due process procedure prescribed in its own company rules. The employers
failure to observe its own company-prescribed due process will make it liable to pay an
indemnity in the form of nominal damages, the amount of which is equivalent to the
P30,000.00 awarded under the Agabon doctrine.
It was found in this case of Abbott Laboratories that respondent Alcaraz,268 who was
hired as a probationary managerial employee, was afforded both the statutorily-mandated
substantive and procedural due process, when she was terminated 269 for failure to qualify
as a regular employee. Nonetheless, despite the existence of a sufficient ground to
terminate Alcarazs employment and Abbotts compliance with the Labor Code termination
procedure, it was found that petitioner Abbott breached its contractual obligation to
Alcaraz when it failed to abide by its own procedure in evaluating the performance of a
probationary employee. Company personnel policies create an obligation on the part
of both the employee and the employer to abide by the same.
Records show that Abbotts PPSE270 procedure mandates, inter alia, that the job
performance of a probationary employee should be formallyreviewed and discussed with
the employee at least twice: first, on the third month and second, on the fifth month from the
date of employment. Abbottis also required to come up with a Performance Improvement
Plan during the third month review to bridge the gap between the employeesperformance
and the standards set, if any. In addition, a signed copy of the PPSE form should be
submitted to Abbotts HRD as the same would serveas basis for recommending the
confirmation or termination of the probationary employment.
In this case, it is apparent that Abbott failed to follow the above-stated procedure in
evaluating Alcaraz. For one, there lies a hiatus of evidence that a signed copy of Alcarazs
PPSE form was submitted to the HRD. It was not even shown that a PPSE form was
completed to formally assess herperformance. Neither was the performance evaluation
discussed with her during the third and fifth months of her employment. Nor did Abbott
comeup with the necessary Performance Improvement Plan to properly gauge Alcarazs
performance with the set company standards.
While it is Abbotts management prerogative to promulgate its own company rules
and even subsequently amend them, this right equallydemands that when it does create its
own policies and thereafter notify its employee of the same, it accords upon itself the
obligation to faithfullyimplement them. Indeed, a contrary interpretation would entail
a disharmonious relationship in the work place for the laborer should never be mired by the
uncertainty of flimsy rules in which the latters labor rights and duties would, to some extent,
depend.
b. Proper sanction for lack of contractual due process.
In imposing the penalty of indemnity in the form of nominal damages upon
petitioner Abbott, it was held that while there lies due cause to terminate Alcarazs
probationary employment for her failure to meet the standards required for her
regularization, and while it must be further pointed out that Abbott had satisfied its
statutory duty to serve a written notice of termination, the fact that it violated its own
company procedure renders the termination of Alcarazs employment procedurally
infirm, warranting the payment of nominal damages.
Evidently, the sanctions imposed in both Agabon271 and Jaka272 proceed from the
necessity to deter employers from future violations of the statutory due process rights of
employees. In similar regard, the Court deems it proper to apply the same principle to the
case at bar for the reason that an employers contractual breach of its own company
procedure albeit not statutory in source has the parallel effect of violating the laborers
rights. Suffice it to state, the contract is the law between the parties and thus, breaches of
the same impel recompense to vindicate a right that has beenviolated. Consequently, while
the Court is wont to uphold the dismissal of Alcaraz because a valid cause exists, the
payment of nominal damages onaccount of Abbotts contractual breach is warranted in
accordance with Article 2221273 of the Civil Code.
c. Proper amount of nominal damages.
Anent the proper amount of damages to be awarded, the Court observes that
Alcarazs dismissal proceeded from her failure to comply withthe standards required for her
regularization. As such, it is undeniable that the dismissal process was, in effect, initiated by
an act imputable to theemployee, akin to dismissals due to just causes under Article
297274 [282] of the Labor Code. Therefore, the Court deems it appropriate to fix the amount
of nominal damages at the amount of P30,000.00, consistent with its rulings
in both Agabon275 and Jaka. 276
4. 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. There is no uniform
procedural due process that should be applied in all cases.
5. THE KING OF KINGS TRANSPORT DOCTRINE: PROCEDURAL DUE PROCESS IN JUST
CAUSE TERMINATION.
a. Procedural steps.
In just cause termination, the twin-notice requirement applies. More particularly, the
following procedure in the order presented below should be followed:
1. Service of first written notice;
2. Conduct of hearing; and
3. Service of second written notice.
b. The King of Kings Transport doctrine.
Based on this doctrine which was enunciated inKing of Kings Transport, Inc. v.
Mamac, 277 the following requirements should be complied with:
(1) First written notice.
The first written notice to be served on the employee should:
a) Contain the specific causes or grounds for termination against him;
b) Contain a directive that the employee is given the opportunity to submit
his written explanation within the reasonable period of FIVE (5) CALENDAR
DAYS from receipt of the notice:
1) to enable him to prepare adequately for his defense;
2) to study the accusation against him;
3) to consult a union official or lawyer;
4) to gather data and evidence; and
5) to decide on the defenses he will raise against the complaint.
c) Contain a detailed narration of the facts and circumstances that will serve as
basis for the charge against the employee. This is required in order to enable
him to intelligently prepare his explanation and defenses. A general
description of the charge will not suffice.
d) Specifically mention which company rules, if any, are violated and/or which
among the grounds under Article 282 is being charged against the employee.
(2) Hearing required,
After serving the first notice, the employer should schedule and conduct
a hearing or conference wherein the employee will be given the opportunity to:
1) explain and clarify his defenses to the charge/s against him;
2) present evidence in support of his defenses; and
3) rebut the evidence presented against him by the management.
During the hearing or conference, the employee is given the chance to defend
himself personally, with the assistance of a representative or counsel of his choice.
Moreover, this conference or hearing could be used by the parties as an opportunity to
come to an amicable settlement.
(3) Second written notice.
After determining that termination of employment is justified, the employer shall
serve the employees a written notice of terminationindicating that:
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. 278
c. The foregoing rule does not apply in case of abandonment.
Abandonment is a just cause to terminate employment. It is considered a form of
gross neglect of duties under Article 282[b] of the Labor Code. However, the procedural due
process is different from the process described above. For obvious reason, due process in
abandonment cases does not involve the conduct of hearing. Compliance with the following
two (2) notices suffices, viz:
1) First notice asking the employee to explain why he should not be declared as
having abandoned his job; and
2) Secondnotice informing him of the employers decision to dismiss him on the
ground of abandonment.
d. The Perez doctrine.
The
2009 Perez doctrine279 enunciates
the newguiding
principles on
the hearing aspect of procedural due process. This dramatically modified the concept of
hearing in just cause termination. (See separate discussion in No. 9 below) .
6. PROCEDURAL DUE PROCESS IN AUTHORIZED CAUSE TERMINATION.
Due process in authorized cause termination is deemed complied with upon the
separate and simultaneous service of a written notice of the intended termination to both:
(1) the employee to be terminated; and
(2) the appropriate DOLE Regional Office, at least one (1) month before the
intended date of the termination specifying the ground/s therefor and the
undertaking to pay the separation pay required under Article 283 of the Labor
Code.
7. PROCEDURAL DUE PROCESS IN DEFINITE-PERIOD EMPLOYMENT.
Procedural due process is not required in termination of the following:
1. Project employment which automatically terminates upon completion of the
project;
2. Seasonal employment which automatically terminates upon the end of the
season;
3. Casual employment which automatically terminates upon the lapse of the agreed
period;
4. Fixed-term employment which automatically terminates upon the expiration of
the fixed period.
8. PROCEDURAL DUE PROCESS IN TERMINATION OF PROBATIONARY EMPLOYMENT.
Probationary employment may be terminated prior to the lapse of the probationary
period fur just or authorized cause; in which case, the appropriate, applicable procedural
due process should apply.
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 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. 280
Per Abbott Laboratories doctrine, 281 however, if the employer has prescribed in its
company rules a certain procedure for the termination of probationary employment, the
same should be complied with; otherwise, the employer will be penalized with an indemnity
in the form of nominal damages in the amount of P30,000.00.
9. THE PEREZ DOCTRINE: NEW GUIDING PRINCIPLE ON THE HEARING REQUIREMENT.
The concept of hearing as part of due process has been significantly changed by
the Perez doctrine.282 It enunciates the newguiding principleson the hearing aspect of
procedural due process. It has interpreted the term ample opportunity to be heard in a
new light, thus:
(a) Ample opportunity to be heard means any meaningful opportunity (verbal or
written) given to the employee to answer the chargesagainst him and submit
evidence in support of his defense, whether in a hearing, conference or some
other fair, just and reasonable way.
(b)
A formal
hearing
or
conference is no longer
mandatory.
becomes mandatoryonly under any of the following circumstances:
It
The Perez doctrine is now the prevailing rule as shown by a catena of cases 283 which
cited it after its promulgation.
10. SOME PRINCIPLES ON HEARING REQUIREMENT.
If employee does not answer, hearing should still proceed. 284
Outright termination violates due process. 285
Investigation still required even if incident was witnessed by many. 286
Meeting, dialogue, consultation or interview is not the hearing required by law. It may
not be a substitute for the actual holding of a hearing. 287
Prior consultation with union is not part of the due process requirement. 288
Cross-examination or confrontation of witnesses is not necessary in company
investigations.289
Co-conspirators confession is not sufficient to merit dismissal. 290
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. 291 But if the dismissal is not justified, this
principle does not apply.292
11. INSTANCES WHERE HEARING IS NOT REQUIRED.
Hearing is not required in the following cases:
1. Termination of project, seasonal, casual or fixed-term employment.
2. Termination of probationary employment on the ground of failure of the
probationary employee to qualify as a regular employee in accordance with
reasonable standards made known to him at the start of the employment. 293
3. Termination due to abandonment of work.
4. Termination due to authorized causes under Article 283 (installation of laborsaving device, redundancy, 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. 294
5. Termination due to disease under Article 284. 295
6. Termination by the employee (resignation) under Article 285.
7. Termination after 6 months of bona-fide suspension of operation under Article
286. For purposes of satisfying 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
termination becomes effective.296
8. Termination due to retirement under Article 287.
9. Termination due to expiration of tenure made coterminous with lease. 297
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 workers in the workplace. 298
11. Termination due to expiration of contractual employment in a legitimate
contracting or subcontracting arrangement. 299
12. Termination of employee who has admitted his guilt for the offense charged. 300
12. SEVEN (7) STANDARD SITUATIONS IN TERMINATION CASES.
------------oOo------------
ChapterFour
TERMINATION OF EMPLOYMENT
TOPICS PER SYLLABUS
C. Reliefs for Illegal Dismissal
1. Reinstatement
a. Pending appeal (Art. 223, Labor Code)
b. Separation pay in lieu of reinstatement
2. Backwages
a. Computation
b. Limited backwages
C.
RELIEFS FOR ILLEGAL DISMISSAL
1. RELIEFS UNDER ARTICLE 279 OF THE LABOR CODE.
Under this article,1 an illegally dismissed employee is entitled to the following reliefs:
(1) Reinstatement without loss of seniority rights and other privileges;
(2) Full backwages, inclusive of allowances; and
(3) Other benefits or their monetary equivalent.
2. OTHER RELIEFS NOT FOUND IN ARTICLE 279 BUT AWARDED IN ILLEGAL DISMISSAL
CASES.
279:
The following reliefs that are awarded in illegal dismissal cases are missing in Article
(1)
(2)
(3)
(4)
(5)
(6)
b.
SEPARATION PAY
IN LIEU OF REINSTATEMENT
1. VARIOUS PROVISIONS OF THE LABOR CODE ENUNCIATING THE REMEDY OF
REINSTATEMENT.
The Labor Code grants the remedy of reinstatement in various forms and situations.
Its provisions recognizing 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 that may be instituted by the
employer.
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 DOLE Secretary of an assumption or certification order. The employer is required to
immediately resume operation and readmit all workers under the same terms and
conditions prevailing before the strike or lockout.
3. Article 277 [b] which empowers the DOLE Secretary to suspend the effects of
termination pending the resolution of the termination dispute in the event of a prima
facie finding by the appropriate official of the DOLE before whom such dispute is pending
that the termination may cause a serious labor dispute or is in implementation of a mass layoff.
4. Article 279 which grants reinstatement as a relief to an employee whose
dismissal is declared illegal in a final and executory judgment.
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 its employees upon
resumption of its operation which should be done before the lapse of said six-month period
of bona-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 Article 223. Discussion, therefore, will focus on this relief)
a.
REINSTATEMENT PENDING APPEAL
(Article 223, Labor Code)
1. ORDER OF REINSTATEMENT ISSUED BY LABOR ARBITER, IMMEDIATELY EXECUTORY
EVEN PENDING APPEAL.
Article 2232 of the Labor Code, as amended,3 provides that an order of
reinstatement by the Labor Arbiter is self-executory and thereforeimmediately
executory even pending appeal. Being self-executory, no writ of execution is required to be
issued to implement it.4 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.5 To underscore its immediate executory nature, the 2011 NLRC Rules of
Procedure provide that the perfection of an appeal shall stay the execution of the decision of
the Labor Arbiter except execution for reinstatement pending appeal. 6
Once an appeal is filed, the Labor Arbiter loses jurisdiction over the case.
Consequently, all pleadings and motions pertaining to the appealed case are required to be
addressed to and filed with the Commission (NLRC) . This rule, however, cannot be
invoked to prejudice the immediate reinstatement of an employee pending appeal. 7
2. DISTINGUISHED FROM REINSTATEMENT ISSUED BY NLRC, CA AND SC.
By way of distinction, while writ of execution is not required in case reinstatement is
ordered by the Labor Arbiter, it is necessary in case reinstatement is ordered by the NLRC
on appeal or by the CA and the Supreme Court, as the case may be. Only the Labor Arbiters
reinstatement order is self-executory or immediately executory. 8
3. DISTINGUISHED FROM REINSTATEMENT UNDER ARTICLE 279 .
The following distinctions may be cited between reinstatement under
Article 223 and Article 279 of the Labor Code:
(1) Finality. The reinstatement under Article 223 has not attained finality
as in fact it is the subject of an appeal; while that contemplated under Article 279
has already become final and executory.
(2) Employers option to reinstate. The reinstatement in the former is
subject to the exercise of option by the employer; while that in the latter, no such
option is available to the employer except to reinstate the employee to his former
position or to a substantially equivalent position.
(3) On nature of duty of Labor Arbiter to implement order. In the
former, it is ministerial upon the Labor Arbiter to implement his order of
reinstatement which is self-executory in character; 9 while in the latter, it is not
ministerial as it requires the filing of a motion for the issuance of writ of execution
before the Labor Arbiter can implement the order of reinstatement.
(4) On necessity for issuance of writ of execution. - In the former, a
writ of execution is not necessary to enforce the reinstatement order; while in the
latter, a writ of execution is indispensable to effect reinstatement.
4. REINSTATEMENT PENDING APPEAL APPLIES TO ALL KINDS OF ILLEGAL DISMISSAL
CASES.
The concept of reinstatement pending appeal under Article 223 contemplates all
kinds of illegal dismissal cases. The nature of the ground invoked to justify the dismissal
which subsequently is declared illegal is inconsequential in determining the validity of this
remedy.
The Court of Appeals, in the 2010 case of C. Alcantara & Sons, Inc. v. CA, 10 denied
the reinstatement of the ordinary union members who participated in the illegal strike but
whose dismissal was found to have been illegally effected since they did not commit any
illegal acts in the course of the strike. The CA justified its denial by ruling that the
reinstatement pending appeal provided under Article 223 contemplates illegal dismissal or
termination cases and not cases under Article 264. 11 The Supreme Court, however,
pronounced that this perceived distinction does not find support in the provisions of the
Labor Code. The grounds for termination under Article 264 are based on prohibited acts
that employees could commit during a strike. On the other hand, the grounds for
termination under Articles 282,12 28313 and 28414 are based on the employees conduct in
connection with his assigned work. Still, Article 217,15 which defines the powers of Labor
Arbiters, vests in the latter jurisdiction over all termination cases, whatever be the grounds
given for the termination of employment. Consequently, Article 223, which provides that
the decision of the Labor Arbiter reinstating a dismissed employee shall immediately be
executory pending appeal, cannot but apply to all terminations irrespective of the grounds
on which they are based.
5. REINSTATEMENT PENDING APPEAL DOES NOT APPLY WHEN THE DISMISSAL IS
LEGAL BUT REINSTATEMENT IS ORDERED FOR SOME REASONS LIKE EQUITY AND
COMPASSIONATE JUSTICE.
The principle of reinstatement pending appeal applies only in case there is a finding
of illegality of dismissal by the Labor Arbiter. In other words, if the dismissal is not illegal as in
fact it was declared valid and legal by the Labor Arbiter, the reinstatement granted by reason
of equity and compassionate justice cannot be executed pending appeal; neither can the
employer be held liable for payment of any reinstatement wages.
This is the gist of the Lansangan doctrine which was enunciated pursuant
to and by virtue of the pronouncement in Lansangan v. Amkor Technology
Philippines, Inc.
16
The Labor Arbiter consequently ruled that the dismissal was valid and legal
but he ordered their reinstatement to their former positions without backwages
as a measure of equitable and compassionate relief owing mainly to petitioners
prior unblemished employment records, show of remorse, harshness of the
penalty and defective attendance monitoring system of respondent company.
Based
on
these
facts,
the
Supreme
Court
noted
that
the
principle
of reinstatement pending appeal under Article 223 on which the appellate court
relied, finds no application in the present case. Article 223 concerns itself with an
interim relief, granted to a dismissed or separated employee while the case for
illegal dismissal is pending appeal.
(2)
There is no way the employer can disregard the reinstatement order. Posting of a
bond does not stay the execution of immediate reinstatement. 19
7. OBLIGATION OF EMPLOYER TO NOTIFY REINSTATED EMPLOYEE OF HIS CHOICE OF
OPTION.
Employer has the obligation to notify employee of his choice of option. 20 Under
the 2011 NLRC Rules of Procedure,21 it is required that the employer should submit a report of
compliance within ten (10) calendar days from receipt of the Labor Arbiters decision,
disobedience to which clearly denotes a refusal to reinstate.
8. INSTANCES WHEN WRIT OF EXECUTION OF LABOR ARBITERS
REINSTATEMENT ORDER IS STILL REQUIRED.
Under the 2011 NLRC Rules of Procedure,22 there are two (2) instances
when a writ of execution should still be issued immediately by the Labor Arbiter to
implement his order of reinstatement, even pending appeal, viz:
(1) When the employer disobeys the Rules-prescribed directive23 to submit a report
of compliance within ten (10) calendar days from receipt of the decision; or
(2) When the employer refuses to reinstate the dismissed employee.
The Labor Arbiter shall motu proprio issue a corresponding writ to satisfy the
reinstatement wages as they accrue until actual reinstatement or reversal of the order of
reinstatement.24
The employee need not file a motion for the issuance of the writ of execution since
the Labor Arbiter shall thereafter motu proprio issue the writ.25 Employer may be cited for
contempt for his refusal to comply with the order of reinstatement. 26
Employer is liable to pay the salaries for the period that the employee was ordered
reinstated pending appeal even if his dismissal is later finally found to be legal on appeal. 27
9. EFFECT OF FAILURE OF EMPLOYEE ORDERED REINSTATED PENDING APPEAL TO
REPORT BACK TO WORK AS DIRECTED BY EMPLOYER.
The provision of Article 223 on reinstatement pending appeal is intended for the
benefit of the employee and cannot be used to defeat his own interest. The law mandates
the employer to either admit the dismissed employee back to work under the same terms
and conditions prevailing prior to his dismissal or to reinstate him in the payroll to abate
further loss of income on the part of the employee during the pendency of the appeal. But
the language of the law should not be stretched as to give the employer the right to remove
an employee who fails to immediately comply with the reinstatement order, especially when
there is a reasonable explanation for his failure. 28
In the 2011 case of Pfizer, Inc. v. Velasco, 29 petitioner Pfizer contends that the
Court of Appeals committed a serious but reversible error when it ordered petitioner Pfizer
to pay respondent Velasco wages from the date of the Labor Arbiters decision ordering her
reinstatement until November 23, 2005, when the Court of Appeals rendered its decision
declaring Velascos dismissal valid. During the pendency of the case with the Court of
Appeals and prior to its November 23, 2005 decision, petitioner claimed that it had already
required respondent to report for work on July 1, 2005. However, according to petitioner, it
was respondent who refused to return to work when she wrote petitioner, through counsel,
that she was opting to receive her separation pay and to avail of petitioners early retirement
program. In petitioner Pfizers view, it should no longer be required to pay wages considering
that it was allegedly ready to reinstate respondent as of July 1, 2005 but it was respondent
who unjustifiably refused to report for work. According to petitioner, it would be tantamount
to allowing respondent to choose payroll reinstatement when by law it was the employer
which had the right to choose between actual and payroll reinstatement.
The Supreme Court, however, found this contention of petitioner devoid of merit
considering the following:
(1) Petitioner waited for the resolution of its appeal to the NLRC and, only after it was
ordered by the Labor Arbiter to pay the amount ofP1,963,855.00 representing respondents
full backwages from December 5, 2003 up to May 5, 2005, did petitioner decide to require
respondent to report back to work via the Letter dated June 27, 2005.
(2) The said letter does not conform to the directive in Article 223 that an employee
entitled to reinstatement shall either be admitted back to work under the same terms
and conditions prevailing prior to his dismissal or separation or, at the option of the
employer, merely reinstated in the payroll.
(3) The letter of respondent to petitioner indicating her preference for the payment
of separation pay in lieu of reinstatement is of no moment. It does not have the effect of
taking away the option from the employer to effect actual or payroll reinstatement.
10. SOME PRINCIPLES ON REINSTATEMENT PENDING APPEAL UNDER ARTICLE 223.
Reinstatement pending appeal under Article 223 is constitutional. 30
It is similar to return-to-work order.31
The Labor Arbiter cannot exercise option of employer by choosing payroll
reinstatement pending appeal.32
If the former position is already filled up, the employee ordered reinstated under
Article 223 should be admitted back to work in a substantially equivalent position. 33
Reinstatement to a position lower in rank is not proper. 34
Reinstatement cannot be refused on the basis of the employment elsewhere of the
employee ordered reinstated.35
In case of two successive dismissals, the order of reinstatement pending appeal under
Article 223 issued in the first case shall apply only to thefirst case and should not affect
the second dismissal.36
The failure of the illegally dismissed employee who was ordered reinstated to report
back to work does not give the employer the right to remove him, especially when there
is a reasonable explanation for his failure. 37
No reinstatement pending appeal should be made when antipathy and antagonism
exist.38
If reinstatement is not stated in the Labor Arbiters decision (neither in the dispositive
portion nor in the text thereof) , reinstatement is not warranted. 39
(NOTE: For discussion on the effect of NLRCs reversal of the Labor Arbiters order of
reinstatement, please read the comments on the topic:VIII. PROCEDURE AND
b.
SEPARATION PAY IN LIEU OF REINSTATEMENT
(4) When reinstatement is rendered moot and academic due to supervening events,
such as:
(a) Death of the illegally dismissed employee. 54
(b) Declaration of insolvency of the employer by the court. 55
(c) Fire which gutted the employers establishment and resulted in its total
destruction.56
(d) In case the establishment where the employee is to be reinstated has closed
or ceased operations.57
(5) To prevent further delay in the execution of the decision to the prejudice of
private respondent.58
(6) Other circumstances59 such as (a) when reinstatement is inimical to the
employers interest;60 (b) reinstatement does not serve the best interests of the
parties involved;61 (c) the employer is prejudiced by the workers continued
employment;62 or (d) that it will not serve any prudent purpose as when
supervening facts transpired which made execution unjust or inequitable. 63
3. COMPONENTS OF SEPARATION PAY IN LIEU OF REINSTATEMENT PER PREVAILING
JURISPRUDENCE.
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:
(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. 64
(2) Allowances that the employee has been receiving on a regular basis.65
4. PERIOD COVERED.
a. From start of employment up to the date of finality of decision.
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. 66 More definitively, it should be reckoned from the
first day of employmentuntil the finality of the decision. 67
b. When employer has already ceased its operations.
When employer has ceased its business operations, the separation pay in lieu of
reinstatement should be computed only up to that date of closure. 68
5. SALARY RATE TO BE USED IN THE COMPUTATION.
The salary rate prevailing at the end of the period of putative service should be the
basis for computation which refers to the period of imputed service for which the
employee is entitled to backwages. 69
6. SOME PRINCIPLES ON SEPARATION PAY IN LIEU OF REINSTATEMENT.
Award of separation pay in lieu of reinstatement is not proper if there is no finding of
illegality of dismissal. This is so because the principal remedy of reinstatement may only
be granted in case the dismissal is illegal. 70
Separation pay, as a substitute remedy, is only proper for reinstatement but not for
backwages.71
Separation pay and backwages are not inconsistent with each other. Hence, both may
be awarded to an illegally dismissed employee. 72 The payment of separation pay is in
addition to payment of backwages. 73
Employer does not have the option to choose between actual reinstatement and
separation pay in lieu thereof. Actual reinstatement has the primacy as the proper relief
to which an illegally dismissed employee is entitled. Payment of separation pay should
be ordered only in the event that there is a showing that reinstatement is no longer
possible by reason of the justifications allowed under established jurisprudence. 74
Reinstatement cannot be granted when what is prayed for by employee is separation
pay in lieu thereof.75
Grant of separation pay in lieu of reinstatement converts the award of reinstatement
into a monetary award; hence, legal interest may be imposed thereon. 76
STRAINED RELATIONS RULE
1. STRAINED RELATIONS OR ANTAGONISM MAY EFFECTIVELY BAR REINSTATEMENT.
The doctrine of strained relations or antipathy and antagonism or irretrievable
estrangement applies when reinstatement will no longer be in the best interest of both the
employee and the employer considering the animosity and antagonism that exist between
them brought about by the filing of the labor case. 77
However, according to the 2013 case of Leopard Security and Investigation
Agency v. Quitoy, 78 standing alone, the doctrine of strained relations will not justify an
award of separation pay, a relief granted in instances where the common denominator is the
fact that the employeewas dismissed by the employer. Even in cases of illegal dismissal,
thedoctrine of strained relations is not applied indiscriminately as to bar reinstatement,
especially when the employee has not indicated an aversion to returning to work or does
not occupy a position of trust and confidence or has no say in the operation of the
employers business. Although litigation may also engender a certain degree of hostility, it
has likewise been ruled that the understandable strain in the parties relations would not
necessarily rule out reinstatement which would, otherwise, become the rule rather than the
exception in illegal dismissal cases.79
In a plethora of cases, the Supreme Court has been consistent in its holding that the
existence of strained relations between the employer and the illegally dismissed employee
may effectively bar reinstatement of the latter. 80
2. SOME PRINCIPLES ON STRAINED RELATIONS.
Strained relations must be proved and demonstrated as a fact. 81
Litigation, by itself, does not give rise to strained relations that may justify nonreinstatement. The filing of the complaint for illegal dismissal does not by itself justify the
invocation of the doctrine of strained relations. 82
No strained relations should arise from a valid and legal act of asserting ones right;
otherwise, an employee who asserts his right could be easily separated from the service
by merely paying his separation pay on the pretext that his relationship with his
employer had already become strained. 83
Indeed, if the strained relations engendered as a result of litigation are sufficient to rule
out reinstatement, then reinstatement would become the exception rather than the rule
in cases of illegal dismissal.84
89
1. Salaries or wages computed on the basis of the wage rate level at the time of the
illegal dismissal and not in accordance with the latest, current wage level of the
employees position.99
2. Allowances and other benefits regularly granted to and received by the employee
should be made part of backwages.100 Examples:
a. Emergency living allowances and 13 month pay mandated under the law.101
b. Fringe benefits or their monetary equivalent. 102
c. Transportation and emergency allowances. 103
d. Holiday pay, vacation and sick leaves and service incentive leaves. 104
e. Just share in the service charges. 105
f. Gasoline, car and representation allowances. 106
g. Any other regular allowances and benefits or their monetary equivalent. 107
th
If termination was made effective immediately, the backwages should be reckoned from
the date of the termination letter where such was stated. 120
If employer has already ceased operations, full backwages should be computed only up
to the date of the closure. To allow the computation of the backwages to be based on a
period beyond that would be an injustice to the employer. 121
If valid retrenchment supervened during the pendency of the case, full backwages
should be computed only up to the effectivity date of the retrenchment. 122
In case the employee dies during pendency of the case, his full backwages should be
computed from the time of his dismissal up to the time of his death. 123
The period of valid suspension is deductible from backwages. 124
Backwages should be reckoned from end of valid suspension. 125
Backwages should include period of preventive suspension. 126
Employers offer to reinstate does not forestall payment of full backwages. 127
Any amount received during payroll reinstatement is deductible from backwages. 128
(b)
LIMITED BACKWAGES
1. VARIATIONS IN THE GRANT OF BACKWAGES.
The discussion above dwells on cases where backwages are granted in full in
accordance with the clear mandate of Article 279 of the Labor Code. However, in certain
instances, backwages are not granted at all or are granted but only for a limited amount.
follows:
The discussion below will point out the variations in the grant of backwages as
(a)
(b)
(2)
(3)
no grave abuse of discretion in the resolution of the NLRC which meted only the penalty of
suspension without backwages.
(3) Pepsi-Cola Distributors of the Philippines, Inc. v. NLRC, 131 where the
employee filed a leave of absence for one day after he suffered stomach ache and upon the
advice of his doctor, he took a rest for 25 days without prior leave. When he reported back
for work, he was told that he had been dismissed for being absent without leave. It was held
that while he was at fault, the employee could not be dismissed. He was ordered reinstated
but he was denied backwages.
Illustrative cases of the SECOND situation above:
(1) In Itogon-Suyoc Mines, Inc. v. National Labor Relations Commission, 132 the
employee was found guilty of breach of trust for stealing ore with high gold content.
However, his dismissal was considered drastic and unwarranted considering that he had
rendered twenty three (23) years of service without previous derogatory record and he was
prematurely suspended during the pendency of the case. Consequently, he was ordered
reinstated but without granting him any backwages. The High Court pronounced that [t]he
ends of social andcompassionate justice would therefore be served if private respondent is
reinstated but without backwages in view of petitioner's good faith.
(2) Finding factual similarity with the foregoing case of Itogon-Suyoc, the Supreme
Court, in the 2013 case of Pepsi-Cola Products Philippines, Inc. v. Molon, 133 deems it
appropriate to render the same disposition insofar as one of the respondents in this case
was concerned - Saunder Santiago Remandaban III. This case involves a strike which the
DOLE Secretary certified to the NLRC for compulsory arbitration. A return-to-work order was
issued as a consequence of such certification. However, Remandaban failed to report for
work within twenty-four (24) hours from receipt of the said order. Because of this, he was
served with a notice of loss of employment status (dated July 30, 1999) which he challenged,
asserting that his absence on that day was justified because he had to consult a physician
regarding the persistent and excruciating pain of the inner side of his right foot. In ordering
his reinstatement but without backwages, the Supreme Court cited the following as its
bases:
(a) While Remandaban was remiss in properly informing Pepsi of his intended
absence, the penalty of dismissal is too harsh for his infractions considering that
his failure to report to work was clearly prompted by a medical emergency and
not by any intention to defy the July 27, 1999 return-to-work order.
(b)
(3) It was likewise held in the 2013 case of Integrated Microelectronics, Inc. v.
Pionella, 134 on motion for reconsideration by petitioner, that the backwages 135 should be
deleted on the grounds that (a) the penalty of dismissal was too harsh of a penalty to be
imposed against Pionilla for his infractions; 136 and (b) petitioner IMI was in good faith when it
dismissed Pionilla as his dereliction of its policy on ID usage was honestly perceived to be a
threat to the companys security. In this respect, since these concurring circumstances
trigger the application of the exception to the rule on backwages as enunciated in the
above-cited cases, the Court found it proper to accord the same disposition and
consequently directed the deletion of the award of backwages in favor of Pionilla,
notwithstanding the illegality of his dismissal.
trust and violation of company rules, the High Court still declared the employees dismissal
illegal as it was too severe a penalty considering that she had served the employer company
for 21 years, it was her first offense, and her leave to study the French language would
ultimately benefit the employer who no longer had to spend for translation services. Even
so, other than ordering the employees reinstatement, the said employee was
awarded backwages limited to a period of two (2) years, given that the employer acted
without malice or bad faithin terminating the employees services.
Illustrative case where award of backwages was limited to 5 years:
In its resolution on the motion for reconsideration filed by the petitioner in Victory
Liner, Inc. v. Race, 146 the High Tribunal reduced and limited the original award of full
backwages to five (5) years in the light of the evident good faith of the employer. While
petitioners argument that respondent had already abandoned his job in 1994 was not
upheld, the Court conceded that petitioner, given the particular circumstances of this case,
had sufficient basis to reasonably and in good faith deem respondent resigned by 1998.
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ChapterFour
TERMINATION OF EMPLOYMENT
TOPICS PER SYLLABUS
D. Preventive Suspension
D.
PREVENTIVE SUSPENSION1
1. LEGAL BASIS.
The Labor Code does not contain any provision on preventive suspension. The legal
basis for the valid imposition thereof is found in Sections 8 and 9, Rule XXIII, Book V of
the Rules to Implement the Labor Code.2
2. PURPOSE AND JUSTIFICATION.
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 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
employees continued presence in the company premises during the investigation poses a
serious and imminent threat to the life or property of the employer or of the employees coworkers. Without this threat, preventive suspension is not proper. 3
3. SOME PRINCIPLES ON PREVENTIVE SUSPENSION.
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. 4
If the basis of the preventive suspension is the employees absences and tardiness, the
imposition of preventive suspension on him is not justified as his presence in the
company premises does not pose any such serious or imminent threat to the life or
15
Failure to state the duration of the preventive suspension in the notice does not mean
it is indefinite. There is a reasonable and logical presumption that said suspension in fact
has a duration which could very well be not more than 30 days as mandated by law. 16
Salaries should be paid for improperly-imposed preventive suspension. 17
Period of preventive suspension of workers in the construction industry is only for 15
days.18
Preventive suspension is different from suspension of operation under Article 286 19 of
the Labor Code.20
Preventive suspension is different from floating status.
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ChapterFour
21
TERMINATION OF EMPLOYMENT
TOPICS PER SYLLABUS
E. Constructive Dismissal
E.
CONSTRUCTIVE DISMISSAL1
1. CONSTRUCTIVE DISMISSAL.
Constructive dismissal contemplates any of the following situations:
1) An involuntary resignation resorted to when continued employment is
rendered impossible, unreasonable or unlikely;
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 that it could foreclose any choice by him except to
forego his continued employment.2
2. INVOLUNTARY RESIGNATION.
The termination initiated by the employee based on the just causes described and
enumerated in Article 2853 of the Labor Code is in the nature of involuntary resignation.
Thus, an employee may put an end to the employment relationship without need of serving
any notice on the 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;
(2) Inhumane and unbearable treatment accorded the employee by the employer or
his representative;
(3) Commission of a crime or offense by the employer or his representative against
the person of the employee or any of the immediate members of his family; and
(4) Other causes analogous to any of the foregoing. 4
Thus, unlike resignation without just cause under the same Article 285 5 where the
law requires prior written notice, the employee may terminate his employment without
serving any notice to the employer if such is occasioned by any of the just causes mentioned
above.
3. FORCED RESIGNATION.
There is 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. 6
4. COMMON DENOMINATOR.
Both involuntary and forced resignations are embraced within the concept of
constructive dismissal. The common character pervading involuntary or forced resignation
or constructive dismissal is the act of quitting from employment by the employee because
of the attendant just causes, acts, facts or circumstances which render the continued
employment impossible, unreasonable or unlikely. 7 Thus, if there is no cessation of
work, there can be no constructive dismissal. 8
5. TEST OF CONSTRUCTIVE DISMISSAL.
The above statement only goes to show that while it was Johnson who tendered his
resignation, it was due to the petitioners acts that he was constrained to resign. The
petitioners cannot expect Johnson to tolerate working for them without any
compensation. It is impossible, unreasonable or unlikely that any employee, such as
Johnson, would continue working for an employer who does not pay him his salaries.
Asking the employee to file a resignation on the condition or promise that she would be
given priority for re-employment and in consideration of immediately paying her two (2)
months vacation which she desperately needed then because she was ill. The
employers refusal in bad faith to reemploy her despite its promise to do so amounted
to illegal dismissal.28
Changing the employees status from regular to casual constitutes constructive
dismissal.29
Offer made by a labor contractor to reassign its employees to another company but
with no guaranteed working hours and payment of only the minimum wage. The terms
of the redeployment thus became unacceptable for said employees and foreclosed any
choice but to reject the employers offer, involving as it does a demotion in status and
diminution in pay.30
Preventing the employee from reporting for work by ordering the guards not to let her
in. This is clear notice of dismissal. 31
Transfer of respondent employee from Credit and Collection Manager to Marketing
Assistant which 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 that the former position is
managerial while the latter is clerical in nature. 32
Reducing the number of trips of the drivers and shortening their workdays which
resulted in the diminution of their pay. 33
Forcing the employee to tender her resignation letter in exchange for her 13 month
pay, the reason being that the employee was found by the employer to have violated its
no-employment-for-relatives-within-the-third-degree-policy,
she
having
been
34
impregnated by a married co-employee.
th
This also manifested from the fact that even before Cosare was required to present his side
on the charges of serious misconduct and willful breach of trust, he was summoned to his
superiors office and was asked to tender his immediate resignation in exchange for financial
assistance.
2. Tuason v. Bank of Commerce. 37 In this 2012 case, the Supreme Court ruled
that petitioner was forced to resign. Pressure was exerted on her to resign from her work.
The Court has in fact examined the exchange of communications between petitioner and
the respondent officers of respondent bank before it arrived at its ruling that petitioner was
constructively dismissed. It was proved, among others, that petitioner was replaced in her
position while she was on leave. Like Tuason, any reasonable person similarly situated would
have felt compelled to give up her post as she was, in fact, stripped of it considering that
someone else was already discharging her functions and occupying her office.
10. SOME PRINCIPLES ON CONSTRUCTIVE DISMISSAL OR INVOLUNTARY OR FORCED
RESIGNATION.
Mere allegations of threat or force do not constitute evidence to support a finding of
forced resignation or constructive dismissal. 38
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 ones claim through competent authority, if the claim is
just or legal, does not vitiate consent. 39
Employee who alleges that he was coerced or intimidated into resigning has the
burden to prove such claim.40
Giving the employee the choice or option between resignation and investigation is not
illegal.41
The facts of the case should be considered to determine if there is constructive
dismissal.42
Voluntary resignation is different from constructive dismissal. An employee who
tendered her voluntary resignation and signed the quitclaim after receiving all the
benefits due her for her separation cannot claim that she was constructively
dismissed.43
An employee may be constructively dismissed and at the same time legally
dismissed. The case in point is Formantes v. Duncan Pharmaceuticals Phils. ,
Inc. 44 Petitioner45 was constructively dismissed because, while still employed with the
respondent, he was 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 was no longer
allowed to participate in the activities of respondent company. His 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 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. However, his dismissal was considered legal because 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 the Notice of Termination
served on him when he was terminated, was duly proved during the trial of the case
before the Labor Arbiter. Since the dismissal, although for a valid 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.
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