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Constructive Dismissal concept
Constructive dismissal is an employer’s act amounting to
dismissal but made to appear as if it were not – a dismissal in
disguise. In most cases of constructive dismissal, the
employee is allowed to continue to work, but is simply
reassigned, or demoted, or his pay diminished without a valid
reason to do so.
Constructive dismissal does not always involve forthright
dismissal or diminution in rank, compensation, benefit and
privileges. There may be constructive dismissal if an act of
clear discrimination, insensibility or disdain by an employer
becomes so unbearable on the part or the employee that it
could foreclose any choice by him except to forego his
continued employment. (See Hyatt Taxi Services case, G.R.
No. 143204, June 26, 2001.)
Constructive Dismissal and Involuntary Resignation
Constructive dismissal is an involuntary resignation resulting
in cessation of work resorted to when continued employment
becomes impossible, unreasonable or unlikely; when there is
a demotion in rank or a diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer
becomes unbearable to an employee.
In Globe Telecom, Inc. v. Florendo-Flores, it was held that
where an employee ceases to work due to a demotion of rank
or a diminution of pay, an unreasonable situation arises
which creates an adverse working environment rendering it
impossible for such employee to continue working for her
employer. Hence, her severance from the company was not
of her own making and therefore amounted to an illegal
termination of employment. (Cited in Francisco vs. NLRC, G.R.
No. 170087, August 21, 2006.)
Cases
Diminution of pay. A diminution of pay is prejudicial to the
employee and amounts to constructive dismissal. (Francisco
vs. NLRC)
Transfer of employee not amounting to constructive
dismissal. Transfer of an employee from one area of
operation to another is a management prerogative and is not
constitutive of constructive dismissal, when the transfer is
based on sound business judgment, unattended by a
demotion in rank or a diminution of pay or bad faith. (Tan vs.
NLRC, G.R. No. 128290, November 24, 1998.)
Transfer of employee amounting to constructive dismissal. A
transfer amounts to constructive dismissal when the transfer
is unreasonable, unlikely, inconvenient, impossible, or
prejudicial to the employee. (Phil. Industrial Security Agency
Corp. vs. Aguinaldo, G.R. No. 149974, June 15, 2005.)
Case title: ‘The Orchard Golf and Country Club vs. Amelia R
Francisco,” G.R. No. 178125, March 2013
Issue: How can an employee file a labor case for constructive
dismissal and at the same time continue reporting for work?
Ruling: Constructive dismissal does not occur when the
employee stops reporting for work, but when the employer
commits acts that make continued employment intolerable.
In difficult times, an employee may have no choice but to
continue working despite the employer’s abuses and even
while a labor case is pending between them. This should not
be taken against the employee.
Definition: “Constructive dismissal” is quitting or cessation of
work because continued employment is rendered impossible,
unreasonable or unlikely;
 when there is a demotion in rank or a diminution of
pay and other benefits;
 if an act of clear discrimination, insensibility, or
disdain by an employer becomes so unbearable on
the part of the employee that it could foreclose any
choice by him except to forego his continued
employment;
 when the employee involuntary resigns due to the
harsh, hostile, and unfavorable conditions set by the
employer.
The test of constructive dismissal is whether a reasonable
person in the employee's position would have felt compelled
to give up his employment/position under the circumstances.
(Gan vs. Galderma Philippines, G.R. No. 177167, January 17,
2013)
In Salvaloza vs. NLRC (G.R. No. 182086, November 24, 2010),
the Supreme Court said:
“Temporary off-detail or floating status is the period of time
when security guards are in between assignments or when
they are made to wait after being relieved from a previous
post until they are transferred to a new one. It takes place
when the security agency’s clients decide not to renew their
contracts with the agency, resulting in a situation where the
available posts under its existing contracts are less than the
number of guards in its roster. It also happens in instances
where contracts for security services stipulate that the client
may request the agency for the replacement of the guards
assigned to it even for want of cause, such that the replaced
security guard may be placed on temporary off-detail if there
are no available posts under the agency’s existing contracts.
During such time, the security guard does not receive any
salary or any financial assistance provided by law. It does not
constitute a dismissal, as the assignments primarily depend
on the contracts entered into by the security agencies with

third parties, so long as such status does not continue beyond
a reasonable time. When such a floating status lasts for more
than six (6) months, the employee may be considered to have
been constructively dismissed.“
There is constructive dismissal if an act of clear
discrimination, insensibility, or disdain by an employer
becomes so unbearable on the part of the employee that it
would foreclose any choice except to forego continued
employment. It exists when there is cessation of work
because continued employment is rendered impossible,
unreasonable, or unlikely, as an offer involving a demotion
in rank and a diminution in pay”.
Section 1 (a), Article 228, Republic Act No. 10396 which
provides that: “(A)ll issues arising from labor and
employment shall be subject to mandatory conciliation-
mediation.” Section 1 (b) also provides that any or both
parties involved in the dispute may pre-terminate the
conciliation-mediation proceedings and request referral or
endorsement to the appropriate Department of Labor and
Employment (DOLE) Agency or Office which has jurisdiction
over the dispute, or if both parties so agree, refer the
unresolved issues to voluntary arbitration.
Begun and held in Metro Manila, on Monday, the twenty-third day
of July, two thousand twelve.
REPUBLIC ACT No. 10396
AN ACT STRENGTHENING CONCILIATION-MEDIATION AS A
VOLUNTARY MODE OF DISPUTE SETTLEMENT FOR ALL LABOR
CASES, AMENDING FOR THIS PURPOSE ARTICLE 228 OF
PRESIDENTIAL DECREE NO. 442, AS AMENDED, OTHERWISE
KNOWN AS THE "LABOR CODE OF THE PHILIPPINES"
Be it enacted by the Senate and House of Representatives of the
Philippines in Congress assembled:
Section 1. A new article is hereby inserted in the Labor Code to read
as follows:
"ART. 228. Mandatory Conciliation and Endorsement of Cases. – (a)
Except as provided in Title VII-A, Book V of this Code, as amended, or
as may be excepted by the Secretary of Labor and Employment, all
issues arising from labor and employment shall be subject to
mandatory conciliation-mediation. The labor arbiter or the
appropriate DOLE agency or office that has jurisdiction over the
dispute shall entertain only endorsed or referred cases by the duly
authorized officer.
"(b) Any or both parties involved in the dispute may pre-terminate
the conciliation-mediation proceedings and request referral or
endorsement to the appropriate DOLE agency or office which has
jurisdiction over the dispute, or if both parties so agree, refer the
unresolved issues to voluntary arbitration."
Section 2. Implementing Rules and Regulations. – The Secretary of
Labor and Employment shall promulgate the necessary rules and
regulations to implement the provisions of this Act.
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Section 3. Repealing Clause. – Presidential Decree No. 442, as
amended, otherwise known as the "Labor Code of the Philippines",
and all other acts, laws, presidential issuances, rules and regulations
inconsistent herewith are hereby repealed, amended or modified
accordingly.
Section 4. Effectivity Clause. – This Act shall take effect fifteen (15)
days after its complete publication in the Official Gazette or in at
least two (2) newspapers of national circulation.
Rule III, Section 6 of CSC Memorandum Circular No. 40,
series of 1998, dated December 14, 1998, which provides:
Section 6. Other Personnel Movements. The following
personnel movements which will not require issuance of an
appointment shall nevertheless require an office order by
duly authorized official.
a. Reassignment Movement of an employee from one
organizational unit to another in the same department or
agency which does not involve reduction in rank, status or
salary. If reassignment is done without consent of the
employee being reassigned it shall be allowed for a maximum
period of one year. Reassignment is presumed to be regular
and made in the interest of public service unless proven
otherwise or it constitutes constructive dismissal.
No assignment shall be undertaken if done indiscriminately or
whimsically because the law is not intended as a convenient
shield for the appointing/ disciplining authority to harass or
oppress a subordinate on the pretext of advancing and
promoting public interest.
Reassignment of small salaried employee is not permissible if
it causes significant financial dislocation.
Although reassignment is a management prerogative, the
same must be done in the exigency of the service without
diminution in rank, status and salary on the part of the officer
or employee being temporarily reassigned. Reassignment of
small salaried employees, however is not allowed if it will
cause significant financial dislocation to the employee
reassigned. Otherwise the Commission will have to intervene.
The primary purpose of emphasizing small salaried
employees in the foregoing rule is to protect the rank and file
employees from possible abuse by the management in the
guise of transfer/reassignment. The Supreme Court in Alzate
v. Mabutas, (51 O.G. 2452) ruled:
x x x [T]he protection against invalid transfer is especially
needed by lower ranking employees. The Court emphasized
this need when it ruled that officials in the unclassified
service, presidential appointees, men in the government set
up occupy positions in the higher echelon should be entitled
to security of tenure, unquestionable a lesser sol[ci]itude
cannot be meant for the little men, that great mass of
Common underprivileged employees-thousand there are of
them in the lower bracket, who generally are without
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connections and who pin their hopes of advancement on the Morales vs Harbour Center Port Terminal, Inc. (G.R. No.
merit system instituted by our civil service law. 174208, January 25, 2012), thus:

In other words, in order to be embraced in the term small-
salaried employees, the latter must belong to the rank and
file; and, his/her salary would be significantly reduced by
virtue of the transfer/reassignment. Rank and file was
categorized as those occupying the position of Division Chief
and below, pursuant to CSC Resolution No. 1, series of 1991,
dated January 28, 1991.
Elements of Constructive Dismissal
Constructive dismissal exists when continued employment is
rendered impossible, unreasonable or unlikely due to one or
more of the following acts: demotion; diminution in pay; or, a
clear discrimination, insensibility, or disdain to the employee.
It may also happen when an employee is placed on
preventive suspension for more than 30 days or on a floating
status for more than 6 months.
And in the case of a transfer of an employee, the employer is
required to show that the act of transferring the employee is
out of a legitimate business decision. And that the transfer is
not unreasonable, inconvenient or prejudicial to the
employee. Otherwise, the act of transferring the employee
may also be an act of unlawful constructive dismissal.
“Constructive dismissal exists where there is cessation of
work because “continued employment is rendered
impossible, unreasonable or unlikely, as an offer involving a
demotion in rank or a diminution in pay” and other benefits.
Aptly called a dismissal in disguise or an act amounting to
dismissal but made to appear as if it were not, constructive
dismissal may, likewise, exist if an act of clear discrimination,
insensibility, or disdain by an employer becomes so
unbearable on the part of the employee that it could
foreclose any choice by him except to forego his continued
employment. In cases of a transfer of an employee, the rule is
settled that the employer is charged with the burden of
proving that its conduct and action are for valid and
legitimate grounds such as genuine business necessity and
that the transfer is not unreasonable, inconvenient or
prejudicial to the employee. If the employer cannot
overcome this burden of proof, the employee’s transfer shall
be tantamount to unlawful constructive dismissal.”
Under Republic Act (R.A.) No. 10396, it is required that you
file first your complaint against your employer before the
Single Entry Assistance Desk (SEAD), in order for you to
undergo the compulsory conciliation-mediation proceeding.

Examples of Constructive Dismissal Cases in the Philippines

Transfer of Employee
In the case of Philippine Japan Active Carbon Corporation, et
al. vs. NLRC, et al., the employee was transferred from
Executive Secretary to the Executive Vice President and
General Manager to Production Secretary with the same
salary and workload. The court has ruled that since the
transfer is not unreasonable, nor inconvenient, nor
prejudicial to the employee, and it does not involve a
demotion in rank or a diminution of the employee’s salaries,
benefits, and other privileges, constructive dismissal, in this
case, is invalid.

Discrimination against Employee

And, in the case of Globe Telecom, Inc., et al. vs. Joan
Florendo-Flores, constructive dismissal was established as the
court finds a clear discrimination from the immediate
superior against the employee without reason.

Professional and Sexual Harassment

In this case of Digitel Telecommunications Philippines, Inc., et
al., vs. Mariquit Soriano, the employee claims to suffer from
professional and sexual harassment leading to the
employee’s resignation. However, there was a lack of
substantial, concrete and credible evidence to support so.
Therefore, constructively dismissal is held invalid.