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TERMINATION OF EMPLOYMENT

SECURITY OF TENURE

Definition
Right not be removed from one‘s job without valid cause and valid procedure. (Kiamco
v. NLRC, 1999)

ART. 279 of the Labor Code of the Philippines: Security of Tenure. In cases of regular
employment, the employer shall not terminate the services of an employee except for a
just cause or when authorized by this Title. An employee who is unjustly dismissed from
work shall be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to his other benefits or
their monetary equivalent computed from the time his compensation was withheld from
him up to the time of his actual reinstatement.

Nature
It is a constitutionally protected right (Art. XIII Sec. 3, 1987 Constitution); it cannot be
blotted out by an employment contract.

It does not give the Employee an absolute right to his position; when a transfer is not
unreasonable, nor inconvenient, nor prejudicial to an employee; and it does not involve
a demotion in rank or diminution of his pay, benefits, and other privileges, the employee
may not complain that it amounts to constructive dismissal. (Lanzadares vs. Amethyst
Security, 2003)

A finding of illegal dismissal entitles the Employee to:

1. reinstatement without loss of seniority rights and privileges, and

2. full backwages inclusive of allowances and to benefits or their monetary


equivalent from the time withheld up to actual reinstatement (Art. 279)

Under the law and prevailing jurisprudence, an illegally dismissed employee is entitled
to reinstatement as a matter of right. However, if reinstatement would only exacerbate
the tension and strained relations between the parties, or where the relationship between
the employer and the employee has been unduly strained by reason of their irreconcilable
differences, particularly where the illegally dismissed employee held a managerial or key
position in the company, it would be more prudent to order payment of separation pay
instead of reinstatement. However, under the doctrine of strained relations, the payment
of separation pay is considered an acceptable alternative to reinstatement when the latter
option is no longer desirable or viable. On one hand, such payment liberates the
employee from what could be a highly oppressive work environment. On the other hand,
it releases the employer from the grossly unpalatable obligation of maintaining in its
employ a worker it could no longer trust. In such cases, it should be proved that the
employee concerned occupies a position where he enjoys the trust and confidence of his
employer; and that it is likely that if reinstated, an atmosphere of antipathy and
antagonism may be generated as to adversely affect the efficiency and productivity of the
employee concerned. (Bank of Lubao v. Manabat, G.R. No. 188722, February 1, 2012)
Coverage
• 1987 Constitution: all workers (Art. XIII Sec. 3)
 Labor Code: regular employees (Art. 279) in all establishments or undertakings,
whether for profit or not (Art. 278), except government and its political
subdivisions including government owned or controlled corporations or GOCCs
(IRR Book VI Rule I Sec. 1)
TWO KINDS OF TERMINATION (SUBSTANTIVE DUE PROCESS)
1. Termination by employer under art. 282, 283 and 284 of the Labor Code of the
Philippines.

2. Termination by employee under art. 285 of the Labor Code of the Philippines.

ART. 282. Termination by employer. – An employer may terminate an employment for any
of the following causes:
(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.
ART. 283. Closure of establishment and reduction of personnel. – The employer may also
terminate the employment of any employee due to installation of labor-saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by
serving a written notice on the worker and the Department of Labor and Employment at least one
(1) month before the intended date thereof. In case of termination due to installation of labor-saving
devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent
to at least one (1) month pay or to at least one (1) month pay for every year of service, whichever
is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious business losses and financial
reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2)
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.
ART. 284. Disease as ground for termination. – An employer may terminate the services of an
employee who has been found to be suffering from any disease and whose continued employment
is prohibited by law or is prejudicial to his health as well as to the health of his co-employees:
Provided, That he is paid separation pay equivalent to at least one (1) month salary or to one-half
(1/2) 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.

In termination disputes, the burden of proving that the dismissal is for a just or valid
cause rests on the employers. Failure on their part to discharge such burden will render
the dismissal illegal. (Grand Asian Shipping Lines, Inc. v. Galvez, G.R. No. 178184,
January 29, 2014)

An employer may validly dismiss an employee from the service, the requirement of
substantial and procedural due process must be complied with. Under the requirement
of substantial due process, the grounds for termination of employment must be based on
just or authorized causes. (The Coca-Cola Export Corporation v. Gacayan, December 15,
2010)

Proof Required: In labor cases, substantial evidence or such relevant evidence as a


reasonable mind might accept as sufficient to support a conclusion is required.
(Hormillosa v. Coca-Cola Bottlers Phils., Inc. G.R. No. 198699, October 9, 2013)
TERMINATION BY EMPLOYER
JUST CAUSES

A. Serious Misconduct

Serious misconduct is a just cause for termination of employment under the law.
Article 282 of the Labor Code provides: "An employer may terminate an
employment for any of the following causes: (a) Serious misconduct or willful
disobedience by the employee of the lawful orders of his employer or
representative in connection with his work, x x x." (Benitez v. Sante Fe Moving and
Relocation Services, G.R. No. 208163, April 20, 2015)

In the case of Phil. Aeolus Automotive United Corp. v. NLRC, G.R. No. 124617,
April 28, 2000, the court ruled on serious misconduct warranting dismissal of an
employee, that for misconduct or improper behavior to be a just cause for dismissal:

(a) it must be serious;


(b) must relate to the performance of the employees duties; and,
(c) must show that the employee has become unfit to continue working for the
employer.

The act of private respondent in throwing a stapler and uttering abusive language
upon the person of the plant manager may be considered, from a lay man's
perspective, as a serious misconduct. However, in order to consider it a serious
misconduct that would justify dismissal under the law, it must have been done in
relation to the performance of her duties as would show her to be unfit to continue
working for her employer. The acts complained of, under the circumstances they
were done, did not in any way pertain to her duties as a nurse. Her employment
identification card discloses the nature of her employment as a nurse and no other.

B. Willful Disobedience

In the case of St. Luke’s Medical Center v. Sanchez, G.R. No. 212054, March 11, 2015,
it explains that: The right of an employer to regulate all aspects of employment,
aptly called “management prerogative,” gives employers the freedom to regulate,
according to their discretion and best judgment, all aspects of employment,
including work assignment, working methods, processes to be followed, working
regulations, transfer of employees, work supervision, lay-off of workers and the
discipline, dismissal and recall of workers. Among the employer’s management
prerogatives is the right to prescribe reasonable rules and regulations necessary or
proper for the conduct of its business or concern, to provide certain disciplinary
measures to implement said rules and to assure that the same would be complied
with. At the same time, the employee has the corollary duty to obey all reasonable
rules, orders, and instructions of the employer; and willful or intentional
disobedience thereto, as a general rule, justifies termination of the contract of
service and the dismissal of the employee. Article 296 (formerly Article 282) of the
Labor Code provides:

Article 296. Termination by Employer. - An employer may terminate an


employment for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful


orders of his employer or his representative in connection with his work;

Note that for an employee to be validly dismissed on this ground, the employer’s
orders, regulations, or instructions must be:

(1) reasonable and lawful,


(2) sufficiently known to the employee, and
(3) in connection with the duties which the employee has been engaged to
discharge.

C. Gross and Habitual Neglect of Duties

In the case of St. Lukes Medical Center v. Notario, G.R. No. 152166, October 20,
2010, it explains that: under Article 282 (b) of the Labor Code, an employer may
terminate an employee for gross and habitual neglect of duties. Neglect of duty,
to be a ground for dismissal, must be both gross and habitual. Gross negligence
connotes want of care in the performance of ones duties. Habitual neglect implies
repeated failure to perform ones duties for a period of time, depending upon the
circumstances. A single or isolated act of negligence does not constitute a just cause
for the dismissal of the employee. Under the prevailing circumstances, respondent
exercised his best judgment in monitoring the CCTV cameras so as to ensure the
security within the hospital premises. Verily, assuming arguendo that respondent
was negligent, although this Court finds otherwise, the lapse or inaction could only
be regarded as a single or isolated act of negligence that cannot be categorized as
habitual and, hence, not a just cause for his dismissal.

Also in the case of School of Holy Spirit of Quezon City v. Taguiam, G.R. No.
165565, July 14, 2008, Under Article 282of the Labor Code, gross and habitual
neglect of duties is a valid ground for an employer to terminate an employee. Gross
negligence implies a want or absence of or a failure to exercise slight care or
diligence, or the entire absence of care. It evinces a thoughtless disregard of
consequences without exerting any effort to avoid them. Habitual neglect implies
repeated failure to perform ones duties for a period of time, depending upon the
circumstances.

Requisites: Gross and Habitual Neglect of Duty

D. Fraud or Willful Breach of Trust


In the case of Chuanico v. Legacy Consolidated Plans, October 9, 2013, it explains
that: under Article 282 (c) of the Labor Code, the breach of trust must be willful.
Ordinary breach will not be enough. A breach is willful if it is done intentionally
and knowingly without any justifiable excuse, as distinguished from an act done
carelessly, thoughtlessly or inadvertently.

In the case of Blue than Blue Joint Ventures Co. v. Esteban, April 7, 2014, it explains
that: Loss of trust and confidence is premised on the fact that the employee
concerned holds a position of responsibility, trust and confidence. The employee
must be invested with confidence on delicate matters, such as the custody,
handling, care and protection of the employer’s property and funds. "[W]ith respect
to rank-and-file personnel, loss of trust and confidence as ground for valid
dismissal requires proof of involvement in the alleged events in question, and that
mere uncorroborated assertions and accusations by the employer will not be
sufficient.

In the case of Jerusalem v. Hock, et. al. G.R. No. 169564, April 6, 2011, it explains
that: Article 282(c) of the Labor Code prescribes two separate and distinct grounds
for termination of employment, namely: (1) fraud; or (2) willful breach by the
employee of the trust reposed in him by his employer or duly authorized
representative.

Law and jurisprudence have long recognized the right of employers to dismiss
employees by reason of loss of trust and confidence. As provided for in Article 282,
an employer may terminate an employees employment for fraud or willful breach
of trust reposed in him. But, in order to constitute a just cause for dismissal, the act
complained of must be work-related such as would show the employee concerned
to be unfit to continue working for the employer.

For breach of trust and confidence to become a valid ground for the dismissal of an
employee, the cause of loss of trust and confidence must be related to the
performance of the employees duties.

In the case of Century Canning Corp v. Ramil, August 8, 2010, G.R. No. 171630, it
explains that: The right of an employer to dismiss an employee on the ground that
it has lost its trust and confidence in him must not be exercised arbitrarily and
without just cause. Loss of trust and confidence, to be a valid cause for dismissal,
must be based on a willful breach of trust and founded on clearly established facts.
The basis for the dismissal must be clearly and convincingly established, but proof
beyond reasonable doubt is not necessary. It must rest on substantial grounds and
not on the employers arbitrariness, whim, caprice or suspicion; otherwise, the
employee would eternally remain at the mercy of the employer.

Requisites:

1. Employee holds a position of trust and confidence or is routinely charged with


the care and custody of the employers money or property

2. the breach must be related to the performance of the employees function.

3. it must be shown that the employee is a managerial employee, since the term
trust and confidence is restricted to said class of employees, except when rank-and-
file position is reposed with trust and confidence
E. Commission of Crime or Offense

In the case of Reno Foods, Inc. v. NLM-Katipunan, G.R. No. 164016, March 15, 2010,
it explained that a criminal conviction is not necessary to find just cause for
employment termination. Otherwise stated, an employees acquittal in a criminal
case, especially one that is grounded on the existence of reasonable doubt, will not
preclude a determination in a labor case that he is guilty of acts inimical to the
employers interests.

Criminal cases require proof beyond reasonable doubt while labor disputes require
only substantial evidence, which means such relevant evidence as a reasonable
mind might accept as adequate to justify a conclusion.

F. Analogous Causes

Article 282(e) of the Labor Code talks of other analogous causes or those which are
susceptible of comparison to another in general or in specific detail. For an
employee to be validly dismissed for a cause analogous to those enumerated in
Article 282, the cause must involve a voluntary and/or willful act or omission of
the employee. (John Hancock Life Insurance Corp. v. Davis, G.R. No. 169549,
September 3, 2009)

In the case of Ace Promotion and Marketing Corp. v. Ursabia, G.R. No. 171703,
September 22, 2006, To constitute a just and valid ground for dismissal,
abandonment requires the deliberate and unjustified refusal of the employee to
resume his employment. Two elements must be present, namely: (1) the failure to
report for work or absence without valid or justifiable reason, and (2) a clear
intention to sever the employer-employee relationship. The second element is more
determinative of the intent and must be evinced by overt acts. Mere absence, not
being sufficient, the burden of proof rests upon the employer to show that the
employee clearly and deliberately intended to discontinue his employment without
any intention of returning.

Also in the case of La Rosa, et. al. v. Ambassador Hotel, G.R. No. 177059, March 13,
2009, it explained abandonment as ground for dismissal. Absence must be
accompanied by overt acts unerringly pointing to the fact that the employee simply
does not want to work anymore. And the burden of proof to show that there was
unjustified refusal to go back to work rests on the employer.

Abandonment is a matter of intention and cannot lightly be inferred or legally


presumed from certain equivocal acts. For abandonment to exist, two requisites
must concur: first, the employee must have failed to report for work or must have
been absent without valid or justifiable reason; and second, there must have been
a clear intention on the part of the employee to sever the employer-employee
relationship as manifested by some overt acts. The second element is the more
determinative factor. Abandonment as a just ground for dismissal thus requires
clear, willful, deliberate, and unjustified refusal of the employee to resume
employment. Mere absence or failure to report for work, even after notice to return,
is not tantamount to abandonment.
Another analogous cause is insubordination, as explained in the case of Pharmacia
and Upjohn v. Albayda, Jr., G.R. No. 172724, August 23, 2010, in which for
insubordination to exist, the order must be reasonable and lawful, sufficiently
known to the employee and in connection to his duties. Where an order or rule is
not reasonable, in view of the terms of the contract of employment and the general
right of the parties, a refusal to obey does not constitute a just cause for the
employees discharge. It is undeniable that the order given by the company to
petitioner to transfer to a place where he has no connections, leaving his family
behind, and with no clear additional remuneration, can be considered
unreasonable and petitioner’s actuation cannot be considered insubordination.

The obesity of petitioner, when placed in the context of his work as flight attendant,
becomes an analogous cause under Article 282(e) of the Labor Code that justifies
his dismissal from the service. His obesity may not be unintended, but is
nonetheless voluntary. As the CA correctly puts it, [v]oluntariness basically means
that the just cause is solely attributable to the employee without any external force
influencing or controlling his actions. This element runs through all just causes
under Article 282, whether they be in the nature of a wrongful action or omission.
Gross and habitual neglect, a recognized just cause, is considered voluntary
although it lacks the element of intent found in Article 282(a), (c), and (d).
(Yrasuegui v. Philippine Airlines, Inc. G.R. No. 168081, October 17, 2008)

AUTHORIZED CAUSES (Business Related and Disease)

The law recognizes the right of every business entity to reduce its workforce if the same
is made necessary by compelling economic factors which would endanger its existence
or stability.

The fundamental law itself guarantees, even during the process of tilting the scales of
social justice towards workers and employees, ―the right of enterprises to reasonable
returns of investment and to expansion and growth.

A. Installation of Labor Saving Devices

The law authorizes an employer to terminate the employment of any employee due to
the installation of labor saving devices. 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 maliciousness on the part of management.

The installation of labor-saving devices contemplates the installation of machinery to


effect economy and efficiency in the method of production.

B. Redundancy

Redundancy exists where the services of an employee are in excess of what is reasonably
demanded by the actual requirements of the enterprise. A position is redundant where it
is superfluous, and superfluity of a position or positions may be the outcome of a number
of factors, such as over hiring of workers, decreased volume of business, or dropping of
a particular product line or service activity previously manufactured or undertaken by
the enterprise. (Arabit v. Jardine Pacific Finance, Inc., G.R. No. 181719, April 2, 2014)

Requisites to ensure the validity of the implementation of a redundancy program:


1) a written notice served on both the employees and the Department of Labor and
Employment (DOLE) at least one month prior to the intended date of retrenchment;

2) payment of separation pay equivalent to at least one month pay or at least one month
pay for every year of service, whichever is higher;

3) good faith in abolishing the redundant positions; and

4) fair and reasonable criteria in ascertaining what positions are to be declared redundant
and accordingly abolished.

C. Retrenchment

Retrenchment is used interchangeably with the term "lay-off." It is the termination of


employment initiated by the employer through no fault of the employee’s and without
prejudice to the latter, resorted to by management during periods of business recession,
industrial depression, or seasonal fluctuations, or during lulls occasioned by lack of
orders, shortage of materials, conversion of the plant for a new production program or
the introduction of new methods or more efficient machinery, or of automation. Simply
put, it is an act of the employer of dismissing employees because of losses in the operation
of a business, lack of work, and considerable reduction on the volume of his business, a
right consistently recognized and affirmed by this Court.

To effect a valid retrenchment, the following elements must be present:

(1) The retrenchment is reasonably necessary and likely to prevent business losses which,
if already incurred, are not merely de minimis, but substantial, serious, and real, or only
if expected, are reasonably imminent as perceived objectively and in good faith by the
employer;

(2) The employer serves written notice both to the employee/s concerned and the
Department of Labor and Employment at least a month before the intended date of
retrenchment;

(3) The employer pays the retrenched employee separation pay in an amount prescribed
by the Code;

(4) The employer exercises its prerogative to retrench in good faith; and

(5) The employer uses fair and reasonable criteria in ascertaining who would be
retrenched or retained. (Sanoh Fulton Phil. V. Bernard, August 14, 2013, G.R. No. 187214)

D. Closure of Business

ART. 283. Closure of establishment and reduction of personnel. - The employer may also
terminate the employment of any employee due to the installation of labor-saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of
operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the workers and
the Department of Labor and Employment at least one (1) month before the intended date
thereof. x x x In case of retrenchment to prevent losses and in cases of closures or cessation
of operations of establishment or undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent to one (1) month pay or to at
least one-half (1/2) month pay for every year of service, whichever is higher. A fraction
of at least six (6) months shall be considered one (1) whole year.
Requisite: Losses in business operations must be proven convincingly

E. Disease

Article 284 of the Labor Code authorizes an employer to terminate an employee on the
ground of disease, viz:

Art. 284. Disease as a ground for termination- An employer may terminate the services of an
employee who has been found to be suffering from any disease and whose continued employment
is prohibited by law or prejudicial to his health as well as the health of his co-employees: xxx

However, in order to validly terminate employment on this ground, Book VI, Rule I,
Section 8 of the Omnibus Implementing Rules of the Labor Code requires:

Sec. 8. Disease as a ground for dismissal- Where the employee suffers from a disease and his
continued employment is prohibited by law or prejudicial to his health or to the health of his co-
employees, the employer shall not terminate his employment unless there is a certification by
competent public health authority that the disease is of such nature or at such a stage that it cannot
be cured within a period of six (6) months even with proper medical treatment. If the disease or
ailment can be cured within the period, the employer shall not terminate the employee but shall ask
the employee to take a leave. The employer shall reinstate such employee to his former position
immediately upon the restoration of his normal health.
(Sy et. al. v. Court of Appeals, G.R. No. 142293. February 27, 2003)

An employee is entitled to separation pay under the provisions of the Labor Code,
particularly Article 284 thereof, which reads as follows:

An employer may terminate the services of an employee who has been found to be
suffering from any disease and whose continued employment is prohibited by law or is
prejudicial to his health as well as to the health of his co-employees: Provided, That he is
paid separation pay equivalent to at least one (1) month salary or to one-half (1/2) month
salary for every year of service whichever is greater, a fraction of at least six months being
considered as one (1) whole year.

A plain reading of the abovequoted provision clearly presupposes that it is the employer
who terminates the services of the employee found to be suffering from any disease and
whose continued employment is prohibited by law or is prejudicial to his health as well
as to the health of his co-employees. It does not contemplate a situation where it is the
employee who severs his or her employment ties. This is precisely the reason why Section
8, Rule 1, Book VI of the Omnibus Rules Implementing the Labor Code, directs that an
employer shall not terminate the services of the employee unless there is a certification by
a competent public health authority that the disease is of such nature or at such a stage
that it cannot be cured within a period of six (6) months even with proper medical
treatment. (Villaruel v. Yeo Han Guan, G.R. No. 169191, June 1, 2011)

F. Other Authorized Cause

Art. 283 and 284 are not exhaustive; other authorized causes are:

1. Total and permanent disability


2. Termination of employment pursuant to a valid union security clause
3. Expiry of term of employment period
4. Completion of project (Project Employees)
5. Failure in probation
6. Relocation of business
TERMINATION BY EMPLOYEE

ART. 285. Termination by employee. – (a) An employee may terminate without just cause
the employee-employer relationship by serving a written notice on the employer at least
one (1) month in advance. The employer upon whom no such notice was served may hold
the employee liable for damages.

(b) An employee may put an end to the relationship without 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. Inhuman 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.

The rule in termination cases is that the employer bears the burden of proving that he
dismissed his employee for a just cause. And, when the employer claims that the employee
resigned from work, the burden is on the employer to prove that he did so willingly.
Whether that is the case would largely depend on the circumstances surrounding such
alleged resignation. Those circumstances must be consistent with the employee’s intent
to give up work. (ELSA S. MALIG-ON vs. EQUITABLE GENERAL SERVICES, INC., June
29, 2010)

There is constructive dismissal when 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. (CHIANG KAI SHEK
COLLEGE VS TORRES,G.R. No. 189456, April 2, 2014)
Resignation

Resignation – the formal pronouncement or relinquishment of a position or office – is the


voluntary act of an employee who is in a situation where he believes that personal reasons
cannot be sacrificed in favor of the exigency of the service, and he has then no other choice
but to disassociate himself from employment. The intent to relinquish must concur with
the overt act of relinquishment; hence, the acts of the employee before and after the alleged
resignation must be considered in determining whether he in fact intended to terminate
his employment. (SAN MIGUEL PROPERTIES PHILIPPINES, INC. vs. GWENDELLYN
ROSE S. GUCABAN, G.R. No. 153982 July 18, 2011)
Requisites
1. Unconditional (Azcor Manufacturing, Inc. vs. NLRC, 1999)
2. Intention to relinquish a portion of the term of office accompanied by an act of
relinquishment. (Azcor Manufacturing, Inc. vs. NLRC, 1999);
3. No valid resignation where it was made without proper discernment (Metro
Transit Organization, Inc. vs. NLRC, 1998)
4. Voluntary
5. Acceptance of Employer – necessary to make the resignation effective. (Shie Jie
Corp./Seastar Ex-im Corp. vs. National Federation of Labor, 2005; Reyes v. CA,
2003)

Resignations once accepted and being the sole act of the employee, may not be withdrawn
without the consent of the employer. (Intertrod Maritime, Inc. v. NLRC, 1991)

Rule: Filing of an illegal dismissal case is inconsistent with resignation. (Valdez v. NLRC,
1998

Except when the filing of an illegal dismissal case by respondent was evidently a mere
afterthought: it was filed not because Employee wanted to return to work but to claim
separation pay and back wages. (Willi Hahn Enterprises vs. Maghuyop, 2004)
No Termination – Circumstances that shall NOT terminate employment:

• Bona fide suspension of the operation of a business or undertaking NOT


exceeding 6 months; OR
• Fulfillment by the Employee of a military or civic duty. (Art 286)

Employer shall reinstate the Employee to his former position without loss of seniority
rights if Employee indicates his desire to resume to work not later than 1 month from the
resumption of operations of his Employer or from relief from the military or civic duty.
(Art 286)

Employer-Employee relationship deemed suspended in case of suspension of operation,


unless suspension is for the purpose of defeating the rights of the Employees, or
mandatory fulfillment of military or civic duty. (Bk VI, Rule I, Sec 12, Omnibus Rules)
Constructive dismissal
The ff. constitute constructive dismissal:

(1) Bona fide suspension of the operation of a business or undertaking exceeding 6 months
(Valdez v. NLRC, 1998)

(2) Floating status of more than 6 months (Agro Commercial Security Services v. NLRC,
1989)

An involuntary resignation is resorted to 1) when continued employment is rendered


impossible, unreasonable, or unlikely; 2) when there is a demotion in rank and/or a
diminution in pay; 3) or when a clear discrimination, insensibility or disdain by an
employer becomes unbearable to the employee. (Phil. Wireless, Inc. v. NLRC, 1998)

If an employee was forced to remain without work or assignment for a period exceeding
6 months, then he is in effect constructively dismissed (Valdez v. NLRC, 1998)
DISMISSAL PROCEDURE (PROCEDURAL DUE PROCESS)
Procedural Due Process - Employee must be given notice with adequate opportunity to
be heard before he/she is notified of his/her actual dismissal for Cause. (Fujitsu v. CA,
2005)

Employer may not substitute the required prior notice & opportunity to be heard with
the mere payment of 30 days' salary. (PNB v. Cabanag, 2005)

As provided for by the amended Implementing Rules and Regulations:

In all cases of termination of employment, the following standards of due process shall
be substantially observed:

For termination of employment based on just cases as defined in Article 282 of the Labor
Code:

(i) A written notice served on the employee specifying the ground or grounds for
termination, and giving said employee reasonable opportunity within which to explain
his side.

(ii) A hearing or conference during which the employee concerned, with the assistance of
counsel, if he so desires, is given opportunity to respond to the charge, present his
evidence, or rebut the evidence presented against him.

(iii) A written notice of termination served on the employee, indicating that upon due
consideration of all the circumstances, grounds have been established to justify his
termination.

For termination of employment as defined in Article 283 of the Labor Code, the
requirement of due process shall be deemed complied with upon service of a written
notice to the employee and the appropriate Regional Office of the Department of Labor
and Employment at least thirty days before effectivity of the termination, specifying the
ground or grounds for termination.

If the termination is brought about by the completion of a contract or phase thereof, or by


failure of an employee to meet the standards of the employer in the case of probationary
employment, it shall be sufficient that a written notice is served the employee within a
reasonable time from the effective date of termination.

(a) Procedure to be observed in termination cases Basis for termination

Basis for Requirements


Termination
Just cause – Art.1. Notice specifying the grounds for which dismissal is sought
282 2. Hearing or opportunity to be heard
3. Notice of the decision to dismiss (Art. 277(b))
Authorized Cause Notice to:
– 1. Employee, &
Arts. 283 & 284 2. DOLE
at least 1 month prior to the effectivity of the separation

Consequences for non-compliance Situation

Situation Effect Liability of ER


Just or Authorized Dismissal No liability
Cause + Due Process valid * separation pay if for authorized cause
No Just or Dismissal Reinstatement + Full Backwages
Authorized Cause invalid * if reinstatement NOT possible = separation pay
+ Due Process
No Just or Dismissal Reinstatement + Full Backwages
Authorized Cause + invalid * if reinstatement NOT possible = separation pay
No Due Process
Just or Authorized Dismissal Liable for damages due to non-compliance with
Cause + No Due valid procedural req'ts
Process *separation pay if for authorized cause
(b) Guiding Principles in connection with the hearing requirements in dismissal cases
Right to counsel

A very basic requirement of substantive due process; it has to be observed. Indeed, the
rights to counsel and to due process of law are two of the fundamental rights guaranteed
by the 1987 Constitution to any person under investigation, be the proceeding
administrative, civil, or criminal. (Salaw v. NLRC, 1991)
Notice

- Notice not needed when Employee consented to the retrenchment or voluntarily


applied for one. (International Hardware Inc. vs. NLRC, 1989)

- Notice must be individual, not collective. (Shoppers Gain Supermart vs. NLRC, 1996);

- Voluntary arbitration satisfies notice requirement for authorized causes (Revidad vs.
NLRC, 1995)
Hearing
A formal or trial type hearing is not at all times and in all instances essential to due
process; it is enough to that the parties are afforded fair and reasonable opportunity to
explain their side of the controversy. (Mendoza vs. NLRC, 1991)

Summary proceeding may be conducted; written explanations, affidavits, position


papers or other pleadings may be used as well; what is essential is the ample opportunity
to be heard. (Homeowners Savings and Loan Assoc. Inc. vs. NLRC, 1996)

No formal hearing necessary when the Employee already admitted his responsibility for
the act he was accused of. (Magos v. NLRC, 1998)
Burden of Proof

Upon the employer. Employer must comply with due process requirements before any
termination is done. (Gothong Lines, Inc. v. NLRC, 1999)

Unsubstantiated suspicions and baseless conclusions by employers are not legal


justification for dismissing employees. (Maranaw Hotel and Resort Corp. v. NLRC, 1999)
Degree of Proof
Substantial evidence; proof beyond reasonable doubt not required. (Manila Electric Co.,
Inc. v. NLRC, 1991)
Prescription Period
An action for reinstatement by reason of illegal dismissal is one based on an injury which
may be brought within 4 years from the time of dismissal. (Art. 1146 of the Civil Code) –
SUSPENSION

Suspension is a time given to an employee for the employee to be heard, to answer and
to explain and to have his own due process in the charges filed against him, while
termination is the result of the due process given if the result of the investigation is not
favorable to the employee

In suspension there is still a Security of tenure in which, the suspension should not exceed
for more than 6 mons. While in Termination there will be a termination of the employer
and employee relationship
Preventive Suspension

Preventive suspension is a disciplinary measure for the protection of the company’s


property pending investigation of any alleged malfeasance or misfeasance committed by
the employee. The employer may place the worker concerned under preventive
suspension if his continued employment poses a serious and imminent threat to the life
or property of the employer or of his co-workers. However, when it is determined that
there is no sufficient basis to justify an employee’s preventive suspension, the latter is
entitled to the payment of salaries during the time of preventive suspension. As provided
in Section 8, Rule XXIII, Book V of the Omnibus Rules Implementing the Labor Code:
Sec. 8. Preventive Suspension. The employer may place the worker concerned under
preventive suspension if his continued employment poses a serious threat to the life
or property of the employer or of his co-workers.

(Gatbonton v. NLRC, G.R. NO. 146779, January 23, 2006)

As held in PNB v. Velasco, 564 SCRA 512 (2008), the employer has the right to
preventively suspend an employee during the pendency of the administrative case
against the latter as a measure of self-protection. In PAL v. NLRC, 292 SCRA 40 (1998),
the Court explained that preventive suspension, by itself, does not signify that the
employer has already adjudged the employee guilty of the charges for which he was
asked to answer and explain. Such disciplinary measure is resorted to for the protection
of the company’s property or the life of the employer or of the co-employees pending
investigation of any alleged malfeasance or misfeasance committed by the employee.
Preventive suspension is limited to 30 days; any more than that amounts to constructive
dismissal. [Pido vs. NLRC, 2007] In Valenzuela v. Caltex Phil., Inc., G.R. No. 169965-66,
August 15, 2010, it was held that after 30 days of preventive suspension, the employer
shall reinstate the worker in his former position or substantially equivalent position. The
employer may also extend the period of suspension provided that during the said period,
he shall pay the wages and other benefits due to the worker.
RETIREMENT
Labor Code, Art. 287. Retirement. – Any employee may be retired upon reaching the retirement
age established in the collective bargaining agreement or other applicable employment contract.
In case of retirement, the employee shall be entitled to receive such retirement benefits as he may
have earned under existing laws and any collective bargaining agreement and other agreements:
Provided, however, That an employee's retirement benefits under any collective bargaining and
other agreements shall not be less than those provided herein.
In the absence of a retirement plan or agreement providing for retirement benefits of employees
in the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond
sixty-five (65) years which is hereby declared the compulsory retirement age, who has served
at least five (5) years in the said establishment, may retire and shall be entitled to retirement pay
equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six
(6) months being considered as one whole year.
Unless the parties provide for broader inclusions, the term one-half (1/2) month salary shall mean
fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more
than five (5) days of service incentive leaves.
An underground mining employee upon reaching the age of fifty (50) years or more, but not
beyond sixty (60) years which is hereby declared the compulsory retirement age for underground
mine workers, who has served at least five (5) years as underground mine worker, may retire and
shall be entitled to all the retirement benefits provided for in this Article. Retail, service and
agricultural establishments or operations employing not more than ten (10) employees or
workers are exempted from the coverage of this provision. Violation of this provision is hereby
declared unlawful and subject to the penal provisions provided under Article 288 of this Code.
Nothing in this Article shall deprive any employee of benefits to which he may be entitled under
existing laws or company policies or practices. (As amended by Republic Act No. 8558).

Retirement is one of the modes of termination of employment. By retirement, the


employment is terminated when the employee has reached a certain age, or after he has
completed a certain number of years of service.

A. Coverage

All employees in the private sector, regardless of their position, designation, or status,
and irrespective of the method by which their wages are paid (Sec 1, RA 7641)

The only exceptions are: employees covered by the Civil Service Law; domestic helpers
and persons in the personal service of another, and employees in retail, service and
agricultural establishments or operations regularly employing not more than ten
employees

B. Exclusions from coverage

R.A. No. 7641, otherwise known as "The Retirement Pay Law," only applies in a situation
where (1) there is no collective bargaining agreement or other applicable employment
contract providing for retirement benefits for an employee; or (2) there is a collective
bargaining agreement or other applicable employment contract providing for retirement
benefits for an employee, but it is below the requirements set for by law. The reason for
the first situation is to prevent the absurd situation where an employee, who is otherwise
deserving, is denied retirement benefits by the nefarious scheme of employers in not
providing for retirement benefits for their employees. The reason for the second situation
is expressed in the Latin maxim pacta privata juri publico derogare non possunt. Private
contracts cannot derogate from the public law. (Oxales v. Unilab, 2008)

C. Components of retirement pay

IRR, Book VI, Rule II, Section 5.2. Components of One-half (1/2) Month Salary. – For the
purpose of determining the minimum retirement pay due an employee under this Rule,
the term "one-half month salary" shall include all the following:

Fifteen (15) days salary of the employee based on his latest salary rate. x x x;
The cash equivalent of not more than five (5) days of service incentive leave;
One-twelfth of the 13th month pay due an employee;

All other benefits that the employer and employee may agree upon that should be
included in the computation of the employee‘s retirement pay.

D. Retirement pay under RA 7641 vis-à-vis retirement benefits under SSS and GSIS laws

RA 7641 mandates payment of retirement benefits. All private sector employees


regardless of their position, designation or status and irrespective of the method by which
their wages are paid are entitled to retirement benefits upon compulsory retirement at
the age of sixty-five (65) or upon optional retirement at sixty (60) or more but not 65.
MANAGEMENT PREROGATIVE
Definition: Employer‘s right to conduct the affairs of his business, According to its own
discretion and judgment, is well-recognized. An employer has a free reign and enjoys
wide latitude of discretion to regulate all aspects of employment. This is a management
prerogative, where the free will of management to conduct its own affairs to achieve its
purpose takes form. (Torreda vs. Toshiba, 2007)

• Discipline
• Right to dismiss or otherwise impose disciplinary sanctions upon an employee for
just and valid cause, pertains in the first place to the employer, as well as the
authority to determine the existence of said cause in accordance with the norms of
due process.
• To Demote
• To Dismiss – it is a measure of self-protection
Requisites for the validity of management prerogative affecting security of tenure

(1) Exercised in good faith for the advancement of the Employer's interest, and

(2) Not for the purpose of defeating or circumventing the rights of the Employees
under special laws or under valid agreements

A. Discipline

The employer‘s right to conduct the affairs of his business, according to its own discretion
and judgment, includes the prerogative to instill discipline in its employees and to
impose penalties, including dismissal, upon erring employees. This is a management
prerogative where the free will of management to conduct its own affairs to achieve its
purpose takes form. The only criterion to guide the exercise of its management
prerogative is that the policies, rules and regulations on work-related activities of the
employees must always be fair and reasonable and the corresponding penalties, when
prescribed, commensurate to the offense involved and to the degree of the infraction.
(Consolidated Food Corporation vs. NRLC, 1999) (St. Michael’s Institute vs. Santos, 2001)

Right to dismiss or otherwise impose disciplinary sanctions upon an employee for just
and valid cause, pertains in the first place to the employer, as well as the authority to
determine the existence of said cause in accordance with the norms of due process.
(Makati Haberdashery, Inc. v. NLRC, 1989)

B. Transfer of employees

Westin Phil. Plaza Hotel v. NLRC (1999):


An Employee‘s right to security of tenure does not give him such a vested right in his
position as would deprive the company of its prerogative to change his assignment or
transfer him where he will be most useful.

The Employer has the right to transfer or assign Employees from one area of operation to
another, or one office to another or in pursuit of its legitimate business interest, provided
there is no demotion in rank or diminution of salary, benefits and other privileges and
not motivated by discrimination or made in bad faith, or effected as a form of punishment
or demotion without sufficient cause.

C. Productivity standard

The employer has the right to demote and transfer an employee who has failed to observe
proper diligence in his work and incurred habitual tardiness and absences and indolence
in his assigned work.(Petrophil Corporation vs. NLRC, 1986)

In the consolidated cases of Leonardo vs. NLRC [G. R. No. 125303, June 16, 2000] and
Fuerte vs. Aquino [G. R. No. 126937, June 16, 2000], the employer claimed that the
employee was demoted pursuant to a company policy intended to foster competition
among its employees. Under this scheme, its employees are required to comply with a
monthly sales quota. Should a supervisor such as the employee fail to meet his quota for
several consecutive months, he will be demoted, whereupon his supervisor‘s allowance
will be withdrawn and be given to the individual who takes his place. When the
employee concerned succeeds in meeting the quota again, he is re-appointed supervisor
and his allowance is restored. The Supreme Court held that this arrangement is an
allowable exercise of company rights since an employer is entitled to impose productivity
standards for its workers. In fact, non-compliance may be visited with a penalty even
more severe than demotion.

D. Grant of Bonus

A bonus is "a gratuity or act of liberality of the giver which the recipient has no right to
demand as a matter of right" (Aragon vs. Cebu Portland Cement Co., 61 O.G. 4597). "It is
something given in addition to what is ordinarily received by or strictly due the
recipient." The granting of a bonus is basically a management prerogative which cannot
be forced upon the employer "who may not be obliged to assume the onerous burden of
granting bonuses or other benefits aside from the employee's basic salaries or wages" …
(Kamaya Point Hotel vs. National Labor Relations Commission, Federation of Free
Workers and Nemia Quiambao, G.R. No. 75289, August 31, 1989). (Traders Royal Bank
vs. NLRC, 1990)

F. Marital discrimination

In the recent case of Duncan Association of Detailman -PTGWO and Pedro Tecson v.
Glaxo Wellcome Philippines, Inc., we passed on the validity of the policy of a
pharmaceutical company prohibiting its employees from marrying employees of any
competitor company. We held that Glaxo has a right to guard its trade secrets,
manufacturing formulas, marketing strategies and other confidential programs and
information from competitors. We considered the prohibition against personal or marital
relationships with employees of competitor companies upon Glaxo‘s employees
reasonable under the circumstances because relationships of that nature might
compromise the interests of Glaxo. In laying down the assailed company policy, we
recognized that Glaxo only aims to protect its interests against the possibility that a
competitor company will gain access to its secrets and procedures. (Star Paper Corp. vs.
Simbol, 2006)

G. Post-employment ban

In cases where an employee assails a contract containing a provision prohibiting him or


her from accepting competitive employment as against public policy, the employer has
to adduce evidence to prove that the restriction is reasonable and not greater than
necessary to protect the employer‘s legitimate business interests. The restraint may not
be unduly harsh or oppressive in curtailing the employee‘s legitimate efforts to earn a
livelihood and must be reasonable in light of sound public policy. (Rivera v Solidbank,
2006)

H. Limitations in its exercise

The right of employees to security of tenure does not give them vested rights to their
positions to the extent of depriving management of its prerogative to change their
assignments or to transfer them. Managerial prerogatives, however, are subject to
limitations provided by law, collective bargaining agreements, and general principles of
fair play and justice. (The Philippine American Life and General Insurance Co. v.
Gramaje, 2004)

Management has the prerogative to discipline its employees and to impose appropriate
penalties on erring workers pursuant to company rules and regulations. This Court has
upheld a company‘s management prerogatives so long as they are exercised in good faith
for the advancement of the employer’s interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws and valid agreementsI
(Court‘s emphasis) (Marival Trading v. NLRC, 2007)
MONEY CLAIMS
Article 291 of the Labor Code states that all money claims arising from employer-
employee relationship shall be filed within three (3) years from the time the cause of
action accrued; otherwise, they shall be forever barred. In the computation of the three-
year prescriptive period, a determination must be made as to the period when the act
constituting a violation of the workers’ right to the benefits being claimed was committed.
(AUTO BUS TRANSPORT SYSTEMS VS. BAUTISTA, MAY 16, 2007)
Effect of change of ownership of a business
Penafrancia Tours and Travel Transport v. Sarmiento, October 20, 2010
Liability of Corporate Officers

ANTONIO C. CARAG v. NATIONAL LABOR RELATIONS COMMISSION, ISABEL G.


PANGANIBAN-ORTIGUERRA, as Executive Labor Arbiter, NAFLU, and MARIVELES
APPAREL CORPORATION LABOR UNION

Case doctrine: Article 212(e) of the Labor Code, by itself, does not make a corporate officer
personally liable for the debts of the corporation. The governing law on personal liability
of directors for debts of the corporation is still Section 31 of the Corporation Code.

The personal liability of corporate officers validly attaches only when (a) they
assent to a patently unlawful act of the corporation; or (b) they are guilty of bad faith or
gross negligence in directing its affairs; or (c) they incur conflict of interest, resulting in
damages to the corporation, its stockholders or other persons.

“Instances when officers may be personally liable for the debts of the corporation” ;
“Article 212 vs. Section 31”
Corporate Liabilities
FERNANDEZ, BELTRAN VERSUS NEWFIELD STAFF SOLUTIONS, INC, JULY 10, 2013
Effect of company merger on union shop clause
BPI V. BPI EMPLOYEES UNION DAVAO CHAPTER, AUGUST 10, 2010
Change of Equity Composition of Corporation

G.R. No. 184517 October 8, 2013, SME BANK INC., ABELARDO P. SAMSON, OLGA
SAMSON and AURELIO VILLAFLOR, JR. vs. PEREGRIN T. DE GUZMAN,EDUARDO
M. AGUSTIN, JR., ELICERIO GASPAR, RICARDO GASPAR JR., EUFEMIA ROSETE,
FIDEL ESPIRITU, SIMEONESPIRITU, JR., and LIBERATO MANGOBA

Because the corporation possesses a personality separate and distinct from that of its
shareholders, a shift in the composition of its shareholders will not affect its existence and
continuity. Thus, notwithstanding the stock sale, the corporation continues to be the
employer of its people and continues to be liable for the payment of their just claims.
Furthermore, the corporation or its new majority shareholders are not entitled to lawfully
dismiss corporate employees absent a just or authorized cause.