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If the period of suspension of operations do not exceed six months, the workers shall be
reinstated to their respective positions without loss of seniority rights if they indicated their
desire to resume work not later than one month from the resumption of operations of business.
If the shutdown is for a period of not more than six months such as may occur in equipment
check or repair, stock inventory or lack of raw materials, the employee is only temporarily laid of
and, therefore, employer-employee relationship is not severed.
Compensation of employees during the six-month suspension.
Employees are not entitled to their wages and benefits during the 6-month period.
The reason is, within the said period, the employer-employee relationship is deemed
suspended. The employment relationship being suspended, both the employer and
the employees cease to be bound, at least temporarily, by the basic terms and
conditions of their employment contract - the employer regarding his obligation to
provide salary to his workers; and on the part of the workers, to provide their
services to the former
If it will last for a period of more than six months and is of an indefinite character , it
may be considered as equivalent to closure of the establishment leading to termination of
employment. In such a case, the requirements of the law and rules on employee dismissals must
be observed.
In the 2005 case of Mayon Hotel & Restaurant vs. Adana, [G. R. No. 157634, May 16,
2005], the High Court declared that Article 286 is clear - there is termination of
employment when an otherwise bona fide suspension of work exceeds six (6)
months. Moreover, even assuming arguendo that the cessation of employment on
April 1997 was merely temporary when hotel operations were suspended due to the
termination of the lease of the old premises, it became dismissal by operation of law
when petitioners failed to reinstate respondents after the lapse of six (6) months,
pursuant to Article 286. And even assuming that the closure was due to a reason
beyond the control of the employer, it still has to accord its employees some relief
in the form of severance pay.
Effect of employment of the employee in other establishments during 6-month period.
In the 2005 case of JPL Marketing Promotions vs. CA, [G. R. No. 151966, July 8,
2005], it was established that private respondent-employees sought employment
from other establishments even before the expiration of the six (6)-month period
provided by law. They admitted that all three of them applied for and were
employed by another establishment after they received the notice from JPL.
Consequently, it was held that petitioner JPL cannot be said to have terminated their
employment for it was they themselves who severed their relations with JPL. Thus,
they are not entitled to separation pay, even on the ground of compassionate
justice. Clearly, the principle in the law which grants separation pay applies only
when the employee is dismissed by the employer, which is not the case in this
instance. In seeking and obtaining employment elsewhere, private respondents
efectively terminated their employment with JPL.
(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 ofense 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.
Voluntary Resignation
Resignation is defined as the voluntary act of an employee who finds himself in a situation where
he believes that personal reasons cannot be sacrificed in favor of the exigency of the service and
he has no other choice but to disassociate himself from his employment. (Virgen Shipping Corp.
vs. Barraquio, G.R. No. 178127, April 16, 2009 citing Valdez vs. NLRC.)
The key is that resignation must be a voluntary act, and that the employee must have
knowingly and voluntarily dissociate himself from his employment for his own personal reasons.
It does not cover cases where the employee is forced to resign with the use of threats,
intimidation, coercion or manipulation, or where resignation is imposed as a penalty for an
ofense.
The common practice of allowing an employee to resign, instead of terminating him for just
cause so as not to smear his employment record, also fall under the category of voluntary
resignation. (See J Marketing Corp. vs. Taran, G.R. No. 163924, June 28, 2009).
Resignation Notice
The Labor Code requires the employee to give an advance notice to the employer of his intention
to resign. The notice of resignation must be in writing and must be served to the employer at
least one month prior to the efective date of his resignation.
Resignation notice usually takes the form of a letter (commonly called resignation letter)
addressed to the employer, expressing the employees intention to terminate his employment. It
must state the date when resignation is to take efect because of the 30-day notice requirement
under the law. It may also contain the reason or justification of the employee for filing his
resignation, although legally, this is not important. The employee may resign for whatever
reason, or even for no reason at all. Thus, in legal parlance, voluntary resignation is also called
termination by employee without just cause.
Resignation letter normally contains explicit words expressing employees intention to terminate
his employment. However, lack of explicit words stating the employees intention to resign is
deemed not crucial, as long as the employees intention to resign can be deduced from letter
itself. In one case, the Supreme Court held that a memorandum written by the employee
containing his deep resentment towards his superior juridically constituted a letter of resignation.
Even if the employee did not expressly indicate his intention to resign (neither of the words
resign or resignation was mentioned), the resentful and sarcastic tone of the memorandum
was held to be sufficiently indicative of such intention.
Effect of Failure to Tender Resignation Notice
If the employee fails to give the employer one month advance notice of his intention to resign,
he may be held liable for damages.
of the
of the
or his
person
Resignation under any of the instance enumerated above is also called termination by
employee with just cause.
Separation Pay
An employee who voluntarily resigns from his work is not entitled to separation pay. There is no
provision in the Labor Code which grants separation pay to voluntarily resigning employees.
Separation pay as a rule is paid only in those instances where the severance of employment is
due to factors beyond the control of the employee. Thus, in case of retrenchment to prevent
losses where the employee is forced to depart from the company due to no fault on his part,
separation pay is required by law to be paid to the dismissed employee.
The case is totally diferent in case of voluntary resignation where severance of employment is
due to employees own initiative. The law does not oblige the employer to give separation pay if
the initiative to terminate employment comes from employee himself.
Exceptions
However, by way of exceptions, there are at least two instances where an employee who
voluntarily resign is entitled to receive separation pay, as follows:
1. When payment of separation pay is stipulated in the employment contract or Collective
Bargaining Agreement (CBA, for companies with existing bargaining agent or union);
2. When it is sanctioned by established employer practice or policy.
In Hinatuan Mining Corporation, et al. vs. NLRC, et al., G.R. No. 117394, February 21, 1997, the
court ruled viz.:
It is well to note that there is no provision in the Labor Code which grants separation
pay to voluntarily resigning employees. Separation pay may be awarded only in cases
when the termination of employment is due to: (a) installation of labor saving devices,
(b) redundancy, (c) retrenchment, (d) closing or cessation of business operations, (e)
disease of an employee and his continued employment is prejudicial to himself or his coemployees, or (f) when an employee is illegally dismissed but reinstatement is no longer
feasible. In fact, the rule is that an employee who voluntarily resigns from employment is
not entitled to separation pay, except when it is stipulated in the employment contract
or CBA, or it is sanctioned by established employer practice or policy.
In Lilia Pascua, et al. vs. NLRC, et al., G.R. No. 123518, March 13, 1998, the Supreme Court,
reiterated that:
The grant of separation pay, however, is inconsistent with existing employment or
voluntary resignation, for it presupposes illegal dismissal.
Special cases
In addition to the exceptions cited above, there are other cases where the court may award
separation pay to voluntarily resigning employee. For example, in Alfaro vs. CA, G.R. No. 140812,
August 28, 2001, the Court ordered the payment of separation pay despite holding that the
employee voluntarily resign from service, and although such payment was not mandated under
the CBA or employment contract. Same conclusion was arrived at in J Marketing.
In both of the above cases, the employer agreed to give separation pay to the employee as an
incident of the latters resignation, but later on renege in the performance of such commitment.
The Court held that such practice should not be countenanced.
In Alfaro, the Court ruled as follows:
Generally, separation pay need not be paid to an employee who voluntarily resigns.
However, an employer who agrees to expend such benefit as an incident of the
resignation should not be allowed to renege in the performance of such commitment.
B. Retirement
REPUBLIC ACT NO. 7641 AN ACT AMENDING ARTICLE 287 OF PRESIDENTIAL DECREE NO. 442, AS
AMENDED, OTHERWISE KNOWN AS THE LABOR CODE OF THE PHILIPPINES, BY PROVIDING FOR
RETIREMENT PAY TO QUALIFIED PRIVATE SECTOR EMPLOYEES IN THE ABSENCE OF ANY RETIREMENT PLAN
IN THE ESTABLISHMEN
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.
"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.
The law recognizes as valid any retirement plan, agreement or management policy regarding
retirement at an earlier or older age.
What are included in the minimum 5-year service requirement?
The minimum 5-year service requirement includes the following.
1. Authorized absences, vacations, regular holidays, included.
2. Only actual service included.
What are included in the retirement benefits under the Retirement Pay Law?
1. One-half (1/2) month salary In the absence of an applicable employment contract, an
employee who retires 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 (8) months being considered as
one (1) whole year.
2. One-half (1/2) month salary, components. - For the purpose of determining the minimum
retirement pay due an employee, the term "one-half month salary" shall include all the following:
(a) fifteen (15) days salary of the employee based on his latest salary rate.
(b)the cash equivalent of five (5)days of service incentive leave; (c) one-twelfth (1/12)
of the 13th month pay due the employee; and
(d) all other benefits that the employer and employee may agree upon that should be
included in the computation of the employee's retirement pay.
3. One-half monthly salary of employees who are paid by results. - For covered workers who are
paid by results and do not have a fixed monthly rate, the basis for determination of the salary for
fifteen (15) days shall be their average daily salary (ADS).
B. Money Claims
ART. 291. Money claims. - All money claims arising from employer-employee relations accruing
during the efectivity of this Code shall be filed within three (3) years from the time the cause of
action accrued; otherwise they shall be forever barred.
All money claims accruing prior to the efectivity of this Code shall be filed with the appropriate
entities established under this Code within one (1) year from the date of efectivity, and shall be
processed or determined in accordance with the implementing rules and regulations of the Code;
otherwise, they shall be forever barred.
Workmens compensation claims accruing prior to the efectivity of this Code and during the
period from November 1, 1974 up to December 31, 1974, shall be filed with the appropriate
regional offices of the Department of Labor not later than March 31, 1975; otherwise, they shall
forever be barred. The claims shall be processed and adjudicated in accordance with the law and
rules at the time their causes of action accrued.
C. Claim for illegal Dismissal with money claims