Termination of Employment

1. What is the right to security of tenure?

The right to security of tenure means that a regular employee shall remain employed unless his
or her services are terminated for just or authorized cause and after observance of procedural
due process.

2. May an employer dismiss an employee? What are the grounds?

Yes. An employer may dismiss an employee on the following just causes:

a) serious misconduct;

b) willful disobedience;

c) gross and habitual neglect of duty;

d) fraud or breach of trust;

e) commission of a crime or offense against the employer, his family or representative;

f) other similar causes.

3. Are there other grounds for terminating an employment? What are they?

Yes. The other grounds are authorized causes:

a) installation of labor-saving devices;

b) redundancy;

c) retrenchment to prevent losses;

d) closure and cessation of business; and

e) disease / illness.

4. Before terminating the services of an employee, what procedure should the employer
observe?

An employer shall observe procedural due process before terminating one’s employment.

5. What are the components of procedural due process?

A. In a termination for just cause, due process involves the two-notice rule:
a) A notice of intent to dismiss specifying the ground for termination, and giving said employee
reasonable opportunity within which to explain his or her side;

b) A hearing or conference where the employee is given opportunity to respond to the charge,
present evidence or rebut the evidence presented against him or her;

c) A notice of dismissal indicating that upon due consideration of all the circumstances,
grounds have been established to justify termination.

B. In a termination for an authorized cause, due process means a written notice of dismissal to
the employee specifying the grounds at least 30 days before the date of termination. A copy of
the notice shall also be furnished the Regional Office of the Department of Labor and
Employment (DOLE) where the employer is located.

6. What is the sanction if the employer failed to observe procedural due process in cases of
legal and authorized termination?

In cases of termination for just causes, the employee is entitled to payment of indemnity or
nominal damages in a sum of not more than 30,000 pesos (Agabon vs. NLRC, 442 SCRA 573); in
case of termination for authorized causes, 50,000 pesos (Jaka Food Processing vs. Darwin
Pacot, 454 SCRA 119).

7. May an employee question the legality of his or her dismissal?

Yes. The legality of a dismissal may be questioned before the Labor Arbiter of a Regional
Arbitration Branch of the National Labor Relations Commission (NLRC), through a complaint
for illegal dismissal. In establishments with a collective bargaining agreement (CBA), the
dismissal may be questioned through the grievance machinery established under the CBA. If
the complaint is not resolved at this level, it may be submitted to voluntary arbitration.

8. In cases of illegal dismissal, who has the duty of proving that the dismissal is valid?

The employer.

9. Suppose the employer denies dismissing the employee, who has the duty to prove that
the dismissal is without valid cause?

The employee must elaborate, support or substantiate his or her complaint that he or she was
dismissed without valid cause (Ledesma, Jr. vs. NLRC, 537 SCRA 358, October 19, 2007).

10. On what grounds may an employee question his or her dismissal?

An employee may question his or her dismissal based on substantive or procedural grounds.

The substantive aspect pertains to the absence of a just or authorized cause supporting the
dismissal.
The procedural aspect refers to the failure of the employer to give the employee the
opportunity to explain his or her side.

11. What are the rights afforded to an unjustly dismissed employee?

An employee who is dismissed without just cause is entitled to any or all of the following:

a) reinstatement without loss of seniority rights;

b) in lieu of reinstatement, an employee may be given separation pay of one month pay for
every year of service (Golden Ace Builders, et. al vs. Jose Talde, May 5, 2010, GR No. 187200);

c) full backwages, inclusive of allowances and other benefits or their monetary equivalent from
the time compensation was withheld up to the time of reinstatement;

d) damages if the dismissal was done in bad faith (Aurora Land Project Corp. vs NLRC, 266
SCRA 48).

12. What is reinstatement?

Reinstatement means restoration of the employee to the position from which he or she has
been unjustly removed.

Reinstatement without loss of seniority rights means that the employee, upon reinstatement,
should be treated in matter involving seniority and continuity of employment as though he or
she had not been dismissed from work.

When a Labor Arbiter rules for an illegal dismissal, reinstatement is immediately executory
even pending appeal by the employer (Article 223 of the Labor Code, as amended).

13. In what forms may reinstatement pending appeal be effected?

Reinstatement pending appeal may be actual or by payroll, at the option of the employer.

14. What is meant by full backwages?

Full backwages refer to all compensations, including allowances and other benefits with
monetary equivalent that should have been earned by the employee but was not collected by
him or her because of unjust dismissal. It includes all the amounts he or she could have earned
starting from the date of dismissal up to the time of reinstatement.

15. What is separation pay?

In termination for authorized causes, separation pay is the amount given to an employee
terminated due to installation of labor-saving devices, redundancy, retrenchment, closure or
cessation of business or incurable disease.
Separation pay may also be granted to an illegally dismissed employee in lieu of
reinstatement.

16. How much is the separation pay?

In cases of installation of labor-saving devices or redundancy, the employee is entitled to

receive the equivalent of one month pay or one month for every year of service, whichever is
higher.

In cases of retrenchment, closure or cessation of business or incurable disease, the employee is

entitled to receive the equivalent of one month pay or one-half month pay for every year of
service, whichever is higher.

In case of separation pay in lieu of reinstatement, the employee is entitled to receive the
equivalent of one month pay for every year of service.

17. Is proof of financial losses necessary to justify retrenchment?

Yes. Proof of actual or imminent financial losses that are substantive in character must be
proven by the employer to justify retrenchment (Lopez Sugar Central vs. NLRC, 189 SCRA
179).

18. Are there other conditions before an employee may be dismissed on the ground of
redundancy?

Yes. It must be shown that there is:

a) Good faith in abolishing redundant position; and

b) Fair and reasonable criteria in selecting employees to be dismissed, such as but not limited
to less preferred status (e.g. temporary employee), efficiency and seniority (Asian Alcohol
Corp. vs. NLRC, 305 SCRA 416);

c) A one-month prior notice is given to the employee and DOLE Regional Office as prescribed
by law.

19. May the services of an employee be terminated due to disease?

Yes. The employer may terminate employment on ground of disease only upon the issuance of
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 months even with proper medical
treatment.

20. What is constructive dismissal?

 Constructive dismissal refers to an involuntary resignation 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 or an unwarranted transfer or demotion of a employee,
or other unjustified action prejudicial to the employee. The employer has to prove that such
managerial actions do not constitute constructive dismissal (Blue Dairy Corp. vs. NLRC, 314
SCRA 401)

21. May an employee be placed on floating status?

Yes, provided it is permitted under circumstances for a period of not more than six (6) months.
Beyond this period, floating status becomes constructive dismissal which entitles the
employee to separation pay (Phil. Industrial Security Agency Corp. vs. Virgilio Dapiton and
NLRC, 320 SCRA 124)

22. When an employee resigned voluntarily, is he or she entitled to separation pay?

No. An employee is not entitled to separation pay when he or she resigns voluntarily, unless it
is a company practice or provided in the CBA (Hanford Philippines Inc. vs. Shirley Joseph, 454
SCRA 786, March 31, 2005).

23. Are quitclaims valid?

Yes, provided that these are voluntarily signed and the consideration is reasonable and is not
against the law or public policy. (More Maritime Agencies vs. NLRC, 307 SCRA 189)

Quitclaims entered into by union officers and some members do not bind those who did not
sign it (Liana’s Supermarket vs. NLRC, 257 SCRA 186).

LABOR STANDARDS REVIEWER

LABOR STANDARDS

Refers to the minimum requirements prescribed by existing laws, rules and regulations and other issuances
relating wages, hours of work, cost of living allowances and other monetary and welfare benefits, including
those set by occupational safety and health standards.

1. 8 Hour Work (shall not exceed)

Hours worked shall include:
1. All time during which an employee is required
  to be on duty
 to be at a prescribed workplace and
2. All time during which an employee is suffered or permitted to work.
 Rest periods of short duration during working hours shall be counted as hours worked.

2. Meal Pay

3. Holiday Pay
Except: Retail and service establishments regularly employing less than 10 workers

Includes: Employee who is paid by results and she works in a service establishment employing more than 10 persons
shall be paid holiday pay. (Sec. 8(b), Rule IV, Book III, IRR’s)

Regular Holidays
1. New Years day - January 1
2. Maundy Thursday - Movable Date
3. Good Friday - Movable Date
4. Eidul Fitr - Movable Date
5. Araw ng Kagitingan - Movable Date nearest April 9
6. Labor day - Monday nearest May 1
7. Independence day - Monday nearest June 12
8. National heroes day - Last Monday of August
9. Bonifacio day - Monday nearest November 30
10. Christmas day - December 25
11. Rizal day - Monday nearest December 30

Nationwide Special Holidays

1. All Saints Day - November 1
2. Last Day of the Year - December 31
3. Ninoy Aquino Day - Monday nearest August 21

 If required to work on reg. holidays = regular rate x

 To receive holiday pay, the EE should not have been absent without pay on the working day preceding the
regular holiday. (Azucena)

 A legal holiday falling on a Sunday creates no legal obligation for the ER to pay extra to the EE who does
not work on that day, aside from the usual holiday pay, to its monthly-paid employee. (Wellington vs.
Trajano)

4. Premium Pay
Is additional compensation for work rendered by the employee on days normally he should not be working.

5. Weekly Rest Period

 It shall be for the duty of every employer, whether operating for profit or not, to provide employee a rest
period of not less than 24 consecutive hours after every 6 consecutive normal working days.
 The employer shall determine and schedule the weekly rest day of his employees, however, the employer
shall respect the preference of employees as to their weekly rest day when such preference is based on
religion grounds.
Where however the choice of the employees as to their rest day based on religious grounds will inevitably
result in serious prejudice or obstruction to the operation of the undertaking, the employer may so schedule
the weekday rest day of their choice at least 2 days in a month. (Sec. 4, Rule III, Book III, IRR’s)

When ER may require Work on rest day [D U A - P N A] (Art. 92)

a. In case of actual or impending emergency caused by serious accident, fire, flood, typhoon, earthquake,
epidemic, or other Disaster or calamity to prevent loss of life, or imminent danger to public safety.

b. In case of Urgent work, to avoid serious loss which the ER would otherwise suffer;
 c. In the event of Abnormal pressure of work due to special circumstances, where the ER cannot ordinarily
be expected to resort to other measures;

d. To prevent or damage to Perishable goods;

e. Where the Nature of work requires continuous operations and stoppage of the work may result in
irreparable injury or loss to the ER; and

f. Analogous (avail of favorable weather) or similar circumstances

How much is a worker entitled if he works on a rest day?

 Scheduled rest day – additional compensation of at least 30% of his regular wage.

 Scheduled rest day which is a non-working holiday – entitled to additional compensation of at least 50% of
his regular wage.

 Scheduled rest day which is a regular holiday – entitled to additional compensation of at least 30% of his
regular holiday rate of 200% based on his regular wage rate. (Sec. 4, Rule III, Book I, IRR’s)

6. Service Incentive Leave

Except :
a. Those enjoying vacation leave with pay of at least 5 days.
b. Those employed in establishments regularly employing less than 10 workers
c. Exempt establishments.

 can be converted to cash

 5 days incentive leaves with pay for at least 1 year of service.

The term ‘at least 1 year of service’ shall mean service within 12 months, whether continuous or broken, reckoned from
the date the EE started working, including authorized absences and paid regular holidays unless the working days in
the establishment as a matter of practice or policy, or that provided in the employment contract are less than 12 months,
in which case said period shall be considered as 1 year. (Sec. 3, Rule V, Book III, IRR’s)

7. Night Shift Deferential

Every EE shall be paid night shift differential of not less than 10% of his regular wage for each hour of work
performed between 10:00 p.m. and 6:00 a.m. (Art. 86)

Except: Employer with not more than 5 employees

8. Overtime Pay
 Is additional compensation for work done beyond the normal work hours on ordinary working days.
 Regular work day – plus 25% basic hourly rate
 Special days, holiday or rest day – plus 30% of the regular hourly rate on said days.

Emergency Overtime Work - Any EE may be required by the ER to perform overtime work in any of the
following cases: [WED-UPS]
a. When the country is at War

b. When any other national or local Emergency has been declared

d. When it is necessary to prevent loss of life or property or in case of imminent Danger to the public safety
due to an actual or impending emergency in the locality caused by serious accidents, fire, flood, typhoon,
earthquake, epidemic or other Disaster or calamity.

e. When there is Urgent work to be performed on machines and installations in order to avoid serious loss or
damage to the ER or some other cause of similar nature.
f. When the work is necessary to prevent loss or damage to Perishable goods.

g. Where the completion or continuation of the work started before the 8th hour is necessary to
prevent Serious obstruction or prejudice to the business operations of the ER.

The EE’s refusal to obey the order of the EE constitutes insubordination for which he may be subjected to
disciplinary action. (Alcantara)

 Undertime work in any particular day shall not be offset by overtime work on another day BUT not on
someday.
 Permission given to the EE to go on leave on some other day of the week shall not exempt the ER from
paying the additional compensation required. (Art. 88)

 For purposes of computing overtime and other additional remuneration as required by this Chapter the
“regular wage” of an EE shall include the cash wage only, without deduction on account of facilities provided
by the ER. (Art. 90)

COVERAGE OF LABOR STANDARD

Applies to ALL employees in all establishments and undertakings whether for profit or not.

Except the following: (MOM –GF – WPD)

M – Managerial Employees
a. Their primary duty consists of the management of the establishment in which they are employed or of a
department or sub-division thereof;

b. Customarily or regularly direct the work of 2 or more employees therein;

c. Has the authority to hire or fire other employees of lower rank; or their suggestions and recommendations
as to the hiring and firing and as to the promotion or any change of status of other employees are given
particular weight. [Sec 2(b), Rule I, Book III]

O – Other Offices or Members of a Managerial Staff

a. Primary duty consists of the performance of work directly related to management policies of the employer;

b. Customarily and regularly, exercise discretion and independent judgment;

c. Regularly directly assist a proprietor or managerial employee or execute under general supervision work
along specialized or technical lines requiring special training, experience or knowledge; or execute under
general supervision special assignment and tasks; and

d. Do not devote more than 20% of their hours worked to activities which are not directly and closely related
to the performance of the work described in the preceding paragraphs.

M – Members of the Family of the Employer who are dependent of him for support
It refers not only to the real “immediate” members of he family of the employer but also to those who are
considered as family members in its loose sense, that is, those who are living with the employer and
dependent on him for support

G – Government Employee
Whether employed by the National Government or any of its political subdivisions, including those employed
in GOCC’s with original charters. (Sec. 2, Rule I, Book III, IRR’s)

F – Field Employee
Non-agricultural EE’s who regularly perform their duties away from the principal place of business or
branch office of the ER whose actual hours of work in the field cannot be determined with reasonable
certainty (Art. 82)
 W – Workers Paid by Result
Compensation computed on the basis of work accomplished and not on time spent in accomplishing the
work.
a. Paid by Task (wholesale) – those who are compensated on the basis of the completion or accomplishment
of a certain specified task.

b. Paid by Piece – those who are compensated on the basis of units or piece of work they produced and
accomplished. The work process involved is usually repetitive and the compensation is uniform per unit or
per piece.

c. Paid Purely on Commission

P – Persons in the personal service of another
Same as the Domestic Helper but includes not only domestic servants or house helpers but drivers, valets
and bodyguards as well.

D – Domestic Helpers
Perform such services:
a. In the ER’s home which are usually necessary or desirable for the maintenance or enjoyment thereof;

b. Or minister to the personal comfort, convenience, or safety of the ER as well as the members of his ER’s
household (Sec. 2, Rule I, Book III, IRR’s)

However, house personnel hired by a ranking company official, but paid for by the company itself, to
maintain a staff house provided for the official, are not the latter’s domestic helpers but regular EE’s of the
company. (Cadiz vs. Philippine Sinter)

13TH MONTH PAY

All land-based employers are required to pay all their rank-and- file employees a 13th month pay not later
than December 24 of every year.
o 1/12 of the total basic salary earned by an EE within a calendar year.

o To be paid only to rank-and file employees regardless of the amount of their basic salary.

o Paid not later than December 24.

 To be entitled to the 13th month pay benefit, it is imposed as a minimum service requirement that
employees, regardless of their designation or employment status and irrespective of the method by which
their wages are paid, should have worked r at for least one (1) month during the calendar year.

 It is possible that ½ of the payment of 13 th month pay be given to employees before the opening of the
regular school year and the other half on or before 24th day of December of every year. The frequency of
the payment of this monetary benefit may be subject of agreement between the employer and the
recognized CBA of the employees.

 OFW is no entitled to 13th month pay in the absence of any provision in his employment contract granting
the payment thereof (Petroleum Shipping Limited v. NLRC, G.R. No. 148130, June 16, 2006)

 An employee who has resigned or whose services were terminated at any time before the time for payment
of the 13th month pay is entitled to this monetary benefit proportion to the length of time he worked during
the year, reckoned from the time he started working during the calendar year up to the time of his resignation
or termination of service.
(Monthly Salary x # of months he worked during he year) / 12

Basic Salary (For purposes of computing the 13th month pay)

 include remuneration or earnings paid by this ER for services rendered
 but does not include allowances and monetary benefits which are not considered or integrated as part of the regular or
basic salary, such as the cash equivalent or unused vacation and sick leave credits, overtime, premium, night-
differential and holiday pay, and cost-of-living allowances.
  However, these salary-related benefits should be included as part of the basic salary in the computation of the
13th month pay if the individual or collective agreement, company practice or policy, the same are treated as part of the
basic salary of the EE’s.

The following are not entitled to 13th month pay:

(WPD – G – MES)

W – Workers Paid by Result

Except: Paid by Piece Employee
D – Domestic Helpers
P – Persons in the personal service of another

G – Government Employee
The government and any of its political subdivisions, including GOCC’s, except those corporations operating essentially
as private subsidiaries of the government.

M – Managerial Employees
E – Employee being paid equivalent of 13th month pay
ER’s already paying their EE’s a 13th month pay or more in a calendar year or its equivalent at the time of this issuance.

The term “its equivalent” … shall include Christmas bonus, mid-year bonus, cash bonuses and other payments but
shall not include cash and stock dividends, cost of living allowances and other allowances regularly enjoyed by the EE,
as well as non-monetary benefits. Where an ER pays less than required 1/12 th of the EE’s basic salary, the ER shall
pay the differences.

S – Supervisory Employee
Have the following duties and functions:
a. Assist the department superintendent in various aspects of management such as in the planning of systems
and procedures;
b. Recommends disciplinary action against erring subordinates or promotion of deserving personnel, train and
guide subordinates;
c. Communicate and coordinate with other supervisors;
d. Recommend measures to improve work method; and
e. Other related tasks as may be assigned by his immediate superior.
They discharge duties and responsibilities which qualify them as members of the managerial staff.

A distressed ER may qualify for exemption for the 13th month pay if there is prior authorization from the DOLE. (Dentech
vs. NLRC)