Tuesday, October 18, 2011

FIRING MISSES (Terminating Employment the Philippine Way)

By Siesta-friendly

For business folk, Philippine labor laws can be too protective of labor. And it’s not as simple as Mr. Donald Trump saying “you’re fired!”  The prime example is the provisions on security of tenure -

“ART. 279. 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.”

The Labor Code’s Implementing Rules specifically Rule I, Book VI add the relevant security of tenure provisions applicable to non-regular employees –

“Section 2. Security of tenure.


b)      The foregoing [security of tenure provisions in cases of regular employment] shall also apply in cases of probationary employment: Provided, however, that in such cases, termination of employment due to failure of the employee to qualify in accordance with the standards of the employer made known to the former at the time of engagement may also be a ground for termination of employment.

c)      In cases of employment covered by contracting or subcontracting arrangements, no employee shall be dismissed prior to the expiration of the contract between the principal and contractor or subcontractor as defined in Rule VIII-A, Book III of these Rules, unless the dismissal is for just or authorized cause, or is brought about by the completion of the phase of the contract for which the employee was engaged but, in any case, subject to the requirements of due process or prior notice.”

Just and Authorized Causes for Termination

So, in general, just or authorized causes naturally negate security of tenure. What are these just or authorized causes?

The just causes for terminating an employee are found in Article 282 of the Labor Code:

“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.”

The authorized causes are in the succeeding articles: 283 (Closure of establishment and reduction of personnel) and 284 (Disease as ground for termination).  They are as follows:

1)      installation of labor-saving devices
2)      redundancy
3)      retrenchment to prevent losses
4)      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, or
5)      when the employee 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.

And if you fire your employee without any legal cause?

“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.” (ART. 279.).

Backwages, mind you, can run indefinitely as long as the case is pending thereby resulting in a windfall for the employee.  Unless, of course, you’re PAL or you have PAL’s lawyer and a mere letter to the Supreme Court can change everything.

Anyway, here’s what the Supreme Court has had to expound on the matter -

“… an illegally dismissed employee is entitled to two reliefs: backwages and reinstatement.  The two reliefs provided are separate and distinct. In instances where reinstatement is no longer feasible because of strained relations between the employee and the employer, separation pay is granted.  In effect, an illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay if reinstatement is no longer viable, and backwages.
The normal consequences of [the employee’s] illegal dismissal, then, are reinstatement without loss of seniority rights, and payment of backwages computed from the time compensation was withheld up to the date of actual reinstatement.  Where reinstatement is no longer viable as an option, separation pay equivalent to one (1) month salary for every year of service should be awarded as an alternative.  The payment of separation pay is in addition to payment of backwages.” (Mt. Carmel College vs. Resuena, et al. G.R. No. 173076, October 10, 2007)

Due Process: 2 Written Notices + 1 Hearing rule

Finding just or authorized causes is not enough.  The laws are strict on due process and have imposed the following requirements –

“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.” (Section 2, Rule I, Book VI, Implementing Rules of the Labor Code)

Check out how the Supreme Court strictly applied the due process rule despite the existence of sufficient cause for termination -

“.. respondent [employee] was not issued a written notice charging him of committing an infraction. The law is clear on the matter. A verbal appraisal of the charges against an employee does not comply with the first notice requirement. In Pepsi Cola Bottling Co. v. NLRC, the Court held that consultations or conferences are not a substitute for the actual observance of notice and hearing. Also, in Loadstar Shipping Co., Inc. v. Mesano, the Court, sanctioning the employer for disregarding the due process requirements, held that the employee’s written explanation did not excuse the fact that there was a complete absence of the first notice.

Second, even assuming that [employer] petitioner KKTI was able to furnish respondent an Irregularity Report notifying him of his offense, such would not comply with the requirements of the law. We observe from the irregularity reports against respondent for his other offenses that such contained merely a general description of the charges against him. The reports did not even state a company rule or policy that the employee had allegedly violated. Likewise, there is no mention of any of the grounds for termination of employment under Art. 282 of the Labor Code. Thus, KKTI’s "standard" charge sheet is not sufficient notice to the employee.

Third, no hearing was conducted. Regardless of respondent’s written explanation, a hearing was still necessary in order for him to clarify and present evidence in support of his defense. Moreover, respondent made the letter merely to explain the circumstances relating to the irregularity in his October 28, 2001 Conductor’s Trip Report. He was unaware that a dismissal proceeding was already being effected. Thus, he was surprised to receive the November 26, 2001 termination letter indicating as grounds, not only his October 28, 2001 infraction, but also his previous infractions.


WHEREFORE, the petition is PARTLY GRANTED and the September 16, 2004 Decision of the CA is MODIFIED by deleting the award of backwages and 13th-month pay. Instead, petitioner KKTI is ordered to indemnify respondent the amount of thirty thousand pesos (PhP 30,000) as nominal damages for failure to comply with the due process requirements in terminating the employment of respondent.” (King Of Kings Transport, et al. vs, Tinga, et al., G.R. No. 166208, June 29, 2007).  

So employers, be very careful how you hire and fire your people. Even with a just or authorized cause for termination and the termination is declared legal, you may still end up being penalized for not following the required manner by which the firing should have been done.  There may be no award of backwages, reinstatement or separation pay but you may still be ordered to pay nominal damages as in the case above.