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Chapter Four

A. Employer-employee relationship
1. Four-fold test
2. Kinds of employment
a. Probationary
b. Regular
c. Project employment
d. Seasonal
e. Casual
f. Fixed-term
3. Job contracting
a. Articles 106 to 109 of the Labor Code
b. Department Order No. 18-A
c. Department Circular No. 01-12
d. Effects of Labor-Only Contracting
e. Trilateral relationship in job contracting
Four-Fold Test
a. Selection and engagement of the employee;
b. Payment of wages or salaries;
c. Exercise of the power of dismissal; or
d. Exercise of the power to control the employee’s conduct. 1
These tests, however, are not fool-proof as they admit of exceptions.
The “control test” is the controlling test. It addresses the issue of whether the
employer controls or has reserved the right to control the employee not only as to
the result of the work to be done but also as to the means and methods by which the
same is to be accomplished.2
a. There is no uniform test prescribed by law or jurisprudence to determine the
existence of employer-employee relationship. 3
b. The existence of the employer-employee relationship is essential in that it
comprises as the jurisdictional basis for recovery under the law. Only cases
arising from said relationship are cognizable by the labor courts. 4
c. The relationship of employer and employee is contractual in nature. It may be an
oral or written contract. A written contract is not necessary for the creation and
validity of the relationship.5

d. Stipulation in a contract is not controlling in determining existence of the
relationship. The employment status of a person is defined and prescribed by law
and not by what the parties say it should be. 6
e. The mode of paying the salary or compensation of a worker does not preclude
existence of employer-employee relationship. Thus, payment by commission 7 or
on a piece-rate basis8 or on a “no work, no pay” 9 basis does not affect existence of
employment relationship.
f. Retainer fee arrangement does not give rise to employment relationship. 10
Following the right-of-control test, the Supreme Court has found that employment
relationship exists in the following cases:
a. Dispatchers of a transportation company. 11
b. Persons paid on “boundary system” basis in relation to the transport operator such
as jeepney drivers and conductors, 12 taxi drivers,13auto-calesa driver,14 and bus
driver.15 Under the “boundary system,” the relationship between the driver and
conductor of a bus and the owner thereof is not that of lessee and lessor but that
of employee and employer.16
c. Musicians employed by a company producing motion pictures for purposes of
making music recordings for title music, background music, musical numbers,
finale music and other forms of music without which a motion picture is not
d. Fishermen-crew who rendered services in various capacities (patron/pilot, master
fisherman, second fisherman, chief engineer, and fisherman) aboard the fishing
vessels of a company engaged in “trawl” fishing and whose compensation was
paid in cash on percent commission basis. 18
e. Stevedores, although supplied to the company by the labor organization
composed of various labor unions, are employees of the company. 19
f. Resident physicians. - There is employer-employee relationship between resident
physicians and the training hospitals unless:
1. there is a training agreement between them; and
2. the training program is duly accredited or approved by the appropriate
government agency.20
g. Employees of cooperatives, but not its members unless the members are also
employees thereof.21
h. Insurance agent.22
There are five (5) classifications of employment. 23 Article 280 provides for four (4)
kinds of employees,24 to wit:
(a) Regularemployees referring to those who have been “engaged to perform
activities which are usually necessary or desirable in the usual business or trade
of the employer”;

(b) Project employees referring to those “whose employment has been fixed for a
specific project or undertaking, the completion or termination of which has been
determined at the time of the engagement of the employee”;
(c) Seasonal employees referring to those who work or perform services which are
seasonal in nature, and the employment is for the duration of the season; and
(d) Casualemployees referring to those who are not regular, project, or seasonal
A fifth one, fixed-term employees, must be added to the above enumeration. 26 This,
however, is not provided in the Labor Code but recognized only in jurisprudence. 27
According to the 2013 case ofGMA Network, Inc. v. Pabriga, 28 pursuant to Article
280, another classification may be formed in accordance with the nature of employment, to
(1) Employees performing activities which are usually necessary or desirable in the
employer’s usual business or trade can either be regular, project or
seasonal employees; while
(2) Those performing activities not usually necessary or desirable in the employer’s
usual business or trade are, as a general rule, casualemployees.
The reason for this distinction may not be readily comprehensible to those who
have not carefully studied these provisions; only employers who constantly need the
specified tasks to be performed can be justifiably charged to uphold the constitutionally
protected security of tenure of the corresponding workers. The consequence of the
distinction is found in Article 279 of the Labor Code. 29 With respect to the activities
of projectemployees, they may or may not be usually necessary or desirable in the usual
business or trade of the employer, as discussed by the Court in some cases. 30
A probationary employee is one who, for a given period of time, is on observation,
evaluation and trial by an employer during which the employer determines whether or not
he is qualified for permanent employment. During the probationary period, the employer is
given the opportunity to observe the skill, competence, attitude and fitness of the
probationary employee while the latter seeks to prove to the employer that he has the
qualifications to meet the reasonable standards for permanent employment. 32
As a general rule, it should not exceed six (6) months from the date the employee
started working.33 One becomes a regular employee upon completion of his six-month
period of probation.34
The 6-month period provided in Article 281 admits of certain exceptions such as:
1. When the employer and the employee agree on a shorter or longer period;
2. When the nature of work to be performed by the employee requires a longer
3. When a longer period is required and established by company policy.
If not one of the exceptional circumstances above is proven, the employee whose
employment exceeds six (6) months is undoubtedly a regular employee. 35

Some principles on termination of employment of probationary employees. HOW RECKONED AND COMPUTED. The intention of the parties (employer and employee) is material. For authorized cause. Hon. 49 c. no such intention exists and the relationship automatically terminates at the expiration of the period. they cannot be dismissed except for just or authorized cause or when he fails to qualify as a regular employee. the parties intend to make their relationship regular after the lapse of the period.46 7. Under Article 281. Security of tenure of probationary employees. Both involve fixed period in terms of duration of employment. 48 b. TERMINATION OF PROBATIONARY EMPLOYMENT.” 37 th 5.  The probationary period may be extended but only upon the mutual agreement by the employer and the probationary employee. or 3. Grounds to terminate probationary employment. For a just cause. probationary employees are entitled to security of tenure notwithstanding their limited tenure and non-permanent status. Solicited ads are published a year after the sale has been made and only then can the company be able to evaluate the efficiency. conduct and selling ability of the sales representatives.42  Employee is deemed regular absent any contract to prove probationary employment.Buiser v.47 Hence. PROBATIONARY PERIOD. Leogardo. FIXED-TERM EMPLOYMENT.45  Probationary employment cannot be ad infinitum. Within the limited legal 6-month probationary period. In fixedterm employment. 1. Procedural due process is required only in the case of the first and second grounds (dismissal due to just or authorized cause) . The 6-month probationary period should be reckoned “from the date of appointment up to the same calendar date of the 6 month following. a. inprobationary employment. 39  Purpose and not length of the probationary period is material. to wit: 1.The probationary period of 18 months was considered valid in the light of the nature of employment of the probationary employees. A probationary period cannot be stipulated within the fixed period of employment. a probationary employee may be terminated only on three (3) grounds. 4. 36 . 38 6. 40  An employee who is allowed to work after a probationary period is considered a regular employee. during their probationary employment. the evaluation being based on the published ads. PROBATIONARY EMPLOYMENT VS. 43  Repetitive rehiring of a probationary employee means he has become a regular employee. However. . or 2.41  Employment is deemed regular if the employment contract has no stipulation on probationary period. When the probationary employee fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the start of the employment. SOME PRINCIPLES ON PROBATIONARY EMPLOYMENT.44  Regular workers of previous owner of business may be hired as probationary employees of new owner. The company here is engaged in the publication of advertisements in PLDT’s Yellow Pages Telephone Directories.

REGULAR EMPLOYMENT58 1. Termination a few days after lapse of probationary period cannot be done without due process as he has already become a regular employee by that time. TWO (2) KINDS OF REGULAR EMPLOYEES.The employment is reckoned as regular when the employee has rendered at least one (1) year of service. 64 . 56 7. 63 b.The employment is deemed regular when the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer.51 3. Agabon doctrine55 applies if dismissal of probationary employee for a just cause is without due process. The presumption having been made by the law itself.The thirdground (failure to qualify as a regular employee) does not require notice and hearing.00. 62 3. The phrase “to perform activities which are usually necessary or desirable in the usual business or trade of the employer” includes performance of peripheral jobs indirectly related to the principal business of employer. Jaka doctrine57 applies if dismissal of probationary employee for an authorized cause is without due process. . with respect to the activity in which he is employed and his employment shall continue while such activity exists. Under the Labor Code. with respect to the activity in which they are employed. By nature of work.54 6. . 50 2. No obligation to pay unexpired portion in case of valid termination prior to lapse of probationary period. By period of service. 60 2. whether such service is continuous or broken. The regular employees under Article 280 consist of the following: (1) Those engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer. Due process of law for the third ground consists of making the reasonable standards expected of the employee during his probationary employment known to him at the time of his engagement.00. regular employment may be attained in either of three (3) ways. and (2) Those who have rendered at least one (1) year of service. Law presumes regularity of employment. b. 59 2. THREE (3) WAYS OF ATTAINING REGULAR EMPLOYMENT. whether such service is continuous or broken. The amount of indemnity is higher: P50. Peremptory and arbitrary termination of probationary employees is not allowed.The employment is considered regular when the employee is allowed to work after a probationary period. a. 52 4. Termination to be valid must be done prior to lapse of probationary period. 61 3. By probationary employment. . it follows that an employee is deemed regular by operation of law the moment the fact is established that the nature of his work is directly related to the principal business of the employer. Thus. SOME PRINCIPLES ON REGULAR EMPLOYMENT. 53 5. the termination is considered legal but the employee will be awarded an indemnity in the form of nominal damages of P30.000.000. namely: 1.

casual or fixed-term but regular employment. his employment is regular by reason of its nature. the completion or termination of such project has been determined at the time of their engagement. g. Jurisprudence abounds where the non-presentation of the written contract was held as evidence that the status of employment is not what it purports to be.c. In order to safeguard the rights of workers against the arbitrary use of the word “project” to prevent employees from attaining the status of regular employees. however. 74 c. The doctrine of adhesion69 applies to employment contracts. a contract of adhesion is not prohibited per se. there is a need to execute a written employment contract if the intention is to stipulate on such other kinds of employment such as probationary. because the absence thereof will make the relationship that of regular employment. Fixed-period employment is the exception to the rule that an employee becomes regular by reason of nature of work or period of employment66 because in fixed-period employment. . as the case may be. No declaration or appointment paper necessary to make one a regular employee. Project employees are those hired: 1. CONCEPT. PROJECT EMPLOYMENT75 1. seasonal.73 i. and 2. that the rule on the interpretation or construction of contracts of adhesion does not apply when the stipulations contained in a contract are not obscure or ambiguous. It is only by proving the terms and conditions of the contract that the general presumption that the relationship is regular in nature would be effectively dispelled. a day certain being understood to be “that which must necessarily come. 70 It must be emphasized. that is. 71Besides. TWO (2) CATEGORIES OF PROJECT EMPLOYEES. ”67 e.76 2. project. casual or fixed-term. project. 72 h. 68 f. these factors are not decisive indicators of regularity of employment. probationary.65 d. The decisive determinant is the day certain agreed upon by the parties for the commencement and termination of their employment relationship. The act of hiring and re-hiring the employees over a period of time without considering them as regular employees evidences bad faith on the part of the employer. The phrase “the provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties”in Article 280 simply means that irrespective of any written or oral agreement stating that the employment is not regular. Manner and method of payment of wage or salary is immaterial to the issue of whether the employee is regular or not. although it may not be known when. However. Written or oral agreement is immaterial to determine regularity of employment. once the fact is established that the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer. for a specific project or undertaking. seasonal.

Regular employees. Due process likewise varies. A construction company ordinarily carries out two or more [distinct] identifiable construction projects: e. the scope and duration of which has been determined and made known to the employees at the time of employment. a particular job or undertaking that is not within the regular business of the corporation. PROJECT EMPLOYMENT VS. due process applicable to Article 282 terminations . If the termination is for just cause. due process is complied with even if no prior notice of termination is served. ” 77 The two (2) categories of project employees on the basis of “project” for which they have been engaged to perform are as follows: (1) A particular job or undertaking that is within the regular or usual business of the employer company. aproject could refer to a particular job or undertaking that is within the regular or usual business of the employer company. secondly . REGULAR EMPLOYMENT. from the other undertakings of the company . but also that there was indeed a “project. The services of project employees are coterminous with the project or any phase thereof and may be terminated upon the end or completion of the project or phase thereof for which they were hired. 78 In the realm of business and industry. as distinguished from regular employment. LITMUS TEST OF PROJECT EMPLOYMENT. . a residential condominium building in Baguio City. but which is distinct and separate.g. Firstly. or (2) A particular job or undertaking that is not within the regular business of the corporation. The term ‘project’ could also refer to. a twenty-five-storey hotel in Makati. from the other undertakings of the company.’ and their services may be lawfully terminated at completion of the project.79 3. in contrast. enjoy security of tenure and are legally entitled to remain in the service of their employer and to hold on to their work or position until their services are terminated by any of the modes of termination of service recognized under the Labor Code. Such a job or undertaking must also be identifiably separate and distinct from the ordinary or regular business operations of the employer. The litmus test of project employment. if the termination is brought about by the completion of the project or any phase thereof. are properly treated as ‘project employees. Employees who are hired for the carrying out of one of these separate projects. Such job or undertaking begins and ends at determined or determinable times. 1. and a domestic air terminal in Iloilo City.81 4. the due process required would necessarily depend on the ground cited. 80 A true project employee should be assigned to a project which begins and ends at determined or determinable times and be informed thereof at the time of hiring. The typical example of this first type of project is a particular construction job or project of a construction company. For termination of regular employment. and identifiable as such.employers claiming that their workers are project employees should not only prove that the duration and scope of the employment was specified at the time they were engaged. and identifiable as such. the duration and scope of which were specified at the time the employees were engaged for that project. we note that ‘project’ could refer to one or the other of at least two (2) distinguishable types of activities . The job or undertaking also begins and ends at determined or determinable times. In case of project employment.82 2. is whether or not the project employees were assigned to carry out a specific project or undertaking. but which is distinct and separate.

In other words. rehiring shows that employee is regular. may be considered as indicator/s that an employee is a project employee: 1. 93 c.87 5. There must be a written contract of project employment stating the duration of the project employment as well as the particular work or service to be performed. If due to authorized cause. Members of a “work pool” may consist of: . Some principles on project employment. 6 indicators of project employment. Project employment should not be confused with fixed-term employment to justify continuous rehiring of so-called project employees. Intervals in employment contracts indicate project employment. due process applicable to Articles 283 and 284 terminations should be followed. The work/service performed by the employee is in connection with the particular project or undertaking for which he is engaged. The termination of his employment in the particular project/undertaking is reported to the Regional Office of the Department of Labor and Employment having jurisdiction over the workplace. Regular employment is inconsistent with project employment. 86 4. employers may or may not form a “work pool. Length of service is not a controlling determinant of employment tenure. 1. Either one or more of the following circumstances. are defined in an employment agreement and is made clear to the employee at the time of hiring. as well as the specific work/service to be performed. The employee. Continuous.84 2. As a general rule. 5. 6. 89 7. “Work pool” principle. 2. 5. 88 6.85 3. is free to offer his services to any other employer. while not employed and awaiting engagement. The duration of the specific/identified undertaking for which the worker is engaged is reasonably determinable.applies. using the prescribed form on employees’ terminations or dismissals or suspensions. An undertaking in the employment contract by the employer to pay completion bonus to the project employee as practiced by most construction companies.” A “work pool” refers to a group of workers from which an employer like a construction company draws the workers it deploys or assigns to its various projects or any phase/s thereof. 90 8. Failure to present contract of project employment means that employees are regular.91 9. 3. within thirty (30) days following the date of his separation from work. 92 10. 4. a regular employee cannot be at the same time a project employee. among others. A written project employment contract is an indispensable requirement. a. 83 b. Project employees should be informed of their status as such at inception of the employment relationship. “Project-to-project” basis of employment is valid. Such duration. INDICATORS OF PROJECT EMPLOYMENT. as opposed to intermittent.

Report to DOLE on termination of project employees is required. The nature of their relationship with the employer is such that during offseason. hence. If the reinstatement is no longer possible. The reason is that their services are deemed coterminous with the project or phase thereof. mostly during certain season. If the project or the phase thereof on which the project employee is working has not yet been completed and his services are terminated without just or authorized cause and there is no showing that his services are unsatisfactory. Project employees are not. 1. entitled to separation pay if their services are terminated as a result of the completion of the project or any phase thereof in which they are employed.” may attain regular status as a project employee. they are temporarily laid off but they are re-employed during the season or when . 103 8. Non-project employees or employees for an indefinite period. a project employee who is a member of a “work pool. SEASONAL EMPLOYMENT105 1.” Regular seasonal workers are called to work from time to time. If they are employed in a particular project. 98 4. Once they attained such regularity.” 6. 95 However. CONCEPT. 2. they can no longer be terminated on the basis of the completion of the project or any phase thereof to which they were deployed. 102 7. 100 6. This kind of employee is known as “regular project employee. the project employee is entitled to reinstatement to his former position or substantially equivalent position. the employee is entitled to his salaries for the unexpired portion of the agreement. under established jurisprudence.1. 106 2. 104 d. they are properly to be called“regular seasonal employees. such termination is considered illegal. Project employees. Payment of completion bonus is an indicator of project employment. A “seasonal employee” is one whose work or service to be performed is seasonal in nature and the employment is for the duration of the season. Advance notice of termination of project employment is not required. by law. 99 5. Burden of proof in termination of project employment rests on the employer. Having become regular employees. Seasonal employees may attain regularity in their employment as such. Project employees enjoy security of tenure only during the term of their project employment. Project employees have presumably become regular employees if they are allowed to work beyond the completion of the project or any phase thereof to which they were assigned or after the “day certain” which they and their employer have mutually agreed for its completion.96 2. 97 3. 94 Mere membership in a “work pool” does not result in the workers’ becoming regular employees by reason of that fact alone. REGULAR SEASONAL EMPLOYMENT. the completion of the project or of any phase thereof will not mean severance of employer-employee relationship. 101 Report should be made after every completion of project or phase thereof. TERMINATION OF PROJECT EMPLOYMENT. These workers in the work pool who are employed in a particular project or in any phase thereof are considered as such if they are free to leave anytime and offer their services to other employers.

114  The wages and benefits of a casual employee whose status is converted into regular employment should not be diminished.115 f. 118 2. he does not attain regularity of employment as a seasonal worker. Both requisites should concur in order that the employee may be classified as regular seasonal employee.117 If the foregoing criteria are not present.their services may be needed.  Casual employee becomes regular after one year of service by operation of law. It satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former on the latter. 113  Repeated rehiring of a casual employee makes him a regular employee. the fixed-term contract of employment should be struck down for being illegal. REQUISITES FOR VALIDITY OF FIXED-TERM CONTRACTS OF EMPLOYMENT. or 2. MEANING OF CASUAL EMPLOYMENT. they can be considered as being in the regular employment of the employer. without any force. There is casual employment where an employee is engaged to perform a job. If the seasonal worker is engaged only for the duration of one (1) season. Their employment relationship is never severed but only suspended. separated from the service but are merely considered as on leave of absence without pay until they are re-employed. FIXED-TERM EMPLOYMENT116 1. SOME PRINCIPLES ON CASUAL EMPLOYMENT. SOME PRINCIPLES ON FIXED-TERM EMPLOYMENT. The two (2) requisites or criteria for the validity of a fixed-term contract of employment are as follows: 1. . e. strictly speaking. 111  No regular appointment papers necessary for casual employees to become regular. and such job. The seasonal employee should perform work or services that are seasonal in nature. CASUAL EMPLOYMENT109 1. work or service is for a definite period made known to the employee at the time of engagement. thus: 1. 107 3. They must have also been employed for more than one (1) season. and 2. 110 2. 112  The one (1) year period should be reckoned from the hiring date. work or service which is merely incidental to the business of the employer. duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent. National Federation of Sugarcane Workers Food and General Trade. The fixed period of employment was knowingly and voluntarily agreed upon by the parties. The case of Hacienda Fatima v. then. As such. 108 enunciates the requisites in order that a seasonal employee may be deemed to have attained regularity of employment as such. REQUISITES FOR REGULARITY OF EMPLOYMENT OF SEASONAL EMPLOYEES. They are not.

 OFWs can never acquire regular employment. 131  OFWs do not become regular employees by reason of nature of work. the Court will not interfere with the exercise of judgment by an employer.128  Liability for illegal dismissal of fixed-term employee is only for salary for unexpired portion. 124  Successive renewals of fixed-period contracts will result to regular employment. JOB CONTRACTING 1. Fixed-term employment is valid even if duties are usually necessary or desirable in the employer’s usual business or trade. It is an exercise of business judgment or management prerogative. 133  CBA cannot override the terms and conditions prescribed by the POEA under the Standard Employment Contract (SEC) for OFWs. 123  Rendering work beyond one (1) year would result to regular employment. CONTRACTING OUT OF SERVICES IS A PROPRIETARY RIGHT OF EMPLOYER EXPRESSLY ALLOWED BY LAW. OUTSOURCING. 126  Employment on a “day-to-day basis for a temporary period” will result to regular employment. 139 3. A UNIVERSALLY ACCEPTED MANAGEMENT PREROGATIVE. 119  Notice of termination not necessary in fixed-term employment. 137  Hiring of seafarer for overseas employment but assigning him to local vessel does not affect his status as an OFW. FIXED-TERM EMPLOYMENT OF OFWs. .129 3. 134  Probationary employment of OFWs is a misnomer. 135  The employment of OFWs for a fixed period is not discriminatory. 136  The contracts of OFWs cease upon expiration thereof. Contracting out of services is not illegal per se.122  Employees allowed to work beyond fixed term become regular employees. 120  Employee is deemed regular if contract failed to state the specific fixed period of employment. Absent proof that the management acted in a malicious or arbitrary manner.130  Employment contracts of OFWs for indefinite period are not valid. They are not relevant if termination is due to expiration of fixed period.121  Charges for misconduct or other wrongful acts or omissions are relevant only in termination prior to expiration of the term.127  Termination prior to lapse of fixed-term contract should be for a just or authorized cause. 132  Series of rehiring of OFWs cannot ripen into regular employment.140 2. 125  Hiring of employees on a uniformly fixed 5-month basis and replacing them upon the expiration of their contracts with other workers with the same employment status circumvents their right to security of tenure. 138  Seafarer hired for overseas deployment but later assigned to domestic operations after the expiration of his overseas contract ceases to be an OFW.

142 3. Article 107 – Indirect Employer.148 and 4. While these services may be considered directly related to the principal business of the employer. in order for such outsourcing to be valid. Article 106 – Contractor or Subcontractor. OUTSOURCING MAY BE DONE REGARDLESS OF WHETHER THE ACTIVITY IS PERIPHERAL OR CORE IN NATURE IN RELATION TO THE EMPLOYER’S BUSINESS. LABOR CODE PROVISIONS ON JOB-CONTRACTING OR CONTRACTUALIZATION. This universal recognition of outsourcing as a legitimate activity has been pronounced in a number of cases.149 These provisions will be discussed below. they are not necessary in the conduct of the principal business of the employer. the High Court. as Amended. security and even technical or other specific services. Inc. 18-A 1. Digitel Employees Union (DEU) .145 a. The validity of outsourcing has been judicially recognized by the Supreme Court. to wit: 1.147 3. . Article 109 – Solidary Liability. . Reiterating its earlier pronouncement in Aliviado v. There are only four (4) provisions in the Labor Code which directly enunciate the rules on contractualization. in the 2012 case of Digital Telecommunications Philippines. v. 18-A. THE PREVAILING IMPLEMENTING RULES. of hiring independent contractors to perform special services. 2011] entitled “Rules Implementing Articles 106 to 109 of the Labor Code. together with the provisions of other issuances. It has already taken judicial notice of the general practice adopted in several government and private institutions and industries. it must be made to a legitimate independent contractor because the current labor rules expressly prohibit labor-only contracting. Department Order No. JUDICIAL RECOGNITION OF VALIDITY OF OUTSOURCING. However. Article 108 – Posting of Bond. ARTICLES 106 TO 109 OF THE LABOR CODE 1. These services range from janitorial. 141 A company can determine in its best judgment whether it should contract out a part of its work for as long as the employer is motivated by good faith. it is management prerogative to farm out any of its activities. the contracting is not for purposes of circumventing the law. [November 14. b. DEPARTMENT ORDER NO. 144 stated that indeed. Inc. regardless of whether such activity is peripheral or core in nature.” was issued by the DOLE . Series of 2011. Procter & Gamble Phils. and does not involve or be the result of malicious or arbitrary action. 143 4.It is within the right of an employer to enter into an outsourcing arrangement as an exercise of its management prerogative in order to achieve greater economy and efficiency in its operations – a universally accepted business objective and standard that can never be questioned.146 2.

clearly speaks of a trilateral relationship that characterizes the covered contracting/subcontracting arrangement. POWER OF DOLE SECRETARY TO RESTRICT OR PROHIBIT CONTRACTING-OUT OF LABOR. 2001]and earlier Department Orders on the same subject matter. Cooperatives engaging in contracting or subcontracting arrangements. but the principal.O. Series of 2011. The third (3 ) paragraph of Article 106. [March 13. becomes solidarily liable with the contractor for the wages of the contractor’s employees.Secretary to enunciate regulations governing contracting and subcontracting arrangements. Department Order No. The first two (2) paragraphs of Article 106 set the general rule that a principal is permitted by law to engage the services of a contractor for the performance of a particular job. he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of the Code. SERIES OF 2012. merchandising. was issued “Clarifying the Applicability of Department Order No. vendor-vendee relationship for entire business processes covered by the applicable provisions of the Civil Code on Contracts is excluded.” The purpose of this Circular is to respond to queries on whether firms or companies in the Business Process Outsourcing (BPO) or Knowledge Process Outsourcing (KPO) and in the Construction Industry are covered by Department Order No. 01-12 1. contemplates generic or focused singular activity in one contract between the principal and the contractor (for example. empowers the Secretary of Labor to make distinctions between permissible job contracting and “labor-only” contracting which is a prohibited act further defined under the last paragraph thereof. SPECIFIC ENUMERATION OF COVERED CONTRACTORS. by appropriate regulations.O. 18-A. Series of 2011 to Business Processing Outsourcing (BPO) /Knowledge Process Outsourcing (KPO) and the Construction Industry. 01. security. 18-A to BPO. 152 The provisions of this Department Order will be discussed jointly with those of Articles 106 to 109 of the Labor Code and those of other issuances and pieces of jurisprudence below. 2.150 rd Thus. CLARIFYING DEPARTMENT ORDER NO. 18-A. This issuance superseded Department Order No. Series of 2012. Series of 2011. Department Circular No. DEPARTMENT CIRCULAR NO. 01. Department Order No. business . On the applicability of D. however. Series of 2001 [May 08. Series of 2011. 18-A. 3. 18-02. In so prohibiting or restricting. DEPARTMENT CIRCULAR NO. Series of 2002 [February 21. specific production work) and does not contemplate information technology-enabled services involving an entire business processes (for example. janitorial. the DOLE Secretary may. 2002]. and 2. 2012]. All parties of contracting and subcontracting arrangements where employeremployee relationships exist. Thus. 1. c. 18-A. restrict or prohibit the contracting-out of labor to protect the rights of workers established under the Labor Code. nevertheless.O. to prevent any violation or circumvention of any provision thereof.153 D. this Circular clarifies as follows: D. 18-A. 18-A. 151 3. Series of 2011 applies to: 1.

157 2. Series of 2011 (on coordination and harmonization of policies and programs on occupational safety and health in the construction industry) . "Contracting" or "subcontracting" refers to an arrangement whereby a principal agrees to put out or farm out with a contractor the performance or completion of a specific job.D. work or service. work or service within a definite or predetermined period. work or service. No. Moreover. Thus. and DOLE-DPWH-DILG-DTI and PCAB Memorandum of Agreement-Joint Administrative Order No. CONTRACTING OR SUBCONTRACTING. There are three (3) parties involved in these arrangements: 1. TRILATERAL RELATIONSHIP IN JOB CONTRACTING 156 1.process outsourcing. this Circular clarifies as follows: The licensing and the exercise of regulatory powers over the construction industry are lodged with the Philippine Contractors Accreditation Board (PCAB) . and maintain these employees based on business requirements. work or service between the principal and the contractor. knowledge process outsourcing. 155 d. 13. 1. findings of violation/s on labor standards and occupational health and safety standards shall be coordinated with PCAB for its appropriate action. which may or may not be for different clients of the BPOs at different periods of the employees' employment. Series of 2011. medical transcription. 1746. shall not require contractors licensed by PCAB in the Construction Industry to register under D. The principal who decides to farm out a job.158 a. PCAB registers all contractors. regardless of whether such job. pursuant to the provisions of P. 154 2.O. including the possible cancellation/suspension of the contractor’s license. work or service is to be performed or completed within or outside the premises of the principal. Series of 1998 (Guidelines Governing the Occupational Safety and Health in the Construction Industry) . 2.O. 18-A to the Construction Industry and Coordination with PCAB-CIAP. legal process outsourcing. whether general or subcontractors. On the applicability of D. work or service to a contractor. the DOLE. in the Construction Industry and regulates the same including ensuring compliance with DOLE Department Order No. 18-A. TRILATERAL RELATIONSHIP. hardware and/or software support. and not with the Department of Labor and Employment or any of its regional offices. and a contract of employment between the contractor and its workers. which is under the Construction Industry Authority of the Philippines (ClAP) . Series of 1980. back office operations/support) . The contractual workers engaged by the contractor to accomplish the job. . Principal. animation services. "Trilateral relationship" refers to the relationship in a contracting or subcontracting arrangement where there is a contract for a specific job. through its regional offices. The contractor who has the capacity to independently undertake the performance of the job. MEANING. These companies engaged in business processes ("BPOs") may hire employees in accordance with applicable laws. and 3.

engaged in a legitimate contracting or subcontracting arrangement providing either services. or 2. project or service from the contractor. job. job."Principal" refers to any employer. and . work. This technical distinction is evident from the language of Article 106 where mention of the“subcontractor” was made not in relation to the employer (or principal) but in relation to the “contractor.” 160 b.e. whether a person or entity. . “Contractual worker” or "Contractor's employee" may refer to either: 1. 162 The “contractor” or “subcontractor” is the “direct employer” of the contractual workers or employees who are supplied to the principal and made to perform the principal’s (or indirect/statutory employer’s) work. association or corporation who/which contracts with an independent contractor for the performance of any work. or a combination of services to a principal under a Service Agreement. 161 In its strict technical sense. One employed by a contractor to perform or complete a job. The principal thereforeis not the direct employer of the workers employed by the contractor and assigned to the principal. i. task or project. task. who/which exercises independent employment and who/which contracts to do a piece of work according to his/its own methods and without being subject of control by the principal (or indirect/statutory employer) . TWO (2) KINDS OF CONTRACTS IN A TRILATERAL RELATIONSHIP. who/which puts out or farms out a job. except as to the results thereof. including government agencies and government-owned and controlled-corporations. simply an“employer. temporary workers. A regular employee of the contractor whose functions are not dependent on the performance or completion of a specific job. a “contractor” is different from a “subcontractor” in that the former is the one who/which directly enters into a contract with the principal with respect to the performance of a certain work. called an independent contractor. service or work to a contractor. Contractual worker or contractor’s employee. a “principal” is also referred to as an “indirect employer. Thus. to wit: (a) Employment Contract between the contractor and its employee. administrative staff. In the trilateral relationship. the “contractor” or “subcontractor” may appropriately refer to the person himself or entity itself. job. 159 Under Article 107 of the Labor Code. skilled workers. job. partnership. they refer to one and the same person or entity. project or service.” As defined therein. including a cooperative. or service pursuant to a Service Agreement with a principal. project or service. an “indirect employer” refers to any person. this technical distinction between a “contractor” and a “subcontractor” is not given any major signification as both terms may be interchangeably used since in almost all cases. "Contractor" refers to any person or entity. task. a “principal” or “indirect employer” is also known as a “statutory employer” or.” However. there are two (2) kinds of contracts that should be executed. task. c. Contractor. while the latter merely subcontracts the said work. work or service within a definite period of time.163 3. Within the context of a valid contracting arrangement.

The place of work and terms and conditions of employment. Employer-employee relationship between contractor and its employees. to include the agreed amount of the services to be rendered and the standard administrative fee of not less than ten percent (10%) of the total contract cost.(b) Service Agreement between the principal and the contractor164 containing the terms and conditions governing the performance or completion of a specific job. Contents of the Service Agreement. and 3. This is the first contract required to be executed in a legitimate contracting arrangement. It shall include the following terms and conditions: 1. Contents of the employment contract. work or service being contracted with the principal. EMPLOYMENT CONTRACT. The place of work and terms and conditions governing the contracting arrangement. 165  Governing la w. The Employment Contract is governed by the Labor Code. The agreement is between principal and contractor.166 4. there exists an employeremployee relationship between the contractor and the employees it engaged to perform the specific job. while the Service Agreement is governed by the Civil Code. The Service Agreement should embody the following: 1. b. work or service to be performed by the employee. The contractor shall inform the employee of the foregoing terms and conditions of employment in writing on or before the first day of his/her employment. . 169 5. work or service being subcontracted. 2. including a statement of the wage rate applicable to the individual employee. as amended. In legitimate contracting or subcontracting arrangement. a. The specific description of the job. Notwithstanding any oral or written stipulations to the contrary. The specific description of the job. the employment contract between the contractor and its employee shall be governed by the provisions of Articles 279 and 280 of the Labor Code. SERVICE AGREEMENT. 167 Thus. The term or duration of employment that must be co-extensive with the Service Agreement or with the specific phase of work for which the employee is engaged. A second contract called “Service Agreement” is required to be executed between the principal and the contractor whose terms and conditions shall govern the contracting arrangement between them. it is essential that a contract of employment be executed between the contractor and the contractual employees.168 c. a. b. 2. work or service being farmed out for a definite or predetermined period. Duty of contractor to inform its employees about the terms of the employment contract.

and other welfare benefits.A. ECC. service incentive leave. 170 c. It bears noting that the Labor Code does not define what constitutes a legitimate job contracting arrangement. Philhealth and Pag-IBIG. which stands for contract duration equivalent to: 10 for one year or less. Philhealth. 9184. which must be equal to the total contract cost. and 20 for more than two (2) years. job contracting shall be legitimate if all of the following circumstances concur: (1) The contractor must be duly registered with the DOLE. as amended. 171 NFCC is the formula set out in the Implementing Rules and Regulations of R. 6. under Department Order No. NFCC is current assets minus current liabilities multiplied by K. the right to self-organization. The principal or the contractor shall be under the obligation to produce a copy of the Service Agreement in the ordinary course of inspection by the DOLE. A finding by competent authority of violation of any of the contracts mentioned above (Employment Contract and Service Agreement) shall render the principal the direct employer of the employees of the contractor or subcontractor. A provision on the issuance of the bond/s renewable every year. work or services sought to be undertaken under a Service Agreement.173 e.172 e. The contractor shall likewise be under the obligation to produce a copy of any Contract of Employment when directed to do so by the DOLE Regional Director or his/her authorized representative. The contractor or subcontractor shall directly remit monthly the employers' share and employees' contribution to the SSS.O. rest days. Net Financial Contracting Capacity (NFCC) . [approved January 10. contributions and remittance of SSS. and the right to security of tenure. 18-A. 18-A175 and jurisprudence. 5. The term "Net Financial Contracting Capacity (NFCC) " mentioned in the Service Agreement above refers to the formula to determine the financial capacity of the contractor to carry out the job. Pag-IBIG Fund. meaning. Provisions ensuring compliance with all the rights and benefits of the employees under the Labor Code and the Implementing Rules (D. pursuant to Article 109 of the Labor Code. minus the value of all outstanding or ongoing projects including contracts to be started. th 4.” d. and 7. EFFECTS OF LABOR-ONLY CONTRACTING 174 1. The term or duration of engagement. LEGITIMATE JOB CONTRACTING ARRANGEMENT. Standardization and Regulation of the Procurement Activities of the Government and For Other Purposes. labor standards such as. collective bargaining and peaceful concerted action. 13 month pay and separation pay. However. Duty to produce copy of contract between the principal and the contractor. No. retirement benefits. 2003] or “An Act Providing for the Modernization. 15 for more than one (1) year up to two (2) years. Effect of violation of any of the contracts aforementioned.3. Series of 2011) on: provision for safe and healthful working conditions. A provision on the Net Financial Contracting Capacity of the contractor. . overtime pay.

Failure to register shall give rise to thepresumption that the contractor is engaged in labor-only contracting. Digitel Employees Union (DEU) . evidently lacked substantial capital or investment required of legitimate job contractors. Illustrative cases:  In the 2012 case of Digital Telecommunications Philippines. a duly-registered cooperative. free exercise of the right to self-organization. Buenavista. equipment. according to its own manner and method. The NLRC highlighted the fact that Digiserv shared the same Human Resources. The NLRC also relied on the letters of commendation. work premises. then this requisite of legitimate job contracting arrangement is fully satisfied. machineries. 2 Requisite above.180 (b) On No. together with the DOLE Regional Director’s finding thatPanaghiusa sa Kauswagan Multi-Purpose Cooperative (PASAKA) .  The same ruling of lack of control by the contractor was cited as additional justification for declaring the contractor as a labor-only contractor in the 2012 case of Norkis Trading Corporation v. 182 Thus. security of tenure.This is the “Substantial Capital or Investment” test which seeks to address the issue of whether the contractor has substantial capital or investment in the form of tools. equipment. and free from control and direction of the principal in all matters connected with the performance of the work except as to the results thereof. was a labor-only contractor of petitioner Digitel because it does not exercise control over the affected employees. (3) The contractor has substantial capital and/or investment in the form of tools. (a) On No. v. 3 Requisite above. . and other materials . and social and welfare benefits. (Digiserv) . IMPORTANT POINTS ON THE ABOVE REQUISITES.(2) The contractor carries a distinct and independent business and undertakes to perform the job. and other materials which are necessary in the conduct of the business. 176 and (4) The Service Agreement between principal and contractor should ensure compliance with all the rights and benefits of workers under Labor Laws177 such as labor and occupational safety and health standards.179 2. (c) On No. 1 Requisite above. Inc.This is the “Right of Control” test which basically addresses the issue of whether the contractor’s manner and methods of performing his job contracting is completely free from the control and direction of the principal except as to the results thereof. Inc. the cooperative failed to dispute the respondents’ allegation that officers of Norkis Trading supervised the work and paid the salaries of its employees. it was further held that Digitel Service. . work or service on its own responsibility. a non-profit enterprise engaged in call center servicing. Accounting. work premises. plaques of appreciation and certification issued by Digitel to the Customer Service Representatives as evidence of control.178 Absence of any of the foregoing requisites makes it a labor-only contracting arrangement. . machineries. 181 besides the lack of substantial capitalization that indicates labor-only contracting.Registration of contractor with the DOLE is now mandatorily required. Audit and Legal Departments with Digitel which manifested that it was Digitel who exercised control over the performance of the affected employees. If the issue is answered in the affirmative.

 Rights of contractors’ employees. and (f) Security of tenure. 18-A.” cases in the past where this issue was raised should now be qualified by this new issuance. as amended.000. to include the following: (a) Safe and healthful working conditions. overtime pay. the amount which constitutes “substantial capital. Under Department Order No. ” are two separate requirements. “Substantial capital” and “investment in tools. . 18-A on November 14. By clearly specifying the amount that constitutes “substantial capital. the contracting arrangement is deemed legitimate. equipment. machineries and work premises” should be treated as two (2) distinct and separate requirements in determining whether there is legitimate job contracting arrangement. temporary. 188 3. (c) Retirement benefits under the SSS or retirement plans of the contractor. whether deployed or assigned as reliever.A finding by competent authority of violation of the said rights of contractor’s employees shall render the principal the direct employer of the employees of the contractor or subcontractor. all contractor's employees. weekender. or promo jobbers. . if there is any. Department Order No.  “Substantial capital” and “investment in tools. 18-A. ” Moreover. (e) Self-organization. rest days. as amended. 185 (d) On No. 13 month pay.000. holiday pay. the term "substantial capital"shall now mean: 1. Cases subsequent to the effectivity of Department Order No. In the case of single proprietorship . .000.which are necessary in the conduct of its business. .Per Department Order No. shall be entitled to all the rights and privileges as provided for in the Labor Code. 186 If answered in theaffirmative. 18-A now sets in very clear terms. partnerships or cooperatives – paid-up capital stocks/shares of at least Three Million Pesos (P3.000. Significant points:  The amount of substantial capital is now fixed under the Rules. collective bargaining and peaceful concerted activities. implements. 2011 should take this specific amounts into account. cooperatives are now mentioned prominently in the enumeration of the entities which may engage in contracting/subcontracting arrangement.00) . pursuant to Article 109 of the Labor Code.a net worth of at least Three Million Pesos (P3. LABOR-ONLY CONTRACTING. (d) Social security and welfare benefits. 184 Unlike in the past implementing rules. (b) Labor standards such as but not limited to service incentive leave.187 th  Effect of violation of the rights of contractor’s employees. etc. the second requisite in legitimate job contracting/subcontracting arrangement is fully complied with. 183 If the answer is in the affirmative. 4 Requisite above. and separation pay as may be provided in the Service Agreement or under the Labor Code.This is the “Legal Rights and Benefits Compliance” test which addresses the issue of whether the Service Agreement between the principal and contractor is compliant with the rights and benefits of workers under labor laws.00) . In the case of corporations. seasonal. or 2.

there is labor-only contracting. among others. Illustrative cases:  In the 2012 case of Norkis Trading Corporation v. equipment. a duly-registered cooperative. Series of 2011. If this poser is answered in the affirmative. supplied or placed by a contractor to the principal are performing activities which are directly related to the main business of the principal. constituting distribution and sale of Coca-Cola products. were performing activities directly related to the principal business of the petitioner. OR (b) The contractor does not exercise the right of control over the performance of the work of the employee. or directly related to the main business of the principal within a definite or predetermined period. Absolute prohibition. machineries. besides its lack of substantial capital or investment in tools and its failure to carry on an independent contracting business. . v. . work or service is to be performed or completed within or outside the premises of the principal. work premises. Labor-only contracting per Department Order No. c.196 the contractor was declared a labor-only contractor because the respondent-workers supplied by it to petitioner company worked therein as salesmen.a. was a labor-only contractor because.194 2) The “Direct Relation to Principal’s Business” test enunciated above seeks to address the issue of whether the employees recruited. it is stated that petitioner is engaged in the manufacture.regardless of whether such job. In the Delivery Agreement between petitioner and the contractor. Some important points on the foregoing requisites: 1) Even if only one of the two (2) elements above is present. the respondent-workers it supplied to petitioner-employer.193 labor-only contracting refers to an arrangement where: (a) The contractor does not have substantial capital or investments in the form of tools. distribution and sale of softdrinks and other related products.191 this Department Order192 and pertinent jurisprudence. and the employees recruited and placed are performing activities which are usually necessary or desirable to the operation of the company.195 it was established that Panaghiusa sa Kauswagan Multi-Purpose Cooperative(PASAKA) .  In the 2009 case of Coca-Cola Bottlers Phils.190 b. 18-A. Code 189 Labor-only contracting is expressly prohibited under Article 106 of the Labor and its implementing rules. Per law. Inc. Agito. Buenavista. The work of respondents. is clearly indispensable to the principal business of petitioner. the contractor is deemed a labor-only contractor and the employees become direct employees of the principal.

2. Best Manpower Services. which supervised petitioners in their work. representations made by the labor-only contractor to the employees will bind the principal.” as this term is understood under Article 107 of the Labor Code. There was absolute lack of evidence that BMSI exercised control over them or their work. It will be responsible to them for all their entitlements and benefits under labor laws. the joint and several obligation of the principal and the legitimate job contractor is only for a limited purpose. Lorenzo Shipping Corp. the principal is considered the “direct employer” of the contractual employees in accordance with the last paragraph of Article 106 of the Labor Code. 201 2. (BMSI) . subject to the classifications of employees under Article 280 of the Labor Code. 4. LABOR-ONLY CONTRACTING. the principal is not responsible for any claim made by the contractual employees. on the one hand. work. The principal and the labor-only contractor will be solidarily treated as the direct employer. except for the fact that petitioners were hired by BMSI. In the former. while in the latter. 200 5. 199 In summary. 203 . or which evaluated the same. Other than this obligation of paying the wages. or service is done within or outside the company premises of the principal. the principal is considered only an “indirect employer. The employees will become employees of the principal. and the prohibited labor-only contracting. the following are the effects of a labor-only contracting arrangement: 1. the principal becomes jointly and severally or solidarily liable with the labor-only contractor to the latter’s employees in the same manner and extent that the principal is liable to employees directly hired by him/her. The principal will become the employer as if it directly employed the workers supplied by the labor-only contractor to undertake the subcontracted job or service. Since the act of an agent is the act of the principal. an employer-employee relationship is created by law between the principal and the contractual employees supplied by the labor-only contractor.3) The validity of job contracting arrangement does not depend on whether the job. 3. EFFECTS OF LABOR-ONLY CONTRACTING. no employer-employee relationship exists between the contractual employees of the job contractor and the principal. was a labor-only contractor. In the former. may be summed up as follows: 1. as amended. there was no showing that it was BMSI which established petitioners’ working procedure and methods. LEGITIMATE JOB CONTRACTING VS. 4. to ensure that the employees are paid their wages. as provided in Article 106 of the Labor Code. The chief distinctions between legitimate job contracting. Inc. and nowhere else. the fact that petitioners worked at respondent LSC’s premises. while in the latter. Other than the provisions of the Agreement between respondent LSC and BMSI. In the former.197 But in the 2010 case ofBabas v. . 198 the High Court cited as additional basis for holding that the contractor. that is. while in the latter. on the other. 202 3. The labor-only contractor will be treated as the agent or intermediary of the principal.

" (3) Taking undue advantage of the economic situation or lack of bargaining strength of the contractor's employees. the labor-only contractor merely provides. the following are declared prohibited for being contrary to law or public policy under Department Order No. as a precondition to employment or continued employment. as amended. (5) Contracting out of a job. work or service being performed by union members when such will interfere with. work or service that is necessary or desirable or directly related to the business or operation of the principal by reason of a strike or lockout whether actual or imminent.4. 248 (c) of the Labor Code. a. restrain or coerce employees in the exercise of their rights to self-organization as provided in Art. work or service through an in-house agency. In the former. Contracting out of jobs. Two (2) sets of other prohibitions. works or services when the same results in the termination or reduction of regular employees and reduction of work hours or reduction or splitting of the bargaining unit. recruits and places the personnel to work for the principal. while in the latter. Series of 2011: A. or a quitclaim releasing the principal. unless the contract is divisible into phases for which substantially different skills are required and this is made known to the employee at the time of engagement. contractor or from any liability as to payment of future claims. (7) Repeated hiring of employees under an employment contract of short duration or under a Service Agreement of short duration with the same or different contractors. Notwithstanding the prohibition on labor-only contracting. 18-A. a waiver of labor standards including minimum wages and social or welfare benefits. and (ii) Requiring them to sign. which circumvents the Labor Code provisions on Security of Tenure. in any of the following instances: (i) Requiring them to perform functions which are currently being performed by the regular employees of the principal. (4) Contracting out of a job. an antedated resignation letter. works or services when not done in good faith and not justified by the exigencies of the business such as the following: (1) Contracting out of jobs. or undermining their security of tenure or basic rights. PROHIBITIONS OTHER THAN LABOR-ONLY CONTRACTING. (9) Refusal to provide a copy of the Service Agreement and the employment contracts between the contractor and the employees deployed to work in the bargaining unit of the principal's certified bargaining agent to the sole and exclusive bargaining agent (SEBA) . or circumventing the provisions of regular employment. 204 6. . (8) Requiring employees under a subcontracting arrangement to sign a contract fixing the period of employment to a term shorter than the term of the Service Agreement. (6) Contracting out of a job. a blank payroll. the legitimate job contractor undertakes to perform a specific job for the principal. (2) Contracting out of work with a "Cabo. supplies.

A finding by competent authority of commission of any of the above enumerated prohibited activities shall render the principal the direct employer of the employees of the contractor or subcontractor. "Cabo" refers to a person or group of persons or to a labor group which. B. Dismissal from employment 1. whether in the capacity of an agent of the employer or as an ostensible independent contractor. Authorized Causes 3. 205 b. 1 Dismissal of employees requires the observance of the two-fold due process requisites. "In-house agency" refers to a contractor which is owned. pursuant to Article 109 of the Labor Code. Due Process a) Twin-notice requirement b) Hearing. cooperative or any entity. namely: 1. meaning. in the guise of a labor organization. managed. meaning. Substantive aspect which means that the dismissal must be for any of the (1) just causes provided under Article 282 of the Labor Code or the company rules and regulations promulgated by the employer. and which operates solely or mainly for the principal. Contracting out of jobs. and . supplies workers to an employer. TWO-FOLD DUE PROCESS REQUIREMENT. 207 d. with or without any monetary or other consideration. meaning of opportunity to be heard B. 206 c. Effect of commission of prohibited activities. Just Causes 2. or (2) authorized causes under Articles 283 and 284 thereof. DISMISSAL FROM EMPLOYMENT 1.(10) Engaging or maintaining by the principal of subcontracted employees in excess of those provided for in the applicable Collective Bargaining Agreement (CBA) or as set by the Industry Tripartite Council (ITC) . works or services analogous to the above when not done in good faith and not justified by the exigencies of the business. as amended. In-house agency.208 ------------oOo------------ Chapter Four TERMINATION OF EMPLOYMENT TOPICS PER SYLLABUS B. or controlled directly or indirectly by the principal or one where the principal owns/represents any share of stock. Cabo.

(2) Article 264(a) . (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. (b) Gross and habitual neglect by the employee of his duties.2. Procedural aspect which means that the employee must be accorded due process.(National Interest Cases) where strikers who violate orders. JUST CAUSES UNDER THE LABOR CODE. JUST CAUSES 1. closure or cessation of business operations3 or disease. (c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative. including dismissal or loss of employment status. A dismissal based on a just cause means that the employee has committed a wrongful act or omission. The . may be imposed immediate disciplinary action. the bargaining union can demand from the employer the dismissal of an employee who commits a breach of union security arrangement.(Union Security Clause) where violation of the union security agreement in the CBA may result in termination of employment. is also deemed to have lost his employment status. (b) Any employee. and (e) Other causes analogous to the foregoing.(Prohibited Activities) which provides for the termination of the following: (a) Union officers who knowingly participate in an illegal strike and therefore deemed to have lost their employment status.4 1. The just causes in the Labor Code are found in the following provisions thereof: (1) Article 282 . such as failure to join the union or to maintain his membership in good standing therein. the elements of which are notice and the opportunity to be heard and to defend himself. retrenchment. prohibitions and/or injunctions as are issued by the DOLE Secretary or the NLRC. Under this clause. while a dismissal based on anauthorized cause means that there exists a ground which the law itself allows or authorizes to be invoked to justify the termination of an employee even if he has not committed any wrongful act or omission such as installation of labor-saving devices. AUTHORIZED CAUSES.2 2.(Termination by the Employer) which provides for the following grounds: (a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work. union officer or ordinary member who knowingly participates in the commission of illegal acts during a strike (irrespective of whether the strike is legal or illegal) . redundancy.5 (4) Article 248(e) . JUST CAUSES VS. (3) Article 263(g) .

REQUISITES. to obey traffic rules and regulations as well as the company policies. 14 the Supreme Court pronounced that the Court of Appeals erred in ruling that the dismissal of private respondent.same union can also demand the dismissal of a member who commits an act of disloyalty against it. It must show that he has become unfit to continue working for the employer. 6 2. to ensure the safety of the riding public as well as the other vehicles and motorist (sic) ’ is so fundamental and so universal that any bus driver is expected to satisfy the requirement whether or not he has been so informed. It must relate to the performance of the employee’s duties. SERIOUS MISCONDUCT 15 1. 4. it is to be expected that the same is not to be found in Article 282 of the Labor Code since the latter merely enumerates the just causes or grounds in general terms. just causes are also found in prevailing jurisprudence. and 2. For misconduct or improper behavior to be a just cause for dismissal. The grounds mentioned in Article 282 shall be discussed herein seriatim. If the ground cited is based on the Company Rules and Regulations or Code of Conduct or Code of Discipline. 3. Violation of company rules and regulations. 7 The following may be cited as just causes in accordance with prevailing jurisprudence: 1. at the very least.]’ xxx are not among thoseenumerated under Article 282 of the Labor Code as just causes for termination of employment. JUST CAUSES IN ACCORDANCE WITH PREVAILING JURISPRUDENCE. The requirement in the company rules that: ‘3. In addition to the just causes mentioned in the Labor Code.’[‘]mababa ang revenue ng bus. DISCUSSION OF THE JUST CAUSES UNDER ARTICLE 282 OF THE LABOR CODE. such as when the member organizes a rival union. conduct analogous to serious misconduct. 10 4. under the abovecited Article 282 of the Labor Code.16 . nag-uutos ng conductor para kumita sa hindi magandang paraan[. I. Attitude problem. NLRC. Failure to attain work quota. viz: ‘hindi lahat ng schedule nailalabas. laging kasama an[g] asawa sa byahe’ and ‘maraming naririnig na kwento tungkol sa kanya. the following requisites must concur: 1. inefficiency or ineptitude. was illegal because the “grounds upon which petitioners based respondent’s termination from employment. DISMISSAL BASED ON COMPANY RULES AND REGULATIONS NOT ILLEGAL. a bus driver of petitioner. 4. Theft of property owned by a co-employee 9 as distinguished from companyowned property which is considered serious misconduct. ” The irregularities or infractions committed by private respondent in connection with his work as a bus driver constitute serious misconduct or. 8 2. In the 2013 case of Sampaguita Auto Transport Corporation v. Incompetence.11 5. It must be serious. 12 6. Failure to comply with weight standards of employer. and 3.13 3.

as a general rule. insulting or offensive words constitutes serious misconduct. 46 • Pilferage or theft of company-owned property is a just cause to terminate. 45 • Dismissal is too harsh a penalty for eating while at work.24 • Immorality. 27 • The act of a 30-year old lady teacher in falling in love with a 16-year old student is not immoral.19 • The charge for serious misconduct must not be a mere afterthought. 20 • Series of irregularities. when put together. 36 • Selling products of a competitor is a just cause for termination.All the above three (3) requisites must concur. 44 • Sleeping while on duty is a ground for termination. 47 • Theft of funds or property not owned by employer is not a ground to terminate. 32 • Utterance of obscene. 39 • Contracting work in competition with employer constitutes serious misconduct. 41 • Intoxication which interferes with the employee’s work constitutes serious misconduct. is not a just ground to terminate employment. 51 . 37 • Organizing a credit union by employees in a bank is a serious misconduct. 22 • Committing libel against an immediate superior constitutes serious misconduct. 18 • Simple or minor misconduct would not justify the termination of the services of an employee. SOME PRINCIPLES ON SERIOUS MISCONDUCT.26 • Sexual intercourse inside company premises constitutes serious misconduct. 48 • Act of falsification is a valid ground to terminate employment. 50 • Circulating fake meal tickets is a just cause for termination. The exception is when such immoral conduct is prejudicial or detrimental to the interest of the employer. 30 • Challenging superiors to a fight is a just cause for termination. 38 • Deceiving a customer for personal gain is a just cause for termination. 23 • Possession or use of shabu or other drugs is a valid ground to terminate employment. 40 • Employer need not suffer any damages resulting from a serious misconduct committed by an employee against a customer. may constitute serious misconduct. 17 2. 21 • Acts destructive of the morale of co-employees constitute serious misconduct. 29 • Filing of criminal case by an employee does not indicate his innocence. • Serious misconduct implies that it must be of such grave and aggravated character and not merely trivial or unimportant. 31 • Assaulting another employee is a just cause for termination.42 • The act of a teacher in pressuring a colleague to change the failing grade of a student is serious misconduct.25 • Immoral act committed beyond office hours is a valid ground to terminate employment. 35 • Rendering service to business rival is a just cause to terminate employment.33 • Disrespectful conduct is not serious misconduct if provoked by superior or employer.34 • Gambling within company premises is a serious misconduct.43 • Sexual harassment is a just ground to dismiss.28 • Fighting is a ground for termination but only the instigator or aggressor and not the victim who was constrained to defend himself should be dismissed. 49 • Punching-in of time cards of other employees is a just cause for termination.

70  Actual damage. to wit: 1. orders and instructions of the employer. the willfulness being characterized by a wrongful and perverse attitude. 71 . 60  Refusal to render overtime to meet production deadline constitutes insubordination. REQUISITES. 62 III. and (2) It must be work-related as would make him unfit to work for his employer. regulation or policy and made known to the employee and must pertain to the duties for which he has been engaged to discharge. the following requisites must be complied with. SOME PRINCIPLES ON GROSS AND HABITUAL NEGLECT OF DUTIES. 53 2. 58  Refusal to undergo random drug testing constitutes both serious misconduct and insubordination. In order to validly invoke this ground. The following are the requisites: (1) There must be negligence which is gross and/or habitual in character.66  Habituality may be disregarded if negligence is gross or the damage or loss is substantial.69  In the absence of any form of negligence. and 2.67 “Habitual negligence” implies repeated failure to perform one’s duties for a period of time. One of the fundamental duties of an employee is to obey all reasonable rules. The order violated must be based on a reasonable and lawful company rule. 68  Negligence is a question of fact. not an excuse for commission of wrongful acts. GROSS AND HABITUAL NEGLECT OF DUTIES 63 1. the dismissal is illegal. 65  As a general rule. INSUBORDINATION OR WILLFUL DISOBEDIENCE OF LAWFUL ORDERS 52 1. negligence must be both gross and habitual to be a valid ground to dismiss.57  Willfulness of conduct may be deduced from the manner the reply is written.  Filing of a case questioning the validity of rules and policies does not prevent employer from enforcing them. REQUISITES. 55  Failure to answer memo to explain constitutes willful disobedience. The employee’s assailed conduct must have been willful or intentional.II.54  Making false allegations in complaint does not constitute insubordination. loss or injury is not an essential requisite. SOME PRINCIPLES ON INSUBORDINATION.59  Prolonged practice. 2. 61  Refusal to comply with a lawful transfer constitutes insubordination.  Simple negligence is not sufficient to terminate employment. 64  The negligence must be gross in character which means absence of that diligence that an ordinarily prudent man would use in his own affairs. depending upon the circumstances. 56  Another notice is required in case of termination on the ground of failure to answer memo to explain.

The employee must have failed to report for work or must have been absent without valid or justifiable reason. ABANDONMENT OF WORK 84 1. 72  Gross negligence may result to loss of trust and confidence. To constitute abandonment. inefficiency and incompetence are considered just causes for dismissal only if they amount to gross and habitual neglect of duties.  Mere absence is not enough to constitute abandonment. and 2.77  Tardiness or absenteeism.78  Tardiness or absenteeism. cannot be cited as a ground to terminate employment. SOME PRINCIPLES ON ABANDONMENT. if not habitual.75  Absences. may be tantamount to serious misconduct.81  Unblemished record belies allegation of gross and habitual neglect.74  No negligence if the act is in accordance with management-sanctioned deviations from the company policy. CONCEPT. Abandonment is a form of neglect of duty. 82  Unsatisfactory or poor performance. may be cited as a ground to terminate employment. if authorized. if habitual. 91  There is no abandonment when it was the employer who prevented the workers from reporting for work. 87  Clear intention to sever employment relationship is necessary. 85 2. 79  Absences or tardiness due to emergency. Higher degree of diligence is required in the banking industry. 89  Abandonment is a factual issue.90  Employer has the burden of proof to prove abandonment. 73  No negligence if the act alleged to be so is in accordance with standing company practice. a just cause for termination of employment under Article 282 [b] of the Labor Code. if habitual. ailment or fortuitous event are justified and may not be cited as just cause to terminate employment. two (2) elements must concur. REQUISITES. 80  Mere allegation of absences or tardiness is not sufficient. 76  Tardiness or absenteeism. There must have been a clear intention on the part of the employee to sever the employer-employee relationship manifested by some overt act. 88  An employee who stopped working because of her mistaken belief that she has been dismissed is not guilty of abandonment.92 .86 3. 83 IV. hence. cannot be cited as a ground to terminate employment. the burden of proof is on the employer. namely: 1.

 An employee who failed to report for work after the expiration of the duly approved leave of absence is considered to have abandoned his job. 105  It is abandonment when what is prayed for in the complaint is separation pay and it was only in the position paper that reinstatement was prayed for. First notice directing the employee to explain why he should not be declared as having abandoned his job. viz: a. Second notice to inform him of the employer’s decision to dismiss him on the ground of abandonment. 112  An employee who failed to comply with the order for his reinstatement is deemed to have abandoned his work. 102  The fact that an employee filed a complaint for illegal dismissal is not by itself sufficient indicator that he had no intention of deserting his employment if the totality of his antecedent acts palpably display the contrary.107  There is no abandonment when it was the employer who prevented the workers from reporting for work.113 . 106  Employment in another firm coinciding with the filing of complaint does not indicate abandonment. and b. Due process in abandonment cases consists only of the service of 2 notices to the employee.109  Subcontracting for another company indicates abandonment. The employer need not look for the employee’s current whereabouts. Hence. 108  Offer of reinstatement by employer during proceedings before Labor Arbiter and refusal by employee does not indicate abandonment but more of a symptom of strained relations between the parties. the employee has a 4-year prescriptive period within which to institute his action for illegal dismissal. the filing of complaint does not negate abandonment. lapse of 2 years and 5 months 98 or 20 months99 or 9 months100 or 8 months101 before filing the complaint for illegal dismissal is not an indication of abandonment.95  Service of the notices of abandonment of work after the six-month period of “floating status” is not valid.93  No hearing is required to validly dismiss an employee for abandonment.111 These two grounds are separate and distinct from each other. 94  Notices in abandonment cases must be sent to employee’s last known address per record of the company. Under the law. 110  An employee may be absolved from the charge of abandonment of work but adjudged guilty of AWOL.104  When what is prayed for in the complaint is separation pay and not reinstatement. 103  Filing of a case to pre-empt investigation of the administrative case is tantamount to abandonment. 97  Lapse of time between dismissal and filing of a case is not a material indication of abandonment.96  Immediate filing of a complaint for illegal dismissal praying for reinstatement negates abandonment.

the commission of fraud by an employee against the employer will necessarily result in the latter’s loss of trust and confidence in the former. that is. 116  Absence to evade arrest is not a valid justification. On the other hand. Fraud is separate and distinct from the other ground provided in the same paragraph. The fact that the employer did not suffer losses from the dishonesty of the dismissed employee because of its timely discovery does not excuse the latter from any culpability. The fraud is work-related and rendered him unfit to work for his employer. 119 V. 118  Employer’s insistence on commission of wrongful acts like estafa and/or qualified theft by the employees negates the charge of abandonment.115  Imprisonment or detention by military does not constitute abandonment. 2. 124  Lack of misappropriation or shortage is immaterial in case of unauthorized encashment of personal checks by teller and cashier. The employee has committed an intentional deception and used dishonest methods for personal gain or to damage the employer. after being transferred to a new assignment. 125 . insensibility and antagonism towards the employees which gave no choice to the latter except to forego their employment. An employee who. the ground of willful breach by the employee of the trust and confidence reposed in him by the employer may not necessarily involve fraud but some other acts that would similarly result in the loss of such trust and confidence. loss of trust and confidence (willful breach by the employee of the trust reposed in him by his employer or duly authorized representative) .  Failure to deposit collection constitutes fraud. The following are the requisites of this ground: 1. CORRELATION OF FRAUD AND LOSS OF TRUST AND CONFIDENCE. 121 However.Rather. 114  An employee who deliberately absented from work without leave or permission from his employer for the purpose of looking for a job elsewhere is deemed to have abandoned his work.122 3. 123  Lack of damage or losses is not necessary in fraud cases. did not report for work anymore is deemed to have abandoned his job. To do so would be to place an imprimatur on the employee’s attempt to derail the normal course of the administration of justice. and 2. REQUISITES. SOME PRINCIPLES ON FRAUD.117  Requesting for a Certificate of Employment is not evidence of abandonment. FRAUD 120 1. it strengthens the finding of petitioner’s discrimination.

or those who. improper or unjustified. SOME PRINCIPLES ON THE DOCTRINE OF LOSS OF TRUST AND CONFIDENCE. 128 which means that the act that betrays the employer’s trust must be real. For the doctrine of loss of trust and confidence to apply. the following requisites must be satisfied: (1) The employee holds a position of trust and confidence. lay-off. knowingly and purposely. discharge. or with the custody. i. handling. it was done intentionally. They refer to those vested with the powers or prerogatives to lay down and execute management policies and/or to hire. i. . GUIDELINES. . (2) It should not be used as a subterfuge for causes which are illegal. without justifiable excuse. Restitution does not have absolutory effect. (3) It may not be arbitrarily asserted in the face of overwhelming evidence to the contrary. founded on clearly established facts.e. 134  “Position of trust and confidence” is one where a person is entrusted with confidence on delicate matters. property custodians.133 3.137 Their primary duty consists of the management of the establishment in which they are employed or of a department or a subdivision thereof. 130 and (4) The act must be in relation to his work which would render him unfit to perform it. (2) There exists an act justifying the loss of trust and confidence. assign or discipline employees or to effectively recommend such managerial actions. . 126 VI. 2.e. in the normal and routine exercise of their functions.129 (3) The employee’s breach of the trust must be willful. the Supreme Court. to justify earlier action taken in bad faith. 138 The second class includes “cashiers. and (4) It must be genuine. by the nature of their position.  Employee’s position must be reposed with trust and confidence. are entrusted with confidential and delicate matters and from whom greater fidelity to duty is correspondingly expected. or care and protection of the employer’s property. in addition to the above elements.135  Two (2) classes of positions of trust. regularly handle significant amounts of [the employer’s] money or property. REQUISITES.” 139 They are fiduciary rank-and-file employees who. 136 The first class consists of managerial employees or those who.132 The foregoing guidelines have been prescribed by the Supreme Court due to the subjective nature of this ground which makes termination based on loss of trust and confidence prone to abuse. came up with the following guidelines for the application of the doctrine:131 (1) The loss of confidence must not be simulated. not a mere afterthought. WILLFUL BREACH OF TRUST AND CONFIDENCE 127 1. auditors. transfer suspend. recall. As a safeguard against employers who indiscriminately use “loss of trust and confidence” to justify arbitrary dismissal of employees.

A crime or offense was committed by the employee. with respect to rank-and-file personnel. the fact that the employer did not suffer losses is of no moment. that the concerned employee is responsible for the misconduct and that the nature of his participation therein rendered him absolutely unworthy of trust and confidence demanded by his position. 143 This means that the rules on termination of employment applicable to managerial or fiduciary employees are different from those involving ordinary employees not holding positions of trust and confidence.though rank-and-file.145  There must be “some basis” for the loss of trust and confidence which means that there is reasonable ground to believe. if not to entertain the moral conviction. 154  Full restitution does not absolve employee of offense which resulted in the loss of trust and confidence. It was committed against any of the following persons: .148  Dismissal due to feng shui mismatch is not a valid ground to lose trust and confidence. handling or care and protection of the employer's money or property.146  In termination for loss of trust and confidence. loss of trust and confidence as a ground for valid dismissal requires proof of involvement in the alleged events in question and that mereuncorroborated assertions and accusations by the employer will not be sufficient. absence of derogatory record and small amount involved are deemed inconsequential insofar as loss of trust and confidence is concerned. 152  Long years of service. As a general rule. are routinely charged with the custody. the mere existence of a basis for believing that he has breached the trust of his employer would suffice for his dismissal. But as regards a managerial employee.141 and are thus classified as occupying positions of trust and confidence.144 Thus.147  Employer has burden of proof. the doctrine of “trust and confidence” is restricted to managerial employees. COMMISSION OF CRIME OR OFFENSE 156 1. REQUISITES. 2. 150  Confidential employee may be dismissed for loss of trust and confidence. The following are the requisites for the valid invocation of this ground: 1.155 VII. 151  Grant of promotions and bonuses negates loss of trust and confidence. 153  Dropping of criminal charges or acquittal in a criminal case arising from the same act does not affect the validity of dismissal based on loss of trust and confidence.149  Command responsibility of managerial employees is a ground to dismiss.142  Rules on termination of managerial and supervisory employees different from those applicable to rank-and-file employees. mere accusations by the employer will not be sufficient. In the latter case. 140 or entrusted with confidence on delicate matters.

164 IX.160 3) Incompetence.  The phrase “immediate members of the family” refers to those persons having family relations under Article 150 of the Family Code. On members of the bargaining union/agent. another just cause for termination is dismissal from employment due to the enforcement of the union security clause in the CBA. or (c) His employer’s duly authorized representative. 161 4) Failure to attain work quota. OTHER ANALOGOUS CAUSES 158 1. TERMINATION DUE TO ENFORCEMENT OF UNION SECURITY CLAUSE 165 1. The “union security clause” is a stipulation in a CBA166 which allows the parties thereto to enter into an agreement requiring membership in the exclusive collective bargaining agent which successfully negotiated said CBA as a condition for continued employment with the exception of employees who are already members of another union at the time of the signing of the CBA. and (4) Among brothers and sisters. work-relation is not necessary. whether of the full or half-blood. (b) Any immediate member of his employer’s family. NLRC. 157 VIII. as distinguished from theft of property owned by the employer. v. They are not allowed to resign or terminate their membership therefrom. The following may be cited as analogous causes: 1) Violation of company rules and regulations. Neither is it necessary to show that the commission of the criminal act would render the employee unfit to perform his work for the employer. to wit: (1) Between husband and wife. 283. 163 6) “Attitude problem” is analogous to loss of trust and confidence.(a) His employer. (2) Between parents and children. 2. Any member of the bargaining agent . inefficiency or ineptitude. 2.162 5) Failure to comply with weight standards of employer. 167 where the Supreme Court declared that in addition to the grounds mentioned in Articles 282. NATURE OF STIPULATION. EFFECTS OF THE APPLICATION OF THE UNION SECURITY CLAUSE.  Because of its gravity. (3) Among other ascendants and descendants. has lately been reiterated in the case ofAlabang Country Club. The validity of dismissal based on this ground which jurisprudentially is considered a just cause. Inc. ANALOGOUS CAUSES UNDER ESTABLISHED JURISPRUDENCE. SOME PRINCIPLES ON THE COMMISSION OF CRIME OR OFFENSE. 159 2) Theft of property owned by a co-employee. The following are the effects: a. 284 and 285 of the Labor Code.

On new employees hired after the signing of the CBA containing the union security clause. They are not bound by the union security clause if they are members of the minority or other unions at the time of the signing of the CBA. they are not bound by the union security doctrine. AUTHORIZED CAUSES 177 1. If not a member of the bargaining agent or any other unions in the bargaining unit at the time of the signing of the CBA by reason of the fact that he is excepted from the coverage of the bargaining unit. c. (1) The union security clause is applicable. (2) The bargaining union is requesting for the termination of employment due to enforcement of the union security provision in the CBA. If they refuse. they can be recommended for termination. damages and attorney’s fees in illegal dismissal cases based on the union security clause. 3. SOME RELEVANT PRINCIPLES.170 5. 173  The employee sought to be terminated should be afforded an “independent and separate hearing” which means that the employer is not duty-bound to immediately implement the recommendation to terminate made by the union. All the foregoing requisites should be complied with to justify the termination of employment. On non-members of the bargaining union/agent but members of the minority union/s. Hence. 171  Employer is obligated to act upon being demanded by the union to terminate the employment of its errant members. EXCEPTION TO APPLICATION OF THE UNION SECURITY CLAUSE. 174  Employer has the liability for reinstatement. 175  The employer has the right to be reimbursed for payment of any claims arising out of dismissals made upon demand of the union under the union security clause.who resigns or is expelled therefrom may be recommended to the employer by the bargaining agent for termination of his employment. the employee cannot be compelled to join the bargaining agent.  Dismissal effected by the employer pursuant to a labor union’s demand in accordance with a union security agreement does not constitute an unfair labor practice. b. full backwages. . On non-members of the bargaining union/agent or of any minority union/s. 176 2. and (3) There is sufficient evidence to support the union’s decision to expel the employee from the union. d. REQUISITES FOR THE VALID TERMINATION DUE TO ENFORCEMENT OF UNION SECURITY CLAUSE. hence. 168 For example: members of the Iglesia ni Kristo (INK) cannot be compelled to join a union. they cannot be compelled to resign from their union/s in order to join the bargaining agent.172  Employer should afford due process to the expelled unionist. Religious ground is the only exception that may effectively be invoked against the application of the union security clause. It has to conduct its own hearing independent and separate from any hearing conducted by the union.169 4. They can be compelled to join the bargaining agent. TWO (2) CLASSES.

discipline. Retrenchment.Under the Labor Code. 2. . (b) If based on (1) retrenchment. enhance efficiency and other justifiable economic reasons. . 2. INSTALLATION OF LABOR-SAVING DEVICE 1. There is good faith in effecting the termination. a fraction of at least six (6) months shall be considered as one (1) whole year. there being no other option available to the employer after resorting to cost-cutting measures. such as to save on cost. adaptability. c. Fair and reasonable criteria in ascertaining what positions are to be affected by the termination. the same must be followed instead of the one provided in Article 283. whichever is higher. the following five (5) common requisites are applicable to the said grounds: 1. and e. .One (1) month pay or at least one-half (½) month pay for every year of service. (2) Health-related causes. or (2) closure NOT due serious business losses or financial reverses. – Referring to disease covered by Article 284 of the Labor Code.178 Failure to follow fair and reasonable criteria in selecting who to terminate would render the termination invalid. trainability. such as. and attitude towards work. 179 I. In addition to the five (5) common requisites above. whichever is higher. temporary or regular) . Two (2) separate written notices are served on both the affected employees and the DOLE at least one (1) month prior to the intended date of termination. Separation pay is paid to the affected employees. experience. d. Redundancy. b. The termination is a matter of last resort. to wit: (a) If based on (1) installation of labor-saving device. job performance. status of employment (whether casual. 3.One (1) month pay or at least one (1) month pay for every year of service. authorized causes are classified into two (2) classes. NO separation pay is required to be paid. flexibility. but not limited to: nature of work. namely: (1) Business-related causes. Closure or cessation of business operations due to serious business losses and financial reverses. – Referring to the grounds specifically mentioned in Article 283. ADDITIONAL REQUISITE UNIQUE TO THIS GROUND. there are certain requisites that are common to the five (5) grounds in Article 283. Installation of labor-saving device. or (2) redundancy. efficiency. Notably. SOME RELEVANT PRINCIPLES. To simplify the discussion. the unique requisite for this ground is that the purpose for such installation must be valid. 4. (d) In case the CBA or company policy provides for a higher separation pay. COMMONALITY OF REQUISITES OF THE AUTHORIZED CAUSES UNDER ARTICLE 283. a fraction of at least six (6) months shall be considered as one (1) whole year. dependability. 180 2. 5. (c) If closure is due to serious business losses or financial reverses. Closure or cessation of business operations NOT due to serious business losses or financial reverses. to wit: a. seniority.

 The wisdom. 192  Redundancy to save on labor costs is valid. it would be surprising to find duplication of work and two (2) or more people doing the work of one person. decreased volume of business. 189  Evidence of losses is not required. 194  Abolition of positions or departments is valid.188  Burden of proof in redundancy rests on the employer. soundness or characterization of service as redundant by the employer is not subject to review. 196 . 183  Proof of losses is not required. or which are in excess of the requirements of the service. The installation of labor-saving device will result in making the positions being held by employees who will be adversely affected thereby redundant and unnecessary.187 2. 184 (2) Where the position is superfluous because of a number of factors. The fact of redundancy must be proved.191  The act of the employer in hiring replacements is not an indication of bad faith if the positions have no similar job descriptions. Redundancy exists under any of the following circumstances: (1) Where the services of employees are in excess of what is reasonably demanded by the actual requirements of the enterprise. 195  Reorganization through redundancy is valid. arbitrariness. 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. such as over-hiring of workers.181  Redundancy results from installation of labor-saving device. 182  Modernization program through introduction of high-speed machines is valid. or malice on the part of management. Indeed. abusers and worst performers through redundancy is not an indication of bad faith. The only exception is when there is a showing that the same was done in violation of law or attended with arbitrary and malicious action. 193  Redundancy resulting from use of high technology equipment is valid. may be declared redundant. II. Positions which overlapped each other.186 (4) Where it is validly resorted to as a cost-cutting measure and to streamline operations so as to make them more viable.185 (3) Where there is duplication of work. ADDITIONAL REQUISITE UNIQUE TO THIS GROUND.190  Elimination of undesirables. in any well-organized business enterprise. SOME PRINCIPLES ON REDUNDANCY. REDUNDANCY 1. dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise or phasing out of service activity priorly undertaken by the business.

wisdom to retrench cannot be questioned. 205 4. 198  Where two or more persons are performing the same work which may be effectively accomplished by only one. Contracting out of abolished positions to independent contractors is valid. conversion of the plant for a new production program or the introduction of new methods or more efficient machinery.204 3.200  The LIFO or FILO (First In. Retrenchment has been defined as “the termination of employment initiated by the employer through no fault of the employees and without prejudice to the latter. or considerable reduction in the volume of the employer’s business. 197  Hiring of casuals or contractual employees after redundancy is valid. resorted by management during periods of business recession. and the expected imminent losses sought to be forestalled. shortage of materials. Proof of losses or possible imminent losses is the distinctive requisite of retrenchment. Retrenchment must be reasonably necessary and likely to effectively prevent the expected losses. 2. DEFINED. RETRENCHMENT. the nature of work and experience of the employees should still be taken into account by the employer.202 III. The substantial loss apprehended must be reasonably imminent. or during lulls occasioned by lack of work or orders. 201  LIFO rule is not controlling as employer has the prerogative to choose who to terminate. the employer may terminate the excess personnel and retain only one. such as the LIFO (Last In. STANDARDS TO DETERMINE VALIDITY OF LOSSES AS JUSTIFICATION FOR RETRENCHMENT. cut other costs than labor costs. Last Out) rule has no basis in law. 206 . or of automation. 4.” 203 2. ADDITIONAL REQUISITE UNIQUE TO THIS GROUND. 3. industrial depression. The employer should have taken other measures prior or parallel to retrenchment to forestall losses. SOME PRINCIPLES ON RETRENCHMENT.e. or seasonal fluctuations. if already realized. i. . The losses expected should be substantial and not merely de minimis or insubstantial and inconsequential in extent. as such imminence can be perceived objectively and in good faith by the employer. This is the only statutory ground in Article 283 which requires this kind of proof. First Out) rule.199  Even if there is a seniority rule. must be proved by sufficient and convincing evidence through presentation of externally audited financial statements.  If said standards are present. The alleged losses. The other grounds of closure or cessation of business operations may be resorted to with or without losses. RETRENCHMENT 1. The general standards in terms of which the act of an employer in retrenching or reducing the number of its employees must be appraised are as follows: 1.

209  The fact that there has been economic or other crisis besetting a particular sector or the country as a whole is not sufficient justification for retrenchment. not valid since they are self-serving documents. 221 However. 224  Profitable operations in the past do not affect the validity of retrenchment. material. 225  Compulsory retirement to prevent further losses is valid. 216  Period covered by financial statements. 211  Cost-reduction or cost-saving measures prior to retrenchment are required. several departments like the Civil Works Division. 228  Retrenchment due to liquidity problem is not valid. 212  The phrase “retrenchment to prevent losses” means that retrenchment must be undertaken by the employer before the losses anticipated are actually sustained or statements audited by COA. 222  Audited financial statements should be presented before the Labor Arbiter or the NLRC but not belatedly before the Court of Appeals or Supreme Court. 207  Notoriety of the employee is a valid criterion. 219  Mere notice of intention to implement a retrenchment program is not sufficient. Electromechanical Works Division and the Territorial Project Management Offices. 210  Article 283 applies only to permanent retrenchment or lay-off. the Structural Steel Division by the end of year 1997. The employer need not keep all his employees until after his losses shall have materialized. 215  Best evidence of losses in a government-controlled corporation . 213  Employer bears the burden of proof to show business losses or financial reverses. The retrenchment must be done in good faith. 218  Mere affidavit on alleged losses is not sufficient. were abolished in the early part of 1996 and statements audited by independent auditors (not by internal auditors) . 220  Rehabilitation receivership presupposes existence of losses.226  Early Retirement Program (ERP) to prevent further losses and implemented prior to retrenchment is valid. among others. the fact that the employer is undergoing rehabilitation receivership does not by itself excuse it from submitting to the labor authorities copies of its audited financial statements to prove the urgency. 214  Best evidence of losses . 229 . Otherwise.227  Rotation of work may be tantamount to constructive dismissal or retrenchment. the law could be vulnerable to attack as undue taking of property for the benefit of another. necessity and extent of its retrenchment program. 223  Retrenchment effected long after the business losses is not valid. 217  Income tax returns. 208  The progressive manner of implementing the streamlining and downsizing of operations resorted to by a construction company in order not to jeopardize the completion of its projects is valid. Thus.

or (b) When due to serious business losses or financial reverses It is only in the first that payment of separation pay is required.230  Litany of woes. court cannot order employer to continue its business.231  Rehiring of retrenched employees does not necessarily indicate illegality of retrenchment. No.A. Management may choose to close only a branch. 239  The burden of proving that the closure or cessation of business operations is bonafide falls upon the employer. in the absence of any solid evidence that they translated into specific and substantial losses that would necessitate retrenchment. CLOSURE OR CESSATION OF BUSINESS OPERATIONS 1. Providing the Mechanisms Therefor and for other Purposes] 242 or closure of the employer’s business because a large portion of its estate was acquired by the Department of Agrarian Reform pursuant to the Comprehensive Agrarian Reform Program (CARP) under R. A mere decline in gross income cannot in any manner be considered as serious business losses.237  Closure of department or section and hiring of workers supplied by independent contractor as replacements is valid. CONCEPT. Example: The closure of the Philippine Veterans Bank by operation of law (R. No. No such requirement is imposed in the second.A. Closure or cessation of business is the complete or partial cessation of the operations and/or shutdown of the establishment of the employer. Sharp drop in income is not a ground to justify retrenchment. or a shop.  Employer may close its business whether it is suffering from business losses or not. SOME PRINCIPLES ON CLOSURE. 7169 [An Act to Rehabilitate the Philippine Veterans Bank Created Under Republic Act 3518. 236  Principle of closure under Article 283 applies in cases of both total and partial closure or cessation of business operations. sustained and real. a department.232  In an enterprise which has several branches nationwide. 234 Closure involves two (2) situations: (a) When NOT due to serious business losses or financial reverses. the financial condition thereof reflects losses.235 2.243 .233 IV. 241  Closure by reason of enactment of a law is valid. will not suffice to justify retrenchment. profitable operations in some of them will not affect the validity of the retrenchment if overall.238  Relocation of business may amount to cessation of operations. It is carried out to either stave off the financial ruin or promote the business interest of the employer. It should be substantial. a plant.240  Closure may constitute an unfair labor practice if it is resorted to as a ruse or scheme to get rid of employees on account of their union activities. 6657.

” the person referred to in the law. 250 and 5. Separation pay should be paid to the employee in an amount equivalent to at least one (1) month salary or to one-half (½) month salary for every year of service. or c) prejudicial to the health of his co-employees. SOME PRINCIPLES ON DISEASE. Article 284 does not apply. Notice of termination based on this ground should be separately served both to the employee and the Department of Labor and Employment at least one (1) month prior to the effectivity of the termination. The following requisites must be complied with before termination of employment due to disease may be justified: 1. 248 V.251 2. Disease is one of the authorized causes to terminate employment. 252  If the disease or ailment can be cured within the period of six (6) months with proper medical treatment. 253  In case of death. 246  For closure to be a valid basis. it having been issued not by a “competent public health authority. There is 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 (6) months even with proper medical treatment. DISEASE 249 1. 255  A medical certificate issued by a company’s own physician is not an acceptable certificate for purposes of terminating an employment based on Article 284.  Burden of proof rests on the employer. 4. held valid. Closure of business to merge or consolidate with another or to sell or dispose all of its assets. The employer should reinstate him to his former position immediately upon the restoration of his normal health.244  Audited financial statements necessary only in closure due to losses. it must be invoked at the time of termination and not after. the employer should not terminate the employee but merely ask him to take a leave of absence. a fraction of at least six (6) months being considered as one (1) whole year. REQUISITES. or b) prejudicial to his health. 245  Evidence of losses in a closure case should not be presented for the first time on appeal with the Court of Appeals or Supreme Court. His continued employment is either: a) prohibited by law. whichever is greater. 254  In case the employee unreasonably refuses to submit to medical examination or treatment upon being requested to do so.247  Closure of a department or section due to losses amounts to retrenchment. 2. The employee is suffering from a disease. the employer may terminate his services on the ground of insubordination or willful disobedience of lawful order. 3.256 .

Private actions. if the employee suffers from tuberculosis.262  Hearing is not required. the medical certificate should be issued by a government-employed pulmonologist who is competent to make an opinion thereon. Meaning of Opportunity to be Heard 1. For instance. THE AGABON DOCTRINE: DUE PROCESS IN TERMINATION OF EMPLOYMENT REFERS TO STATUTORY. Pearlie Ann F. 259  The employer has the burdent to prove existence of the medical certificate. the Bill of Rights is not meant to be invoked against acts of private individuals like employers. THE ABBOTT LABORATORIES DOCTRINE: CONTRACTUAL DUE PROCESS. 267 it is now required that . The norm since Agabon is that compliance with the statutorily-prescribed procedural due process under Article 277(b) 266 would suffice. a. 260  Employee dismissed without the medical certificate is entitled to moral and exemplary damages. no matter how egregious. The foregoing topics will be discussed herein jointly in the light of their close interrelation. 3. disease being an authorized cause.261  Separate notices of the termination to the affected employee and to the DOLE is necessary. JOINT DISCUSSION. If the employee has cardiac symptoms.264 it is now the prevailing rule that it is not the due process provided in the Constitution265 that is required in termination of employment but the statutory due process provided under Article 277[b] of the Labor Code. AND NOT CONSTITUTIONAL. DUE PROCESS263 (a) Twin-Notice Requirement (b) Hearing. Per Agabon doctrine. 3. 2. under the latest doctrinal en banc ruling in the 2013 case of Abbott Laboratories. 257 It is the best evidence of illness. while “statutory due process” protects employees from being unjustly terminated without just cause after notice and hearing. Philippines v. Alcaraz. However. Put differently. the competent physician in this case would be a cardiologist.  Medical certificate is an indispensable requisite. “Constitutional due process” protects the individual from the government and assures him of his rights in criminal. Whether there is an existing company policy which also enunciates the procedural due process in termination cases need not be considered nor given any weight in determining the validity of the termination. DUE PROCESS. A “competent public health authority” refers to a government doctor whose medical specialization pertains to the disease being suffered by the employee.258  The medical certificate should be procured by the employer and not by the employee. New doctrine. civil or administrative proceedings. cannot violate the constitutional guarantees.

the employer should still comply with the due process procedure prescribed in its own company rules. there lies a hiatus of evidence that a signed copy of Alcaraz’s PPSE form was submitted to the HRD. despite the existence of a sufficient ground to terminate Alcaraz’s employment and Abbott’s compliance with the Labor Code termination procedure. The employer’s failure to observe its own company-prescribed due process will make it liable to pay an indemnity in the form of nominal damages. this right equallydemands that when it does create its own policies and thereafter notify its employee of the same. on the fifth month from the date of employment. Neither was the performance evaluation discussed with her during the third and fifth months of her employment. In similar regard. Company personnel policies create an obligation on the part of both the employee and the employer to abide by the same. It was found in this case of Abbott Laboratories that respondent Alcaraz. Proper sanction for lack of contractual due process.00 awarded under the Agabon doctrine. Evidently. and while it must be further pointed out that Abbott had satisfied its statutory duty to serve a written notice of termination. In addition. Abbottis also required to come up with a Performance Improvement Plan during the third month review to bridge the gap between the employee’sperformance and the standards set. was afforded both the statutorily-mandated substantive and procedural due process. the fact that it violated its own company procedure renders the termination of Alcaraz’s employment procedurally infirm. the amount of which is equivalent to the P30. it was found that petitioner Abbott breached its contractual obligation to Alcaraz when it failed to abide by its own procedure in evaluating the performance of a probationary employee. to some extent. For one. warranting the payment of nominal damages. inter addition to compliance with the statutory due process. In imposing the penalty of indemnity in the form of nominal damages upon petitioner Abbott. that the job performance of a probationary employee should be formallyreviewed and discussed with the employee at least twice: first. b. it is apparent that Abbott failed to follow the above-stated procedure in evaluating Alcaraz. a contrary interpretation would entail a disharmonious relationship in the work place for the laborer should never be mired by the uncertainty of flimsy rules in which the latter’s labor rights and duties would. when she was terminated 269 for failure to qualify as a regular employee. it accords upon itself the obligation to faithfullyimplement them. It was not even shown that a PPSE form was completed to formally assess herperformance.268 who was hired as a probationary managerial employee. While it is Abbott’s management prerogative to promulgate its own company rules and even subsequently amend them. the Court deems it proper to apply the same principle to the case at bar for the reason that an employer’s contractual breach of its own company procedure – albeit not statutory in source – has the parallel effect of violating the laborer’s . depend. Nor did Abbott comeup with the necessary Performance Improvement Plan to properly gauge Alcaraz’s performance with the set company standards.000. the sanctions imposed in both Agabon271 and Jaka272 proceed from the necessity to deter employers from future violations of the statutory due process rights of employees. if any. it was held that while there lies due cause to terminate Alcaraz’s probationary employment for her failure to meet the standards required for her regularization. Records show that Abbott’s PPSE270 procedure mandates. a signed copy of the PPSE form should be submitted to Abbott’s HRD as the same would serveas basis for recommending the confirmation or termination of the probationary employment. on the third month and second. Indeed. In this case. Nonetheless.

5.00. the contract is the law between the parties and thus.000. There is no uniform procedural due process that should be applied in all cases. More particularly. 276 4. Consequently. Procedural steps. it is undeniable that the dismissal process was. Service of second written notice. A general description of the charge will not suffice. 277 the following requirements should be complied with: (1) First written notice. 3) to consult a union official or lawyer. initiated by an act imputable to theemployee. b. akin to dismissals due to just causes under Article 297274 [282] of the Labor Code. 2) to study the accusation against him.rights. it is clear that the procedural due process required to validly terminate an employee depends on the ground invoked. Based on this doctrine which was enunciated inKing of Kings Transport. the payment of nominal damages onaccount of Abbott’s contractual breach is warranted in accordance with Article 2221273 of the Civil Code. Service of first written notice. and 5) to decide on the defenses he will raise against the complaint. breaches of the same impel recompense to vindicate a right that has beenviolated. As such. Conduct of hearing. c) Contain a detailed narration of the facts and circumstances that will serve as basis for the charge against the employee. and 3. b) Contain a directive that the employee is given the opportunity to submit his written explanation within the reasonable period of FIVE (5) CALENDAR DAYS from receipt of the notice: 1) to enable him to prepare adequately for his defense. The first written notice to be served on the employee should: a) Contain the specific causes or grounds for termination against him. Therefore. This is required in order to enable him to intelligently prepare his explanation and defenses. the following procedure in the order presented below should be followed: 1. Anent the proper amount of damages to be awarded. c. Inc. Mamac. in effect. Based on law and jurisprudence. . the twin-notice requirement applies. a. In just cause termination. the Court observes that Alcaraz’s dismissal proceeded from her failure to comply withthe standards required for her regularization. Proper amount of nominal damages. PROCEDURAL DUE PROCESS VARIES DEPENDING ON THE GROUND/S INVOKED. v. 2. while the Court is wont to uphold the dismissal of Alcaraz because a valid cause exists. THE KING OF KINGS TRANSPORT DOCTRINE: PROCEDURAL DUE PROCESS IN JUST CAUSE TERMINATION. the Court deems it appropriate to fix the amount of nominal damages at the amount of P30. The King of Kings Transport doctrine. 4) to gather data and evidence. Suffice it to state. consistent with its rulings in both Agabon275 and Jaka.

due process in abandonment cases does not involve the conduct of hearing. PROCEDURAL DUE PROCESS IN DEFINITE-PERIOD EMPLOYMENT. and 2) Secondnotice informing him of the employer’s decision to dismiss him on the ground of abandonment. with the assistance of a representative or counsel of his choice. Moreover. Seasonal employment which automatically terminates upon the end of the season. d. and (2) the appropriate DOLE Regional Office. the procedural due process is different from the process described above. 2) present evidence in support of his defenses. After determining that termination of employment is justified. 278 c. Project employment which automatically terminates upon completion of the project. viz: 1) First notice asking the employee to explain why he should not be declared as having abandoned his job. the employer should schedule and conduct a hearing or conference wherein the employee will be given the opportunity to: 1) explain and clarify his defenses to the charge/s against him. 9 below) . The Perez doctrine. Abandonment is a just cause to terminate employment. PROCEDURAL DUE PROCESS IN AUTHORIZED CAUSE TERMINATION. (2) Hearing required. (3) Second written notice. It is considered a form of gross neglect of duties under Article 282[b] of the Labor Code. This dramatically modified the concept of hearing in just cause termination. this conference or hearing could be used by the parties as an opportunity to come to an amicable settlement. at least one (1) month before the intended date of the termination specifying the ground/s therefor and the undertaking to pay the separation pay required under Article 283 of the Labor Code. the employer shall serve the employees a written notice of terminationindicating that: 1) all circumstances involving the charge/s against the employee have been considered. the employee is given the chance to defend himself personally. Compliance with the following two (2) notices suffices. The foregoing rule does not apply in case of abandonment. 7. Due process in authorized cause termination is deemed complied with upon the separate and simultaneous service of a written notice of the intended termination to both: (1) the employee to be terminated. After serving the first notice. (See separate discussion in No. 2. if any. 6. are violated and/or which among the grounds under Article 282 is being charged against the employee. . The 2009 Perez doctrine279 enunciates the newguiding principles on the hearing aspect of procedural due process. and 3) rebut the evidence presented against him by the management. During the hearing or conference. However.d) Specifically mention which company rules. and 2) grounds have been established to justify the severance of his employment. Procedural due process is not required in termination of the following: 1. For obvious reason.

otherwise. Book VI of the Implementing Rules of the Labor Code. This is how the Supreme Court resolved the conflict in the following provisions of the Labor Code and its implementing rules: 1) Under Article 277(b) of the Labor Code.” . (c) the “ample opportunity to be heard” standard in the Labor Code prevails over the “hearing or conference” requirement in itsImplementing Rules and Regulations.282 It enunciates the newguiding principleson the hearing aspect of procedural due process. However. conference or some other fair. or (2) When substantial evidentiary disputes exist. the employer is required to afford to the employee a“hearing or conference during which the employee concerned. if he so desires. The concept of hearing as part of due process has been significantly changed by the Perez doctrine.000. (b) A formal hearing or conference is no longer mandatory. whether in a hearing. the employer will be penalized with an indemnity in the form of nominal damages in the amount of P30. the appropriate. or (4) When similar circumstances justify it. is given opportunity to respond to the charge. THE PEREZ DOCTRINE: NEW GUIDING PRINCIPLE ON THE HEARING REQUIREMENT. if the ground invoked is the failure of the probationary employee to qualify as a regular employee based on the reasonable standards made known to him at the time of his engagement. becomes mandatoryonly under any of the following circumstances: It (1) When requested by the employee in writing. the same should be complied with.3. Probationary employment may be terminated prior to the lapse of the probationary period fur just or authorized cause. 280 Per Abbott Laboratories doctrine. no due process is required. if the employer has prescribed in its company rules a certain procedure for the termination of probationary employment. while 2) Under Section 2(d) . 8. 281 however. Fixed-term employment which automatically terminates upon the expiration of the fixed period. 4. in which case. with the assistance of counsel. the employer is required to afford the employee “ample opportunity to be heard and to defend himself with the assistance of his representative if he so desires”. present his evidence or rebut the evidence presented against him. it is sufficient that a written notice of termination is served to the probationary employee within a reasonable time from the effective date thereof setting forth the justification of such termination. just and reasonable way. or (3) When a company rule or practice requires it.00. PROCEDURAL DUE PROCESS IN TERMINATION OF PROBATIONARY EMPLOYMENT. Rule I. thus: (a) “Ample opportunity to be heard” means any meaningful opportunity (verbal or written) given to the employee to answer the chargesagainst him and submit evidence in support of his defense. applicable procedural due process should apply. Casual employment which automatically terminates upon the lapse of the agreed period. 9. It has interpreted the term “ample opportunity to be heard” in a new light.

289  Co-conspirator’s confession is not sufficient to merit dismissal. 295 6. Termination due to disease under Article 284. 10. 7. It may not be a substitute for the actual holding of a hearing. 290  If a party was not initially given a chance to be heard at the company level. Termination due to expiration of tenure made coterminous with lease. Termination due to authorized causes under Article 283 (installation of laborsaving device. this principle does not apply. 286  Meeting. SOME PRINCIPLES ON HEARING REQUIREMENT. SEVEN (7) STANDARD SITUATIONS IN TERMINATION CASES. 294 5. 300 12. redundancy. retrenchment or closure of business or cessation of operations) . . Termination by the employee (resignation) under Article 285. 285  Investigation still required even if incident was witnessed by many. INSTANCES WHERE HEARING IS NOT REQUIRED. 284  Outright termination violates due process. hearing should still proceed. 298 11. Termination due to closure or stoppage of work by government authorities when non-compliance with the law or implementing rules and regulations poses grave and imminent danger to the health and safety of workers in the workplace. Termination due to abandonment of work. Termination after 6 months of bona-fide suspension of operation under Article 286. 293 3. Termination of project. but later was given full opportunity to submit position papers or present his case and arguments before the Labor Arbiter. consultation or interview is not the hearing required by law. there are no allegations which the employees should refute and defend themselves from. 297 10.The Perez doctrine is now the prevailing rule as shown by a catena of cases 283 which cited it after its promulgation. 291 But if the dismissal is not justified. For purposes of satisfying due process. what is required is simply that the notices provided under Article 283 be served to both the affected employees and the Department of Labor and Employment at least one (1) month before the termination becomes effective. seasonal. Termination due to retirement under Article 287.296 8. 2.292 11. In such cases. 287  Prior consultation with union is not part of the due process requirement. 9. casual or fixed-term employment. this defect is cured. 288  Cross-examination or confrontation of witnesses is not necessary in company investigations. dialogue. Termination of employee who has admitted his guilt for the offense charged. Hearing is not required in the following cases: 1. Termination of probationary employment on the ground of failure of the probationary employee to qualify as a regular employee in accordance with reasonable standards made known to him at the start of the employment.  If employee does not answer. Termination due to expiration of contractual employment in a legitimate contracting or subcontracting arrangement. 4. 299 12.

305 6. 1. a. namely: 1. unlike in the case of just cause termination where the employee has committed a wrongful act. Measure of penalty or indemnity . as in this case.00 per Agabon doctrine. the dismissal process is initiated by the employer’s exercise of his management prerogative. Application of the Agabon and Jaka doctrines. Some principles under the Agabon doctrine. any award of backwages must be deleted and replaced by award of indemnity. The dismissal was not supported by any evidence of termination – This termination is NEITHER LEGAL NOR ILLEGAL as there is no dismissal to speak of.311 3. 303 4. The dismissal was for a just or authorized cause but due process was not observed – This termination is LEGAL. i. 304 5. when the employer opts to install labor saving devices. The dismissal was without a just or authorized cause and due process was not observed – This termination is ILLEGAL. Since the dismissal is considered legal. .000. a survey of Supreme Court decisions indicates that there has yet been no decision increasing the indemnity beyond what has been prescribed in Agabon and Jaka.The rules on termination of employment in the Labor Code and pertinent jurisprudence are applicable to seven (7) different situations. 301 2. If based on authorized cause – P50. 302 3. The dismissal was without a just or authorized cause but due process was observed – This termination is ILLEGAL. and due process was observed – This termination is LEGAL. 306 Reinstatement is ordered not as a relief for illegal dismissal but on equitable ground. . INDEMNITY IN THE FORM OF NOMINAL DAMAGES. The dismissal was for a just cause under Article 282. he undertakes to implement a retrenchment program b. 312 But as far as the upping of the amount is longer full backwages but nominal damages.e. 307 13. or for health reasons under Article 284.309 2.310 According to Jaka. Instead. the employee will not be ordered reinstated but will be awarded an indemnity in the form of nominal damages the amount of which will depend on whether the termination is grounded on just cause or authorized cause. when he decides to cease business operations or when.00 per Jaka doctrine. The dismissal was brought about by the implementation of a law – This termination is LEGAL. the indemnity is “stiffer” in case of authorized cause termination because. 2.000. 7. Termination for a just cause or authorized cause but without affording the employee procedural due process should no longer be considered illegal or ineffectual 308 but legal. an employee dismissed based on authorized cause has not committed any blameworthy act nor any delinquency or culpability on his part. for an authorized cause under Article 283. thus: 1. If based on just cause – P30. The dismissal was for a non-existent cause – This termination is ILLEGAL. Consequently. Amount of nominal damages may be reduced.

Reliefs for Illegal Dismissal 1. Under this article. PENDING APPEAL (ArtIcle 223. (6) Imposition of legal interest on separation pay. inclusive of allowances. Backwages a. (4) Award of damages and attorney’s fees. Labor Code) . Limited backwages C.1 an illegally dismissed employee is entitled to the following reliefs: (1) Reinstatement without loss of seniority rights and other privileges. OTHER RELIEFS NOT FOUND IN ARTICLE 279 BUT AWARDED IN ILLEGAL DISMISSAL CASES. (5) Award of financial assistance in cases where the employee’s dismissal is declared legal but because of long years of service. 223. (2) Full backwages. Reinstatement a. RELIEFS UNDER ARTICLE 279 OF THE LABOR CODE. Labor Code) b. (3) Reliefs to illegally dismissed employee whose employment is for a fixed period. RELIEFS FOR ILLEGAL DISMISSAL 1. REINSTATEMENT a. Separation pay in lieu of reinstatement 2. financial assistance is awarded. Pending appeal (Art. and (3) Other benefits or their monetary equivalent. 1. backwages and other monetary awards. Computation b. (2) Award of penalty in the form of nominal damages in case of termination due to just or authorized cause but without observance of procedural due process. 279: The following reliefs that are awarded in illegal dismissal cases are missing in Article (1) Award of separation pay in lieu of reinstatement. The proper relief is only the payment of the employee’s salaries corresponding to the unexpired portion of the employment contract.------------oOo------------ Chapter Four TERMINATION OF EMPLOYMENT TOPICS PER SYLLABUS C. 2. and other considerations.

Article 263 [g] which provides for automatic return to work of all striking or locked-out employees. REINSTATEMENT PENDING APPEAL (Article 223. 6 Once an appeal is filed. as amended. Consequently. Discussion. Article 2232 of the Labor Code. It is required under this provision that the employer should reinstate its employees upon resumption of its operation which should be done before the lapse of said six-month period of bona-fide suspension of operation or after the rendition by the employees of military or civic duty.b. IMMEDIATELY EXECUTORY EVEN PENDING APPEAL.4 The concept of reinstatement under Article 223 is to restore the illegally dismissed employee to a state or condition from which he has been removed or separated. The employer is required to immediately resume operation and readmit all workers under the same terms and conditions prevailing before the strike or lockout. Article 277 [b] which empowers the DOLE Secretary to suspend the effects of termination pending the resolution of the termination dispute in the event of a prima facie finding by the appropriate official of the DOLE before whom such dispute is pending that the termination may cause a serious labor dispute or is in implementation of a mass layoff. 5. Its provisions recognizing reinstatement as a remedy are as follows: 1. the Labor Arbiter loses jurisdiction over the case. Article 286 which involves bona-fide suspension of operation for a period not exceeding six (6) months or the rendition by an employee of military or civic duty. 3. upon the issuance by the DOLE Secretary of an assumption or certification order. no writ of execution is required to be issued to implement it.5 To underscore its immediate executory nature. SEPARATION PAY IN LIEU OF REINSTATEMENT 1. if a strike or lockout has already taken place. ORDER OF REINSTATEMENT ISSUED BY LABOR ARBITER. 2. Being self-executory. 4. The Labor Code grants the remedy of reinstatement in various forms and situations. This form of reinstatement is self-executory and must be implemented even during the pendency of the appeal that may be instituted by the employer. Article 223 which provides for reinstatement of an employee whose dismissal is declared illegal by the Labor Arbiter. Article 279 which grants reinstatement as a relief to an employee whose dismissal is declared illegal in a final and executory judgment. (NOTE: The reinstatement referred to in the Syllabus pertains only to the reinstatement under Article 223.3 provides that an order of reinstatement by the Labor Arbiter is self-executory and thereforeimmediately executory even pending appeal. therefore. Labor Code) 1. VARIOUS PROVISIONS OF THE LABOR CODE ENUNCIATING THE REMEDY OF REINSTATEMENT. will focus on this relief) a. all pleadings and motions pertaining to the appealed case are required to be . the 2011 NLRC Rules of Procedure provide that the perfection of an appeal shall stay the execution of the decision of the Labor Arbiter except execution for reinstatement pending appeal.

the grounds for termination under Articles 282. On the other hand. while that in the latter. 11 The Supreme Court.In the former.15 which defines the powers of Labor . – In the former. The grounds for termination under Article 264 are based on prohibited acts that employees could commit during a strike. it is not ministerial as it requires the filing of a motion for the issuance of writ of execution before the Labor Arbiter can implement the order of reinstatement. – The reinstatement in the former is subject to the exercise of option by the employer. while in the latter. 8 3. while writ of execution is not required in case reinstatement is ordered by the Labor Arbiter. 7 2. Alcantara & Sons. in the 2010 case of C. it is ministerial upon the Labor Arbiter to implement his order of reinstatement which is self-executory in character. v. By way of distinction. REINSTATEMENT PENDING APPEAL APPLIES TO ALL KINDS OF ILLEGAL DISMISSAL CASES. 9 while in the latter. DISTINGUISHED FROM REINSTATEMENT UNDER ARTICLE 279 . 10 denied the reinstatement of the ordinary union members who participated in the illegal strike but whose dismissal was found to have been illegally effected since they did not commit any illegal acts in the course of the strike. – The reinstatement under Article 223 has not attained finality as in fact it is the subject of an appeal. no such option is available to the employer except to reinstate the employee to his former position or to a substantially equivalent position. Still. cannot be invoked to prejudice the immediate reinstatement of an employee pending appeal. CA. (3) On nature of duty of Labor Arbiter to implement order. a writ of execution is not necessary to enforce the reinstatement order. CA AND SC.addressed to and filed with the Commission (NLRC) . This rule. however. Article 217. The concept of reinstatement pending appeal under Article 223 contemplates all kinds of illegal dismissal cases. The following distinctions may be cited between reinstatement under Article 223 and Article 279 of the Labor Code: (1) Finality. (4) On necessity for issuance of writ of execution. 4. Inc. The nature of the ground invoked to justify the dismissal which subsequently is declared illegal is inconsequential in determining the validity of this remedy. . (2) Employer’s option to reinstate. while that contemplated under Article 279 has already become final and executory. DISTINGUISHED FROM REINSTATEMENT ISSUED BY NLRC. The CA justified its denial by ruling that the reinstatement pending appeal provided under Article 223 contemplates illegal dismissal or termination cases and not cases under Article 264. Only the Labor Arbiter’s reinstatement order is self-executory or immediately executory. a writ of execution is indispensable to effect reinstatement. as the case may be. it is necessary in case reinstatement is ordered by the NLRC on appeal or by the CA and the Supreme Court. pronounced that this perceived distinction does not find support in the provisions of the Labor Code. however.12 28313 and 28414 are based on the employee’s conduct in connection with his assigned work. The Court of Appeals.

17 so states . Amkor Technology Philippines.” The Labor Arbiter consequently ruled that the dismissal was valid and legal but he ordered their reinstatement to their former positions without backwages “as a measure of equitable and compassionate relief” owing mainly to petitioners’ prior unblemished employment records. Article 223. if no longer available.Arbiters. TWO (2) OPTIONS OF THE EMPLOYER. The employer has only 2 options both of which involve reinstatement: (1) Actual reinstatement. i. It does not apply where there is no finding of illegal dismissal. Further. Consequently.D. which provides that the decision of the Labor Arbiter reinstating a dismissed employee shall immediately be executory pending appeal. whatever be the grounds given for the termination of employment. card to gain personal advantage and/or in the interest of cheating”. This is the gist of the Lansangan doctrine which was enunciated pursuant to and by virtue of the pronouncement in Lansangan v. finds no application in the present case. Inc. 6. if the dismissal is not illegal as in fact it was declared valid and legal by the Labor Arbiter. card or requesting another employee to swipe one’s I. as in the present case.payment of backwages and other benefits is justified only if the employee was unjustly dismissed. 16 The petitioners in this case were found by the Labor Arbiter to have committed a dishonest act consisting of: “[s]wiping another employees’ [sic] I.D. Based on these facts. Article 223 concerns itself with an interim relief. 5. In other words. Agabon v. an offense of dishonesty punishable as a serious form of misconduct and fraud or breach of trust under Article 297 [282] of the Labor Code: xxx which allows the dismissal of an employee for a valid cause. cannot but apply to all terminations irrespective of the grounds on which they are based. REINSTATEMENT PENDING APPEAL DOES NOT APPLY WHEN THE DISMISSAL IS LEGAL BUT REINSTATEMENT IS ORDERED FOR SOME REASONS LIKE EQUITY AND COMPASSIONATE JUSTICE. to a substantially-equivalent position. vests in the latter jurisdiction over all termination cases. harshness of the penalty and defective attendance monitoring system of respondent company. NLRC. the Supreme Court noted that the principle of reinstatement pending appeal under Article 223 on which the appellate court relied.e. neither can the employer be held liable for payment of any reinstatement wages. petitioners are not also entitled to full backwages as their dismissal was not found to be illegal. the reinstatement granted by reason of equity and compassionate justice cannot be executed pending appeal. or . granted to a dismissed or separated employee while the case for illegal dismissal is pending appeal. The principle of reinstatement pending appeal applies only in case there is a finding of illegality of dismissal by the Labor Arbiter. show of remorse. . the employee should be reinstated to his position which he occupies prior to his illegal dismissal under the same terms and conditions prevailing prior to his dismissal or separation or.

24 The employee need not file a motion for the issuance of the writ of execution since the Labor Arbiter shall thereafter motu proprio issue the writ. especially when there is a reasonable explanation for his failure. During the pendency of the case with the Court of Appeals and prior to its November 23. But the language of the law should not be stretched as to give the employer the right to remove an employee who fails to immediately comply with the reinstatement order. 20 Under the 2011 NLRC Rules of Procedure. 19 7. The provision of Article 223 on reinstatement pending appeal is intended for the benefit of the employee and cannot be used to defeat his own interest. However. 8. through counsel. The law mandates the employer to either admit the dismissed employee back to work under the same terms and conditions prevailing prior to his dismissal or to reinstate him in the payroll to abate further loss of income on the part of the employee during the pendency of the appeal. viz: (1) When the employer disobeys the Rules-prescribed directive23 to submit a report of compliance within ten (10) calendar days from receipt of the decision.25 Employer may be cited for contempt for his refusal to comply with the order of reinstatement. Velasco. . Under the 2011 NLRC Rules of Procedure.e. EFFECT OF FAILURE OF EMPLOYEE ORDERED REINSTATED PENDING APPEAL TO REPORT BACK TO WORK AS DIRECTED BY EMPLOYER. 26 Employer is liable to pay the salaries for the period that the employee was ordered reinstated pending appeal even if his dismissal is later finally found to be legal on appeal. Inc. 2005. 2005 decision. Posting of a bond does not stay the execution of immediate reinstatement. 18 There is no way the employer can disregard the reinstatement order. 28 In the 2011 case of Pfizer. according to petitioner. .22 there are two (2) instances when a writ of execution should still be issued immediately by the Labor Arbiter to implement his order of reinstatement. 2005. The Labor Arbiter shall motu proprio issue a corresponding writ to satisfy the reinstatement wages as they accrue until actual reinstatement or reversal of the order of reinstatement. i. when the Court of Appeals rendered its decision declaring Velasco’s dismissal valid. reinstatement of the employee in the payroll of the company without requiring him to report back to his work. OBLIGATION OF EMPLOYER TO NOTIFY REINSTATED EMPLOYEE OF HIS CHOICE OF OPTION. 29 petitioner Pfizer contends that the Court of Appeals committed a serious but reversible error when it ordered petitioner Pfizer to pay respondent Velasco wages from the date of the Labor Arbiter’s decision ordering her reinstatement until November 23. INSTANCES WHEN WRIT OF EXECUTION OF LABOR ARBITER’S REINSTATEMENT ORDER IS STILL REQUIRED. even pending appeal. it was respondent who refused to return to work when she wrote petitioner. v.21 it is required that the employer should submit a report of compliance within ten (10) calendar days from receipt of the Labor Arbiter’s decision.(2) Payroll reinstatement. petitioner claimed that it had already required respondent to report for work on July 1. or (2) When the employer refuses to reinstate the dismissed employee. disobedience to which clearly denotes a refusal to reinstate. 27 9. Employer has the obligation to notify employee of his choice of option.

it should no longer be required to pay wages considering that it was allegedly ready to reinstate respondent as of July 1. 39 (NOTE: For discussion on the effect of NLRC’s reversal of the Labor Arbiter’s order of reinstatement. 2005. 33  Reinstatement to a position lower in rank is not proper. It does not have the effect of taking away the option from the employer to effect actual or payroll reinstatement. 10. the order of reinstatement pending appeal under Article 223 issued in the first case shall apply only to thefirst case and should not affect the second dismissal.00 representing respondent’s full backwages from December 5. at the option of the employer.35  In case of two successive dismissals.  Reinstatement pending appeal under Article 223 is constitutional.that she was opting to receive her separation pay and to avail of petitioner’s early retirement program. 37  No reinstatement pending appeal should be made when antipathy and antagonism exist.38  If reinstatement is not stated in the Labor Arbiter’s decision (neither in the dispositive portion nor in the text thereof) . 2005 but it was respondent who unjustifiably refused to report for work.855.31  The Labor Arbiter cannot exercise option of employer by choosing payroll reinstatement pending appeal. please read the comments on the topic:“VIII. SOME PRINCIPLES ON REINSTATEMENT PENDING APPEAL UNDER ARTICLE 223. found this contention of petitioner devoid of merit considering the following: (1) Petitioner waited for the resolution of its appeal to the NLRC and. 2005. the employee ordered reinstated under Article 223 should be admitted back to work in a substantially equivalent position. 34  Reinstatement cannot be refused on the basis of the employment elsewhere of the employee ordered reinstated. (2) The said letter does not conform to the directive in Article 223 that an employee entitled to reinstatement “shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or. reinstatement is not warranted. especially when there is a reasonable explanation for his failure. 30  It is similar to return-to-work order.” (3) The letter of respondent to petitioner indicating her preference for the payment of separation pay in lieu of reinstatement is of no moment. did petitioner decide to require respondent to report back to work via the Letter dated June 27. The Supreme Court.36  The failure of the illegally dismissed employee who was ordered reinstated to report back to work does not give the employer the right to remove him. PROCEDURE AND . however.963. merely reinstated in the payroll. only after it was ordered by the Labor Arbiter to pay the amount ofP1. 2003 up to May 5. it would be tantamount to allowing respondent to choose “payroll reinstatement” when by law it was the employer which had the right to choose between actual and payroll reinstatement. According to petitioner.32  If the former position is already filled up. In petitioner Pfizer’s view.

National Labor Relations Commission (NLRC) .” infra) b. 43 (b) Where the dismissed employee’s position is no longer available at the time of reinstatement for reasons not attributable to the fault of the employer. 47 (e) The employee has already reached retirement age under a Retirement Plan. not feasible or unwarranted for varied reasons and thus hardly in the best interest of the parties such as: (a) Where the employee has already been replaced permanently as when his position has already been taken over by a regular employee and there is no substantially equivalent position to which he may be reinstated.40 Undeniably. SEPARATION PAY IN LIEU OF REINSTATEMENT 1. 51 (i) Takeover of the business of the employer by another company and there is no agreement regarding assumption of liability by the acquiring company. 46 (d) By reason of the injury suffered by the employee. Effect of NLRC Reversal of Labor Arbiter’s Order of Reinstatement. SPECIFIC INSTANCES WHERE SEPARATION PAY IN LIEU OF REINSTATEMENT WAS AWARDED. Article 279 expressly mandates only reinstatement and never the alternative remedy of separation pay in lieu thereof. xxx B.JURISDICITON. 52 (3) Where the employee decides not to be reinstated as when he does not pray for reinstatement in his complaint or position paper but asked for separation pay instead. 50 (h) When the general sales agency contract between the employer and its client has been terminated and reinstatement is no longer feasible. xxx 2. impracticable. It is now well-settled that separation pay in lieu of reinstatement should be awarded in the following situations: (1) Where the continued relationship between the employer and the employee is no longer viable due to the strained relations and antagonism between them (Doctrine of Strained Relations) .53 . NO PROVISION IN THE LABOR CODE EXPRESSLY GRANTING SEPARATION PAY IN LIEU OF REINSTATEMENT.49 (g) When reinstatement of a security guard can no longer be ordered because he was past the age qualification for a security guard license.42 (2) When reinstatement proves impossible. 44 (c) When there has been long lapse or passage of time that the employee was out of employer’s employ from the date of the dismissal to the final resolution of the case45 or because of the realities of the situation. 48 (f) When the illegally dismissed employees are over-age or beyond the compulsory retirement age and their reinstatement would unjustly prejudice their employer. But jurisprudence clearly enunciates the award of separation pay in the event reinstatement is not possible or feasible. it is a recourse based on equity that has been sanctioned by the Supreme Court in a catena of cases.41 2.

however.  Award of separation pay in lieu of reinstatement is not proper if there is no finding of illegality of dismissal. 66 More definitively. Jurisprudence. 63 3. is only proper for reinstatement but not for backwages. 70  Separation pay.65 4.60 (b) reinstatement does not serve the best interests of the parties involved.71 . a fraction of at least six (6) months being considered as one (1) whole year. 55 (c) Fire which gutted the employer’s establishment and resulted in its total destruction. This is so because the principal remedy of reinstatement may only be granted in case the dismissal is illegal. 64 (2) Allowances that the employee has been receiving on a regular basis. SOME PRINCIPLES ON SEPARATION PAY IN LIEU OF REINSTATEMENT. SALARY RATE TO BE USED IN THE COMPUTATION. When employer has already ceased its operations. The amount of separation pay that should be paid in lieu of reinstatement is not provided under the Labor Code.61 (c) the employer is prejudiced by the workers’ continued employment. it should be reckoned from the first day of employmentuntil the finality of the decision. PERIOD COVERED.57 (5) To prevent further delay in the execution of the decision to the prejudice of private respondent. 54 (b) Declaration of insolvency of the employer by the court. Separation pay in lieu of reinstatement is computed from the commencement of employment up to the time of termination. From start of employment up to the date of finality of decision. as a substitute remedy. 68 5. COMPONENTS OF SEPARATION PAY IN LIEU OF REINSTATEMENT PER PREVAILING JURISPRUDENCE.(4) When reinstatement is rendered moot and academic due to supervening events. 69 6. the separation pay in lieu of reinstatement should be computed only up to that date of closure.58 (6) Other circumstances59 such as (a) when reinstatement is inimical to the employer’s interest.62 or (d) that it will not serve any prudent purpose as when supervening facts transpired which made execution unjust or inequitable. The salary rate prevailing at the end of the period of putative service should be the basis for computation which refers to the period of imputed service for which the employee is entitled to backwages.56 (d) In case the establishment where the employee is to be reinstated has closed or ceased operations. such as: (a) Death of the illegally dismissed employee. including the imputed service for which the employee is entitled to backwages. dictates that the following should be included in its computation: (1) The amount equivalent to at least one (1) month salary or to one (1) month salary for every year of service. whichever is higher. When employer has ceased its business operations. 67 b. a.

81  Litigation. Payment of separation pay should be ordered only in the event that there is a showing that reinstatement is no longer possible by reason of the justifications allowed under established jurisprudence. Separation pay and backwages are not inconsistent with each other. The doctrine of “strained relations” or “antipathy and antagonism” or “irretrievable estrangement” applies when reinstatement will no longer be in the best interest of both the employee and the employer considering the animosity and antagonism that exist between them brought about by the filing of the labor case. otherwise.  Strained relations must be proved and demonstrated as a fact. 78 standing alone.79 In a plethora of cases. 74  Reinstatement cannot be granted when what is prayed for by employee is separation pay in lieu thereof. 72 The payment of separation pay is in addition to payment of backwages. 73  Employer does not have the option to choose between actual reinstatement and separation pay in lieu thereof. otherwise. thedoctrine of strained relations is not applied indiscriminately as to bar reinstatement. it has likewise been ruled that the understandable strain in the parties’ relations would not necessarily rule out reinstatement which would. Although litigation may also engender a certain degree of hostility. does not give rise to strained relations that may justify nonreinstatement. hence. if the strained relations engendered as a result of litigation are sufficient to rule out reinstatement. especially when the employee has not indicated an aversion to returning to work or does not occupy a position of trust and confidence or has no say in the operation of the employer’s business. 77 However. STRAINED RELATIONS OR ANTAGONISM MAY EFFECTIVELY BAR REINSTATEMENT. 80 2. both may be awarded to an illegally dismissed employee.75  Grant of separation pay in lieu of reinstatement converts the award of reinstatement into a monetary award. then reinstatement would become the exception rather than the rule in cases of illegal dismissal. Actual reinstatement has the primacy as the proper relief to which an illegally dismissed employee is entitled. Hence. SOME PRINCIPLES ON STRAINED RELATIONS. by itself. a relief granted in instances where the common denominator is the fact that the employeewas dismissed by the employer. legal interest may be imposed thereon. 76 STRAINED RELATIONS RULE 1. the Supreme Court has been consistent in its holding that the existence of strained relations between the employer and the illegally dismissed employee may effectively bar reinstatement of the latter. 83  Indeed.84 . the doctrine of strained relations will not justify an award of separation pay. an employee who asserts his right could be easily separated from the service by merely paying his separation pay on the pretext that his relationship with his employer had already become strained. according to the 2013 case of Leopard Security and Investigation Agency v. Even in cases of illegal dismissal. become the rule rather than the exception in illegal dismissal cases. The filing of the complaint for illegal dismissal does not by itself justify the invocation of the doctrine of strained relations. 82  No strained relations should arise from a valid and legal act of asserting one’s right. Quitoy.

CONCEPT. Where the employee. reinstatement is proper if no strained relations exist with new owner. an employee who is unjustly dismissed is entitled not only to reinstatement. Backwages represent compensation that should have been earned by the employee but were lost because of the unjust or illegal dismissal. as a rule.90 2.e. BACKWAGES91 1. without deducting from backwages the earnings derived elsewhere by the concerned employee during the period of his illegal dismissal. 97 which is now known as the Bustamante doctrine.85  Non-settlement of dispute after long period of time is not indicative of strained relations. productivity and performance of the latter. 95 2. i. 94 But if the dismissal is not illegal. 89  In case of new ownership of the establishment. 88  A managerial employee should not be reinstated if strained relations exist. the term “full backwages” should mean exactly that. NLRC. strained relations may be invoked in order to justify non-reinstatement. Under this rule. without loss of seniority rights and other privileges. the Supreme Court changed the rule 96 on the reckoning of backwages. an employee whose dismissal is found to be illegal is considered not to have left his office so that he is entitled to all the rights and privileges that accrue to him by virtue of the office that he held. an award of backwages is not proper. has no say in the operation of his employer’s business. however. is from the time of his illegal dismissal) up to the time of his actual reinstatement. In 1996. but also to the payment of his full backwages.93 Simply stated. 87  Criminal prosecution confirms the existence of “strained relations” which would render the employee’s reinstatement highly undesirable. inclusive of allowances and other benefits or their monetary equivalent.” If the nature of the position requires that trust and confidence be reposed by the employer upon the employee occupying it as would make reinstatement adversely affect the efficiency. THE BUSTAMANTE DOCTRINE. invocation of this doctrine is not proper. The nature of position is material in determining the validity of “strained relations. It announced a new doctrine in the case of Bustamante v.86  The refusal of an employee to be reinstated is indicative of strained relations. COMPONENTS. 98 (a) COMPUTATION 1. computed from the time his compensation was withheld from him (which. . 92 The raison d’ etre for the payment of backwages is equity. The components of backwages are as follows: . Under Article 279.

1. Salaries or wages computed on the basis of the wage rate level at the time of the
illegal dismissal and not in accordance with the latest, current wage level of the
employee’s position.99
2. Allowances and other benefits regularly granted to and received by the employee
should be made part of backwages.100 Examples:
a. Emergency living allowances and 13 month pay mandated under the law.101
b. Fringe benefits or their monetary equivalent. 102
c. Transportation and emergency allowances. 103
d. Holiday pay, vacation and sick leaves and service incentive leaves. 104
e. Just share in the service charges. 105
f. Gasoline, car and representation allowances. 106
g. Any other regular allowances and benefits or their monetary equivalent. 107

 The computation of said regularly paid allowances and benefits as part of backwages
should be made up to the date of reinstatement as provided under Article 279 of the
Labor Code or, if reinstatement be not possible, up to the finality of the decision
granting full backwages.108
 Salary increases during period of unemployment are not included as component in the
computation of backwages.109
 Dismissed employee’s ability to earn is irrelevant in the award of backwages. 110
 The failure to claim backwages in a complaint for illegal dismissal is a mere procedural
lapse which cannot defeat a right granted under substantive law. Hence, the illegally
dismissed employee may still be awarded backwages despite said failure. 111
 When Labor Arbiter or NLRC failed to award any backwages, the same may be corrected
on appeal even if worker did not appeal. 112
 In case reinstatement is ordered, full backwages should be reckoned from the time
the compensation was withheld (which, as a rule, is from the time of illegal dismissal) up
to the time of reinstatement, whether actual or in the payroll . 113
 If separation pay is ordered in lieu of reinstatement, full backwages should be
computed from the time of illegal dismissal until the finalityof the decision. The
justification is that along with the finality of the Supreme Court’s decision, the issue on
the illegality of the dismissal is finally laid to rest. 114
 The rule is different if employment is for a definite period. The illegally dismissed
fixed-term employee is entitled only to the payment of his salaries corresponding to
the unexpired portion of his fixed-term employment contract. 115
 If the illegally dismissed employee has reached the optional retirement age of 60 years,
his backwages should only cover the time when he was illegally dismissed up to the time
when he reached 60 years. Under Article 287, 60 years is the optional retirement age. 116
 If the employee has reached 65 years of age or beyond, his full backwages should be
computed only up to said age. The contention of the employer that backwages should
be reckoned only up to age 60 cannot be sustained. 117 In Jaculbe v. Silliman
University, 118 it was declared that since petitioner has already reached seventy-one (71)
years of age at the time the decision was rendered by the Supreme Court in this case,
the award of backwages in her favor must be computed from the time of her illegal
dismissal up to her compulsory retirement age of sixty-five (65) . 119

 If termination was made effective immediately, the backwages should be reckoned from
the date of the termination letter where such was stated. 120
 If employer has already ceased operations, full backwages should be computed only up
to the date of the closure. To allow the computation of the backwages to be based on a
period beyond that would be an injustice to the employer. 121
 If valid retrenchment supervened during the pendency of the case, full backwages
should be computed only up to the effectivity date of the retrenchment. 122
 In case the employee dies during pendency of the case, his full backwages should be
computed from the time of his dismissal up to the time of his death. 123
 The period of valid suspension is deductible from backwages. 124
 Backwages should be reckoned from end of valid suspension. 125
 Backwages should include period of preventive suspension. 126
 Employer’s offer to reinstate does not forestall payment of full backwages. 127
 Any amount received during payroll reinstatement is deductible from backwages. 128
The discussion above dwells on cases where backwages are granted in full in
accordance with the clear mandate of Article 279 of the Labor Code. However, in certain
instances, backwages are not granted at all or are granted but only for a limited amount.

The discussion below will point out the variations in the grant of backwages as

When reinstatement is granted without backwages; or


When reinstatement is granted with limited backwages.

Under the following situations, reinstatement of an illegally dismissed employee is
granted without the accompanying backwages:

When the dismissal is deemed too harsh a penalty;


When the employer acted in good faith; or


Where there is no evidence that the employer dismissed the employee.

 Illustrative cases of the FIRST situation above:
(1) Associated Labor Unions-TUCP v. NLRC, 129 where reinstatement with no
backwages was ordered because the penalty of dismissal imposed on the employee for
committing theft of company property was reduced to suspension due to mitigating
circumstances. The justification was that the entire period when the employee was out of
job because of his dismissal should already be considered as the period of his suspension;
hence, he should no longer be entitled to backwages for the same period.
(2) Yupangco Cotton Mills, Inc. v. NLRC, 130 where, after finding that the employee
was illegally dismissed but at the same time guilty of misconduct, it was ruled that there was

no grave abuse of discretion in the resolution of the NLRC which meted only the penalty of
suspension without backwages.
(3) Pepsi-Cola Distributors of the Philippines, Inc. v. NLRC, 131 where the
employee filed a leave of absence for one day after he suffered stomach ache and upon the
advice of his doctor, he took a rest for 25 days without prior leave. When he reported back
for work, he was told that he had been dismissed for being absent without leave. It was held
that while he was at fault, the employee could not be dismissed. He was ordered reinstated
but he was denied backwages.
 Illustrative cases of the SECOND situation above:
(1) In Itogon-Suyoc Mines, Inc. v. National Labor Relations Commission, 132 the
employee was found guilty of breach of trust for stealing ore with high gold content.
However, his dismissal was considered drastic and unwarranted considering that he had
rendered twenty three (23) years of service without previous derogatory record and he was
prematurely suspended during the pendency of the case. Consequently, he was ordered
reinstated but without granting him any backwages. The High Court pronounced that “[t]he
ends of social andcompassionate justice would therefore be served if private respondent is
reinstated but without backwages in view of petitioner's good faith.”
(2) Finding factual similarity with the foregoing case of Itogon-Suyoc, the Supreme
Court, in the 2013 case of Pepsi-Cola Products Philippines, Inc. v. Molon, 133 deems it
appropriate to render the same disposition insofar as one of the respondents in this case
was concerned - Saunder Santiago Remandaban III. This case involves a strike which the
DOLE Secretary certified to the NLRC for compulsory arbitration. A return-to-work order was
issued as a consequence of such certification. However, Remandaban failed to report for
work within twenty-four (24) hours from receipt of the said order. Because of this, he was
served with a notice of loss of employment status (dated July 30, 1999) which he challenged,
asserting that his absence on that day was justified because he had to consult a physician
regarding the persistent and excruciating pain of the inner side of his right foot. In ordering
his reinstatement but without backwages, the Supreme Court cited the following as its
(a) While Remandaban was remiss in properly informing Pepsi of his intended
absence, the penalty of dismissal is too harsh for his infractions considering that
his failure to report to work was clearly prompted by a medical emergency and
not by any intention to defy the July 27, 1999 return-to-work order.

Pepsi's good faith is supported by the NLRC's finding that
“the return-to-work order of the Secretary was taken lightly by Remandaban. ” In
this regard, considering Remandaban's ostensible dereliction of the said order,
Pepsi could not be blamed for sending him a notice of termination and eventually
proceeding to dismiss him.

(3) It was likewise held in the 2013 case of Integrated Microelectronics, Inc. v.
Pionella, 134 on motion for reconsideration by petitioner, that the backwages 135 should be
deleted on the grounds that (a) the penalty of dismissal was too harsh of a penalty to be
imposed against Pionilla for his infractions; 136 and (b) petitioner IMI was in good faith when it
dismissed Pionilla as his dereliction of its policy on ID usage was honestly perceived to be a
threat to the company’s security. In this respect, since these concurring circumstances
trigger the application of the exception to the rule on backwages as enunciated in the
above-cited cases, the Court found it proper to accord the same disposition and
consequently directed the deletion of the award of backwages in favor of Pionilla,
notwithstanding the illegality of his dismissal.

Quitoy. It is well settled that backwages may be granted only when there is a finding of illegal dismissal. NLRC 141 where the Supreme Court ordered the reinstatement sans backwages of the employee (Fuerte) who was declared neither to have abandoned his job nor was he constructively dismissed. Although it was found that the employee was indeed guilty of breach of . 142 the High Court affirmed the consistent findings and conclusions of the Labor Arbiter. while affirming the illegality of the dismissal of the employee. 138 as well as in the earlier case of Security and Credit Investigation. As pointed out by the Court.143 the Supreme Court. dismiss them. petitioners expressed willingness to accept them back to work. De Lemos. insensibility or disdain on the part of petitioners in transferring respondents – both sewers on piece-rate basis . for which the petitioners should not be held liable particularly as the latter did not. NLRC. in a case where the employee’s failure to work was occasioned neither by his abandonment nor by a termination. Bondesto. the employee was ordered reinstated to his former position without loss of seniority and other privileges appertaining to him prior to his dismissal.144  Illustrative case where award of backwages was limited to 2 years: In Dolores v. Javate. there are also instances where the backwages were not given in full but merely limited for the same reason of good faith on the part of the employer. for their part. but the award of backwages waslimited to only one (1) year considering the mitigating circumstance of good faith attributed to the employer. but the employer’s liability was mitigated by its evident good faith in terminating the employee’s services based on the terms of its Health. in fact. the NLRC. There being no termination of employment by the employer. In fact. Illustrative cases of the THIRD situation above: (1) In the 2012 case of Best Wear Garments v. the Supreme Court ordered the employees’ reinstatement but without backwages. While in the aforementioned cases of illegal dismissal. (2) In the 2013 case of Leopard Security and Investigation Agency v. Hence. 3.  Illustrative cases where award of backwages was limited to 1 year: (a) In San Miguel Corporation v. have not abandoned their employment. REINSTATEMENT WITH LIMITED BACKWAGES. Jr. the remedy is reinstatement but without backwages. and the Court of Appeals that the employee was illegally dismissed since he was still fit to resume his work. there was no evidence that respondents were dismissed from employment. . v. Indeed. It agreed with the findings of the NLRC and the Court of Appeals that in view of the employee’s absences that were not wholly justified. That respondents eventually discontinued reporting for work after their plea to be returned to their former work assignments was their personal decision. Each party must bear his own loss. 137 where the records are bereft of any showing of clear discrimination.140 (3) Leonardo v. 139 reinstatement without backwages was ordered because petitioners were found not to have dismissed respondents (security guards) and that the latter. the burden of economic loss is not rightfully shifted to the employer. did not grant him full perform a different type of sewing job which would amount to constructive dismissal. (b) In Procter and Gamble Philippines v. the award of backwages cannot be sustained. 145 the employee was terminated for her continuous absence without permission. he should be entitled to backwages limited to one (1) year only. NLRC. Inc. Welfare and Retirement Plan. In cases where there is no evidence of dismissal.

The legal basis for the valid imposition thereof is found in Sections 8 and and violation of company rules. v. other than ordering the employee’s reinstatement. Rule XXIII. Race. given that the employer acted without malice or bad faithin terminating the employee’s services. 3 3. its purpose is to prevent him from causing harm or injury to the company as well as to his fellow employees. SOME PRINCIPLES ON PREVENTIVE SUSPENSION. Even so. Inc. Preventive suspension may be legally imposed against an errant employee only when his alleged violation is the subject of an investigation. preventive suspension is not proper. The Labor Code does not contain any provision on preventive suspension. had sufficient basis to reasonably and in good faith deem respondent resigned by 1998. and her leave to study the French language would ultimately benefit the employer who no longer had to spend for translation services. Book V of the Rules to Implement the Labor Code. the imposition of preventive suspension on him is not justified as his presence in the company premises does not pose any such serious or imminent threat to the life or . Without this threat. LEGAL BASIS. Consequently. 4  If the basis of the preventive suspension is the employee’s absences and tardiness. the said employee was awarded backwages limited to a period of two (2) years. It is justified only in cases where the employee’s continued presence in the company premises during the investigation poses a serious and imminent threat to the life or property of the employer or of the employee’s coworkers. PREVENTIVE SUSPENSION1 1. While petitioner’s argument that respondent had already abandoned his job in 1994 was not upheld.  Illustrative case where award of backwages was limited to 5 years: In its resolution on the motion for reconsideration filed by the petitioner in Victory Liner. it was her first offense. PURPOSE AND JUSTIFICATION. ------------oOo------------ Chapter Four TERMINATION OF EMPLOYMENT TOPICS PER SYLLABUS D. the High Court still declared the employee’s dismissal illegal as it was too severe a penalty considering that she had served the employer company for 21 years. 146 the High Tribunal reduced and limited the original award of full backwages to five (5) years in the light of the evident good faith of the employer.2 2. the Court conceded that petitioner. This remedy may thus be resorted to only while the errant employee is undergoing an investigation for certain serious offenses. given the particular circumstances of this case. Preventive Suspension D.  An employer has the right to preventively suspend the employee during the pendency of the administrative case against him as a measure of self-protection.

he is obligated to pay the wages and other benefits due the worker during said period of extension. amounts to constructive dismissal. 12  Extension of period must be justified. the worker is not entitled to his wages and other benefits. by itself. 14  Indefinite preventive suspension amounts to constructive dismissal. 16  Salaries should be paid for improperly-imposed preventive suspension. 17  Period of preventive suspension of workers in the construction industry is only for 15 days. 10  Preventive suspension is neither equivalent nor tantamount to dismissal.13  Preventive suspension lasting longer than 30 days. 6  The failure by an employee to attend a meeting called by his supervisor will not justify his preventive suspension. the worker is not bound to reimburse the amount paid to him during the extension if the employer decides to dismiss him after the completion of the investigation.” 5  The grounds of violation of the school rules and regulations on the wearing of uniform. No extension thereof can be made based on whimsical.7  Preventive suspension does not mean that due process may be disregarded. There is a reasonable and logical presumption that said suspension in fact has a duration which could very well be not more than 30 days as mandated by law. to extend the period of preventive suspension beyond said 30-day period. the employer is required to reinstate the worker to his former position or to a substantially equivalent of the employer or of the employee’s co-workers simply “by incurring repeated absences and tardiness.” ------------oOo------------ Chapter Four 21 .20  Preventive suspension is different from “floating status. The period of thirty (30) days may only be extended if the employer failed to complete the hearing or investigation within said period due to justifiable grounds. However. capricious or unreasonable grounds. 8  Preventive suspension is not a penalty. tardiness or absence. During the 30-day period of preventive suspension. for a justifiable reason.  During the 30-day preventive suspension. In such a case. without the benefit of valid extension. 9 Preventive suspension. 15  Failure to state the duration of the preventive suspension in the notice does not mean it is indefinite.18  Preventive suspension is different from suspension of operation under Article 286 19 of the Labor Code. 11  Preventive suspension should only be for a maximum period of thirty (30) days. the employer is expected to conduct and finish the investigation of the employee’s administrative case. if the employer decides. do not justify the imposition of preventive suspension. After the lapse of the 30-day period. does not signify that the company has already adjudged the employee guilty of the charges for which she was asked to answer and explain. and maliciously spreading false accusations against the school.

facts or circumstances which render the continued employment impossible. Both involuntary and forced resignations are embraced within the concept of constructive dismissal. TEST OF CONSTRUCTIVE DISMISSAL. (2) Inhumane and unbearable treatment accorded the employee by the employer or his representative. Constructive dismissal contemplates any of the following situations: 1) An involuntary resignation resorted to when continued employment is rendered impossible. an employee may put an end to the employment relationship without need of 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. acts. Thus.2 2.submission or tender of resignation . luring or influencing or practically forcing the employee to effectuate the termination of employment. unlike resignation without just cause under the same Article 285 5 where the law requires prior written notice. (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. 4 Thus. the employee may terminate his employment without serving any notice to the employer if such is occasioned by any of the just causes mentioned above. FORCED RESIGNATION. if there is no cessation of work. insensibility or disdain by an employer which becomes unbearable to the employee that it could foreclose any choice by him except to forego his continued employment. 8 5. COMMON DENOMINATOR. 3. instead of doing the termination himself. CONSTRUCTIVE DISMISSAL. . 2) A demotion in rank and/or a diminution in pay. unreasonable or unlikely. or 3) A clear discrimination. and (4) Other causes analogous to any of the foregoing. 7 Thus.TERMINATION OF EMPLOYMENT TOPICS PER SYLLABUS E. The common character pervading involuntary or forced resignation or constructive dismissal is the act of “quitting” from employment by the employee because of the attendant just causes. unreasonable or unlikely. INVOLUNTARY RESIGNATION. 6 4. CONSTRUCTIVE DISMISSAL1 1. there can be no constructive dismissal.meant to validate the action of management in inveigling. Constructive Dismissal E. There is forced resignation where the employee is made to do or perform an involuntary act . The termination initiated by the employee based on the just causes described and enumerated in Article 2853 of the Labor Code is in the nature of involuntary resignation.

he worked for the release of his clearance and the payment of his 13 month pay and leave pay benefits. In fact. cannot render nugatory the voluntary nature of her resignation. It was not shown that her transfer was prompted by ill will of management. The voluntary nature of his acts has manifested itself clearly and belied his claim of constructive dismissal. or the alleged hostility on the part of her employer.000AU (approx 8million pesos) and your non-payment of wages to me from 1 August 2007 as per Employment Agreement. Dreamland Resort. the employee who is constructively dismissed may be allowed to keep on coming to work. such as Johnson. In Admiral Realty Company. Zambales. I have put my heart and soul into the business. would continue working for an employer who does not pay him his salaries. he. It is impossible. worked as Operations Manager for about three (3) months with petitioner hotel but he was not paid his salaries corresponding thereto. a dismissal in disguise. She was not eased out much less was she forced to resign. Mr[. due totally to the fact that I have lent you and your resort/hotel well over $200. “Since joining Dreamland Resort & Hotel over three months ago. 14 Respondent. I am now literally penniless. CONSTRUCTIVE DISMISSAL. It merely involved a change in location of the office and not a change of her position. I have donated many hours of my personal time. Johnson. unreasonable or unlikely that any employee. If indeed he was forced into resigning. it was due to the petitioners’ acts that he was constrained to resign. Subic. This is a case of voluntary resignation and not a constructive dismissal. Constructive dismissal is. Philippines. [Admiral Hotel] v.9 The law recognizes and resolves this situation in favor of the employees in order to protect their rights and interests from the coercive acts of the employer. VOLUNTARY RESIGNATION VS. NLRC. 12 it was ruled that the transfer of the location of an employee’s office from under the steps of the stairs to the kitchen which allegedly caused her mental torture which forced her to resign does not amount to constructive dismissal but a case of voluntary resignation. the tenor of which reads: “I hereby tender my resignation to you. In doing so. For instance. 13 th An example of a resignation which was deemed indicative of constructive dismissal is the 2014 case of Dreamland Hotel Resort v. it was held in Concrete Aggregates v. It is an act amounting to dismissal but made to appear as if it were not. an Australian citizen. xxx.10 6. in fact. I have frequently worked seven days a week and twelve to thirteen hours a day. The fact of her transfer due to a new secretarial staffing pattern which she objected to. An indication that the resignation was voluntary and does not constitute constructive dismissal is the act of the employee who resigned and took a leave of absence on the date of effectivity of his resignation and while on leave. Voluntary resignation is likewise distinct from constructive dismissal. prompting him to tender his resignation letter. The petitioners cannot expect Johnson to tolerate working for them without any compensation. . Inc.15 st The above statement only goes to show that while it was Johnson who tendered his resignation. NLRC. performed all that an employee normally does after he resigns. ] Wes Prentice. he would not have sought to be cleared by his employer and to be paid the monies due him. therefore.The test of constructive dismissal is whether a reasonable person in the employee’s position would have felt compelled to give up his position under the circumstances. 11 that an employee who tendered her voluntary resignation and signed the quitclaim after receiving all the benefits due her for her separation cannot claim that she was constructively dismissed.

22  Reducing the employee’s functions which were originally supervisory in nature and such reduction is not grounded on valid grounds such as genuine business necessity. “Illegal dismissal” is readily shown by the act of the employer in openly and expressly seeking the termination of employment of an employee. in constructive dismissal. after they had waited for a long time and had left. 20  Sending to an employee a notice of indefinite suspension which is tantamount to dismissal. 25  Forcing the employee to resign with threat that if he will not resign. 27 . benefits and other privileges. CONSTRUCTIVE DISMISSAL. in illegal dismissal cases. the employer in illegal dismissal cases would normally defend and justify the termination but in constructive dismissal.7. 23  Imposing indefinite preventive suspension without actually conducting any investigation. 24  Threatening a sickly employee with dismissal if he will not retire and promising employment to his son and daughter. ILLEGAL DISMISSAL VS. the employer. Such act is in the nature of a contrivance to effect a dismissal without cause. The employee retired and signed two (2) quitclaims entitled “Receipt and Release” in favor of the company. More concretely. In terms of evidence.” being dismissal in disguise. makes the cessation from employment of said employee not voluntary. 26  Asking the employee to choose whether to continue as a faculty member or to withdraw as a lawyer against the mayor with whom the former owes certain favors.  Denying to the workers entry to their work area and placing them on shifts “not by weeks but almost by month” by reducing their workweek to three days. he will file charges against him that would adversely affect his chances for new employment. 19  Implementing a rotation plan for reasons other than business necessity. while “constructive dismissal. the employer would normally contend that there was no termination at all. would advance arguments against the circumstantial evidence being presented by the employee to prove his constructive dismissal. who normally denies the termination. documentary. As far as the reliefs under Article 27916 of the Labor Code are concerned. 8. INSTANCES OF CONSTRUCTIVE DISMISSAL OR FORCED RESIGNATION. the same are available to both illegal and constructive dismissal. testimonial and other forms of evidence are adduced by the employer to secure affirmation from the court of the validity of the termination.21  Demoting a worker or re-assigning him involving a demotion in rank or diminution of salaries.18  Instructing the employee to go on indefinite leave and asking him to return to work only after more than three (3) years from the time he was instructed to go on indefinite leave during which period his salaries were withheld.17  Barring the employees from entering the premises whenever they would report for work in the morning without any justifiable reason. is not readily indicated by any similar act of the employer that would openly and expressly show its desire and intent to terminate the employment relationship. and they were made to wait for a certain employee who would arrive in the office at around noon. It was only after almost one (1) year that the employer made known the findings in its investigation which was conducted ex parte. there being no express dismissal to speak of.

36 the standards to be observed by employers in complying with the service of notices prior to termination which require compliance with the reasonable period of at least five (5) calendar days from receipt of the notice within which to explain his side. the reason being that the employee was found by the employer to have violated its no-employment-for-relatives-within-the-third-degree-policy. 31  Transfer of respondent employee from Credit and Collection Manager to Marketing Assistant which resulted in demotion as it reduced his duties and responsibilities although there was no corresponding diminution in his salary.In this 2014. Cosare v. 2009 further evidenced the resolve to deny Cosare of the opportunity to be heard prior to any decision on the termination of his employment. However. Broadcom Asia. even this limitation was a flaw in the memo or notice to explain which only further signified the respondents’ discrimination. 32  Reducing the number of trips of the drivers and shortening their workdays which resulted in the diminution of their pay. 33  Forcing the employee to tender her resignation letter in exchange for her 13 month pay. the Supreme Court declared petitioner as having been constructively dismissed based on the facts and circumstances obtaining herein. This is clear notice of dismissal. The Court emphasized in King of Kings Transport. The terms of the redeployment thus became unacceptable for said employees and foreclosed any choice but to reject the employer’s offer. 1. retain his employment.29  Offer made by a labor contractor to reassign its employees to another company but with no guaranteed working hours and payment of only the minimum wage. In sum. disdain and insensibility towards Cosare. Inc. 35 . Inc. apparently resorted to by the respondents in order to deny their employee of the opportunity to fully explain his defenses and ultimately. v. . It is clear that the respondents already rejected Cosare’s continued involvement with the company. notwithstanding the facts which could have been established by his explanations and the respondents’ full investigation on the matter. the court took note of the fact that the former position is managerial while the latter is clerical in nature. In addition to this. involving as it does a demotion in status and diminution in pay. th 9. Mamac. The employer’s refusal in bad faith to reemploy her despite its promise to do so amounted to illegal dismissal. 2009. the respondents were already resolute on a severance of their working relationship with Cosare. Asking the employee to file a resignation on the condition or promise that she would be given priority for re-employment and in consideration of immediately paying her two (2) months’ vacation which she desperately needed then because she was ill. the fact that no further investigation and final disposition appeared to have been made by the respondents on Cosare’s case only negated the claim that they actually intended to first look into the matter before making a final determination as to the guilt or innocence of Cosare.30  Preventing the employee from reporting for work by ordering the guards not to let her in. In holding that there was constructive dismissal. Even their refusal to accept the explanation which Cosare tried to tender on April 2.28  Changing the employee’s status from regular to casual constitutes constructive dismissal. The respondents allegedly refused acceptance of the explanation as it was filed beyond the mere 48-hour period which they granted to Cosare under the memo dated March 30. she having been 34 impregnated by a married co-employee. EXAMPLES OF CASES WHERE FACTS PROVED CONSTRUCTIVE DISMISSAL.

although not cited in the Notice of Termination served on him when he was terminated. cannot at all be considered as intimidation. However. Since the dismissal. not being an unjust act. while still employed with the respondent. He was required to explain his side on the issue of sexual abuse as well as the charge of insubordination only after these things have already been done to him. Duncan Pharmaceuticals Phils. An employee who tendered her voluntary resignation and signed the quitclaim after receiving all the benefits due her for her separation cannot claim that she was constructively dismissed. 2. any reasonable person similarly situated would have felt compelled to give up her post as she was. his dismissal was considered legal because there was a just cause for his dismissal from the service consisting of his sexual abuse of a subordinate female employee which. but rather a valid and legal act to enforce a claim. His subordinates were directed not to report to him and the company directed one of its district managers to take over his position and do his functions without prior notice to him. if the claim is just or legal. although for a valid cause. was done . that petitioner was replaced in her position while she was on leave. 38  A threat to sue the employee is not unjust and will not amount to forced resignation or constructive dismissal. Tuason v. The Court has in fact examined the exchange of communications between petitioner and the respondent officers of respondent bank before it arrived at its ruling that petitioner was constructively dismissed. 10. he was summoned to his superior’s office and was asked to tender his immediate resignation in exchange for financial assistance. the Supreme Court ruled that petitioner was forced to resign. His salary was no longer remitted to him. Pressure was exerted on her to resign from her work. was duly proved during the trial of the case before the Labor Arbiter. It was proved. stripped of it considering that someone else was already discharging her functions and occupying her office. does not vitiate consent. . SOME PRINCIPLES ON CONSTRUCTIVE DISMISSAL OR INVOLUNTARY OR FORCED RESIGNATION. among others. 39  Employee who alleges that he was coerced or intimidated into resigning has the burden to prove such claim. 37 In this 2012 case. a threat to file estafa case.41  The facts of the case should be considered to determine if there is constructive dismissal. in fact. 44 Petitioner45 was constructively dismissed because. petitioner was no longer allowed to participate in the activities of respondent company.43  An employee may be constructively dismissed and at the same time legally dismissed. After being confronted with the complaint for sexual abuse lodged by a subordinate female employee and before being required to explain his side. Bank of Commerce.40  Giving the employee the choice or option between resignation and investigation is not illegal.This also manifested from the fact that even before Cosare was required to present his side on the charges of serious misconduct and willful breach of trust. Inc. The case in point is Formantes v. For instance. A threat to enforce one’s claim through competent authority.42  Voluntary resignation is different from constructive dismissal.  Mere allegations of threat or force do not constitute evidence to support a finding of forced resignation or constructive dismissal. he was compelled to resign and forced to go on leave. Like Tuason.

00.without due process of law. ------------oOo------------ .000. the employer was ordered to indemnify petitioner with nominal damages in the amount of P30.