NOTES ON TERMINATION OF EMPLOYEES DUE TO AUTHORIZED CAUSES

Grounds for termination of

employment:

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

a) serious misconduct;
b) willful disobedience;
c) gross and habitual neglect of duty;
d) fraud or breach of trust;
e) commission of a crime or offense against the employer, his family or representative;
f) other similar causes. (Article 296, Labor Code)

An employer may also dismiss an employee based on the following authorized causes:
a) installation of labor-saving devices;
b) redundancy;
c) retrenchment to prevent losses; and
d) closure and cessation of business; (Article 297, Labor Code)
e) disease / illness.(Art. 298 Labor Code)

Procedure for termination of

employment:

In a termination for just cause, due process involves the two-notice rule:
a) A notice of intent to dismiss specifying the ground for termination, and giving said
employee reasonable opportunity within which to explain his or her side;
b) A hearing or conference where the employee is given opportunity to respond to the
charge, present evidence or rebut the evidence presented against him or her;
c) A notice of dismissal indicating that upon due consideration of all the circumstances,
grounds have been established to justify termination.

In a termination for an authorized cause, due process means a written notice of

dismissal to the employee specifying the grounds at least 30 days before the date of
termination. A copy of the notice shall also be furnished the Regional Office of the
Department of Labor and Employment (DOLE) where the employer is located. (Article
297, Labor Code)

Benefits due to an employee for

termination of employment due to
authorized causes:

In termination for authorized causes, separation pay is the amount given to an

employee terminated due to installation of labor-saving devices, redundancy,
retrenchment, closure or cessation of business or incurable disease.

Separation pay may also be granted to an illegally dismissed employee in lieu of

reinstatement.
In cases of installation of labor-saving devices or redundancy, the employee is entitled
to receive the equivalent of one month pay or one month for every year of service,
whichever is higher.

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

employee is entitled to receive the equivalent of one month pay or one-half month pay
for every year of service, whichever is higher. (Article 297, Labor Code)

In case of separation pay in lieu of reinstatement, the employee is entitled to receive

the equivalent of one month pay for every year of service.

Other Notes in payment of

Separation Pay vis a vis Liquidation
Proceedings:

In the event of bankruptcy or liquidation of an employer’s business, his workers shall

enjoy first preference as regards their unpaid wages and other monetary claims, any
provision of law to the contrary notwithstanding. Such unpaid wages and monetary
claims shall be paid in full before the claims of the Government and other creditors may
be paid. (Article 110, Labor Code)

However, it must be noted that what Art. 110 of the Labor Code envisions is a
preference in the application of the employer’s debts and are not in reference to liens
that attach to specific properties which are governed by Articles 2241 and 2242 of the
Civil Code.

The Liquidation Plan and its Implementation shall ensure that the concurrence and
preference of credits as enumerated in the Civil Code of the Philippines and other
relevant laws shall be observed, unless a preferred creditor voluntarily waives his
preferred right. For purposes of this chapter, credits for services rendered by employees
or laborers to the debtor shall enjoy first preference under Article 2244 of the Civil Code,
unless the claims constitute legal liens under Article 2241 and 2242 thereof. (Section 133,
Financial Rehabilitation and Insolvency Act, Underscoring supplied.)