Termination of Employment

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LAST-MINUTE
NOTES ON THE 2012 BAR EXAMINATION IN LABOR LAW BASED ON THE
SUPREME COURT-PRESCRIBED SYLLABUS
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Prof. Joselito Guianan Chan
D. TERMINATION OF EMPLOYMENT
[These 8-part Notes discuss all topics/sub-topics in the Supreme Court-prescribed

Syllabus for Labor Law]
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2. Termination of Employment
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a. Substantive Due Process
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1. Employer-Employee Relationship
a. Four-fold Test
b. Probationary Employment
c. Kinds of Employment
(1) Regular employment
(a) Reasonable connection rule
(2) Project employment
(a) Indicators of project employment
(3) Seasonal employment
(4) Casual employment
(5) Fixed term employment
(a) Requisites for validity
d. Job contracting and Labor-only contracting
(1) When is there “job contracting”?
(2) When is there “labor-only contracting”?
(3) Conditions that must concur in legitimate job contracting
(4) Effects of finding that there is labor-only contracting
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(a) Just Causes

(a) Serious misconduct or willful disobedience
i. Requisites
(b) Gross and habitual neglect of duties
i. Requisites
(c) Fraud or willful breach of trust (loss of trust and confidence)
i. Requisites
(d) Abandonment of employment; Elements that must concur
(e) Termination of employment pursuant to a Union Security Clause
(f) Totality of infractions doctrine
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(b) Authorized Causes
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b. Procedural Due Process
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(a) Redundancy, Retrenchment and Closure

i. Procedural steps required
ii. Requirements for valid retrenchment/redundancy
iii. Criteria in selecting employees for dismissal
iv. Standards to be followed
(b) Disease or illness
i. Requisites
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c. Reliefs for illegal dismissal

(1) Reinstatement aspect
(a) Immediately executory
i. Actual reinstatement
ii. Payroll reinstatement
(2) Separation pay in lieu of Reinstatement
(a) Strained Relation rule
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(1) Procedure to be observed in termination cases

(2) Guiding Principles in connection with the hearing requirements in dismissal
cases
(3) Agabon doctrine
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TOPICS UNDER THE SYLLABUS
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LABOR LAW: D. TERMINATION OF EMPLOYMENT

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(3) Backwages
(a) Components of the amount of backwages
(4) Constructive dismissal
(5) Preventive Suspension
(6) Quitclaims
(7) Termination of employment by employee
3. Retirement Pay Law
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1. FOUR‐FOLD TEST OF EMPLOYER‐EMPLOYEE RELATIONSHIP.
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a. 4‐fold test.
1. Selection and engagement of the employee;
2. Payment of wages or salaries;
3. Exercise of the power of dismissal; or
4. Exercise of the power to control the employee’s conduct.1
These tests, however, are not fool‐proof as they admit of exceptions.
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b. Control test, the controlling test.

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
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c. Some principles on employer‐employee relationship.

1. Absence of uniform test prescribed by law or jurisprudence.3
2. 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
3.
The relationship of employer and employee is contractual in nature. It may be an or
al or written contract. A
written contract is not necessary for the creation and validity of the relationship
.5
4. Stipulation in a contract not controlling in determining existence of the rela
tionship. The employment status
of a person is defined and prescribed by law and not by what the parties say it sho
uld be.6
5. The mode of paying the salary or compensation of a worker does
not preclude existence of employer‐
employee relationship. Thus, payment by commission7 or on a piece‐rate basis8 or on
a “no work, no pay” 9
basis does not affect existence of employment relationship.
6. Retainer fee arrangement does not give rise to employment relationship.10
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d. Cases where employment relationship exists.
Following the right‐of‐control test, the Supreme Court has found that
employment relationship exists in the
following cases:
1. Dispatchers of a transportation company.11
2.
Persons paid on “boundary system” basis in relation to the transport operator such
as jeepney drivers and
conductors,12 taxi drivers,13 auto‐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
Philippine Global Communications, Inc. v. De Vera, G.R. No. 157214, June 7, 2005.
Gallego v. Bayer Philippines, Inc., G.R. No. 179807, July 31, 2009, 594 SCRA 736.
Caurdanetaan Piece Workers Union v. Laguesma, G.R. No. 113542. Feb. 24, 1998, 286
SCRA 401, 426.
4 Madrigal Shipping Co. v. Melad, G.R. Nos. L-17362 & L-17367-69, Feb. 28, 1963, 7
SCRA 330.
5 Compania Maritima v. Ernesta Cabagnot Vda. De Hio, G.R. No. L-10675, April 29,
1960, 107 Phil. 873.
6 Chavez v. NLRC, [G.R. No. 146530, January 17, 2005].
7 Lazaro v. Social Security Commission, [G.R. No. 138254, July 30, 2004].
8 Lambo v. NLRC, [G.R. No. 111042, October 26, 1999, 317 SCRA 420].
9 CRC Agricultural Trading v. NLRC, [G.R. No. 177664, December 23, 2009].
10 Philippine Global Communications, Inc. v. De Vera, [G.R. No. 157214, June 7,
2005].
11 Tiu v. NLRC, G.R. No. 95845, Feb. 21, 1996.
12 National Labor Union v. Dinglasan, 52, O.G. No. 4, p. 1933, 98 Phil 648 [1956];
See also Gabriel v. Bilon, G.R. No. 146989, Feb. 7, 2007; Villamaria, Jr. v. CA,
G.R. No. 165881, April 19, 2006.
13 Jardin v. NLRC, G.R. No. 119268, Feb. 23, 2000.
14 Citizens’ League of Freeworkers v. Abbas, G.R. No. L-20946. Sept. 23, 1966, 18
SCRA 71, 73.
15 R. Transport Corporation v. Ejandra, G.R. no. 148508, May 20, 2004.
16 Paguio Transport Corporation v. NLRC, G.R. No. 119500, Aug. 28, 1998.
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TOPIC UNDER THE SYLLABUS:
a. Four-fold Test
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a. Coverage
b. Exclusions from coverage
c. Components of retirement pay
d. Retirement pay under RA 7641 vis-à-vis retirement benefits under SSS and GSIS
laws
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b. Probationary Employment
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Relevant Provision: Article 281, Labor Code
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1. PROBATIONARY EMPLOYMENT.
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b. Probationary period.
As a general rule, it should not exceed six (6) months from the date
the employee started working.24 One
becomes a regular employee upon completion of his six‐month period of probation.25
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c. Exceptions.
The six‐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 period
;
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 emp
loyment exceeds six (6)
months is undoubtedly a regular employee.26
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Buiser v. Hon. Leogardo, [G.R. No. L‐63316, July 31, 1984].

The probationary period of 18 months was considered valid in the light of the natur
e of employment of the
probationary employees. The company here is engaged in the publication
of advertisements in PLDT’s Yellow Pages
Telephone Directories. 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 repres
entatives, the evaluation being based on
the published ads.
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d. Probationary period, how reckoned and computed.

The 6‐month probationary period should be reckoned “from the date of appointment up
to the same calendar
date of the 6th month following.”27
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e. Distinction between probationary employment and fixed‐term employment.

The intention of the parties (employer and employee) is material. Both
involved fixed term or duration of
employment. However, in probationary employment, the parties intend to
make their relationship regular after the
lapse of the period. In fixed‐term employment, no such intention exists and the rel
ationship automatically terminates at
the expiration of the period.
A probationary period cannot be stipulated within the fixed period of employment.28
LVN Pictures, Inc. v. Philippine Musicians Guild, G.R. Nos. L-12582 and L-12598,
Jan. 28, 1961, 1 SCRA 132.
Ruga v. NLRC, G.R. No. 72654-61, Jan. 22, 1990; See also Teng v. Pahagac, [G.R. No.
169704, November 17, 2010; Mercidar Fishing Corporation v. NLRC, G.R. No. 112574,
Oct. 8, 1998, 297 SCRA 440.
Visayan Stevedore Transportation Company v. CIR, G.R. No. L-21696, Feb. 25, 1967,
19 SCRA 426.
20 Section 15, Rule X, Book III, Rules to Implement the Labor Code; Felix v.
Buenaseda, G.R. No. 109704 Jan. 17, 1995, 240 SCRA 139.
21 Perpetual Help Credit Cooperative, Inc. v. Faburada, [G.R. No. 121948, October
8, 2001].
22 Investment Planning Corporation v. SSS, [G.R. No. L-19124, November 18, 1967, 21
SCRA 294].
23 De la Cruz, Jr. v. NLRC, G.R. No. 145417, Dec. 11, 2003.
24 Article 281, Labor Code.
25 Voyeur Visage Studio, Inc. v. CA, G.R. No. 144939, March 18, 2005; A’ Prime
Security Services, Inc. v. NLRC, G.R. No. 107320, Jan. 19, 2000.
26 San Miguel Corp. v. Del Rosario, G.R. Nos. 168194 & 168603, Dec. 13, 2005.
27 Cebu Royal Plant [SMC] v. Deputy Minister of Labor, [G.R. No. L-58639, August
12, 1987, 153 SCRA 38]; Cals Poultry Supply Corporation v. Roco, [G.R. No. 150660,
July 30, 2002].
28 Villanueva v. NLRC, [G. R. No. 127448, September 10, 1998, 356 Phil. 638];
Servidad v. NLRC, [G.R. No. 128682, March 18, 1999, 305 SCRA 49, 55; 364 Phil.
518]; Innodata Philippines, Inc. v. Quejada-Lopez, [G.R. No. 162839, October 12,
2006].
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a. Nature of probationary employment.
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 pe
rmanent employment. During the
probationary period, the employer is given the opportunity to observe the skill, co
mpetence, 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.23
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3.
Musicians employed by a company producing motion pictures for purposes of making mu
sic recordings for
title music, background music, musical numbers, finale music and other
forms of music without which a
motion picture is not complete.17
4. 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
5.
Stevedores, although supplied to the company by the labor organization composed of
various labor unions,
are employees of the company.19
6. Resident physicians. ‐ There is employer‐employee relationship between
resident physicians and the
training hospitals unless:
a. there is a training agreement between them; and
b. the training program is duly accredited or approved by the appropriate governme
nt agency.20
7.
Employees of cooperatives, but not its members unless, the members are also employe
es thereof.21
8. Insurance agent.22
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2. TERMINATION OF PROBATIONARY EMPLOYMENT.
a. Security of tenure of probationary employees.

Within the limited legal six‐month probationary period, probationary
employees are entitled to security of
tenure notwithstanding their limited tenure and non‐permanent status.37 Hence, duri
ng their probationary employment,
they cannot be dismissed except for just or authorized cause or when he fails to qu
alify as a regular employee.38
b. Grounds to terminate probationary employment.

Under Article 281, a probationary employee may be terminated only on two (2) ground
s, to wit:
1. For a just cause or authorized cause; or
2. 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
.39
c. Some principles on termination of employment of probationary employees.

1.
Procedural due process is required only in the case of the first ground (dismissal
due to just or authorized
cause). The second ground (failure to qualify as a regular employee)
does not require notice and
hearing. Due process of law for the second ground consists of making the reasonabl
e standards expected of
the employee during his probationary period known to him at the time of his probati
onary employment.40
2. Termination to be valid must be done prior to lapse of probationary period.41
3.
Termination a few days after lapse of probationary period, cannot be done without d
ue process as he has
already become a regular employee by that time.42
4. Peremptory and arbitrary termination of probationary employees not allowed.43
5.
No obligation to pay unexpired portion in case of valid termination prior to lapse
of probationary period.44
6. Agabon doctrine45 applies if dismissal of probationary employee for
a just cause is without due process.
Thus, the termination is considered legal but the employee will be awarded an indem
nity in the form of
nominal damages of P30,000.00.46
7. Jaka doctrine47 applies if dismissal of probationary employee for an
authorized cause is without due
process. The amount of indemnity is higher: P50,000.00.
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c. Kinds of Employment
(1) Regular employment
(a) Reasonable connection rule
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1. REGULAR EMPLOYMENT.
a. Three (3) ways of attaining regular employment.

Under the Labor Code, regular employment may be attained in either of three (3) way
s, namely:
Mariwasa Manufacturing, Inc. v. Leogardo, [G.R. No. 74246, January 26, 1989]; Dusit
Hotel Nikko v. Gatbonton, [G.R. No. 161654, May 5, 2006].
International Catholic Migration Commission v. NLRC, G.R. No. 72222, Jan. 30, 1989.
Article 281, Labor Code; Philippine National Bank v. Cabansag, G.R. No. 157010,
June 21, 2005; Servidad v. NLRC, G.R. No. 128682, March 18, 1999.
32 ATCI Overseas Corporation v. CA, G.R. No. 143949, Aug. 9, 2001; A. M. Oreta &
Co., Inc. v. NLRC, G.R. No. 74004, August 10, 1989.
33 San Miguel Corp. v. Del Rosario, [G.R. Nos. 168194 and 168603, Dec. 13, 2005].
34 Octaviano, v. NLRC, [G.R. No. 88636, October 3, 1991].
35 Espina v. Hon. CA, [G.R. No. 164582, March 28, 2007].
36 Voyeur Visage Studio, Inc. v. CA, [G.R. No. 144939, March 18, 2005].
37 Philippine Daily Inquirer, Inc. v. Magtibay, Jr., G.R. No. 164532, July 24,
2007.
38 Lacuesta v. Ateneo de Manila University, G.R. No. 152777, December 9, 2005, 477
SCRA 217, 225.
39 Sections 2 [b] and 6 [c], Rule I, Book VI, Rules to Implement the Labor Code, as
amended by Article V, Department Order No. 10, Series of 1997; See also Cathay
Pacific Airways, Ltd. v. Marin, G.R. No. 148931, Sept. 12, 2006; Athenna
International Manpower Services, Inc. v. Villanos,
G.R. No. 151303, April 15, 2005; Aberdeen Court, Inc. v. Agustin, Jr., G.R. No.
149371, April 13, 2005.
40 Philippine Daily Inquirer, Inc. v. Magtibay, Jr., G.R. No. 164532, July 24,
2007; Sameer Overseas Placement Agency, Inc. v. NLRC, G.R. No. 132564, Oct. 20,
1999; Woodridge School [now known as Woodridge College, Inc.] v. Benito, [G.R. No.
160240, October 29, 2008].
41 Pasamba v. NLRC, G.R. No. 168421, June 8, 2007; See also Manila Electric Company
v. NLRC, G.R. No. 83751, Sept. 29, 1989, 178 SCRA 198, 203.
42 San Miguel Corp. v. Del Rosario, [G.R. Nos. 168194 and 168603, December 13,
2005]; Cebu Royal Plant [San Miguel Corporation] v. Hon. Deputy Minister of Labor,
[G.R. No. L-58639, August 12, 1986].
43 Cebu Marine Beach Resort v. NLRC, [G.R. No. 143252, October 23, 2003].
44 International Catholic Migration Commission v. NLRC, [G.R. No. 72222, January
30, 1989].
45 Agabon v. NLRC, [G.R. No. 158693, November 17, 2004].
46 Aberdeen Court, Inc. v. Agustin, Jr., G.R. No. 149371, April 13, 2005.
47 Jaka Food Processing Corporation v. Pacot, [G.R. 151378, March 28, 2005].
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f. Some principles on probationary employment.

1.
The probationary period may be extended but only upon the mutual agreement by the e
mployer and the
probationary employee.29
2. Purpose and not length of the probationary period is material. 30
3.
An employee who is allowed to work after a probationary period is considered a regu
lar employee.31
4.
Employment is deemed regular if the employment contract has no stipulation on proba
tionary period.32
5.
Employee is deemed regular absent any contract to prove probationary employment.33
6.
Repetitive rehiring of a probationary employee means he has become a regular employ
ee.34
7.
Regular workers of previous owner of business may be hired as probationary employee
s of new owner.35
8. Probationary employment cannot be ad infinitum.36
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1. PROJECT EMPLOYMENT.
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a. Concept.
As defined by law, project employees are those hired:
1. for a specific project or undertaking; and
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the completion or termination of such project has been determined at the time of th
eir engagement.
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b. Principal distinctions between project employment and regular employment.

1. 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 the
y were hired. Regular employees, in
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Article 280, Labor Code; Paguio v. NLRC, G.R. No. 147816, May 9, 2003, 403 SCRA
190; Viernes v. NLRC, G.R. No. 108405, April 4, 2003, 400 SCRA 557.
Article 280, Labor Code; Conti v. NLRC, G.R. No. 119253, April 10, 1997, 271 SCRA
114; Philippine Fruit & Vegetable Industries, Inc. v. NLRC, G.R. No. 122122, July
20, 1999.
Article 281, Labor Code.
51 Association of Trade Unions [ATU] v. Abella, G.R. No. 100518, Jan. 24, 2000; San
Miguel Corporation v. NLRC, G.R. 125606, Oct. 7, 1998, p. 5.
52 Brent School, Inc. v. Zamora, G.R. No. 48494, Feb. 5, 1990.
53 Labor Congress of the Philippines v. NLRC, G.R. No. 123938, May 21, 1998, 290
SCRA 509; RJL Martinez Fishing Corporation v. NLRC, G.R. Nos. L-63550-51, Jan. 31,
1984, 127 SCRA 454, 462.
54 Columbus Philippines Bus Corporation v. NLRC, [G.R. Nos. 114858-59, September 7,
2001].
55 Sonza v. ABS-CBN Broadcasting Corp., [G.R. No. 138051, June 10, 2004].
56 ABS-CBN Broadcasting Corporation v. Marquez, [G.R. No. 167638, June 22, 2005,
pp. 5-6 (Unsigned Resolution), SC E-Library]; Dumpit-Murillo v. CA, [G.R. No.
164652, June 8, 2007]; Consolidated Broadcasting System, Inc. v. Oberio, [G.R. No.
168424, June 8, 2007].
57 ABS-CBN Broadcasting Corp. v. Nazareno, [G.R. No. 164156, September 26, 2006].
58 Orozco v. The Fifth Division of the Honorable Court of Appeals, [G.R. No.
155207, August 13, 2008].
59 Id.
60 San Miguel Corporation v. NLRC, G.R. No. 80774, May 31, 1988, 161 SCRA 719, 724.
61 National Federation of Labor v. Eisma, G,R, No. L-61236, Jan. 31, 1984, 127 SCRA
419, 428.
62 Dai-ichi Electronics Manufacturing Corporation v. Villarama, Jr. G.R. No.
112940, Nov. 21, 1994, 238 SCRA 267, 271.
63 San Miguel Corporation v. Etcuban, G. R. No. 127639, Dec. 3, 1999.
64 Article 280, Labor Code; Section 5 [a], Rule I, Book VI, Rules to Implement the
Labor Code, as amended by Article IV, Department Order No. 10, Series of 1997;
Saberola v. Suarez, G.R. No. 151227, July 14, 2008, 558 SCRA 135, 142; D. M.
Consunji, Inc. v. NLRC, G.R. No. 116572,
Dec. 18, 2000; Association of Trade Unions [ATU] v. Abella, G.R. No. 100518, Jan.
24, 2000.
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2. REASONABLE CAUSAL CONNECTION RULE.
a. This rule is used not in connection with regular employment.

The reasonable causal connection rule is applied in case of conflict of
jurisdiction between labor court and
regular court. It is not used to determine regularity of employment. It is rather a
misplaced topic under this topic on
regular employment.
In any event, it is well‐recognized that not all claims involving workers and their
employers can be resolved
solely by the labor courts.60 However, the present trend is to refer worker‐
employer controversies to labor courts, unless
unmistakably provided by the law to be otherwise.61 Because of this trend, jurispru
dence has developed the “reasonable
causal connection rule.” Under this rule, if there is a reasonable causal connectio
n between the claim asserted and the
employer‐employee relations, then the case is within the jurisdiction of labor cour
ts.62 In the absence of such nexus, it is
the regular courts that have jurisdiction.63
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(2) Project employment
(a) Indicators of project employment
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1.
By nature of work. The employment is deemed regular when the employee has been eng
aged to perform
activities which are usually necessary or desirable in the usual business or trade
of the employer.48
2.
By period of service. The employment is reckoned as regular when the employee has r
endered at least one
(1) year of service, whether such service is continuous or broken, with respect to
the activity in which he is
employed and his employment shall continue while such activity exists.49
3. By probationary employment. The employment is considered regular when
the employee is allowed to
work after a probationary period.50
b. Some principles on regular employment.

1.
Written or oral agreement is immaterial in the determination of regular employment.
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2. Exception to the rule on regularity of employment in Article 280 is fixed‐
period employment. This means
that an employee may validly enter into a fixed‐term employment contract even if th
e nature of his work is
directly related to the principal business or trade of his employer.52
3.
Manner or mode of paying the wages of employee does not affect the regularity of hi
s employment. So,
even if an employee is paid on a per‐piece basis53 or on commission
basis,54 his becoming a regular
employee is not affected thereby.
4. TV and radio talents are, as a general rule, not employees but independent contr
actors.55 They have their
special skills and talents as tools. But they may become regular employees if they
were hired not as talents
(independent contractors) but as employees.56 Production Assistants are
not talents but regular
employees.57
5. A newspaper columnist is not an employee of the newspaper publishing the column.
58 But regular reporters
are employees of the newspaper.59
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c. “Work pool” principle.

As a general rule, employers may or may not form a “work pool.” A “work pool” refer
s 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. Members of a “work pool” may consist of:
1. Non‐
project employees or employees for an indefinite period. If they are employed in a
particular project,
the completion of the project or of any phase thereof will not mean
severance of employer‐employee
relationship.
2.
Project employees. 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.75
Mere membership in a “work pool” does not result in the workers’ becoming regular e
mployees by reason of
that fact alone.76 However, under established jurisprudence, a project employee wh
o is a member of a “work pool,”
may attain regular status as a project employee. This kind of employee is known as
“regular project employee.”
3. TERMINATION OF PROJECT EMPLOYMENT.
a. Some principles relevant to termination of employment.

Millennium Erectors Corporation v. Magallanes, [G.R. No. 184362, November 15,
2010]; Equipment Technical Services v. Court of Appeals, [G.R. No. 157680, October
08, 2008, 568 SCRA 122, 130].
Section 2.2., Department Order No. 19, Series of 1993.
Abesco Construction and Development Corp. v. Ramirez, G.R. No. 141168, April 10,
2006.
68 Id.
69 Hanjin Heavy Industries and Construction Co, Ltd. v. Ibañez, [G.R. No. 170181,
June 26, 2008].
70 Magcalas v. NLRC, G.R. No. 100333, March 13, 1997, 269 SCRA 453, 468.
71 Palomares v. NLRC, G.R. No. 120064, Aug. 15, 1997.
72 PLDT v. Ylagan, G.R. No. 155645, Nov. 24, 2006.
73 Salinas v. NLRC, G.R. No. 114671, Nov. 24, 1999.
74 Fabela v. San Miguel Corporation, G.R. No. 150658, Feb. 9, 2007.
75 Under Policy Instructions No. 20; Raycor Aircontrol Systems, Inc. v. NLRC, G. R.
No. 114290, Sept. 9, 1996, 261 SCRA 589.
76 Abesco Construction and Development Corp. v. Ramirez, G.R. No. 141168, April 10,
2006.
65
66
67
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contrast, enjoy security of tenure and are legally entitled to remain in the servic
e of their employer and to hold on to
their work or position until their services are terminated by any of the modes of t
ermination of service recognized under
the Labor Code.65
2. Due process likewise varies. In case of project employment, if the
termination is brought about by the
completion of the project or any phase thereof, due process is complied with even i
f no prior notice of termination is
served. For termination of regular employment, the due process required would nece
ssarily depend on the ground/s
cited. If the termination is for just cause/s, due process applicable
to Article 282 terminations applies. If due to
authorized cause/s, due process applicable to Articles 283 and 284 terminations sho
uld be followed.
2. INDICATORS OF PROJECT EMPLOYMENT.
a. 6 indicators of project employment.

Either one or more of the following circumstances, among others, may be considered
as indicator/s that an
employee is a project employee:
1. The duration of the specific/identified undertaking for which the
worker is engaged is reasonably
determinable.
2. Such duration, as well as the specific work/service to be performed,
is defined in an employment
agreement and is made clear to the employee at the time of hiring.
3.
The work/service performed by the employee is in connection with the particular pro
ject or undertaking for
which he is engaged.
4. The employee, while not employed and awaiting engagement, is free to
offer his services to any other
employer.
5.
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, w
ithin thirty (30) days
following the date of his separation from work, using the prescribed form on employ
ees’ terminations or
dismissals or suspensions.
6. An undertaking in the employment contract by the employer to pay
completion bonus to the project
employee as practiced by most construction companies.66
b. Some principles on project employment.

1.
Project employees should be informed of their status as such at inception of the em
ployment relationship.67
2.
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.68
3.
Failure to present contract of project employment means that employees are regular.
69
4.
Regular employment is inconsistent with project employment. In other words, a regul
ar employee cannot
be at the same time project employee.70
5. Intervals in employment contracts indicate project employment.71
6.
Continuous, as opposed to intermittent, rehiring shows that employee is regular.72
7. “Project‐to‐project” basis of employment held valid.73
8. Length of service not controlling determinant of employment tenure.74
6

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1. SEASONAL EMPLOYMENT.
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a. Concept.
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.86
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b. Regular seasonal employment.

Seasonal employees may attain regularity in their employment as such.
Once they attained such regularity,
they are properly to be called “regular seasonal employees.”
Regular seasonal workers are called to work from time to time, mostly during certai
n season. The nature of
their relationship with the employer is such that during off‐season,
they are temporarily laid off but they are re‐
employed during the season or when their services may be needed. They are not, stri
ctly speaking, separated from the
service but are merely considered as on leave of absence without pay until they are
re‐employed. Their employment
relationship is never severed but only suspended. As such, they can be considered
as being in the regular employment
of the employer.87
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c. Requisites for regularity of employment of seasonal employees.

The case of Hacienda Fatima v. National Federation of Sugarcane Workers ‐ Food and
General Trade, [G.R.
No. 149440, January 28, 2003], enunciates the requisites in order that a seasonal e
mployee may be deemed to have
attained regularity of employment as such, thus:
1.
The seasonal employee should perform work or services that are seasonal in nature;
and
2. They must have also been employed for more than one (1) season.
Both requisites should concur in order that the employee may be classified as regul
ar seasonal employee. If
the seasonal worker is engaged only for the duration of one (1)
season, then, he does not attain regularity of
employment as a seasonal worker.
Tomas Lao Construction, v. NLRC, G.R. No. 116781, Sept. 5, 1997.

Filipinas Pre-Fabricated Building Systems [Filsystems], Inc. v. Puente, [G.R. No.
153832, March 18, 2005].
Section 3.2., Department Order No. 19, Series of 1993, Guidelines Governing the
Employment of Workers in the Construction Industry which supersedes Policy
Instructions No. 20 of 1977; Saberola v. Suarez, G.R. No. 151227, July 14, 2008;
Salazar v. NLRC, G.R. No. 109210, April 17,
1996, 256 SCRA 273.
80 See Dacuital v. L.M. Camus Engineering Corp., [G.R. No. 176748, September 1,
2010].
81 Cioco v. C. E. Construction Corporation, G.R. No. 156748, Sept. 8, 2004.
82 Department Order No. 19, [April 1, 1993]; Cioco v. C. E. Construction
Corporation, supra; See also PLDT v. Ylagan, G.R. No. 155645, Nov. 24, 2006;
Phesco, Inc. v. NLRC, G.R. Nos. 104444-49, Dec. 27, 1994.
83 Dacuital v. L.M. Camus Engineering Corp., G.R. No. 176748, Sept. 1, 2010;
Equipment Technical Services v. CA, G.R. No. 157680, Oct. 8, 2008; Goma v. Pamplona
Plantation, Inc., G.R. No. 160905, July 4, 2008; Belle Corp. v. Macasusi, G.R. No.
168116, April 22, 2008.
84 Section 3.4. of Department Order No. 19, Series of 1993; Hanjin Heavy Industries
and Construction Co, Ltd. v. Ibañez, [G.R. No. 170181, June 26, 2008].
85 Southern Cotabato Development and Construction, Inc. v. NLRC, G.R. No. 121582,
Oct. 16, 1997, 280 SCRA 853.
86 Article 280, Labor Code; Section 5, Rule I, Book VI of the Rules to Implement
the Labor Code.
87 Abasolo v. NLRC, G.R. No. 118475, Nov. 29, 2000; Bacolod-Murcia Milling Co.,
Inc. v. NLRC, G.R. No. 84272, Nov. 21, 1991, 204 SCRA 155, 158; Visayan Stevedore
Transportation Company v. CIR, No. L-21696, Feb. 25, 1967.
77
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(3) Seasonal employment
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1.
Project employees enjoy security of tenure during the term of the project employmen
t.77
2.
If the project or the phase of the project the project employee is working on has n
ot yet been completed
and his services are terminated without just or authorized cause and there is no sh
owing that his services are
unsatisfactory, such termination is considered illegal, hence, the project
employee is entitled to
reinstatement with backwages to his former position or substantially
equivalent position. If the
reinstatement is no longer possible, the employee is entitled to his salaries for t
he unexpired portion of the
agreement.78
3.
Project employees are not, by law, 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. The
reason is that their
services are deemed coterminous with the project or phase thereof.79
4. 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. Having become regu
lar employees, they
can no longer be terminated on the basis of the completion of the project or any ph
ase thereof to which
they were deployed.80
5. Advance notice of termination of project employment, not required.81
6. Report to DOLE on termination of project employees, required.82
Report should be made after every
completion of project or phase thereof.83
7. Completion bonus as indicator of project employment.84
8. Burden of proof in termination of project employment rests on the employer.85
7

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1. CASUAL EMPLOYMENT.
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a. Meaning of casual employment.

There is casual employment where an employee is engaged to perform a job, work or s
ervice which is merely
incidental to the business of the employer, and such job, work or service is for a
definite period made known to the
employee at the time of engagement.88
1. FIXED‐TERM EMPLOYMENT.
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a. Requisites for validity of fixed‐term contracts of employment.

The two (2) requisites or criteria for the validity of a fixed‐term contract of emp
loyment are as follows:
1.
The fixed period of employment was knowingly and voluntarily agreed upon by the par
ties, without any
force, duress or improper pressure being brought to bear upon the employee and abse
nt any other
circumstances vitiating his consent; or
2.
It satisfactorily appears that the employer and employee dealt with each other on m
ore or less equal terms
with no moral dominance whatever being exercised by the former on the latter.95
If the foregoing criteria are not present, the fixed‐term contract of
employment should be struck down for
being illegal.96
b. Some principles on fixed‐term employment.

1. Fixed‐
term employment is valid even if duties are usually necessary or desirable in the e
mployer’s usual
business or trade.97
2. Notice of termination not necessary in fixed‐term employment.98
3.
Employee is deemed regular if contract failed to state the specific fixed period of
employment.99
4.
Charges for misconduct or other wrongful acts or omissions, relevant only in termin
ation prior to expiration
of the term. Not relevant if termination is due to expiration of fixed period.100
5. Employees allowed to work beyond fixed term become regular employees.101
6. Rendering work beyond one (1) year would result to regular employment.102
7. Successive renewals of fixed‐
period contracts will result to regular employment.103
8. 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.104
89
f.
Article 280, Labor Code; Section 5 [b], Rule I, Book VI, Rules to Implement the
Labor Code, as amended by Article IV, Department Order No. 10, Series of 1997;
Conti v. NLRC, G.R. No. 119253, April 10, 1997, 271 SCRA 114.
Section 5 [b], Rule I, Book VI, Rules to Implement the Labor Code, as amended by
Article IV, Department Order No. 10, Series of 1997; Capule, v. NLRC, G.R. No.
90653, Nov. 12, 1990.
Kimberly Independent Labor Union for Solidarity, Activism and Nationalism-Organized
Labor Association In Line Industries and Agriculture v. Drilon, G.R. Nos. 77629 and
78791, May 9, 1990, 185 SCRA 190; See also Kay Products, Inc. v. CA, G.R. No.
162472, July 28, 2005; Cebu
Engineering and Development Company, Inc. v. NLRC, G.R. No. 118695, April 22, 1998.
91 Kimberly-Clark [Phils.], Inc. v. Secretary of Labor, [G.R. No. 156668, November
23, 2007].
92 Tan v. Lagrama, G.R. No. 151228, Aug. 15, 2002; Romares v. NLRC, G.R. No.
122327, Aug. 19, 1998.
93 Philippine American Management Association, v. CIR, G.R. No. L-37206, April 15,
1988.
94 Brent School, Inc. v. Zamora and Alegre, [G.R. No. 48494, February 5, 1990].
95 Philippine National Oil Company-Energy Development Corporation v. NLRC, [G.R.
No. 97747, March 31, 1993]; See also Philips Semiconductors [Phils.], Inc. v.
Fadriquela, G.R. No. 141717, April 14, 2004; Labayog v. M.Y. San Biscuits, Inc.,
G.R. No. 148102, July 11, 2006; Medenilla
v. Philippine Veterans Bank, G.R. No. 127673, March 13, 2000.
96 Pure Foods Corporation v. NLRC, [G.R. No. 122563, December 12, 1997, 283 SCRA
133].
97 Caparoso v. CA, G.R. No. 155505, February 15, 2007.
98 Pangilinan v. General Milling Corporation, supra; Blancaflor v. NLRC, G.R. No.
101013, Feb. 2, 1993, 218 SCRA 366; New Sunrise Metal Construction v. Pia, G.R. No.
171131, July 10, 2007.
99 Poseidon Fishing v. NLRC, [G.R. No. 168052, February 20, 2006].
100 AMA Computer College, Paranaque, v. Austria, [G.R. No. 164078, November 23,
2007].
101 Viernes v. NLRC, [G.R. No. 108405, April 4, 2003].
102 Megascope General Services v. NLRC, [G.R. No. 109224, June 19, 1997, 274 SCRA
147, 156]; Agusan del Norte Electric Cooperative, Inc. v. Cagampang and Garzon,
[G.R. No. 167627, October 10, 2008].
103 Philips Semiconductors [Phils.], Inc. v. Fadriquela, [G.R. No. 141717, April
14, 2004].
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(a) Requisites for validity
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b. Some principles on casual employment.

1.
Casual employee becomes regular after one year of service by operation of law.89
2.
No regular appointment papers necessary for casual employees to become regular.90
3. The one (1) year period should be reckoned from the hiring date.91
4. Repeated rehiring of a casual employee makes him a regular employee.92
5.
The wages and benefits of a casual employee whose status is converted into regular
employment should
not be diminished.93
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(4) Casual employment
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8

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2. FIXED‐TERM EMPLOYMENT OF OVERSEAS FILIPINO WORKERS (OFWs).
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1. JOB CONTRACTING AND LABOR‐ONLY CONTRACTING ARRANGEMENT.
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Relevant Provisions: Articles 106 to 109, Labor Code
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=====================================================
d. Job contracting and Labor-only contracting
(1) When is there “job contracting”?
(2) When is there “labor-only contracting”?
(3) Conditions that must concur in legitimate job contracting
(4) Effects of finding that there is labor-only contracting
=====================================================
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a. “Contracting” or “subcontracting,” defined.

“Contracting” or “subcontracting” refers to an arrangement whereby a
principal or indirect or statutory
employer agrees to put out or farm out with a contractor or subcontractor the perfo
rmance or completion of a specific
job, work or service within a definite or predetermined period, regardless of wheth
er such job, work or service is to be
performed or completed within or outside the premises of the principal.118
The terms “contracting” and “subcontracting” are synonymous under
Philippine labor law. The term that is
more commonly used, however, is subcontracting.119
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b. Trilateral arrangement.
There are three (3) parties involved in these arrangements:
(1)
The principal who/which farms out a work, job, task, project or service to a contra
ctor or subcontractor;
(2) The contractor or subcontractor who/which has the capacity to
independently undertake the
performance of the work, job, task, project or service; and
(3)
The contractual workers engaged by the contractor or subcontractor to accomplish th
e work, job, task,
project or service.120
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1.1. PERMISSIBLE OR LEGITIMATE JOB CONTRACTING ARRANGEMENT.
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a. Requisites.
The following are the requisites for the validity of a job contracting arrangement:
(1)
The contractor carries on an independent business and undertakes the contract work
on his own account
under his own responsibility according to his own manner and method, free from the
control and direction
of his employer or principal (indirect/statutory employer) in all matters connected
with the performance
of the work except as to the results thereof.
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105
f.
Pure Foods Corporation v. NLRC, [G.R. No. 122653, December 12, 1997, 283 SCRA 133];
Universal Robina Corp. v. Catapang, [G.R. No. 164736, October 14, 2005].
Coca-Cola Bottlers Phils., Inc. v. De la Cruz, [G.R. No. 184977, December 7, 2009];
Pacquing v. Coca-Cola Philippines, Inc., [G.R. No. 157966, January 31, 2008];
Magsalin & Coca-Cola Bottlers Phils., Inc. v. National Organization of Working Men
(N.O.W.M.), [G.R. No. 148492, May 9,
2003].
106 Medenilla v. Philippine Veterans Bank, infra; George Anderson v. NLRC, G.R. No.
111212, Jan. 22, 1996, 252 SCRA 116; 322 Phil. 122, 137.
107 New Sunrise Metal Construction v. Pia, [G.R. No. 171131, July 10, 2007].
108 See second 2002 Resolution in Millares v. NLRC, [G.R. No. 110524, July 29,
2002, 385 SCRA 306].
109 Pentagon International Shipping, Inc. v. Adelantar, [G.R. No. 157373, July 27,
2004].
110 Gu-Miro v. Adorable, G. R. No. 160952, Aug. 20, 2004.
111 Id.
112 De La Cruz v. Maersk Filipinas Crewing, Inc., [G.R. No. 172038, April 14,
2008].
113 Millares v. NLRC, [G.R. No. 110524, July 29, 2002, 385 SCRA 306]; See also De
La Cruz v. Maersk Filipinas Crewing, Inc., G.R. No. 172038, April 14, 2008.
114 Ravago v. Esso Eastern Marine, Ltd., [G.R. No. 158324, March 14, 2005].
115 Ravago v. Esso Eastern Marine, Ltd., supra; Millares v. NLRC, supra.
116 OSM Shipping Philippines, Inc. v. NLRC, [G.R. No. 138193, March 5, 2003].
117 Delos Santos v. Jebsen Maritime, Inc., [G.R. No. 154185, November 22, 2005].
118 Section 4, Department Order No. 18-02, Series of 2002, [Feb. 21, 2002].
119 No. 1, DOLE Primer on Contracting and Subcontracting, Effects of Department
Order No. 3, Series of 2001.
104
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a. Some principles on fixed‐term employment of OFWs.

1. OFWs can never acquire regular employment. 108
2. Employment contracts of OFWs for indefinite period, not valid.109
3. OFWs do not become regular employees by reason of nature of work.110
4. Series of rehiring of OFWs cannot ripen into regular employment.111
5. CBA cannot override the terms and conditions prescribed by the
POEA under the Standard Employment
Contract for OFWs.112
6. Probationary employment of OFWs, a misnomer.113
7. The employment of OFWs for a fixed period, not discriminatory.114
8. The contracts of OFWs cease upon expiration thereof.115
9.
Hiring of seaman for overseas employment but assigning him to local vessel does not
affect his status as an
OFW.116
10. Seaman hired for overseas deployment but later assigned to domestic operations
after the expiration of his
overseas contract ceases to be an OFW.117
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9. Employment on a “day‐to‐
day basis for a temporary period” will result to regular employment.105
10. Termination prior to lapse of fixed‐term contract should be for a just or autho
rized cause.106
11. Liability for illegal dismissal of fixed‐term employee is only for salary for u
nexpired portion.107
9

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(2)
The contractor has substantial capital or investment in the form of tools, equipmen
t, machineries, work
premises, and other materials which are necessary in the conduct of the business.12
1
(3) The agreement between the principal (or indirect/statutory employer)
and contractor/ subcontractor
assures the contractual employees entitlement to all labor and occupational safety
and health standards,
free exercise of the right to self‐organization, security of tenure, and social and
welfare benefits.122
Absence of any of the requisites makes it a labor‐only contracting arrangement.123
1.2. LABOR‐ONLY CONTRACTING.
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a. Labor‐only contracting, expressly prohibited by law and the rules.

Labor‐only contracting is expressly prohibited under Article 106 of the Labor Code.
125
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c. Requisites/Elements of labor‐only contracting.
(1)
(a) the contractor/subcontractor does not have substantial capital or investment wh
ich relates to the job,
work or service to be performed and (b) the employees recruited,
supplied or placed by such
contractor/subcontractor are performing activities which are directly related to th
e main business of the
principal;126
OR
(2)
The contractor/subcontractor does not exercise the right of control over the perfor
mance of the work of
the contractual employee. (Note: Emphasis and CAPITALIZATION supplied by the Suprem
e Court in the
same case of Philippine Airlines, Inc. v. Ligan, [G.R. No. 146408, February 29, 200
8]).127
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Even if only one of the two (2) elements above is present, there is labor‐only cont
racting.
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d. Effects of a labor‐only contracting arrangement.

In summary, the following are the effects of a labor‐only contracting arrangement:
1. The labor‐
only contractor will be treated as the agent or intermediary of the principal. Sinc
e the act of an
agent is the act of the principal, representations made by the labor‐only contracto
r to the employees will
bind the principal.
2.
The principal will become the employer as if it directly employed the workers suppl
ied by the labor‐only
contractor to undertake the subcontracted job or service. It will be
responsible to them for all their
entitlements and benefits under labor laws.
3. The principal and the labor‐
only contractor will be solidarily treated as the employer.
4.
The employees will become employees of the principal, subject to the classification
s of employees under
Article 280 of the Labor Code.128
f.
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2. TESTS TO DETERMINE THE EXISTENCE OF PERMISSIBLE OR LEGITIMATE JOB CONTRACTING AR

RANGEMENT.
To determine the existence of permissible or legitimate job contracting arrangement
, the following tests may
be applied:
a. “Right of control” test;
b. “Substantial capital or investment” test; and
c. “Legal rights and benefits compliance” test.
Pr
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De los Santos v. NLRC, [G.R. No. 121327, December 20, 2001, 423 Phil. 1020, 1032];
See also Manila Electric Company v. Benamira, G.R. No. 145271, July 14, 2005;
Manila Water Co., Inc. v. Pena, G.R. No. 158255, July 8, 2004; Corporal, Sr. v.
NLRC, G.R. No. 129315, Oct. 2,
2000, 395 Phil. 890.
See also Almeda v. Asahi Glass Philippines, Inc., G.R. No. 177785, Sept. 3, 2008;
Acevedo v. Advanstar Co., Inc., G.R. No. 157656, Nov. 11, 2005; Vinoya v. NLRC,
G.R. No. 126586, Feb. 2, 2000, 324 SCRA 469.
123 Philippine School of Business Administration [PSBA]-Manila v. NLRC, G.R. No.
114143, Aug. 28, 1996; Tabas v. California Manufacturing Co., Inc., G.R. No. 80680,
Jan. 26, 1989, 169 SCRA 497.
124 Wack Wack Golf & Country Club v. NLRC, [G.R. No. 149793, April 15, 2005]; See
also San Miguel Corp. v. Semillano, G.R. No. 164257, July 5, 2010.
125 Teng v. Pahagac, G.R. No. 169704, Nov. 17, 2010.
126 Section 5, Rules Implementing Articles 106 to 109 of the Labor Code, as amended
by Department Order No. 18-02, [Series of 2002]; Philippine Airlines, Inc. v.
Ligan, [G.R. No. 146408, February 29, 2008]; See Babas v. Lorenzo Shipping Corp.,
G.R. No. 186091, Dec. 15, 2010.
127 See Article 106, Labor Code; No. 9, DOLE Primer on Contracting and
Subcontracting, Effects of Department Order No. 3, Series of 2001; See also Almeda
v. Asahi Glass Philippines, Inc., G.R. No. 177785, Sept. 3, 2008; Coca-Cola
Bottlers Phils., Inc. v. Agito, G.R. No. 179546, Feb.
13, 2009; Manila Water Co., Inc. v. Pena, G.R. No. 158255, July 8, 2004; Sandoval
Shipyards, Inc. v. Pepito, G.R. No. 143428, June 25, 2001; Escario v. NLRC, G.R.
No. 124055, June 8, 2000.
128 See Manila Electric Company v. Benamira, G.R. No. 145271, July 14, 2005; Also
Coca-Cola Bottlers Phils., Inc. v. De la Cruz, [G.R. No. 184977, December 7, 2009];
Teng v. Pahagac, [G.R. No. 169704, November 17, 2010].
121
122
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b. Labor‐only contracting, meaning.

Labor‐only contracting refers to an arrangement where the contractor
merely recruits, supplies or places
workers to perform a work, job, task, project or service for a principal.
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b. Other factors indicative of permissible job contracting arrangement.

In order to be considered an independent contractor, it is not enough
to show substantial capitalization or
investment in the form of tools, equipment, machinery and work premises. In additio
n, the following factors need to be
considered:
(1) Whether the contractor is carrying on an independent business;
(2) The nature and extent of the work;
(3) The skill required;
(4) The term and duration of the relationship;
(5) The right to assign the performance of specified pieces of work;
(6) The control and supervision of the workers;
(7)
The power of the employer with respect to the hiring, firing and payment of workers
of the contractor;
(8) The control of the premises;
(9) The duty to supply premises, tools, appliances, materials, and labor; and
(10) The mode, manner and terms of payment.124
10

2.1. RIGHT OF CONTROL TEST.
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2.2. SUBSTANTIAL CAPITAL OR INVESTMENT TEST.
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b. Right of control, meaning.

The “right to control” refers to the right reserved to the person for whom the serv
ices of the contractual workers are
performed, to determine not only the end to be achieved, but also the manner and me
ans to be used in reaching that
end. (Section 5, Department Order No. 18‐02, Series of 2002, [Feb. 21, 2002]).
Ch
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a. Substantial capital or investment test, how made.

The substantial capital or investment test seeks to address the second of the three
(3) elements of permissible
job contracting arrangement, that is, whether the contractor has substantial capita
l or investment in the form of tools,
equipment, machineries, work premises, and other materials which are necessary in t
he conduct of its business.129
If the answer is in the affirmative, the second requisite in
permissible job contracting/ subcontracting
arrangement is fully complied with.
b. Substantial capital or investment, meaning.
“Substantial capital or investment” refers to the capital stocks and
subscribed capitalization in the case of
corporations, as well as tools, equipment, implements, machineries and work premise
s, actually and directly used by the
contractor/subcontractor in the performance or completion of the job, work or servi
ce contracted out.130
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2.3. LEGAL RIGHTS AND BENEFITS COMPLIANCE TEST.

a. Element of compliance with contractual employees’ rights and benefits in permiss
ible job
contracting/subcontracting arrangement.
The legal rights and benefits compliance test addresses the third of the three (3)
elements of permissible job
contracting, that is, whether the agreement between the principal (or
indirect/statutory employer) and contractor
assures the contractual employees of the latter of their entitlement to
all labor and occupational safety and health
standards, free exercise of the right to self‐organization, security of tenure, and
social and welfare benefits.132
If answered in the positive, the third and last element of permissible

job contracting arrangement is fully
satisfied and complied with.
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b. Rights of a contractual employee.

As an employee of the contractor – his direct employer, a contractual employee is e
ntitled to all the rights and
privileges due a regular employee as provided for in the Labor Code. Such rights in
clude the following:
(a) Safe and healthful working conditions;
(b)
Labor standards such as service incentive leave, rest days, overtime pay, holiday p
ay, 13th‐month pay and
separation pay;
(c) Social security and welfare benefits;
(d) Self‐organization, collective bargaining and peaceful concerted action; and
(e) Security of tenure.133
3. MAJOR DISTINCTIONS BETWEEN LEGITIMATE JOB CONTRACTING AND LABOR‐ONLY CONTRACTING

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The principal distinctions between legitimate and permissible job contracting, on t

he one hand, and the
prohibited labor‐only contracting, on the other, may be summed up as follows:
1. In the former, no employer‐employee relationship exists between the
contractual employees of the job
contractor and the principal; while in the latter, an employer‐employee
relationship is created by law
between the principal and the contractual employees of the labor‐only contractor.13
4
2. In the former, the principal is considered only an “indirect
employer,” as this term is understood under
Article 107 of the Labor Code; while in the latter, the principal is considered the
“direct employer” of the
contractual employees in accordance with the last paragraph of Article 106 of the L
abor Code.135
Manila Electric Company v. Benamira, G.R. No. 145271, July 14, 2005; Manila Water
Co., Inc. v. Pena, G.R. No. 158255, July 8, 2004; Corporal, Sr. v. NLRC, G.R. No.
129315, Oct. 2, 2000, 395 Phil. 890.
Section 5, Department Order No. 18-02, Series of 2002, [Feb. 21, 2002]; No. 8, DOLE
Primer on Contracting and Subcontracting, Effects of Department Order No. 3, Series
of 2001.
Neri v. NLRC, G.R. Nos. 97008-09, July 23, 1993, 224 SCRA 7171.
132 See also Acevedo v. Advanstar Co., Inc., G.R. No. 157656, Nov. 11, 2005; Vinoya
v. NLRC, G.R. No. 126586, Feb. 2, 2000, 324 SCRA 469.
134 PCI Automation Center, Inc. v. NLRC, G.R. No. 115920, Jan. 29, 1996 citing
Philippine Bank of Communications v. NLRC, G.R. No. 66598, Dec. 19, 1986, 146 SCRA
347.
135 PCI Automation Center, Inc. v. NLRC, supra.
129
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131
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c. “Substantial capital” and “investment in tools, etc.” are two separate requireme
nts.
Jurisprudentially, “substantial capital” and “investment in tools, equipment, imple
ments, machineries and work
premises” should be treated as two (2) distinct and separate factors in
determining whether permissible job
contracting/subcontracting arrangement exists in a certain case.131
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a. Right of control test, how made.

The “right of control” test basically addresses the first of the three (3) elements
of permissible job contracting
arrangement, that is, whether the contractor carries on an independent business and
undertakes the contract work on
his own account under his own responsibility according to his own
manner and method, free from the control and
direction of his employer or principal (indirect/statutory employer) in all matters
connected with the performance of the
work except as to the results thereof.
If the issue is answered in the affirmative, then the first requisite of permissibl
e job contracting arrangement is
fully satisfied.
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3. In the former, the joint and several obligation of the principal and the legit
imate job contractor is only for a
limited purpose, that is, to ensure that the employees are paid their wages. Other
than this obligation of
paying the wages, the principal is not responsible for any claim made by the contra
ctual employees; while in
the latter, the principal becomes solidarily liable with the labor‐only contractor
for all the rightful claims of
the contractual employees.136
4. In the former, the legitimate job contractor/subcontractor undertakes
to perform a specific job for the
principal; while in the latter, the labor‐only contractor merely provides
the personnel to work for the
principal.137
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Relevant Provisions: Articles 277 [b], 279, 282 and 283, Labor Code
1. STATUTORY BASiS OF DUE PROCESS.
a.
Due process in termination of employment refers to statutory, and not constitutiona
l, due process.
144
It is now the prevailing doctrine that it is not the due process provided in the Co
nstitution that is required in
termination of employment but the statutory due process provided under
Article 277 [b] of the Labor Code.
“Constitutional due process” protects the individual from the government and assure
s him of his rights in criminal, civil
or administrative proceedings; while “statutory due process” protects
employees from being unjustly terminated
without just cause after notice and hearing. Put differently, the Bill of Rights is
not meant to be invoked against acts of
private individuals like employers. Private actions, no matter how
egregious, cannot violate the constitutional
guarantees.
b. Other constitutional rights that cannot be invoked in administrative or labor ca

ses.
For the same reason that the due process clause in the Constitution cannot be invok
ed against the employer,
the following constitutional rights have no application to administrative or labor
cases:
1. Right against self‐incrimination145 except if the case partakes of
the character of a criminal proceeding
because of the nature of the penalty that may be imposed for the offense.146
2. Right to counsel147 because it is meant to protect a suspect in a
criminal case who is under custodial
investigation.148 But if the employer failed to inform the employee who
is undergoing administrative
investigation of his right to counsel, it would amount to deprivation of due proces
s.149
3.
Right to equal protection of the laws150 because it is addressed only to the state
or those acting under color
of its authority.151
Id.; Coca-Cola Bottlers Phils., Inc. v. Agito, G.R. No. 179546, Feb. 13, 2009.
PCI Automation Center, Inc. v. NLRC, supra.
Section 7, Department Order No. 18-02, Series of 2002, [Feb. 21, 2002]; Aboitiz
Haulers, Inc. v. Dimapatol, G.R. No. 148619, Sept. 19, 2006.
139 Section 14, Ibid..
140 Acevedo v. Advanstar Co., Inc., [G.R. No. 157656, November 11, 2005].
141 Babas v. Lorenzo Shipping Corp., [G.R. No. 186091, December 15, 2010].
142 Lakas sa Industriya ng Kapatirang Haligi ng Alyansa-Pinagbuklod ng Manggagawang
Promo ng Burlingame v. Burlingame Corporation, [G.R. No. 162833, June 15, 2007].
143 SSS v. CA, [G.R. No. 100388, December 14, 2000].
144 Section 1, Article III [Bill of Rights], 1987 Constitution which states that
“no person shall be deprived of life, liberty or property without due process of
law, nor shall any person be denied the equal protection of the laws.”; Per Agabon
v. NLRC, [G.R. No. 158693, November 17,
2004].
145 Section 17, Article III [Bill of Rights], 1987 Constitution.
146 Pascual, Jr. v. Board of Medical Examiners, G.R. No. L-25018, May 26, 1969;
Cabal v. Kapunan, Jr., G.R. No. L-19052, Dec. 29, 1962.
148 Manuel v. N. C. Construction Supply, G.R. No. 127553, Nov. 28, 1997, 282 SCRA
326.
149 Punzal v. ETSI Technologies, Inc., [G.R. Nos. 170384-85, March 9, 2007].
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4. SOME PRINCIPLES ON LEGITIMATE JOB CONTRACTING AND LABOR‐ONLY CONTRACTING.
1.
Contractor, not the principal, is considered the “direct” employer of the contractu
al employees.
2.
Principal is deemed direct employer of the contractual employees in any of the foll
owing cases:
(a) Where there is labor‐only contracting; or
(b)
Where the contracting arrangement falls within the prohibitions provided in Section
6 (Prohibitions)
thereof.138
3.
Duty to produce copy of the contract devolves upon both the principal and the contr
actor.139
4. Performance of the work within or outside the premises of the principal, not mat
erial in determining the
validity of job contracting arrangement.140
5. The fact that the contractor has only the principal as its single client indicat
es labor‐only contracting.141
6. Stipulation in the contract on non‐existence of employment
relationship between the principal and the
employees of the contractor, not controlling.142
7. In case of doubt, one must be classified as an employee, not as an independent c
ontractor.143
==============================
(a) Just Causes
==============================
12

4. Right against unreasonable searches and seizures152 because it does

not protect citizens from
unreasonable searches and seizures perpetrated by private individuals like employer
s.153
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c. Do employers have the right to due process?

Yes, for while the intendment of our laws is to favor the employee, however, in no
way is it implied that the
employer is not entitled to due process.154
2. SUBSTANTIVE AND PROCEDURAL ASPECTS OF DUE PROCESS.
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b. Just causes and authorized causes, distinguished.

A dismissal based on a just cause means that the employee has committed a wrongful
act or omission; while a
dismissal based on an authorized cause means that there exists a ground which the l
aw itself allows to be invoked to
justify the termination of an employee even if he has not committed any wrongful ac
t or omission such as installation of
labor‐saving devices, redundancy, retrenchment, closure or cessation of business op
erations156 or disease.157
c. Procedural due process varies depending on the ground/s invoked.
Based on law and jurisprudence, it is clear that the procedural due process require
d to validly terminate an
employee depends on the ground invoked.
If for just cause, due process means compliance with the requirements of (1) servic
e of first written notice to
explain, (2) hearing and (3) second written notice of termination.
If for authorized cause, due process means compliance with the
requirement of service of notice to the
employee to be terminated and notice to the DOLE at least one (1) month prior to th
e effectivity of the termination. No
hearing is required.
(See further discussion on this topic under the heading of “Procedural Due Process”
below).
==============================
(a) Just Causes
(a) Serious misconduct or
willful disobedience
i. Requisites
==============================
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Relevant Provision: Article 282 [a], Labor Code
1. SERIOUS MISCONDUCT.
a. Requisites.
For misconduct or improper behavior to be a just cause for dismissal, the following
requisites must concur:
1. It must be serious;
2. It must relate to the performance of the employee’s duties; and
3.
It must show that the employee has become unfit to continue working for the employe
r.158
All the 3 requisistes must concur.159
b. Some principles on serious misconduct.

1. The charge for serious misconduct must not be a mere afterthought.160
2.
Series of irregularities, when put together, may constitute serious misconduct.161
3. Acts destructive of the morale of co‐
employees constitute serious misconduct.162
4.
Committing libel against an immediate superior constitutes serious misconduct.163
Yrasuegui v. Philippine Airlines, Inc., [G.R. No. 168081, October 17, 2008]; Duncan
Association of Detailman-PTGWO v. Glaxo Welcome Philippines, Inc., [G.R. No.
162994, September 17, 2004].
Section 2, Article III, 1987 Constitution.
Waterous Drug Corporation v. NLRC, G.R. No. 113271, Oct. 16, 1997, 280 SCRA 735.
154 Unicraft Industries International Corporation v. CA, [G.R. No. 134903, March
26, 2001]; EDI-Staffbuilders International, Inc. v. NLRC, [G.R. No. 14558, October
26, 2007]; PLDT v. Honrado, G.R. No. 189366, Dec. 8, 2010.
155 Pascua v. NLRC, G.R. No. 123518, March 13, 1998; Manila Electric Co. [MERALCO]
v. NLRC, G.R. No. 153180, Sept. 2, 2005; St. Luke’s Medical Center, Inc. v.
Notario, G.R. No. 152166, Oct. 20, 2010; Lima Land, Inc. v. Cuevas, G.R. No.
169523, June 16, 2010.
158 Roquero v. Philippine Air Lines, Inc., G.R. No. 152329, April 22, 2003.
159 Coca-Cola Bottlers, Phils., Inc. v. Kapisanan ng Malayang Manggagawa sa Coca-
Cola-FFW, G.R. No. 148205, Feb. 28, 2005.
160 Coca-Cola Export Corp. v. Gacayan, [G.R. No. 149433, December 15, 2010].
161 Piedad v. Lanao del Norte Electric Cooperative, Inc., G.R. No. 73735, Aug. 31,
1987, 153 SCRA 500; See also Quiambao v. Manila Electric Company, G.R. No. 171023,
Dec. 18, 2009.
162 Citibank, N.A. v. NLRC, G.R. No. 159302, Feb. 6, 2008.
163 Torreda v. Toshiba Information Equipment [Phils.], Inc., [G.R. No. 165960,
February 8, 2007].
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a. Two‐fold due process requirement.

The requirement of due process is two‐fold, namely:
1. Substantive aspect which means that the dismissal must be for any
of the just causes provided under
Article 282 of the Labor Code or the company rules and regulations promulgated by t
he employer or any of
the authorized causes under Articles 283 and 284 thereof; and
2.
Procedural aspect which means that the employee must be accorded due process, the e
lements of which
are notice and the opportunity to be heard and to defend himself.155
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==============================
(a) Just Causes
(a) Serious misconduct or
willful disobedience
i. Requisites
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1. INSURBORDINATION OR WSILLFUL DISOBEDIENCEE OF THE LAWFUL ORDER OF THE EMPLOYER.
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Roquero v. Philippine Air Lines, Inc., [G.R. No. 152329, April 22, 2003];
Plantation Bay Resort and Spa v. Dubrico, [G.R. No. 182216, December 4, 2009].
Santos, Jr. v. NLRC, G.R. No. 115795, March 6, 1998, 287 SCRA 117.
Navarro III v. Damasco, [G.R. No. 101875, July 14, 1995].
167 Stanford Microsystems, Inc. v. NLRC, [G.R. No. L-74187, January 28, 1988].
168 Chua-Qua v. Clave, [G.R. No. L-49549, August 30, 1990, 189 SCRA 117].
169 Garcia v. NLRC, G. R. No. 116568, Sept. 3, 1999; Supreme Steel Pipe Corp. v.
Bardaje, [G.R. No. 170811, April 24, 2007].
170 Flores v. NLRC, [G.R. No. 109362, May 15, 1996, 256 SCRA 735].
171 Luzon Stevedoring Corporation v. CIR, G.R. No. L-18683, Dec. 31, 1965.
172 Haverton Shipping Ltd. v. NLRC, [G.R. No. 65442, April 15, 1985, 135 SCRA 685].
173 Echeverria v. Venutek Medika, Inc., G.R. No. 169231, Feb. 15, 2007; Solid
Development Corporation Workers Association (SDCWA-UWP) v. Solid Development
Corporation, [G.R. No. 165995, August 14, 2007].
174 Golden Thread Knitting Industries v. NLRC, G.R. No. 119157, March 11, 1999.
175 Dimalanta v. Secretary of Labor, [G.R. No. 83854, May 24, 1989].
176 ABS-CBN Employees Union v. NLRC, G.R. No. 111211, July 24, 1997, 276 SCRA 123.
177 Elizalde International [Phils.], Inc. v. CA, G.R. No. L-40553, February 26,
1981, 103 SCRA 247.
178 Aboc v. Metropolitan Bank and Trust Company, [G.R. Nos. 170542-43, December 13,
2010].
179 PLDT v. NLRC, [G.R. No. 74562, July 31, 1987].
180 Lopez v. NLRC, [G.R. No. 167385, December 13, 2005, 477 SCRA 596, 602].
181 Panuncillo v. CAP Philippines, Inc., [G.R. No. 161305, February 9, 2007].
182 Sanyo Travel Corporation v. NLRC, G.R. No. 121449, Oct. 2, 1997; Club Filipino,
Inc. v. Sebastian, G.R. No. 85490, July 23, 1992, 211 SCRA 717.
183 Padilla v. NLRC, G.R. No. 114764, June 13, 1997, 273 SCRA 457.
184 R.A. No. 7877 (Anti-Sexual Harassment Act); Villarama v. NLRC and Golden
Donuts, Inc., G.R. No. 106341, Sept. 2, 1994, 236 SCRA 280.
185 First Dominion Resources Corp. v. Peñaranda and Vidal, [G.R. No. 166616,
January 27, 2006].
186 Tanduay Distillery Labor Union v. NLRC, G.R. No. 73352, Dec. 06, 1995.
187 Nagkakaisang Lakas ng Manggagawa sa Keihin (NLMK-OLALIA-KMU) v. Keihin
Philippines Corp., [G.R. No. 171115, August 9, 2010].
188 Villamor Golf Club v. Pehid, [G.R. No. 166152, October 4, 2005].
189 Ramoran v. Jardine CMG Life Insurance Co., Inc., [G.R. No. 131943, February 22,
2000].
190 San Miguel Corporation v. NLRC, [G.R. No. 82467, June 29, 1989].
191 Ibarrientos v. NLRC, [G.R. No. 75277, July 31, 1989].
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a. Company rules and regulations, requisites.

Lawful orders of the employers are usually expressed by way of company rules and re
gulations (CRR). In order
that insubordination or willful disobedience by an employee of the orders, regulati
ons or instructions of the employer
may constitute a just cause for terminating his employment, said orders, regulation
s, or instructions must be:
164
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5.
Possession or use of shabu or other drugs, a valid ground to terminate employment.1
64
6.
Immorality, as a general rule, is not a just ground to terminate employment. The e
xception is when such
immoral conduct is prejudicial or detrimental to the interest of the employer .
165
7.
Immoral act committed beyond office hours is a valid ground to terminate employment
.166
8. Sexual intercourse inside company premises constitutes serious misconduct.167
9. The act of a 30‐year old lady teacher in falling in love with a 16‐
year old student, not immoral.168
10. 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.169
11. Filing of criminal case by an employee does not indicate his innocence.170
12. Challenging superiors to a fight, a just cause for termination.171
13. Assaulting another employee, a just cause for termination.172
14.
Utterance of obscene, insulting or offensive words constitutes serious misconduct.1
73
15.
Disrespectful conduct is not serious misconduct if provoked by superior or employer
.174
16. Gambling within company premises, a serious misconduct.175
17.
Rendering service to business rival, a just cause to terminate employment.176
18. Selling products of a competitor, a just cause for termination.177
19. Organizing a credit union by employees in a bank, a serious misconduct.178
20. Deceiving a customer for personal gain, a just cause for termination.179
21.
Contracting work in competition with employer constitutes serious misconduct.180
22.
Employer need not suffer any damages resulting from a serious misconduct committed
by an employee
against a customer.181
23.
Intoxication which interferes with the employee’s work constitutes serious miscondu
ct.182
24. The act of a teacher in pressuring a colleague to change the
failing grade of a student is serious
misconduct.183
25. Sexual harassment is a just ground to dismiss.184
26. Sleeping while on duty is a ground for termination.185
27. Dismissal is too harsh a penalty for eating while at work.186
28. Pilferage or theft of company‐
owned property is a just cause to terminate.187
29.
Theft of funds or property not owned by employer, not a ground to terminate.188
30. Act of falsification, a valid ground to terminate employment.189
31. Punching‐
in of time cards of other employees, a just cause for termination.190
32. Circulating fake meal tickets, a just cause for termination.191
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Relevant Provision: Article 282 [b], Labor Code
1. GROSS AND HABITUAL NEGLECT OF DUTIES.
a. Requisites.
1.
The negligence must be gross in character which means absence of that diligence tha
t an ordinarily prudent
203
man would use in his own affairs.
2. Habituality may be disregarded if negligence is gross or the damage
or loss is substantial. 204“Habitual
negligence” implies repeated failure to perform one’s duties for a
period of time, depending upon the
circumstances.205
b. Test to determine negligence.

The test to determine the existence of negligence is as follows: Did the employee,
in doing the alleged negligent
act, use that reasonable care and caution which an ordinarily prudent person would
use in the same situation?206
c. Some principles on gross and habitual neglect of duties.

1. Simple negligence is not sufficient to terminate employment.207
2. Negligence is a question of fact.208
3. Absence of any form of negligence, dismissal is illegal.209
4. Actual damage, loss or injury, not an essential requisite.210
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f.
Ace Promotion and Marketing Corp. v. Ursabia, G.R. No. 171703, Sept. 22, 2006;
Genuino Ice Company, Inc. v. Magpantay, G.R. No. 147790, June 27, 2006.
Equitable PCI Bank v. Dompor, G.R. Nos. 163293 & 163297, Dec. 8, 2010; St. Luke’s
Medical Center, Incorporated v. Fadrigo, G.R. No. 185933, Nov. 25, 2009, 605 SCRA
728, 738.
Alcantara, Jr. v. CA, [G.R. No. 143397, August 6, 2002].
195 Petron Corp. v. NLRC, [G.R. No. 154532, October 27, 2006].
196 Ace Promotion and Marketing Corp. v. Ursabia, [G.R. No. 171703, September 22,
2006].
197 Id.
198 ePacific Global Contact Center, Inc. v. Cabansay, [G.R. No. 167345, November
23, 2007].
199 Llosa-Tan v. Silahis International Hotel, [G.R. No. 77457, February 5, 1990].
200 Santos v. San Miguel Corporation, [G.R. No. 149416, March 14, 2003].
201 R.B. Michael Press v. Galit, [G.R. No. 153510, February 13, 2008].
202 San Miguel Corp. v. Pontillas, G.R. No. 155178, May 7, 2008; Westin Philippine
Plaza Hotel v. NLRC, G.R. No. 121621, May 3, 1999.
203 Chavez v. NLRC, G.R. No. 146530, Jan. 17, 2005; Union Motor Corporation v.
NLRC, G.R. No. 159738, Dec. 9, 2004; Sec. 4343.01[2], Department of Labor Manual.
204 Fuentes v. NLRC, [G.R. No. 75955, October 28, 1988]; Associated Bank v. NLRC,
[G.R. No. 86023, June 29, 1989].
205 Premiere Development Bank v. Mantal, G.R. No. 167716, March 23, 2006, 485 SCRA
234, 239.
206 Reyes v. Maxim’s Tea House, [G.R. No. 140853, February 27, 2003].
207 St. Luke’s Medical Center, Inc. v. Notario, G.R. No. 152166, Oct. 20, 2010;
Talidano v. Falcon Maritime & Allied Services, Inc., G.R. No. 172031, July 14,
2008.
208 School of the Holy Spirit of Quezon City v. Taguiam, G.R. No. 165565, July 14,
2008; Reyes v. Maxim’s Tea House, G.R. No. 140853, Feb. 27, 2003.
209 St. Luke’s Medical Center, Inc. v. Notario, [supra].
210 Sec. 4343.01[2], Department of Labor Manual.
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1. lawful and reasonable;

2. sufficiently known to the employee; and
3.
in connection with the duties for which the employee has been engaged to discharge.
192
b. Insubordination or willful disobedience; requisites.

In order for the ground of “willful disobedience” to be considered a just cause to
terminate employment, the
following requisites must concur:
1.
The employee’s assailed conduct must have been willful or intentional, the willfuln
ess being characterized
by a wrongful and perverse attitude; and
2. The order violated must have been reasonable and lawful and made
known to the employee and must
pertain to the duties for which he has been engaged to discharge.193
c. Some principles on insubordination.

1.
Filing of a case questioning validity of rules and policies does not prevent employ
er from enforcing them.194
2. Making false allegations in complaint does not constitute insubordination.195
3. Failure to answer memo to explain constitutes willful disobedience.196
4.
Another notice is required in case of termination on the ground of failure to answe
r memo to explain.197
5.
Willfulness of conduct may be deduced from the manner the reply is written.198
6. Refusal to undergo random drug testing constitutes insubordination.
7. Unauthorized encashment of check is a just cause to terminate.199
8. Prolonged practice, not an excuse for commission of wrongful acts.200
9.
Refusal to render overtime to meet production deadline constitutes insubordination.
201
10. Refusal to comply with a lawful transfer constitutes insubordination.202
===============================
(a) Just Causes
(b) Gross and habitual neglect
of duties
i. Requisites
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Relevant Provision: Article 282 [c], Labor Code
1. ARTICLE 282 [c] CONTEMPLATES TWO (2) SEPARATE GROUNDS.
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2. FRAUD.
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Article 282 [c] of the Labor Code prescribes two (2) separate and distinct grounds
for termination of
employment, to wit:
1. Fraud; or
2. Willful breach by the employee of the trust reposed in him by his
employer or duly authorized
representative.
Commission of fraud by an employee against the employer will necessarily result in
the latter’s loss of trust and
confidence in the former. On the other hand, the ground of willful breach by the em
ployee of the trust and confidence
reposed in him by the employer may not necessarily involve fraud but some other act
s that would similarly result in the
loss of such trust and confidence.
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a. Concept.
The circumstances evidencing fraud and misrepresentation are as varied as the peopl
e who perpetrate it, each
assuming different shapes and forms and may be committed in as many different ways.
Fraud and misrepresentation
are, therefore, never presumed; it must be proved by clear and convincing evidence
and not mere preponderance of
evidence.221
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b. Some principles on fraud.

1. Lack of damage or losses not necessary in fraud cases.222
2. Restitution does not have absolutory effect.223
3. Failure to deposit collection constitutes fraud.224
4.
Lack of misappropriation or shortage is immaterial in case of unauthorized encashme
nt of personal checks
by teller and cashier.225
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3. WILLFUL BREACH OF TRUST AND CONFIDENCE.
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a. Requisites.
The following requisites should concur for the doctrine of loss of trust and confid
ence to apply:
1. The loss of confidence must not be simulated;
2.
It should not be used as a subterfuge for causes which are illegal, improper or unj
ustified;
3.
It may not be arbitrarily asserted in the face of overwhelming evidence to the cont
rary;
4.
It must be genuine, not a mere afterthought, to justify earlier action taken in bad
faith; and
5. The employee involved holds a position of trust and confidence.226
Dycoco, Jr. v. Equitable PCI Bank (now Banco de Oro), [G.R. No. 188271, August 16,
2010].
Id,
Oriental Mindoro Electric Cooperative, Inc. v. NLRC, G.R. No. 111905, July 31,
1995; Atlas Consolidated Mining and Development Corporation v. NLRC, G.R. No.
75751, Oct. 17, 1990, 190 SCRA 505.
214 Genuino Ice Company, Inc. v. Magpantay, [G.R. No. 147790, June 27, 2006].
215 Valiao v. Hon. CA, [GR. No. 146621, July 30, 2004, 435 SCRA 543]; Philippine
Geothermal, Inc. v. NLRC, G.R. No. 106370, Sept. 8, 1994; Sajonas v. NLRC, G.R. No.
49286, March 15, 1990; Manila Electric Company v. NLRC, G.R. No. 114129, Oct. 24,
1996.
216 Quiambao v. Manila Electric Company, [G.R. No. 171023, December 18, 2009].
217 PLDT v. Teves, [G.R. No. 143511, November 15, 2010]; Navarro v. Coca-Cola
Bottlers Phils., Inc., [G.R. No. 162583, June 8, 2007].
218 Erector Advertising Sign Group, Inc. v. NLRC, [G.R. No. 167218, July 2, 2010].
219 Union Motor Corporation v. NLRC, [G.R. No. 159738, December 9, 2004].
220 Miranda v. Carreon, G.R. No. 143540, April 11, 2003, 401 SCRA 303, 309.
221 Solidbank Corporation v. Mindanao Ferroalloy Corporation, G.R. No. 153535, July
28, 2005, 464 SCRA 409, 426.
222 Villanueva v. NLRC, G. R. No. 129413, July 27, 1998; Diamond Motors Corporation
v. CA, [G.R. No. 151981, December 1, 2003].
223 Gonzales v. NLRC and Pepsi-Cola Products, Phils., Inc., [G.R. No. 131653, March
26, 2001].
224 Aldeguer & Co., Inc./Loalde Boutique v. Tomboc, [G.R. No. 147633, July 28,
2008].
225 Central Pangasinan Electric Cooperative, Inc. v. Macaraeg, [G.R. No. 145800,
January 22, 2003].
226 The Coca-Cola Export Corp. v. Gacayan, G.R. No. 149433, Dec. 15, 2010;
Equitable PCI Bank v. Dompor, G.R. Nos. 163293 & 163297, Dec. 8, 2010 ; Rubia v.
NLRC, G.R. No. 178621, July 26, 2010.
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(a) Just Causes
(c) Fraud or willful breach of trust
(loss of trust and confidence)
i. Requisites
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5. Higher degree of diligence in the banking industry.211

6. Gross negligence may result to loss of trust and confidence.212
7.
Absences, if authorized, cannot be cited as a ground to terminate employment.213
8.
Tardiness or absenteeism, if not habitual, cannot be cited as a ground to terminate
employment.214
9.
Tardiness or absenteeism, if habitual, may be cited as a ground to terminate employ
ment.215
10.
Tardiness or absenteeism, if habitual, may be tantamount to serious misconduct.216
11.
Absences or tardiness due to emergency, ailment or fortuitous event are justified.2
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12.
Mere allegation on absences/tardiness, not sufficient; burden of proof is on the em
ployer.218
13. Unblemished record belies allegation of gross and habitual neglect.219
14.
Unsatisfactory or poor performance, inefficiency or incompetence, considered a just
cause for dismissal
only if it amounts to gross and habitual neglect of duties.220
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b. Position of trust and confidence, meaning.

“Position of trust and confidence.” is one where a person is “entrusted with confi
dence on delicate matters,”
or with the custody, handling, or care and protection of the employer’s property.22
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c. Two (2) classes of positions of trust and confidence.

1. Managerial positions.
2. Non‐
managerial positions whose holders thereof regularly handle significant amounts of
money or property
in the normal and routine exercise of their functions.228 Some positions so classif
ied are:
a. Supervisor.229
b. Salesman.230
c. Teller.231
d. Cashier.232
e. Engineer.233
f. Security guard or security officer.234
g. Roomboy or chambermaid.235
h. Assistant Cook or Chief Cook.236
i. Chief Purser.237
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e. Some principles on the doctrine of loss of trust and confidence.

1. Breach must be willful and without justifiable excuse.241
2. Ordinary breach of trust will not suffice.242
3. Breach must be founded on clearly established facts.243
4. Breach must be work‐related.244
5. Loss of confidence must not be a mere afterthought.245
6. Employee’s position must be reposed with trust and confidence.246
7. In termination for loss of trust and confidence, the fact that the
employer did not suffer losses is of no
moment.247
8. Employer has burden of proof.248
9. 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 that the concerned emplo
yee is responsible for
the misconduct and that the nature of his participation therein rendered him absolu
tely unworthy of trust
and confidence demanded by his position.249
10.
Dismissal due to feng shui mismatch, not valid ground to lose trust and confidence.
250
11. Command responsibility of managerial employees, a ground to dismiss.251
12. Confidential employee may be dismissed for loss of trust and confidence.252
13. Grant of promotions and bonuses negates loss of trust and confidence.253
14. Long years of service, absence of derogatory record and small
amount involved, when deemed
inconsequential insofar as loss of trust and confidence is concerned.254
15. Dropping of criminal charges or acquittal in a criminal case
arising from the same act does not affect
validity of dismissal based on loss of trust and confidence. 255
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Lepanto Consolidated Mining Co. v. CA, [G.R. No. L-15171, April 29, 1961, 1 SCRA
1251].
Bristol Myers Squibb [Phils.], Inc. v. Baban, [G.R. No. 167449, December 17, 2008];
See also Mabeza v. NLRC, G.R. No. 118506, April 18, 1997, 271 SCRA 670.
Coca-Cola Bottlers, Phils., Inc. v. Kapisanan ng Malayang Manggagawa sa Coca-Cola-
FFW, G.R. No. 148205, Feb. 28, 2005; Tan vs. NLRC, G. R. No. 128290, Nov. 24, 1998,
299 SCRA 169, 183.
230 Coca-Cola Bottlers, Phils., Inc. vs. Kapisanan ng Malayang Manggagawa sa Coca-
Cola-FFW, G. R. No. 148205, Feb. 28, 2005.
231 Central Pangasinan Electric Cooperative, Inc. vs. Macaraeg, [G. R. No. 145800,
January 22, 2003].
232 Central Pangasinan Electric Cooperative, Inc. vs. Macaraeg [supra] and Metro
Drug Corporation vs. NLRC, [G.R. No. 72248, July 22, 1986, 143 SCRA 132],
233 Almoite vs. Pacific Architects, G. R. No. 73680, July 10, 1986.
234 Nasipit Lumber Co., Inc. vs. NLRC, G. R. No. L-54424, Aug. 31, 1989; Cañete vs.
NLRC, G. R. No. 130425, Sept. 30, 1999.
235 Manila Midtown Commercial vs. NUWHRAIN [Ramada Chapter], G. R. No. L-57268,
March 25, 1988.
236 Concorde Hotel vs. CA, G. R. No. 144089, Aug. 9, 2001.
237 Etcuban, Jr. vs. Sulpicio Lines, Inc., G. R. No. 148410, Jan. 17, 2005.
238 The Coca-Cola Export Corp. v. Gacayan, G.R. No. 149433, Dec. 15, 2010.
239 Lamsan Trading, Inc. v. Leogardo, G.R. No. 73245, Sept. 30, 1986; Metro Drug
Corporation v. NLRC, G.R. No. 72248, July 22, 1986; Gonzales v. NLRC and Pepsi-Cola
Products, Phils., Inc., G.R. No. 131653, March 26, 2001.
240 Alcantara v. The Philippine Commercial and Industrial Bank, G.R. No. 151349,
Oct. 20, 2010; PLDT v. Buna, G.R. No. 143688, Aug. 17, 2007.
241 Baron v. NLRC, G.R. No. 182299, Feb. 22, 2010; St. Lukes Medical Center v.
Fadrigo, G.R. No. 185933, Nov. 25, 2009.
242 Salas v. Aboitiz One, Inc., G.R. No. 178236, June 27, 2008, 556 SCRA 374, 388.
243 Asia Pacific Chartering [Phils.], Inc. v. Farolan, G.R. No. 151370, Dec. 4,
2002.
244 Alcantara v. The Philippine Commercial and Industrial Bank, G.R. No. 151349,
Oct. 20, 2010.
245 Salas v. Aboitiz One, Inc., [G.R. No. 178236, June 27, 2008].
246 Panday v. NLRC, G.R. No. 67664, May 20, 1992, 209 SCRA 122, 125-126.
247 Ang v. Philippine National Bank, [G.R. No. 178762, June 16, 2010].
248 Felix v. NLRC, G.R. No. 148256, Nov. 17, 2004.
249 Central Pangasinan Electric Cooperative, Inc. v. Macaraeg, G.R. No. 145800,
Jan. 22, 2003; See also Sagales v. Rustan’s Commercial Corp., G.R. No. 166554, Nov.
27, 2008.
250 Wensha Spa Center, Inc. v. Yung, [G.R. No. 185122, August 16, 2010].
251 Muaje-Tuazon v. Wenphil Corp., [G.R. No. 162447, December 27, 2006].
252 PLDT v. Buna, [G.R. No. 143688, August 17, 2007].
253 Easycall Communications Phils., Inc. v. King, [G.R. No. 145901, December 15,
2005].
254 Etcuban, Jr. v. Sulpicio Lines, Inc., [G.R. No. 148410, January 17, 2005].
255 Metro Transit Organization, Inc. v. CA, G.R. No. 142133, Nov. 19, 2002.
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d.
Rules on termination of managerial and supervisory employees different from those a
pplicable to rank‐
and‐file employees.
As a general rule, the doctrine of “trust and confidence” is restricted to manageri
al employees.238 This means
that the rules on termination of employment applicable to managerial or fiduciary e
mployees are different from those
involving ordinary employees not holding positions of trust and confidence. In the
latter case, mere accusations by the
employer will not be sufficient.239 Thus, with respect to rank‐and‐file personnel,
loss of trust and confidence as a ground
for valid dismissal requires proof of involvement in the alleged events
in question and that mere uncorroborated
assertions and accusations by the employer will not be sufficient. But
as regards a managerial employee, the mere
existence of a basis for believing that such employee has breached the
trust of his employer would suffice for his
dismissal.240
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Full restitution does not absolve employee of offense which resulted in loss of tru
st and confidence.256
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(a) Just Causes
(d) Abandonment of employment;
Elements that must concur
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Relevant Provision: Article 282 [b], Labor Code

1. ABANDONMENT OF WORK.
b. Requisites.
To constitute abandonment, two (2) elements must concur, namely:
1.
The employee must have failed to report for work or must have been absent without v
alid or justifiable
reason; and
2. There must have been a clear intention on the part of the employee
to sever the employer‐employee
relationship manifested by some overt act.258
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c. Some principles on abandonment.

1. Mere absence is not enough to constitute abandonment.259
2. Clear intention to sever employment relationship, necessary.260
3.
An employee who stopped working because of her mistaken belief that she has been di
smissed is not guilty
of abandonment.261
4. Abandonment is a factual issue.262
5. Employer has the burden of proof to prove abandonment.263
6.
There is no abandonment when it was the employer who prevented the workers from rep
orting for
work.264
7.
Due process in abandonment cases consists only of the service of 2 notices to the e
mployee, viz.:
a.
First notice directing the employee to explain why he should not be declared as hav
ing abandoned his
job; and
b.
Second notice to inform him of the employer’s decision to dismiss him on the ground
of abandonment.
265
8. No hearing is required to validly dismiss an employee for abandonment.266

9.
Notices in abandonment cases must be sent to employee’s last known address.267
10. Notices of abandonment of work served after the six‐
month period of floating status, not valid.268
11.
Immediate filing of a complaint for illegal dismissal praying for reinstatement neg
ates abandonment. 269
12.
Lapse of time between dismissal and filing of a case, not material indication of ab
andonment. Hence, lapse
of 2 years and 5 months270 or 20 months271 or 9 months272 or 8 months273 before fi
ling the complaint for
illegal dismissal is not an indication of abandonment. Under the law,
the employee has 4 years within
which to institute his action for illegal dismissal.274
13.
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 since the totality of his antecedent a
cts palpably display the
contrary.275
14. Filing of a case to pre‐
empt investigation of case tantamounts to abandonment.276
15.
When what is prayed for in the complaint is separation pay and not reinstatement,
the filing of complaint
does not negate abandonment.277
Santos v. San Miguel Corp., [G. R. No. 149416, March 14, 2003, 447 Phil. 264].
Forever Security & General Services v. Flores, G.R. No. 147961, Sept. 7, 2007;
Remington Industrial Sales Corporation v. Castaneda, G.R. Nos. 169295-96, Nov. 20,
2006.
CRC Agricultural Trading v. NLRC, G.R. No. 177664, Dec. 23, 2009; RBC Cable Master
System v. Baluyot, G.R. No. 172670, Jan. 20, 2009, 576 SCRA 668.
259 New Ever Marketing, Inc. v. CA, G.R. No. 140555, July 14, 2005.
260 CRC Agricultural Trading v. NLRC, G.R. No. 177664, Dec. 23, 2009.
261 Uniwide Sales Warehouse Club v. NLRC, [G.R. No. 154503, February 29, 2008].
262 Premiere Development Bank v. NLRC, G.R. No. 114695, July 23, 1998.
263 Northwest Tourism Corp. v. Former Special Third Division of the Hon. CA, G.R.
No. 150591, June 27, 2005.
264 Pasig Cylinder Mfg., Corp. v. Rollo, [G.R. No. 173631, September 8, 2010].
265 Kingsize Manufacturing Corporation v. NLRC, G.R. Nos. 110452-54, Nov. 24, 1994;
Cebu Royal Plant [San Miguel Corporation] v. Hon. Deputy Minister of Labor, G.R.
No. 58639, Aug. 12, 1987, 153 SCRA 38 [1987].
266 Intertranz Container Lines, Inc. v. Bautista, [G.R. No. 187693, July 13, 2010].
268 Malig-on v. Equitable General Services, Inc., [G.R. No. 185269, June 29, 2010].
269 Pasig Cylinder Mfg., Corp. v. Rollo, G.R. No. 173631, Sept. 8, 2010; Unicorn
Safety Glass, Inc. v. Basarte, G.R. No. 154689, Nov. 25, 2004; See also Cosmos
Bottling Corp. v. Nagrama, Jr., G.R. No. 164403, March 4, 2008.
270 Reno Foods, Inc. v. NLRC, G.R. No. 116462, Oct. 18, 1995, 249 SCRA 379, 387.
271 Angeles v. Fernandez, G.R. No. 160213, Jan. 30, 2007.
272 NS Transport Services, Inc. v. Zeta, G.R. No. 158499, April 4, 2007.
273 Padilla Machine Shop v. Javilgas, G.R. No. 175960, Feb. 19, 2008.
274 Pare v. NLRC, G.R. No. 128957, Nov. 16, 1999,
275 Leopard Integrated Services, Inc. v. Macalinao, [G.R. No. 159808, September 30,
2008, 567 SCRA 192]; Philippine Rural Reconstruction Movement [PRRM] v. Pulgar,
[G.R. No. 169227, July 5, 2010].
276 Intertranz Container Lines, Inc. and Tumibay v. Ma. Teresa Bautista, [G.R. No.
187693, July 13, 2010].
277 Jo v. NLRC, G.R. No. 121605, Feb. 2, 2000; Bombase v. NLRC, G.R. No. 110889,
June 30, 1995, 245 SCRA 496, 500.
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a. Concept.
Abandonment is a form of neglect of duty; hence, a just cause for termination of em
ployment under Article 282
[b] of the Labor Code.257
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Relevant Provision: Article 248 [e], Labor Code

1. UNION SECURITY CLAUSE.
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a. Nature of stipulation.
The “union security clause” is a stipulation in a CBA292 which allows
the parties thereto to enter into an
agreement requiring membership in the exclusive collective bargaining agent which s
uccessfully 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.
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b. Effects of the application of the union security clause.

The following are the effects:
1. Members of the bargaining agent. They are not allowed to resign or
terminate their membership
therefrom. Any member of the bargaining agent who resigns or is
expelled therefrom may be
recommended to the employer by the bargaining agent for termination of his employme
nt.
2. Non‐
members of the bargaining agent but members of the minority union/s. They are not b
ound by the
union security clause if they are members of the minority or other unions at the ti
me of the signing of the
CBA. Hence, they cannot be compelled to resign from their union/s in order to join
the bargaining agent.
3. Non‐members of the bargaining agent nor of any minority union/s. 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, the employee
cannot be compelled to join the
bargaining agent.
4. New employees hired after the signing of the CBA containing the
union security clause. They can be
compelled to join the bargaining agent. If they refuse, they can be recommended for
termination.
c. Exception to application of the union security clause.
Calipay v. NLRC, [G.R. No. 166411, August 3, 2010].

Hda. Dapdap I v. NLRC, G.R. No. 120556, Jan. 26, 1998; NS Transport Services, Inc.
v. Zeta, G.R. No. 158499, April 4, 2007.
Hantex Trading Co., Inc. v. CA, [G.R. No. 148241, September 27, 2002].
282 Metro Transit Organization, Inc. v. NLRC, [G.R. No. 119724, May 31, 1999].
283 Ramo v. Elefano, G.R. No. L-55629, July 39, 1981, 106 SCRA 221.
284 East Asiatic v. CIR, G.R. No. L-29068, Aug. 31, 1971, 40 SCRA 521.
285 Castillo v. CIR, G.R. No. L-26124 and L-32725, May 29, 1971, 39 SCRA 75.
286 Sandoval Shipyard v. Clave, G.R. No. L-49875, Nov. 21, 1979, 94 SCRA 472.
287 Magtoto v. NLRC, [G.R. No. 63370, November 18, 1985]; Pedroso v. Castro, [G.R.
No. 70361, January 30, 1986].
288 Camua, Jr. v. NLRC, [G.R. No. 158731, January 25, 2007].
289 City Trucking, Inc. v. Balajadia, [G.R. No. 160769, August 9, 2006].
290 Romy’s Freight Service v. Castro, [G.R. No. 141637, June 8, 2006].
291 Agricultural and Industrial Supplies Corp. v. Siazar, [G.R. No. 177970, August
25, 2010].
292 Based on the second sentence of paragraph [e] of Article 248.
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16. 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.278
17. Employment in another firm coinciding with the filing of complaint does not ind
icate abandonment.279
18. 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 t
he parties.280
19. Subcontracting for another company indicates abandonment.281
20.
An employee may be absolved from the charge of abandonment of work but adjudged gui
lty of AWOL.282
21.
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.283
22.
An employee who failed to comply with the order for his reinstatement is deemed to
have abandoned his
work.284
23. An employee who, after being transferred to a new assignment, did
not report for work anymore is
deemed to have abandoned his job.285
24.
An employee who deliberately absented from work without leave or permission from hi
s employer for the
purpose of looking for a job elsewhere is deemed to have abandoned his work.286
25. Imprisonment or detention by military does not constitute abandonment.287
26. Absence to evade arrest, not a valid justification.288
27. Requesting for a Certificate of Employment, not evidence of abandonment.289
28. Employer’s insistence on commission of wrongful acts by the
employees negates the charge of
abandonment.290
29.
Employer is liable if the charge for abandonment is not proved by substantial evide
nce.291
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(a) Just Causes
(e) Termination of employment
pursuant to a Union Security
Clause
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1. RELEVANCE OF EMPLOYEE’S RECORD OF PAST VIOLATIONS VIS‐À‐VIS NEW INFRACTIONS.
a. Totality of conduct or infractions doctrine.

Under this doctrine, the employee’s historical records of offenses, malfeasance or
misfeasance, as a general
rule, are relevant in the consideration of the gravity of his present violations or
transgressions. In the actual imposition
by the employer of penalties on erring employees, due consideration must be given t
o their length of service and the
number of violations they have committed during their employ.301
This doctrine dictates that the offenses committed by an employee should not be tak
en singly and separately
but in their totality.302
b. Some principles on this doctrine.

1. Past violations may only be used as justification to dismiss an employee for sub
sequent similar or related
offense. The previous infractions, in other words, may be used if they
have a bearing to the proximate
offense warranting dismissal.303
2. Past infractions for which the employee has already amply explained but without
the employer taking any
action thereon can no longer be cited as grounds to dismiss.304
3. Past infractions for which employee has not yet been penalized can still be cite
d as basis for administrative
sanction.305
4. Employer has to prove subsequent offense by substantial evidence.306
Victoriano v. Elizalde Rope Workers Union, [G.R. No. L-25246, September 12, 1974,
59 SCRA 54].
Picop Resources, Inc. v. Tañeca, [G.R. No. 160828, August 9, 2010]; Alabang Country
Club, Inc. v. NLRC, [G.R. No. 170287, February 14, 2008].
Malayang Samahan ng Manggagawa sa M. Greenfield v. Ramos, [G.R. No. 113907,
February 28, 2000].
296 National Union of Workers in Hotels, Restaurants and Allied Industries – Manila
Hotel Pavilion Chapter v. NLRC, [G.R. No. 179402, September 30, 2008].
297 Cariño v. NLRC, [G.R. No. 91086, May 8, 1990, 185 SCRA 177]; Del Monte
Philippines, Inc. v. Saldivar and Timbal, [G.R. No. 158620, October 11, 2006].
298 Alabang Country Club [supra].
299 Del Monte Philippines, Inc. v. Saldivar, [G.R. No. 158620, October 11, 2006].
300 Id.
301 Agabon v. NLRC, G.R. No. 158693, Nov. 17, 2004; Cosmos Bottling Corp. v. NLRC,
G.R. No. 111155, Oct. 23, 1997, 281 SCRA 146, 153-154.
302 Valiao v. Hon. CA, G.R. No. 146621, July 30, 2004.
303 La Carlota Planters Association, Inc. v. NLRC, [G.R. No. 126689, October 27,
1998]; See also PLDT Co., Inc. v. Balbastro, G.R. No. 157202, March 28, 2007; De
Guzman v. NLRC, G.R. No. 130617, Aug. 11, 1999.
304 Felix v. NLRC, [G.R. No. 148256, November 17, 2004].
305 R.B. Michael Press v. Galit, [G.R. No. 153510, February 13, 2008].
306 (Coca-Cola Bottlers Phils., Inc. v. Daniel, G.R. No. 156893, June 21, 2005.
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Religion is the only ground that may effectively be invoked against the
application of the union security
clause.293
2.
OBSERVANCE OF DUE PROCESS REQUIRED IN CASE OF DISMISSAL BASED ON THE UNION SECURITY
CLAUSE.
a. Requisites for valid termination based on union security clause.

The following requisites should be complied with by the employer prior to terminati
ng the employment of an
employee on the ground of violation of the union security clause:
(1) The union security clause is applicable;
(2)
The union is requesting for the enforcement of the union security provision in the
CBA; and
(3)
There is sufficient evidence to support the union’s decision to expel the employee
from the union.
The foregoing requisites constitute a just cause for terminating an employee based
on the CBA’s union security
provision.294
b. Some principles on dismissal based on violation of the union security clause.

1.
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.295
2.
Employer is obligated to act upon being demanded by the union to terminate the empl
oyment of its errant
members.296
3. Employer should afford due process to the expelled unionist.297
4.
The employee sought to be terminated should be afforded an “independent and separat
e hearing” which
means that the employer is not duty‐bound to immediately implement the recommendati
on to terminate
made by the union. It has to conduct its own hearing independent and
separate from any hearing
conducted by the union.298
5.
Employer has the liability for reinstatement, full backwages, damages and attorney’
s fees in illegal dismissal
cases based on the union security clause.299
6.
The employer has the right to be reimbursed for payment of any claims arising out o
f dismissals made upon
demand of the union under the union security clause.300
==================================
(a) Just Causes
(f) Totality of infractions doctrine
==================================
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1. AUTHORIZED CAUSES.
a. Concept.
As distinguished from dismissal due to just causes, in termination due to authorize
d causes, the employee has
not committed any wrongful act. It is valid because the law itself authorizes the t
ermination. Sans any provision of law
authorizing the termination, its validity may be properly questioned.
b. Grounds.
The authorized causes are enumerated under Articles 283 as follows:
1. Installation of labor‐saving devices;
2. Redundancy;
3. Retrenchment; and
4.
Closure or cessation of business operations of an establishment or an undertaking.
5. In addition, Article 284 of the Labor Code cites disease as an authorized groun
d.
[NOTE: Installation of labor‐saving device is not included In the Syllabus].
c. Exclusivity of grounds.
The grounds enumerated as authorized causes under Article 283 are exclusive in natu
re. No other grounds
may be invoked by analogy or in lieu or in substitution thereof.
2. PROCEDURAL STEPS REQUIRED.
To effect valid redundancy, retrenchment or closure, the following procedural steps

should be taken prior to
termination:
1. The employer must first take cost‐cutting or cost‐
reducing measures and exhaust all other lawful means
short of termination of the employees. In other words, there should be no other opt
ion available to the
employer except to terminate redundant employees;
2. To subserved due process, a written notice of the termination
should be served on both the affected
employees and the Department of Labor and Employment (DOLE) at least
one (1) month prior to the
intended date of termination;
3. REQUIREMENTS FOR VALID RETRENCHMENT/REDUNDANCY.

(NOTE: CLOSURE IS NOT INCLUDED IN THE SYLLABUS BUT THE REQUISITES THEREFOR ARE
INCLUDED BELOW).
a. Requisites for redundancy.

The following requisites must be present to validly invoke redundancy:
1. There is good faith in abolishing the redundant positions;
2.
There is no other option available to the employer except to terminate redundant em
ployees;
3.
Written notice is served on both the affected employees and the Department of Labor
and Employment
at least one (1) month prior to the intended date of termination;
4.
Separation pay is paid to the affected employees in such amount equivalent to at le
ast his one (1) month
pay or to at least one (1) month pay for every year of service, whichever is higher
, a fraction of at least six
(6) months shall be considered as one (1) whole year. In case the CBA or company p
olicy provides for a
higher separation pay, the same must be followed instead of the one provided in Art
icle 283.
5.
Fair and reasonable criteria in ascertaining what positions are to be declared redu
ndant and accordingly
abolished.307
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(a) Redundancy, Retrenchment and Closure
i. Procedural steps required
ii. Requirements for valid retrenchment/redundancy
iii. Criteria in selecting employees for dismissal
iv. Standards to be followed
====================================================
Lopez Sugar Corporation v. Franco, G.R. No. 148195, May 16, 2005; See also Caltex
[Phils.], Inc. v. NLRC, G.R. No. 159641, Oct. 15, 2007; Asian Alcohol Corporation
v. NLRC, G.R. No. 131108, March 25, 1999.
21

b. Requisites for retrenchment.

The following are the requisites for a valid retrenchment:
(1) That the retrenchment is reasonably necessary and duly proved and
likely to prevent business losses
which, if already incurred, are not merely de minimis but substantial, seri
ous, actual and real or, if only
expected, are reasonably imminent as perceived objectively and in good faith by the
employer;
(2)
That the employer serves a written notice both to the affected employees and to the
Department of Labor
and Employment at least one (1) month prior to the intended date of retrenchment;
(3)
That the employer pays the retrenched employees separation pay equivalent to one (1
) month pay or at
least one‐half (½) month pay for every year of service, whichever is higher;
(4)
That the employer exercises its prerogative to retrench employees in good faith for
the advancement of its
interest and not to defeat or circumvent the employees’ right to security of tenure
; and
(5) That the employer uses fair and reasonable criteria in
ascertaining who would be dismissed and who
would be retained among the employees, such as status (i.e., whether they are tempo
rary, casual, regular
or managerial employees), efficiency, seniority, physical fitness, age,
and financial hardship for certain
workers.308
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In selecting who to terminate based on any of the authorized causes,

there should be reasonable and fair
criteria to be followed such as:
1. nature of work;
2. status of employment (whether casual, temporary or regular);
3. experience;
4. efficiency;
5. seniority, among other considerations;
6. dependability;
7. adaptability;
8. flexibility;
9. trainability;
10. job performance;
11. discipline; and
12. attitude towards work.310
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Failure to follow fair and reasonable criteria in selection would render the termin
ation invalid.311
5. REDUNDANCY, ADDITIONAL NOTES.
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a. When redundancy exists.

Redundancy exists where the services of an employee are in excess of what is reason
ably demanded by the
actual requirements of the enterprise. A position is redundant where it is superflu
ous, and superfluity of a position or
positions may be the outcome of a number of factors, such as over‐hiring of workers
, decreased volume of business,
dropping of a particular product line or service activity previously manufactured o
r undertaken by the enterprise. An
employer has no legal obligation to keep on the payroll employees more than the num
ber needed for the operation of
the business.312
Flight Attendants and Stewards Association of the Philippines [FASAP] v. Philippine

Airlines, Inc., [G.R. No. 178083, July 22, 2008]; See also Shimizu Phils.
Contractors, Inc. v. Callanta, G.R. No. 165923, Sept. 29, 2010; Lambert Pawnbrokers
and Jewelry Corp. v. Binamira, G.R. No.
170464, July 12, 2010.
Catatista v. NLRC, G.R. No. 102422, Aug. 03, 1995; AFP Mutual Benefit Association,
Inc. v. AFP-MBAI-EU, G.R. Nos. 39140 and 39145, May 17, 1980, 97 SCRA 715.
310 Philippine Tuberculosis Society, Inc. v. NLRC, [G.R. No. 115414, August 25,
1998].
311 Lambert Pawnbrokers and Jewelry Corp. v. Binamira, G.R. No. 170464, July 12,
2010.
312 Dusit Hotel Nikko v. NUWHRAIN – Dusit Hotel Nikko Chapter, G.R. No. 160391,
Aug. 9, 2005.
308
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b. Requisites for closure or cessation of business operations.
The following are the requisites for a valid closure or cessation of business opera
tions:
1. The decision to close or cease operations should be made in good faith;
2.
The purpose should not be to circumvent the provisions of Title I (Termination of E
mployment) of Book Six
(Post Employment) of the Labor Code;
3.
There is no other option available to the employer except to close or cease its bus
iness operations;
4.
The notice requirement under Article 283 should be complied with by serving a copy
thereof to the affected
employees and to the Department of Labor and Employment at least one (1) month prio
r to the effectivity
of the termination. This requisite applies irrespective of whether or
not the closure or cessation of
operations is due to serious business losses or financial reverses; and
5. When the closure or cessation of business operations is not due to
serious business losses or financial
reverses, the affected employees should be paid a separation pay equivalent to one
(1) month pay or at
least one‐half (½) month pay for every year of service, whichever is higher. A fra
ction of at least six (6)
months shall be considered one (1) whole year.309
If the ground is serious business losses or financial reverses, there
should be clear proof thereof since no
separation pay to the employees is required to be paid.
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6. RETRENCHMENT, ADDITIONAL NOTES.
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a. Retrenchment, meaning.
Retrenchment has been defined as “the termination of employment initiated by the em
ployer through no fault
of the employees and without prejudice to the latter, resorted by management during
periods of business recession,
industrial depression, or seasonal fluctuations; or during lulls occasioned by lack
of work or orders, shortage of materials;
or considerable reduction in the volume of the employer’s business,
conversion of the plant for a new production
program or the introduction of new methods or more efficient machinery, or of autom
ation.”329
Retrenchment is the only statutory ground in Article 283 which requires proof of lo
sses or possible losses as
justification for termination of employment. The other grounds, particularly closur
e or cessation of business operations,
may be resorted to with or without losses.330
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b. Standards to determine validity of losses as justification for retrenchment.

The general standards in terms of which the act of an employer in retrenching or re
ducing the number of its
employees must be appraised are as follows:
Firstly, the losses expected should be substantial and not merely de minimis in ext
ent. If the loss purportedly
sought to be forestalled by retrenchment is clearly shown to be insubstantial and i
nconsequential in character, the bona‐
fide nature of the retrenchment would appear to be seriously in question.
Secondly, the substantial loss apprehended must be reasonably imminent,
as such imminence can be
perceived objectively and in good faith by the employer. There should, in other wo
rds, be a certain degree of urgency
for the retrenchment which is, after all, a drastic recourse with serious consequen
ces for the livelihood of the employees
retrenched or otherwise laid off.
Thirdly, retrenchment, because of its consequential nature, must be
reasonably necessary and likely to
effectively prevent the expected losses. The employer should have taken
other measures prior or parallel to
retrenchment to forestall losses, i.e., cut other costs than labor costs.
Lastly, but certainly not the least important, the alleged losses, if already reali
zed, and the expected imminent
losses sought to be forestalled, must be proved by sufficient and
convincing evidence. The reason for requiring this
quantum of proof is apparent; any less exacting standard of proof would render too
easy the abuse of this ground for
termination of services of employees.331
314
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f.
Maya Farms Employees Organization v. NLRC, G.R. No. 106256, Dec. 28, 1994..
Smart Communications, Inc. v. Astorga, G.R. No. 148132, Jan. 28, 2008; Caltex
[Phils.], Inc. v. NLRC, G.R. No. 159641, Oct. 15, 2007.
Coca-Cola Bottlers Philippines,Inc. v. Del Villar, [G.R. No. 163091, October 6,
2010].
316 Sebuguero v. NLRC, G.R. No. 115394, Sept. 27, 1995; Escareal v. NLRC, G.R. No.
99359, Sept. 2, 1992, 213 SCRA 472.
317 Dole Philippines, Inc. v. NLRC, [G.R. No. 120009, September 13, 2001].
318 Santos v. CA, [G.R. No. 141947, July 5, 2001].
319 De Ocampo v. NLRC, [G.R. No. 101539, September 4, 1992, 213 SCRA 652].
320 Soriano, Jr. v. NLRC and PLDT, [G.R. No. 165594, April 23, 2007].
321 San Miguel Corporation v. NLRC, G.R. No. 99266, March 2, 1999; Pantranco North
Express, Inc. v. NLRC, G.R. No. 106516, Sept. 21, 1999.
322 International Harvester Macleod, Inc. v. IAC, 149 SCRA 641 [1987]; See also
Dole Philippines, Inc. v. NLRC, G.R. No. 120009, Sept. 13, 2001.
323 Serrano v. NLRC, [G.R. No. 117040, January 27, 2000].
324 Dole Philippines, Inc. v. NLRC, [G.R. No. 120009, September 13, 2001].
325 Wiltshire File Co., Inc. v. NLRC, G.R. No. 82249, Feb. 7, 1991, 193 SCRA 665;
See also Becton Dickinson Phils., Inc. v. NLRC, G.R. Nos. 159969 & 160116, Nov. 15,
2005, 475 SCRA 123.
326 Maya Farms Employees Organization v. NLRC, [G.R. No. 106256, December 28,
1994].
327 Asian Alcohol Corporation v. NLRC, G.R. No. 131108, March 25, 1999.
328 De la Salle University v. De la Salle University Employees Association, [G.R.
No. 109002, April 12, 2000].
329 F. F. Marine Corporation v. The Hon. Second Division, NLRC, G.R. No. 152039,
April 8, 2005; See also Anabe v. Asian Construction, G.R. No. 183233, Dec. 23,
2009.
330 Precision Electronics Corporation v. NLRC, G.R. No. 86657, Oct. 23, 1989.
331 Andrada v. NLRC, G.R. No. 173231, Dec. 28, 2007; Oriental Petroleum and
Minerals Corp. v. Fuentes, G.R. No. 151818, Oct. 14, 2005; Clarion Printing House,
Inc. v. NLRC, G.R. No. 148372, June 27, 2005.
313
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Redundancy may also be validly resorted to as a cost‐cutting measure and to streaml

ine operations so as to
make them more viable. Positions which overlapped each other, or which
are in excess of the requirements of the
service, may be declared redundant.313
b. Some principles on redundancy.

1. The wisdom, soundness or characterization of service as redundant by
the employer is not subject to
review. 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.314
2. Burden of proof in redundancy rests on the employer.315
3. Evidence of losses, not required.316
4. Elimination of undesirables, abusers and worst performers through
redundancy, not an indication of bad
faith.317
5. The act of the employer in hiring replacements was not deemed an indication of b
ad faith since the positions
have no similar job descriptions.318
6. Redundancy to save on labor costs, held valid.319
7. Redundancy resulting from use of high technology equipment, held valid.320
8. Abolition of positions or departments, held valid.321
9. Reorganization through redundancy held valid.322
10. Contracting out of abolished positions to independent contractors held valid.32
3
11. Hiring of casuals or contractual employees after redundancy, held valid.324
12. Where two or more persons are performing the same work which may be effectively
accomplished by only
one, the employer may terminate the excess personnel and retain only one.325
13.
Even if there is a seniority rule, such as the LIFO (Last In, First Out) rule, the
nature of work and experience
of the employees should still be taken into account by the employer.326
14. The LIFO or FILO (First In, Last Out) rule has no basis in law.327
15.
LIFO rule is not controlling as employer has the prerogative to choose who to termi
nate.328
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NDC-Guthrie Plantations, Inc. v. NLRC, G. R. No. 110740, Aug. 9, 2001.

Sentinel Integrated Services, Inc. v. Remo, [G.R. No. 188223, July 5, 2010].
Shimizu Phils. Contractors, Inc. v. Callanta, [G.R. No. 165923, September 29,
2010].
335 Id.
336 Central Azucarera de la Carlota v. NLRC, [G.R. No. 100092, December 29, 1995,
251 SCRA 589].
337 Sebuguero v. NLRC, [G.R. No. 115394, September 27, 1995].
338 Lambert Pawnbrokers and Jewelry Corp. v. Binamira, G.R. No. 170464, July 12,
2010.
339 Asian Alcohol Corporation v. NLRC, G.R. No. 131108, March 25, 1999, 305 SCRA
416; TPI Philippines Cement Corp. v. Cajucom VII, G.R. No. 149138, Feb. 28, 2006.
340 Emco Plywood Corporation v. Abelgas, G.R. No. 148532, April 14, 2004.
341 (Danzas Intercontinental, Inc. v. Daguman, G.R. No. 154368, April 15, 2005;
Composite Enterprises, Inc. v. Caparoso, G.R. No. 159919, Aug. 8, 2007.
342 NDC-Guthrie Plantations, Inc. v. NLRC, [G.R. No. 110740, August 9, 2001].
343 Flight Attendants and Stewards Association of the Philippines [FASAP] v.
Philippine Airlines, Inc., [G.R. No. 178083, July 22, 2008].
344 Casimiro v. Stern Real Estate, Inc., Rembrandt Hotel, G.R. No. 162233, March
10, 2006; Favila v. NLRC, G.R. No. 126768, June 16, 1999, 367 Phil. 584, 595.
345 Polymart Paper Industries, Inc. v. NLRC, G.R. No. 118973, Aug. 12, 1998.
346 Composite Enterprises, Inc. v. Caparoso, [G.R. No. 159919, August 8, 2007].
347 Clarion Printing House, Inc. v. NLRC, [G.R. No. 148372, June 27, 2005].
348 Flight Attendants and Stewards Association of the Philippines [FASAP] v.
Philippine Airlines, Inc., [G.R. No. 178083, July 22, 2008].
349 Id.
350 Taggat Industries, Inc. v. NLRC, [G.R. No. 120971, March 10, 1999].
351 Manatad v. Philippine Telegraph and Telephone Corp., [G.R. No. 172363, March 7,
2008].
352 Lopez Sugar Corporation v. Federation of Free Workers, G.R. Nos. 75700-01, Aug.
30, 1990.
353 Korean Air Co., Ltd. v. Yuson, [G.R. No. 170369, June 16, 2010].
354 International Hardware, Inc. v. NLRC, G.R. No. 80770, Aug. 10, 1989; See also
Unicorn Safety Glass, Inc. v. Basarte, G.R. No. 154689, Nov. 25, 2004.
355 Hernandez v. Philippine Blooming Mills Co., NLRC-NCR Case No. 3-1223-83, July
26, 1985.
356 Lambert Pawnbrokers and Jewelry Corp. v. Binamira, [G.R. No. 170464, July 12,
2010].
357 Central Azucarera de la Carlota v. NLRC, [G.R. No. 100092, December 29, 1995,
251 SCRA 589, 321 Phil. 989, 997].
358 Atlantic Gulf and Pacific Company of Manila, Inc. [AG & P], v. NLRC, [G.R. No.
127516, May 28, 1999].
359 Manatad v. Philippine Telegraph and Telephone Corp., [G.R. No. 172363, March 7,
2008].
360 Eastridge Golf Club, Inc. v. Eastridge Golf Club, Inc. Labor Union – Super,
G.R. No. 166760, Aug. 22, 2008; Espina v. CA, G.R. No. 164582, March 28, 2007.
332
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c. Some principles on retrenchment.

1. If standards are present, wisdom to retrench cannot be questioned.332
2. The retrenchment must be done in good faith.333
3. Notoriety of the employee, a valid criterion.334
4.
The progressive manner of implementing the streamlining of operations and complemen
ts downsizing by a
construction company, held valid.335
5.
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.336
6. Article 283 applies only to permanent retrenchment or lay‐off.337
7. Cost‐reduction or cost‐saving measures prior to retrenchment, required.338
8. The phrase “retrenchment to prevent losses” means that retrenchment
must be undertaken by the
employer before the losses anticipated are actually sustained or realized. The empl
oyer need not keep all
his employees until after his losses shall have materialized. Otherwise, the law c
ould be vulnerable to attack
as undue taking of property for the benefit of another.339
9.
Employer bears the burden of proof to show business losses or financial reverses.34
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10. Best evidence of losses ‐ audited financial statements.341
11. Best evidence of losses in a government‐controlled corporation ‐ financial stat
ements audited by COA.342
12. Period covered by financial statements, material.343
14. Income tax returns, self‐serving documents.344
15. Mere affidavit on alleged losses, not sufficient.345
16. Mere notice of intention to implement a retrenchment program, not sufficient.34
6
17. Rehabilitation receivership presupposes existence of losses.347
However, 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, necessity and exte
nt, of its retrenchment
program.348
18.
Audited financial statements should be presented before the Labor Arbiter or the NL
RC but not belatedly
before the Court of Appeals or Supreme Court.349
19. Retrenchment effected long after business losses, not valid.350
20.
Profitable operations in the past does not affect validity of retrenchment.351
21. Compulsory retirement to prevent further losses, held valid.352
22.
Early Retirement Program (ERP) to prevent further losses and implemented prior to r
etrenchment, held
valid.353
23.
Rotation of work may be tantamount to constructive dismissal or retrenchment.354
24. Retrenchment due to liquidity problem, not valid.355
25.
Sharp drop in income, not a ground to justify retrenchment. A mere decline in gross
income cannot in any
manner be considered as serious business losses. It should be substantial, sustain
ed and real.356
26. Litany of woes, in the absence of any solid evidence that they translated into
specific and substantial losses
that would necessitate retrenchment will not suffice to justify retrenchment.357
27.
Rehiring of retrenched employees does not necessarily indicate illegality of retren
chment.358
28.
In an enterprise which has several branches nationwide, profitable operations in so
me of them will not
affect the validity of the retrenchment if overall, the financial condition thereof
reflects losses.359
7. CLOSURE OR CESSATION OF BUSINESS OPERATIONS, ADDITIONAL NOTES.
a. Concept.
Closure or cessation of business is the complete
or partial cessation of the operations and/or shutdown of the
establishment of the employer. It is carried out to either stave off the financial
ruin or promote the business interest of
the employer.360
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1. DISEASE AS A GROUND FOR TERMINATION OF EMPLOYMENT.
a. Requisites.
Disease is one of the authorized causes to terminate employment. The following req
uisites must be complied
with before termination of employment due to disease may be justified:
1. The employee is suffering from a disease;
2. His continued employment is either:
a. prohibited by law; or
b. prejudicial to his health; or
c. prejudicial to the health of his co‐employees;
3.
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 me
dical treatment;
4.
Notice of termination based on this ground should be served both to the employee an
d the Department
of Labor and Employment at least one (1) month prior to the effectivity of the term
ination;374 and
5.
Separation pay should be paid to the employee in an amount equivalent to at least o
ne (1) month salary
or to one‐half (½) month salary for every year of service, whichever is greater, a
fraction of at least six (6)
months being considered as one (1) whole year.375
b. Some principle on disease.
1. Burden of proof rests on the employer.376
2.
If the disease or ailment can be cured within the period of six (6) months with pro
per medical treatment,
the employer should not terminate the employee but merely ask him to
take a leave of absence. The
employer should reinstate him to his former position immediately upon
the restoration of his normal
health.377
f.
Peñafrancia Tours and Travel Transport, Inc. v. Sarmiento, G.R. No. 178397, Oct.
20, 2010.
Edge Apparel, Inc. v. NLRC, G.R. No. 121314, Feb. 12, 1998, 286 SCRA 302; Phil.
Engineering Corp. v. CIR, G.R. No. L-27880, Sept. 30, 1971, 41 SCRA 89.
Association of Integrated Security Force of Bislig [AISFB] - ALU v. Hon. CA, and
PICOP, [G.R. No. 140150, August 22, 2005].
364 Cheniver Deco Print Technics Corporation v. NLRC, [G.R. No. 122876, February
17, 2000].
365 J.A.T. General Services v. NLRC, G.R. No. 148340, Jan. 26, 2004; Industrial
Timber Corporation v. NLRC, G. R. Nos. 107302-107306 & 108559-10860, June 10, 1997,
339 Phil. 395, 404.
366 Mac Adams Metal Engineering Workers Union-Independent v. Mac Adams Metal
Engineering, G.R. No. 141625, 24 Oct. 2003, 414 SCRA 411.
367 St. John Colleges, Inc. v. St. John Academy Faculty and Employees Union, [G.R.
No. 167892, October 27, 2006].
368 Cornista-Domingo v. NLRC, [G.R. No. 156761, October 17, 2006].
369 Espina v. Hon. CA, [G.R. No. 164582, March 28, 2007].
370 Danzas Intercontinental, Inc. v. Daguman, [G.R. No. 154368, April 15, 2005].
371 Me-Shurn Corporation v. Me-Shurn Workers Union - FSM, [G.R. No. 156292, January
11, 2005].
372 Sapitan v. JB Line Bicol Express, Inc., [G.R. No. 163775, October 19, 2007].
373 San Miguel Corp. v. Aballa, [G.R. No. 149011, June 28, 2005].
374 Per Agabon v. NLRC, [G.R. No. 158693, November 17, 2004].
375 See also Section 8, Rule I, Book VI, Rules to Implement the Labor Code.
376 Phil. Employ Services and Resources, Inc. v. Paramio, infra; Crayons
Processing, Inc. v. Pula, G.R. No. 167727, July 30, 2007; ATCI Overseas Corporation
v. CA, [G.R. No. 143949, August 9, 2001, 414 Phil. 883, 893.
377 Section 8, Rule I, Book VI, Rules to Implement the Labor Code; Sevillana v.
I.T. [International] Corp., G.R. No. 99047, April 16, 2001.
361
362
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(b) Disease or illness
i. Requisites
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b. Some principles on closure.
1.
Employer may close its business whether it is suffering from business losses or not
; court cannot order
employer to continue its business.361
2.
Principle of closure under Article 283 applies in cases of both total and partial c
losure or cessation of
business operations. Management may choose to close only a branch, a department, a
plant, or a shop.362
3. Closure of department or section and hiring of workers supplied by
independent contractor as
replacements, held valid.363
4. Relocation of business may amount to cessation of operations.364
5. The burden of proving that the closure or cessation of business
operations is bona‐fide falls upon the
employer.365
6.
Good faith, test of validity of closure or cessation of business operations.366
7. Closure may constitutes an unfair labor practice act if it is
resorted to as a ruse or scheme to get rid of
employees on account of their union activities.367
8. Closure by reason of enactment of a law, held valid.368
9.
Closure of business to merge or consolidate with another or to sell or dispose all
of its assets, held valid.369
10. Audited financial statements necessary only in closure due to losses.370
11. 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.371
12. For closure to be a valid basis, it must be invoked at the time of termination
and not after.372
13. Closure of a department or section due to losses amounts to retrenchment.373
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1. PROCEDURE TO BE OBSERVED IN TERMINATION CASES.
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Relevant Provision: Articles 277 [b], Labor Code
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1.1. PROCEDURE IN JUST CAUSE TERMINATION.
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a. Procedural due process varies depending on the ground/s invoked.

There is no uniform procedural due process that should be applied in all cases. The
kind of due process will
depend on the ground/s invoked in support of the termination. Due process for just
cause termination is different from
authorized cause termination.
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a. Just cause termination.

In just cause termination, the twin requirements of notice and hearing apply. More
particularly, the following
procedure should be followed:
1. Service of first written notice;
2. Conduct of hearing; and
3. Service of second written notice.
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(1) First written notice.

The first written notice to be served on the employee should:
a. Contain the specific causes or grounds for termination against him;
b. Contain a directive that the employee is given the opportunity to submit his wr
itten 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;
2. to study the accusation against him;
3. to consult a union official or lawyer;
4. to gather data and evidence; and
5. to decide on the defenses he will raise against the complaint.
Gomez v. Central Vegetable Oil, G.R. No. L-22702, July 28, 1969, 28 SCRA 845.
Article 282[a], Labor Code.
Cebu Royal Plant [San Miguel Corporation] v. Hon. Deputy Minister of Labor, G.R.
No. 58639, Aug. 12, 1987, 153 SCRA 38 [1987].
Manly Express, Inc. v. Payong, Jr. G.R. No. 167462, Oct. 25, 2005; Cruz v. NLRC,
G.R. No. 116384, Feb. 7, 2000.
382 Union Motor Corporation v. NLRC, [G.R. No. 159738, December 9, 2004].
383 Tan v. NLRC, [G.R. No. 116807, April 14, 1997, 271 SCRA 216]; Duterte v.
Kingswood Trading Co., Inc., [G.R. No. 160325, October 4, 2007].
384 ATCI Overseas Corporation v. CA, G.R. No. 143949, Aug. 9, 2001; Cebu Royal
Plant [San Miguel Corporation] v. Hon. Deputy Minister of Labor, G.R. No. 58639,
Aug. 12, 1987, 153 SCRA 38 [1987].
385 Cathay Pacific Airways, Ltd. v. NLRC, [G.R. No. 141702-03, August 2, 2001].
378
379
380
381
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(1) Procedure to be observed in termination cases
(2) Guiding Principles in connection with the hearing
requirements in dismissal cases
(3) Agabon doctrine
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3. In case of death, Article 284 does not apply.378

4. In case the employee unreasonably refuses to submit to medical
examination or treatment upon being
requested to do so, the employer may terminate his services on the ground of insubo
rdination or willful
disobedience by the employee of the lawful order of his employer or representative
in connection with his
work.379
4. Company physician is not a “competent public health authority.”
5.
A medical certificate issued by a company’s own physician is not an acceptable cert
ificate for purposes of
terminating an employment based on Article 284, it having been issued not by a “com
petent public health
authority,” the person referred to in the law.380
6. A “competent public health authority” refers to a government doctor whose medica
l specialization pertains
to the disease being suffered by the employee. For instance, an employee who is sic
k of tuberculosis should
consult a government‐employed pulmonologist who is competent to make an
opinion thereon. If the
employee has cardiac symptoms, the competent physician in this case would be a card
iologist.
7. Medical certificate, an indispensable requisite.381
8. Medical certificate is the best evidence of illness.382
9. The medical certificate should be procured by the employer.383
10. Existence of certificate, burden of proof is on the employer.384
11. Employee dismissed without the medical certificate is entitled to moral and exe
mplary damages.385
12. Notice of termination to the employee and to the DOLE, necessary.386
13. Hearing is not required, disease being an authorized cause.
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(2) Hearing required,

After serving the first notice, 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;
2. present evidence in support of his defenses; and
3. rebut the evidence presented against him by the management.
During the hearing or conference, the employee is given the chance to
defend himself personally, with the
assistance of a representative or counsel of his choice. Moreover, this conference
or hearing could be used by the parties
as an opportunity to come to an amicable settlement.
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(3) Second written notice.

After determining that termination of employment is justified, the
employers shall serve the employees a
written notice of termination indicating that:
1. all circumstances involving the charge/s against the employee have been conside
red; and
2. grounds have been established to justify the severance of his employment.387
b. Exception in case of abandonment.

Abandonment is a just cause to terminate employment. It is considered a form of gro
ss neglect of duties under
Article 282 [b] of the Labor Code. However, the procedural due process is different
from the process described above.
For obvious reason, due process in abandonment cases does not involve the conduct o
f hearing. Compliance with the
following two (2) notices suffices, viz.:
1.
First notice asking the employee to explain why he should not be declared as having
abandoned his job; and
2. Second notice to inform him of the employer’s decision to dismiss him on the gro
und of abandonment.
1.2. PROCEDURE IN AUTHORIZED CAUSE TERMINATION.
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Due process is not required in termination of the following:

1. Project employment which automatically terminates upon completion of the project
;
2. Seasonal employment which automatically terminates upon the end of the season;
3. Casual employment which automatically terminates upon the lapse of the agreed pe
riod.
4. Fixed‐term employment which automatically terminates upon the expiration of the
fixed period.
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3. PROCEDURE IN TERMINATION OF PROBATIONARY EMPLOYMENT.
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Due process 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; and
(2) the appropriate DOLE Regional Office,
at least one (1) month before the intended date of the termination specifying the g
round/s therefor and the undertaking
to pay the separation pay required under Article 283 of the Labor Code.
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Probationary employment may be terminated prior to the lapse of the

probationary period fur just or
authorized cause. In which case, the appropriate, applicable procedural due process
should apply.
However, if the ground invoked is the failure of the probationary employee to quali
fy as a regular employee
based on the reasonable standards made known to him at the time of his engagement,
no due process is required. it is
sufficient that a written notice of termination is served to the probationary emplo
yee within a reasonable time from the
effective date thereof setting forth the justification of such termination.388
4. GUIDING PRINCIPLES IN CONNECTION WITH THE HEARING REQUIREMENT IN DISMISSAL CASES
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a. Nature.
It must be stressed that hearing is a requisite only in just cause
termination. It is not required in case of
authorized cause termination.
A just cause dismissal without the benefit of a hearing prior to the employee’s ter
mination violates his right to
due process which requires that the person sought to be dismissed must be given a c
hance to answer and be heard on
the charges against him before he is dismissed.389
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b. Ample opportunity to be heard.

Due process is satisfied when the employee is afforded fair and reasonable opportun
ity to explain his side of
the controversy at hand.390
King of Kings Transport, Inc. v. Mamac, [G.R. No. 166208, June 29, 2007]; See also
Lima Land, Inc. v. Cuevas, G.R. No. 169523, June 16, 2010; Inguillo v. First
Philippine Scales, Inc., G.R. No. 165407, June 5, 2009, 588 SCRA 471, 491.
Section 2, Rule I, Book VI, Rules to Implement the Labor Code, as amended by
Article III, Department Order No. 10, Series of 1997.
Bondoc v. NLRC, G.R. No. 103209, July 28, 1997, 276 SCRA 288; See also Agullano v.
Christian Publishing and Pizarro, G.R. No. 164850, Sept. 25, 2008.
390 Gana v. NLRC, G.R. No. 164640, June 13, 2008; Filipino v. Macabuhay, G.R. No.
158960, Nov. 24, 2006, 508 SCRA 50, 58.
387
388
389
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c. Contain a detailed narration of the facts and circumstances that will serve as b
asis for the charge against the
employee. This is required in order to enable him to intelligently
prepare his explanation and defenses. A general
description of the charge will not suffice.
d. Specifically mention which company rules, if any, are violated and/or which amon
g the grounds under Article
282 is being charged against the employees.

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Lima Land, Inc. v. Cuevas, G.R. No. 169523, June 16, 2010.
Valiao v. Hon. CA, G.R. No. 146621, July 30, 2004; See also Aboc v. Metropolitan
Bank and Trust Company, G.R. Nos. 170542-43, Dec. 13, 2010; PLDT v. Honrado, G.R.
No. 189366, Dec. 8, 2010; Equitable PCI Bank v. Dompor, G.R. Nos. 163293 & 163297,
Dec. 8, 2010.
IBM Philippines, Inc. v. NLRC, G.R. No. 117221, April 13, 1999, 305 SCRA 592.
394 Pepsi-Cola Distributors of the Philippines, Inc. v. NLRC, G.R. No. 100686, Aug.
15, 1995; New Puerto Commercial v. Lopez, [G.R. No. 169999, July 26, 2010.
395 Hagonoy Rural Bank, Inc. v. NLRC, G.R. No. 122075, Jan. 28, 1998, 285 SCRA 297.
396 Robusta Agro Marine Products, Inc. v. Gorombalem, G.R. No. 80500, July 5, 1989.
397 Wenphil Corporation v. NLRC, G.R. No. 80587, Feb. 8, 1989.
398 Maneja v. NLRC, G. R. No. 124013, June 5, 1998.
399 Century Textile Mills, Inc. v. NLRC, [G.R. No. 77859, May 25, 1988].
400 Alcantara v. The Philippine Commercial and Industrial Bank, [G.R. No. 151349,
October 20, 2010]; PLDT v. Honrado, [G.R. No. 189366, December 8, 2010].
401 Century Textile Mills, Inc. v. NLRC, G.R. No. 77859, May 25, 1988.
402 Pepsi-Cola Distributors of the Philippines, Inc. v. NLRC, G.R. No. 100686, Aug.
15, 1995.
391
392
Hellenic Philippine Shipping, Inc. v. Siete, G.R. No. 84082, March 13, 1991.
Philippine Daily Inquirer, Inc. v. Magtibay, Jr., G.R. No. 164532, July 24, 2007.
Wiltshire File Co. v. NLRC, G.R. No. 82249, Feb. 7, 1991.
Agabon v. NLRC, G.R. No. 158693, Nov. 17, 2004.
407 Sebuguero v. NLRC, GTI Sportswear Corporation, G.R. No. 115394, Sept. 27, 1995.
408 Hilado v. Leogardo, [G.R. No. L-65863, June 11, 1986].
409 Under Article 128 [c] of the Labor Code.
410 Section 5, Rule VIII-A, Book III, Rules to Implement the Labor Code, as amended
by Article I, Department Order No. 10, Series of 1997 [30 May 1997].
411 Philippine Pizza, Inc. v. Bungabong, G. R. No. 154315, May 9, 2005; Roche
[Philippines] v. NLRC, G.R. No. 83335, Oct. 5, 1989, 178 SCRA 386, 394.
403
404
405
406
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The essence of due process is simply an opportunity to be heard or, as applied to a

dministrative proceedings,
an opportunity to explain one’s side or an opportunity to seek a reconsideration of
the action or ruling complained of.391
A formal or trial‐type hearing is not at all times and in all instances essential,
as the due process requirements
are satisfied where the parties are afforded fair and reasonable opportunity to exp
lain their side of the controversy at
hand.392
“Ample opportunity” means every kind of assistance that the employer must accord to
the employee to enable
him to prepare adequately for his defense, including legal representation.393
Due process, therefore, is not violated where a person is not heard
because he has chosen, for whatever
reason, not to be heard. It should be obvious that if he opts to be silent where h
e has a right to speak, he cannot later be
heard to complain that he was unduly silenced.394
c. Some principles on hearing requirement.

1. If employee does not answer, hearing should still proceed.395
2. Outright termination violates due process.396
3. Investigation still required even if incident was witnessed by many.397
4.
Meeting, dialogue, consultation or interview is not the hearing required by law. It
may not be a substitute
for the actual holding of a hearing.398
5. Prior consultation with union, not compliance with due process.399
6. Cross‐
examination or confrontation of witnesses, not necessary in company investigations.
400
7. Co‐conspirator’s confession, not sufficient to merit dismissal.401
8. If a party was not initially given a chance to be heard at the
company level, but later was given full
opportunity to submit position papers or present his case and arguments
before the Labor Arbiter, this
defect is cured.402 But if the dismissal is not justified, this principle does not
apply.403
4.1. INSTANCES WHERE HEARING IS NOT REQUIRED.
Hearing is not required in the following cases:

1. Termination of project, seasonal, casual or fixed‐term employments.
2.
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, no notice and hearing are required.404
3. Termination due to abandonment of work.
4. Termination due to authorized causes under Article 283 (installation
of labor‐saving device, redundancy,
retrenchment or closure of business or cessation of operations). In such
cases, there are no allegations
which the employees should refute and defend themselves from.405
5. Termination due to disease under Article 284.406
6. Termination by the employee (resignation) under Article 285.
7. Termination after 6 months of bona‐
fide suspension of operation in Article 286. 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.407
8. Termination due to retirement under Article 287.
9. Termination due to expiration of tenure made coterminous with lease.408
10. Termination due to closure or stoppage of work by government authorities when n
on‐compliance with the
law or implementing rules and regulations poses grave and imminent danger to the he
alth and safety of
workers in the workplace.409
11. Termination due to expiration of contractual employment in a
legitimate contracting or subcontracting
arrangement.410
12. Termination of employee who has admitted his guilt for the offense charged.411
5. SEVEN (7) STANDARD SITUATIONS IN TERMINATION DISPUTES.

The rules on termination of employment in the Labor Code and pertinent jurisprudenc
e are applicable to seven
(7) different situations, namely:
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1. If based on just cause – P30,000.00 (per Agabon).

2. If based on authorized cause – P50,000.00 (per Jaka Food Processing Corporation
v. Pacot, [G.R. 151378,
March 28, 2005]).
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The indemnity is “stiffer” in case of authorized cause termination

because, unlike in the case of just cause
termination where the employee has committed a wrongful act, an employee dismissed
based on authorized cause has
not committed any blameworthy act and does not imply delinquency or culpability on
his part. Instead, the dismissal
process is initiated by the employer’s exercise of his management prerogative, i.e.
when the employer opts to install
labor saving devices, when he decides to cease business operations or when, as in t
his case, he undertakes to implement
a retrenchment program
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(1) Reinstatement aspect
(a) Immediately executory
i. Actual reinstatement
ii. Payroll reinstatement
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b. Some principles under the Agabon doctrine.

1. Measure of penalty or indemnity ‐ no longer full backwages but nominal damages.
2. Award of backwages must be deleted and replaced by award of indemnity.420
3. Amount of nominal damages may be reduced.421 Thus far, a survey of Supreme Cour
t decisions indicates
that there has yet been no decision increasing the indemnity beyond what has been p
rescribed in Agabon
and Jaka.
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1. VARIOUS FORMS OF REINSTATEMENT UNDER THE LABOR CODE.
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a. Provisions of the Labor Code enunciating the remedy of reinstatement.

The Labor Code grants the remedy of reinstatement in various forms and situations.
Its provisions recognizing
reinstatement as a remedy are as follows:
1. Article 223 which provides for reinstatement of an employee whose dismissal is d
eclared illegal by the Labor
Arbiter. 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.
Philippine Airlines, Inc. v. NLRC, G.R. No. 115785, Aug. 4, 2000.
ACD Investigation Security Agency, Inc. v. Daquera, G.R. No. 147473, March 30,
2004; Pioneer Texturizing Corporation v. NLRC, G.R. No. 118651, Oct. 16, 1997;
Oania v. NLRC, G.R. Nos. 97162-64, June 1, 1995, 244 SCRA 668.
Lambert Pawnbrokers and Jewelry Corp. v. Binamira, G.R. No. 170464, July 12, 2010;
JGB and Associates, Inc. v. NLRC, G.R. No. 109390, March 7, 1996.
416 Standard Electric Manufacturing Corporation v. Standard Electric Employees
Union-NAFLU-KMU, G.R. No. 166111, August 25, 2005; Magtoto v. NLRC, G.R. No. 63370,
Nov. 18, 1985; Pepito v. Secretary of Labor, G.R. No. L-49418, Feb. 29, 1980, 96
SCRA 454; Pedroso v. Castro,
G.R. No. 70361, January 30, 1986.
417 Ledesma, Jr. v. NLRC, [G.R. No. 174585, October 19, 2007].
418 St. Mary’s Academy of Dipolog City v. Palacio, [G.R. No. 164913, September 8,
2010]; St. Luke’s Medical Center Employees Association-AFW and Santos v. NLRC,
[G.R. No. 162053, March 7, 2007].
419 Per Serrano v. NLRC, [G.R. No. 117040, January 27, 2000].
420 Electro System Industries Corp. v. NLRC, G.R. No. 165282, Oct. 5, 2005.
421 Business Services of the Future Today, Inc. v. CA, [G.R. No. 157133, January
30, 2006]; Industrial Timber Corp. v. Ababon, [G.R. No. 164518, March 30, 2006].
412
413
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6. THE AGABON DOCTRINE.
a. Agabon doctrine applies when dismissal is for just or authorized cause but witho
ut due process.
The Agabon doctrine is based on the case of Agabon v. NLRC, [G.R. No. 158693, Novem
ber 17, 2004], where it
was held that a termination for a just or authorized cause but without affording th
e employee procedural due process
should no longer be considered illegal or ineffectual419 but legal.
Consequently, 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 groun
ded on just cause or authorized
cause, thus:
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1. The dismissal was for a just cause under Article 282, for an authorized cause un
der Article 283, or for health
reasons under Article 284, and due process was observed – This termination is LEGAL
.412
2. The dismissal was without a just or authorized cause but due process was observe
d – This termination is
ILLEGAL.413
3. The dismissal was without a just or authorized cause and due process was not obs
erved – This termination is
ILLEGAL.414
4. The dismissal was for a just or authorized cause but due process
was not observed – This termination is
LEGAL.415
5. The dismissal was for a non‐existent cause – This termination is ILLEGAL. 416
6. The dismissal was not supported by any evidence of termination – This terminatio
n is NEITHER LEGAL NOR
ILLEGAL as there is no dismissal to speak of.417
7. The dismissal was brought about by the implementation of a law – This terminatio
n is LEGAL. 418
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Composite Enterprises, Inc. v. Caparoso, G.R. No. 159919, Aug. 8, 2007; Pheschem
Industrial Corporation v. Moldez, G.R. No. 161158, May 9, 2005, 458 SCRA 339, 346.
Aris (Phil.) Inc. v. NLRC, [G.R. No. 90501, August 5, 1991, 200 SCRA 246].
Philippine Airlines, Inc. v. NLRC, [G.R. No. 113827, July 5, 1996, 258 SCRA 243].
425 Article 223, Labor Code; Section 4 [d], NLRC Manual on Execution of Judgment;
Pioneer Texturizing Corporation v. NLRC, G.R. No. 118651, Oct. 16, 1997, 280 SCRA
806.
426 Roquero v. Philippine Air Lines, Inc., G.R. No. 152329, April 22, 2003.
427 Pioneer Texturizing Corporation v. NLRC, [G.R. No. 118651, October 16, 1997,
280 SCRA 806].
428 Article 223, Labor Code; Zamboanga City Water District v. Buat, G.R. No.
104389, May 27, 1994, 232 SCRA 587.
429 Pioneer Texturizing [supra].
430 Garcia and Dumago v. Philippine Airlines, Inc., G.R. No. 164856, January 20,
2009 [En Banc].
431 Maranaw Hotel Resort Corporation [Century Park Sheraton Manila] v. NLRC, [G.R.
No. 110027, November 16, 1994].
432 Christian Literature Crusade v. NLRC, G.R. No. 79106, April 10, 1989, 171 SCRA
712; See also Ocampo v. Hon. Carale, G.R. No. 110687, Dec. 15, 1993; Industrial and
Transport Equipment, Inc. v. NLRC, G.R. No. 113592, Jan. 15, 1998.
433 Roquero v. Philippine Air Lines, Inc., [G.R. No. 152329, April 22, 2003]; Air
Philippines Corp. v. Zamora, [G.R. No. 148247, August 7, 2006]; Torres, Jr. v.
NLRC, [G.R. No. 172584, November 28, 2008].
434 C. Alcantara & Sons, Inc. v. CA, [G.R. No. 155109, September 29, 2010].
435 Lansangan v. Amkor Technology Philippines, Inc., [G.R. No. 177026, January 30,
2009].
436 Enunciated in Genuino v. NLRC, [G.R. Nos. 142732-33, December 4, 2007].
422
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2. Article 263 [g] which provides for automatic return to work of all striking or l
ocked‐out employees, if a strike
or lockout has already taken place, upon the issuance by the Secretary of Labor and
Employment of an assumption or
certification order. The employer is required to immediately resume operations and
readmit all workers under the same
terms and conditions prevailing before the strike or lockout.
3. Article 277 [b] which empowers the Secretary of Labor and Employment
to suspend the effects of
termination pending the resolution of the termination dispute in the event of a pri
ma facie finding by the appropriate
official of the Department of Labor and Employment before whom such dispute is pend
ing that the termination may
cause a serious labor dispute or is in implementation of a mass lay‐off.
4. Article 279 which grants reinstatement as a relief to an employee whose dismissa
l is declared as illegal in a
final and executory judgment.
5. Article 286 which involves bona‐fide suspension of operation for a period not ex
ceeding six (6) months or the
rendition by an employee of military or civic duty. It is required under this provi
sion that the employer should reinstate
its employees upon resumption of its operation which should be done before the laps
e of said six‐month period of bona‐
fide suspension of operation or after the rendition by the employees of military or
civic duty.
[NOTE: The reinstatement referred to in the Syllabus pertains only to the reinstate
ment under
Article 223. Discussion, therefore, will focus on this relief].
2. REINSTATEMENT ASPECT OF LABOR ARBITER’S DECISION, IMMEDIATELY EXECUTORY EVEN PEN

DING APPEAL.
a. Concept of reinstatement pending appeal, immediately executory.

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.422
b. Some principles on reinstatement pending appeal under Article 223.

1. Reinstatement pending appeal under Article 2223 is constitutional.423
2. Reinstatement pending appeal, similar to return‐to‐work order.424
3. Posting of a bond does not stay the execution of immediate reinstatement.425
4. Reinstatement pending appeal, ministerial duty of Labor Arbiter.426
5. Award of reinstatement pending appeal is self‐
executory, no writ of execution required.427
6. The employer has only 2 options:
a.
Actual reinstatement, i.e., 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 d
ismissal or separation or,
if no longer available, to a substantially‐equivalent position; or
b. Payroll reinstatement, i.e., reinstatement of the employee in the
payroll of the company without
requiring him to report back to his work.428
7.
Employer has the obligation to notify employee of his choice of option.429 Under th
e 2005 Revised NLRC
Rules of Procedure [January 7, 2006], it is required that the employer should submi
t a report of compliance
within ten (10) calendar days from receipt of the Labor Arbiter’s
decision, disobedience to which clearly
denotes a refusal to reinstate.
8.
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.430
9.
NLRC cannot exercise option of employer by choosing payroll reinstatement pending a
ppeal.431
10.
Employer may be cited for contempt for his refusal to comply with the order of rein
statement.432
11.
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.433
13.
The concept of reinstatement pending appeal under Article 223 contemplates all kind
s of illegal dismissal
cases.434
13. However, the principle of reinstatement pending appeal as well as
the Roquero doctrine (now Garcial
doctrine) apply only in case there is a finding of illegality of dismissal by the L
abor Arbiter. It does not apply
in case the dismissal is found valid and legal but the Labor Arbiter ordered reinst
atement “as a measure of
equitable and compassionate relief” owing mainly to employees’ prior unblemished em
ployment records,
show of remorse, harshness of the penalty and defective attendance
monitoring system of the
employer.435
14. The rule436 that the payroll‐
reinstated employee should refund the salaries he received if his dismissal is
finally found legal on appeal no longer applies. Whether reinstated actually or in
the payroll, the employee
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Garcia and Dumago v. Philippine Airlines, Inc., [G.R. No. 164856, January 20, 2009
(En Banc)].
Aboc v. Metropolitan Bank and Trust Company, [G.R. Nos. 170542-43, December 13,
2010], citing College of the Immaculate Conception v. NLRC & Atty. Marius F.
Carlos, Ph.D., G.R. No. 167563, March 22, 2010.
Roquero v. Philippine Air Lines, Inc., [supra].
440 Genuino v. NLRC, [supra].
441 Garcia and Dumago v. Philippine Airlines, Inc., [supra].
442 Mt. Carmel College v. Resuena, [G.R. No. 173076, October 10, 2007]; Panuncillo
v. CAP Philippines, Inc., [G.R. No. 161305, February 9, 2007].
444 Citing Garcia v. Philippine Airlines, Inc., G.R. No. 164856, Jan. 20, 2009, 576
SCRA 479, 489; See also Triad Security & Allied Services, Inc. v. Ortega, [G.R. No.
160871, February 6, 2006].
445 Triad Security & Allied Services, Inc. v. Ortega, [supra].
446 Buenviaje v. CA, [G.R. No. 147806, November 12, 2002].
447 Sevilla v. NLRC, [G.R. No. 108878, September 20, 1994].
448 Medina v. Consolidated Broadcasting System, G.R. Nos. 99054-56, May 28, 1993,
222 SCRA 707; Pedroso v. Castro, G.R. No. 70361, Jan. 30, 1986, 141 SCRA 252.
450 Equitable Banking Corporation v. NLRC, G.R. No. 102467, June 13, 1997, 273 SCRA
352, 370; Philippine Telegraph & Telephone Corporation v. NLRC, G.R. No. 109281,
Dec. 7, 1995, 251 SCRA 21.
451 Filflex Industrial and Manufacturing Corporation v. NLRC, G.R. No. 115395, Feb.
12, 1998, 349 Phil. 913, 924-925; 286 SCRA 245.
437
438
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is not required to refund what he has received even if the decision of the Labor Ar
biter is subsequently
reversed on appeal.437
15.
Entitlement to wages and benefits during the period of payroll reinstatement until
reversed by the higher
court includes salary increases and other benefits granted during the payroll
reinstatement period. The
fact that the decision of the Labor Arbiter was reversed on appeal has no controlli
ng significance. The rule
is that even if the order of reinstatement of the Labor Arbiter is reversed on appe
al, it is obligatory on the
part of the employer to reinstate and pay the wages of the dismissed
employee during the period of
appeal until final reversal by the higher court.438
16.
The 2003 Roquero439 and 2007 Genuino440 doctrines have already been modified by the
2009 Garcia441
doctrine. Thus, after the Labor Arbiter’s decision is reversed by a higher tribunal
, the employee may be
barred from collecting the accrued wages (i.e., from the time he was
ordered reinstated by the Labor
Arbiter until reversed on appeal), if it is shown that the delay in
enforcing the reinstatement pending
appeal was without fault on the part of the employer.
17. The test under the Garcia doctrine is 2‐fold:
(a) There must be actual delay or the fact that the order of
reinstatement pending appeal was not
executed prior to its reversal; and
(b) The delay must not be due to the employer’s unjustified act or omission. If
the delay is due to the
employer’s unjustified refusal, the employer may still be required to pay the salar
ies notwithstanding
the reversal of the Labor Arbiter’s decision.
18.
While writ of execution is not required in case reinstatement is ordered by the Lab
or Arbiter, it is necessary
in case reinstatement is ordered by the NLRC on appeal.442
19.
If reinstatement is ordered not by the Labor Arbiter but by the NLRC on appeal and
it was not executed
by writ and the finding of illegal dismissal is later reversed, employer is not lia
ble to pay any backwages.443
20.
Employer may be held liable for backwages despite the fact that the Labor Arbiter f
ailed to issue any writ
to implement the reinstatement order issued by the NLRC on appeal.
C. Alcantara & Sons, Inc. v. CA, [G.R. No. 155109, September 29, 2010].
The Labor Arbiter ordered the reinstatement of the union members who were dismissed
by reason of their
partication in the illegal strike. A motion for execution of their reinstatement wa
s immediately filed but the
Labor Arbiter failed to issue any writ to enforce the same. Later, the NLRC reverse
d the Labor Arbiter’s
finding of illegality of their dismissal but on certiorari before the Court of Appe
als, the Labor Arbiter’s
order of reinstatement was reinstated. Ruling in the affirmative on
the issue of whether the striking
employees are entitled to their backwages reckoned from the time they were ordered
reinstated by the
Labor Arbiter until the reversal thereof by the NLRC, the Supreme Court reasoned th
at although the Labor
Arbiter failed to act on the terminated union members’ motion for
reinstatement pending appeal, the
company had the duty under Article 223 to immediately reinstate the
affected employees even if it
intended to appeal from the decision ordaining such reinstatement. The company’s f
ailure to do so made
it liable for accrued backwages until the eventual reversal of the order of reinsta
tement by the NLRC on
November 8, 1999, a period of four (4) months and nine (9) days.444
21.
Employment elsewhere does not affect reinstatement order and obligation to pay back
wages.445
22.
The failure of the illegally dismissed employee who was ordered reinstated to repor
t back to work does
not give the employer the right to remove him, especially when there is a reasonabl
e explanation for his
failure.446
23.
In case of two successive dismissals, the order of reinstatement pending appeal und
er Article 223 issued in
the first case shall apply only to the first case and should not affect the second
dismissal.447
24.
If position is already filled up, the employee ordered reinstated under Article 223
should be admitted back
to work in a substantially equivalent position.448
25. Reinstatement to a position lower in rank, not proper.449
26. No reinstatement pending appeal should be made when antipathy and antagonism ex
ist.450
27. If reinstatement is not stated in the Labor Arbiter’s decision (neither in the
dispositive portion nor in the
text thereof), reinstatement is not warranted.451
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1. SEPARATION PAY IN LIEU OF REINSTATEMENT.
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(2) Separation pay in lieu of
reinstatement
(a) Strained Relation rule
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c. Instances where separation pay in lieu of reinstatement is awarded.

Based on jurisprudence, separation pay in lieu of reinstatement should be paid in t
he following circumstances:
1.
In case strained relations exists between the employer and the employee. 458 Absenc
e of strained relations,
payment of separation pay in lieu of reinstatement is not justified.459
2. Where the company has been declared insolvent.460
3. Where the employee’s former position no longer exists at the time
of reinstatement for reasons not
attributable to the fault of the employer.461
4. Where the employee decides not to be reinstated as when he does
not pray for reinstatement in his
complaint or position paper.462
5.
Where the employee expressly prayed for the award of separation pay instead of rein
statement thereby
effectively foreclosing reinstatement as a relief.463
6.
In case the establishment where the employee is to be reinstated has closed or ceas
ed operations.464
7.
When, by reason of compassionate justice or long years of service or lack of bad re
cords in the past, an
employee is granted by the court separation pay in accordance with his entitlement
under the law, or under
the CBA or company rules or practice, whichever is higher, although
there was a finding of legality of
dismissal.465
8.
When there has been long passage of time or due to certain realities of the situati
on.466
9. When reinstatement proves impracticable, and hardly in the best interest of the
parties.467
10.
When reinstatement is rendered moot and academic due to supervening events such as
fire.468
11.
When there is take over of the business of the employer by another company and ther
e is no agreement
regarding assumption of liability by the acquiring company.469
12. When the illegally dismissed employees are over‐
aged and their reinstatement would unjustly prejudice
their employer.470
13. When the general sales agency contract between the employer and its
client has been terminated and
reinstatement is no longer feasible.471
Capili v. NLRC, [G.R. No. 117378, March 26, 1997, 270 SCRA 488].
See also Kingsize Manufacturing Corporation v. NLRC, G.R. Nos. 110452-54, Nov. 24,
1994.
St. Luke’s Medical Center, Inc. v. Notario, G.R. No. 152166, Oct. 20, 2010.
455 Section 4[b], Rule I, Book VI, Rules to Implement the Labor Code; St. Luke’s
Medical Center, Inc. v. Notario, G.R. No. 152166, Oct. 20, 2010; Agricultural and
Industrial Supplies Corp. v. Siazar, G.R. No. 177970, Aug. 25, 2010.
456 Planters Products, Inc. v. NLRC, G.R. No. 78524, Jan. 20, 1989.
457 See Millares v. NLRC, G.R. No. 122827, March 29, 1999, 305 SCRA 500.
458 Century Canning Corp. v. Ramil, G.R. No. 171630, Aug. 8, 2010; Coca-Cola
Bottlers Phils., Inc. v. Daniel, G.R. No. 156893, June 21, 2005.
459 Golden Donuts, Inc. v. NLRC, [G.R. Nos. 113666-68, January 19, 2000].
460 Electruck Asia, Inc. v. Meris, G.R. No. 147031, July 27, 2004.
461 Section 4[b], Rule I, Book VI, Rules to Implement the Labor Code.
462 Labor v. NLRC, G. R. No. 110388, Sept. 14, 1995; Gaco v. The Hon. NLRC, G.R.
No. 104690, Feb. 23, 1994.
463 F. F. Marine Corporation v. The Hon. Second Division NLRC, G.R. No. 152039,
April 8, 2005.
464 Section 4[b], Rule I, Book VI, Rules to Implement the Labor Code; Daughson
Construction Co. Ltd. v. NLRC, G.R. No. 72945, May 29, 1986; Pizza Inn v. NLRC,
G.R. No. 74531, June 28, 1988.
465 Firestone Tire and Rubber Co. of the Philippines v. Lariosa, G.R. No. L-70479,
Feb. 27, 1987..
466 Esmalin v. NLRC, G.R. No. 67880, Sept. 15, 1989; See also Sari-Sari Group of
Companies, Inc. v. Piglas Kamao [Sari-Sari Chapter], G.R. No. 164624, Aug. 11,
2008.
467 St. Luke’s Medical Center, Inc. v. Notario, G.R. No. 152166, Oct. 20, 2010.
468 Bagong Bayan Corporation v. Ople, G.R. No. 73334, Dec. 8, 1986.
469 Callanta v. Carnation Philippines, G.R. No. 70615, Oct. 28, 1986.
470 Bustamante v. NLRC, G.R. No. 111651, Nov. 28, 1996; Sagales v. Rustan’s
Commercial Corp., G.R. No. 166554, Nov. 27, 2008.
471 Asia Pacific Chartering [Phils.], Inc. v. Farolan, G.R. No. 151370, Dec. 4,
2002.
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b. Components of separation pay in lieu of reinstatement.

The amount of separation pay that should be paid in lieu of reinstatement is not pr
ovided under the Labor
Code. Jurisprudence, however, 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 f
or every year of service,
whichever is higher, a fraction of at least six (6) months being considered as one
(1) whole year.455
2. Allowances that the employee has been receiving on a regular
basis.456 The well‐settled rule is that
allowances that are regularly received by the employee should be
included in the computation of the
separation pay. If not regularly received, the same may not be so included.457
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a. Concept.
Article 279 is unambiguous insofar as it mandates the reinstatement of
the employee in case he is unjustly
dismissed. It does not, however, provide for the payment of separation pay in lieu
of reinstatement. That Article 279 is
the basis for such an award is well‐settled.452 It is awarded in instances where th
e relations between the employer and
the employee have been so severely strained that it is no longer advisable to reins
tate the latter. In such events, the
employer will instead be ordered to pay separation pay.453
It is, therefore, now well‐settled that if reinstatement is no longer possible, the
employer has the alternative of
paying the employee his separation pay in lieu of reinstatement.454
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a. Strained relations or antagonism may effectively bar reinstatement.

In a plethora of cases, 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.481
b. Some principles on strained relations.
1.
Strained relations must be raised before the Labor Arbiter. It must be demonstrated
as a fact.482
2.
Litigation, by itself, does not give rise to strained relations that may justify no
n‐reinstatement. The filing of
the complaint for illegal dismissal does not by itself justify the
invocation of the doctrine of strained
relations. 483
3.
No strained relations should arise from a valid and legal act of asserting one’s ri
ght; otherwise, an employee
who asserts his right could be easily separated from the service by merely paying h
is separation pay on the
pretext that his relationship with his employer had already become strained.484
4.
Indeed, if the strained relations engendered as a result of litigation are sufficie
nt to rule out reinstatement,
then reinstatement would become the exception rather than the rule in cases of ille
gal dismissal.485
5.
Nature of position, material in determining validity of “strained relations.” If th
e nature of the position
requires that trust and confidence be reposed by the employer upon the employee occ
upying it as would
make reinstatement adversely affect the efficiency, productivity and
performance of the latter, strained
relations may be invoked in order to justify non‐reinstatement. Where the employee,
however, has no say
in the operation of his employer’s business, invocation of this doctrine is not pro
per.486
6. Non‐
settlement of dispute after long period of time, not indicative of strained relatio
ns.487
7. Refusal by the employee to be reinstated indicates strained relations.
8.
The refusal of an employee to be reinstated is indicative of strained relations.488
9. Criminal prosecution confirms the existence of “strained relations”

which would render the employee’s
reinstatement highly undesirable.489
10.
A managerial employee should not be reinstated if strained relations exist. 490
11.
In case of new owhership of the establishment, reinstatement is proper if no strain
ed relations exist with
new owner.491
Colgate-Palmolive Philippines, Inc. v. Ople, G.R. No. L-73681, June 30, 1988.
Pheschem Industrial Corporation v. Moldez, G.R. No. 161158, May 9, 2005; Johnson &
Johnson [Phils.], Inc. v. Johnson Office & Sales Union – FFW, [G.R. No. 172799,
July 6, 2007].
Arc-Men Food Industries Corporation v. NLRC, [G.R. No. 127086, August 22, 2002];
JPL Marketing Promotions v. CA, [G.R. No. 151966, July 8, 2005].
475 Masagana Concrete Products v. NLRC, G.R. No. 106916, Sept. 3, 1999; Jardine
Davies, Inc. v. NLRC, G.R. No. 76272, July 28, 1999.
476 Soriano v. NLRC, G.R. No. L-75510, Oct. 27, 1987.
477 Songco v. NLRC, G.R. Nos. 50999-51000, March 23, 1990.
478 St. Luke’s Medical Center, Inc. v. Notario, G.R. No. 152166, Oct. 20, 2010;
Agricultural and Industrial Supplies Corp. v. Siazar, G.R. No. 177970, Aug. 25,
2010.
479 Pulp and Paper, Inc. v. NLRC, G.R. No. 116593, Sept. 24, 1997, 279 SCRA 408,
420.
480 Maxi Security and Detective Agency v. NLRC, [G.R. No. 162850, December 16,
2005].
481 Wensha Spa Center, Inc. v. Yung, G.R. No. 185122, Aug. 16, 2010; Century
Canning Corp. v. Ramil, G.R. No. 171630, Aug. 8, 2010; CRC Agricultural Trading v.
NLRC, G.R. No. 177664, Dec. 23, 2009.
482 Paguio Transport Corporation v. NLRC, G. R. No. 119500, Aug. 28, 1998.
483 Id.; Capili v. NLRC, G.R. No. 117378, March 26, 1997, 270 SCRA 488, 495.
484 Globe-Mackay Cable and Radio Corporation v. NLRC, G.R. No. 82511, March 3,
1992, 206 SCRA 701, 709.
485 Procter and Gamble Philippines v. Bondesto, G.R. No. 139847, March 5, 2004.
486 Acesite Corporation v. NLRC, [G. R. No. 152308, January 26, 2005].
487 Palmeria v. NLRC, [G.R. Nos. 113290-91, August 3, 1995].
488 Sentinel Security Agency, Inc. v. NLRC, G.R. No. 122468, Sept. 3, 1998;
Philippine American Life Insurance Company v. NLRC, G.R. No. 122716, Sept. 3, 1998.
489 RDS Trucking, v. NLRC, G.R. No. 123941, Aug. 27, 1998; Cabatulan v. Buat, [G.R.
No. 147142, February 14, 2005].
490 Golden Donuts, Inc. et al. v. NLRC, [G.R. Nos. 105758-59, February 21, 1994];
See also Wensha Spa Center, Inc. v. Yung, G.R. No. 185122, Aug. 16, 2010.
491 PLDT v. Tolentino, [G.R. No. 143171, September 21, 2004],.
472
473
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d. Some principles on separation pay in lieu of reinstatement.

1.
Separation pay as a substitute remedy is only proper for reinstatement but not for
backwages nor for both
reinstatement and backwages.472
2.
The law intended reinstatement to be the general rule. It is only when reinstateme
nt is no longer feasible
that payment of separation pay is awarded to an illegally dismissed employee.473
3. No constructive/illegal dismissal, no separation pay required.474
4.
Separation pay in lieu of reinstatement is computed from the commencement of employ
ment up to the
time of termination, including the imputed service for which the employee is entitl
ed to backwages, with
the salary rate prevailing at the end of the period of putative service being the b
asis for computation. 475
5.
Commissions may or may not be included. As a general rule, commissions should not b
e included in the
computation of the base figure of the separation pay because the same is dependent
on the earnings of the
employee through actual marketing transactions taken by him.476 But if
commissions are earned from
actual transactions attributable to the employees like in the case of salesmen, the
same should be included
in the monthly salary for purposes of computing the separation pay. Consequently, w
hat should be taken
into account as separation pay is the average commission earned during their last y
ear of employment.477
6. Separation pay in lieu of reinstatement and backwages, not inconsistent with ea
ch other.478
7. The separation pay in lieu of reinstatement of employees who were constructivel
y dismissed is equivalent to
one (1) month salary for every year of service.479
8. Death of employee during the pendency of the case forestalls award
of separation pay in lieu of
reinstatement.480
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(3) Backwages
(a) Components of the amount
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1. BACKWAGES.
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a. Components.
The components of backwages are as follows:
1.
Salaries or wages computed on the basis of the wage rate level at the time of the i
llegal dismissal and not in
accordance with the latest, current wage level of the employee’s position.498
2.
Allowances and other benefits regularly granted to and received by the employee sho
uld be made part of
backwages.499 Examples:
a. Emergency living allowances and 13th month pay mandated under the law.500
b. Fringe benefits or their monetary equivalent.501
c. Transportation and emergency allowances.502
d. Holiday pay, vacation and sick leaves and service incentive leaves.503
e. Just share in the service charges.504
f. Gasoline, car and representation allowances.505
g. Any other regular allowances and benefits or their monetary equivalent.506
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1.
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.507
2. Salary increases during period of unemployment, not included as
component in the computation of
backwages.508
3.
Dismissed employee’s ability to earn, irrelevant in the award of backwages.509
4.
The failure to claim backwages in a complaint for illegal dismissal is a mere proce
dural lapse which cannot
defeat a right granted under substantive law. Hence, the illegally dismissed employ
ee may still be awarded
backwages despite said failure.510
Philippine Journalists, Inc. v. Mosqueda, G.R. No. 141430, May 7, 2004; Rodriguez,
Jr. v. NLRC, G.R. No. 153947, Dec. 5, 2002, 393 SCRA 511, 517.
PLDT v. NLRC, G.R. No. 106947, Feb. 11, 1999.
Buhain v. The Hon. CA, G.R. No. 143709, July 2, 2002.
495 Telefunken Semiconductors Employees Union-FFW v. Court of Appeals, [G.R. Nos.
143013-14, December 18, 2000, 348 SCRA 565, 590].
496 Earlier, there were two (2) rules on backwages. The first is the so-called
“Mercury Drug Rule” refers to the rule first enunciated in the case of Mercury Drug
Co., Inc. v. CIR, [G.R. No. L-23357, April 30, 1974, 56 SCRA 694, (1974)], which
mandates that in case the illegal dismissal of
an employee has lasted for many years, he is entitled to backwages for a fixed
period of three (3) years, “without further qualifications or deductions,” The
Mercury Drug rule was superseded later by the “Ferrer Doctrine” laid down in the
case of Ferrer v. NLRC, [G.R. No. 100898, July
5, 1993, 224 SCRA 410, 423], which granted backwages in full but the employer may
deduct any amount which the employee may have earned elsewhere during the period of
his illegal termination.
497 See also Kay Products, Inc. v. CA, G. R. No. 162472, July 28, 2005; Traders
Royal Bank v. NLRC, G.R. No. 127864, Dec. 22, 1999.
498 See also PLDT v. NLRC, G.R. No. 106947, Feb. 11, 1999; General Baptist Bible
Colleges v. NLRC, G.R. No. 85534, March 5, 1993, 219 SCRA 549
499 Evangelista v. NLRC, G.R. No. 93915, Oct. 11, 1995; Paramount Vinyl Products
Corporation v. NLRC, G.R. No. 81200, Oct. 17, 1990.
500 Espejo v. NLRC, G.R. No. 112678, March 29, 1996, 325 Phil. 753, 760; General
Baptist Bible Colleges v. NLRC, G.R. No. 85534, March 5, 1993, 219 SCRA 549.
501 Acesite Corporation v. NLRC, G.R. No. 152308, Jan. 26, 2005.
502 Santos v. NLRC, G.R. No. 76721, Sept. 21, 1987; Soriano v. NLRC, G.R. No. L-
75510, Oct. 27, 1987.
503 St. Louise College of Tuguegarao v. NLRC, G.R. No. 74214, Aug. 31, 1989; On
service incentive leave, see Fernandez v. NLRC, G.R. No. 105892, Jan. 28, 1998, 285
SCRA 149.
504 Maranaw Hotels & Resort Corporation v. NLRC, G.R. No. 123880, Feb. 23, 1999.
505 Consolidated Rural Bank [Cagayan Valley], Inc. v. NLRC, G.R. No. 123810, Jan.
20, 1999, 301 SCRA 223.
506 Blue Dairy Corporation v. NLRC, G.R. No. 129843, Sept. 14, 1999.
507 Fernandez v. NLRC, G.R. No. 105892, Jan. 28, 1998, 285 SCRA 149.
508 Equitable Banking Corp. v. Sadac, [G.R. No. 164772, June 8, 2006].
509 Tomas Claudio Memorial College, Inc. v. CA, [G.R. No. 152568, February 16,
2004].
510 Dela Cruz v. NLRC, G.R. No. 121288, Nov. 20, 1998, 299 SCRA 1, 12-13; L. T.
Datu & Co., Inc. v. NLRC, G.R. No. 113162. Feb. 9, 1996, 253 SCRA 440, 453.
492
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b. The Bustamante rule [the prevailing doctrine].

In 1996, the Supreme Court changed the rule496 on the reckoning of backwages. It an
nounced a new doctrine in
the case of Bustamante v. NLRC, [G.R. No. 111651, November 28, 1996,
265 SCRA 61],which is now known as the
Bustamante rule. Under this rule, the term “full backwages” should
mean exactly that, i.e., without deducting from
backwages the earnings derived elsewhere by the concerned employee during the perio
d of his illegal dismissal.497
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a. Concept.
Under Article 279, an employee who is unjustly dismissed is entitled not only to re
instatement, without loss of
seniority rights and other privileges, but also to the payment of his full backwage
s, inclusive of allowances and other
benefits or their monetary equivalent, computed from the time his compensation was
withheld from him (which, as a
rule, is from the time of his illegal dismissal) up to the time of his actual reins
tatement.492
The raison d’ etre for the payment of backwages is equity. Backwages
represent compensation that should
have been earned by the employee but were lost because of the unjust or illegal dis
missal.493
Simply stated, 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.494
But if the dismissal is not illegal, an award of backwages is not proper.495
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[NOTE: CONSTRUCTIVE DISMISSAL is classified in the Syllabus under the topic of

“Reliefs for Illegal
Dismissal.” It bears noting, however, that constructive dismissal is not a “relief”
as this term is understood
within the context of Labor Law].
1. CONSTRUCTIVE DISMISSAL.
Pr
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a. Concept.
Constructive dismissal contemplates the following:
1.
An involuntary resignation resorted to when continued employment is rendered imposs
ible, unreasonable
or unlikely;
f.
Aurora Land Projects Corporation v. NLRC, [G.R. No. 114733, January 2, 1997, 266
SCRA 48].
The Coca-Cola Export Corp. v. Gacayan, G.R. No. 149433, Dec. 15, 2010; Buenviaje v.
CA, G.R. No. 147806, 12 Nov. 2002, 391 SCRA 440.
CRC Agricultural Trading v. NLRC, G.R. No. 177664, Dec. 23, 2009; Gaco v. NLRC
[G.R. No. 104690, 23 February 1994, 230 SCRA 260, 269].
514 Philippine-Singapore Transport Services, Inc. v. NLRC, G.R. No. 95449, Aug. 18,
1997; Orlando Farms Growers Association/Glicerio Anover v. NLRC, G.R. No. 129076,
Nov. 25, 1998, 299 SCRA 364.
515 Espejo v. NLRC, G.R. No. 112678, March 29, 1996, 255 SCRA 430, 435.
516 St. Michael’s Institute v. Santos, [G.R. No. 145280, December 4, 2001].
517517 See also Intercontinental Broadcasting Corp. v. Benedicto, [G.R. No. 152843,
July 20, 2006].
518 RDS Trucking, v. NLRC, G.R. No. 123941, Aug. 27, 1998.
519 Chronicle Securities Corporation v. NLRC, [G.R. No. 157907, November 25, 2004];
See also Price v. Innodata Phils., Inc./Innodata Corp., [G.R. No. 178505, Sept. 30,
2008].
520 Mitsubishi Motors Philippines Corporation v. Chrysler Philippines Labor Union,
[G.R. No. 148738, June 29, 2004].
521 Maxi Security and Detective Agency v. NLRC, [G.R. No. 162850, December 16,
2005].
522 Id., Metro Transit Organization, Inc. v. NLRC, [G.R. No. 119724, May 31, 1999];
PLDT v. Teves, [G.R. No. 143511, November 15, 2010].
523 Quiñones v. NLRC, [G.R. No. 105763, July 14, 1995]; See also Visperas v.
Inciong, 119 SCRA 476 [1982].
524 Buhain v. The Hon. CA, [G.R. No. 143709, July 2, 2002].
525 Condo Suite Club Travel, Inc. v. NLRC, [G.R. No. 125671, January 28, 2000].
526 Glory Philippines, Inc. v. Vergara, G.R. No. 176627, Aug. 24, 2007.
527 Medina v. Consolidated Broadcasting System, G.R. Nos. 99054-56, May 28, 1993,
222 SCRA 707.
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5.
When Labor Arbiter or NLRC failed to award any backwages, the same may be corrected
on appeal even if
worker did not appeal.511
6.
In case reinstatement is ordered, full backwages should be reckoned from the time t
he compensation was
withheld (which, as a rule, is from the time of illegal dismissal) up to the time o
f reinstatement, whether
actual or in the payroll.512
7.
If separation pay is ordered in lieu of reinstatement, full backwages should be com
puted from the time of
illegal dismissal until the finality of 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 l
aid to rest.513
8.
The rule is different if employment is for a definite period. The illegally dismiss
ed fixed‐term employee is
entitled only to the payment of his salaries corresponding to the
unexpired portion of his fixed‐term
employment contract.514
9.
If the illegally dismissed employee has reached 60 years of age, his backwages shou
ld only cover the time
when he was illegally dismissed up to the time when he reached 60 years. Under Art
icle 287, 60 years is the
optional retirement age.515
10.
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.516 In Jaculbe v. Silliman University, [G.R. No. 156934, March 16, 2007],
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 comp
uted from the time
of her illegal dismissal up to her compulsory retirement age of sixty‐five (65).517
11.
If termination was made effective immediately, the backwages should be reckoned fro
m the date of the
termination letter where such was stated.518
12.
If employer has already ceased operations, full backwages should be computed only u
p 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.519
13.
If valid retrenchment supervened during the pendency of the case, full backwages sh
ould be computed
only up to the effectivity date of the retrenchment.520
14. In case the employee dies during pendency of the case, his full backwages shou
ld be computed from the
time of his dismissal up to the time of his death.521
15. The period of valid suspension is deductible from backwages.522
16. Backwages should be reckoned from end of valid suspension.523
17. Backwages should include period of preventive suspension.524
18. Employer’s offer to reinstate does not forestall payment of full backwages.525
19. Amount received during payroll reinstatement deductible from backwages.526
20. The unjustified refusal of the employer to reinstate an illegally
dismissed employee entitles him to
payment of his salaries effective from the time the employer failed to reinstate hi
m despite the issuance of
a writ of execution.527
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(4) Constructive dismissal
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Unicorn Safety Glass, Inc. v. Basarte, G.R. No. 154689, Nov. 25, 2004; See also
Formantes v. Duncan Pharmaceuticals, G.R. No. 170661, Dec. 4, 2009; Montederamos v.
Tri-Union International Corp., G.R. No. 176700, Sept. 4, 2009, 598 SCRA 370, 376;
Norkis Trading Co., Inc. v.
Gnilo, G.R. No. 159730, Feb. 11, 2008, 544 SCRA 279.
Nitto Enterprises v. NLRC, [G.R. No. 114337, September 29, 1995]; Phil. Employ
Services and Resources, Inc. v. Paramio, [G.R. No. 144786, April 15, 2004]; Siemens
Philippines, Inc. v. Domingo, [G.R. No. 150488, July 28, 2008]; SHS Perforated
Materials, Inc. v.
Diaz, [G.R. No. 185814, October 13, 2010].
530 CRC Agricultural Trading v. NLRC, [G.R. No. 177664, December 23, 2009]; Aguilar
v. Burger Machine Holdings Corporation, G.R. No. 172062, Oct. 30, 2006, 506 SCRA
266, 273; Globe Telecom, Inc. v. Florendo-Flores, G.R. No. 150092, Oct. 20, 2003,
SC E-Library.
531 Mandapat v. Add Force Personnel Services, Inc., G.R. No. 180285, July 6, 2010].
532 Callanta v. NLRC, [G.R. No. 105083, August 20, 1993, 225 SCRA 526].
533 Belaunzaran v. NLRC, [G.R. No. 120038, December 23, 1996, 265 SCRA 800];
Mandapat v. Add Force Personnel Services, Inc., [G.R. No. 180285, July 6, 2010];
Cathay Pacific Airways, Ltd. v. Marin, [G.R. No. 148931, September 12, 2006].
534 Philippine Rural Reconstruction Movement [PRRM] v. Pulgar, [G.R. No. 169227,
July 5, 2010].
535 Concrete Aggregates v. NLRC, G.R. No. 82458, Sept. 7, 1989.
528
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2. A demotion in rank and/or a diminution in pay; or
3.
A clear discrimination, insensibility or disdain by an employer which becomes unbea
rable to the employee
that it could foreclose any choice by him except to forego his continued employment
.528
b. Forced resignation.
Constructive dismissal includes forced resignation where the employee is made to do
or perform an involuntary
act ‐ submission or tender of resignation ‐ meant to validate the action of managem
ent in inveigling, luring or influencing
or practically forcing the employee to effectuate the termination of
employment, instead of doing the termination
himself.529
c. Test of constructive dismissal.

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. It is an act amounting
to dismissal but made to appear as if it
were not. In fact, the employee who is constructively dismissed may be
allowed to keep on coming to
work. Constructive dismissal is, therefore, a dismissal in disguise. The law reco
gnizes and resolves this situation in favor
of the employees in order to protect their rights and interests from the coercive a
cts of the employer.530
d. Some principles on constructive dismissal or forced resignation.

1. Mere allegations of threat or force do not constitute evidence to support a find
ing of forced resignation or
constructive dismissal.531
2. A threat to sue the employee is not unjust and will not amount to
forced resignation or constructive
dismissal. For instance, a threat to file estafa case, not being an unjust act, bu
t rather a valid and legal act to
enforce a claim, cannot at all be considered as intimidation. A threat
to enforce one’s claim through
competent authority, if the claim is just or legal, does not vitiate consent.532
3.
Giving the employee the choice or option between resignation and investigation is n
ot illegal.533
4.
The facts of the case should be considered to determine if there is constructive di
smissal.534
5. Voluntary resignation is different from constructive dismissal. An
employee who tendered her voluntary
resignation and signed the quitclaim after receiving all the benefits due her for h
er separation cannot claim
that she was constructively dismissed.535
6.
An employee may be constructively dismissed and at the same time legally dismissed.
Formantes v. Duncan Pharmaceuticals Phils., Inc., [G.R. No. 170661, December 4, 200
9].
This is quite a unique case where the employee was held to have been constructively
dismissed but at the same
time, was declared to have been legally dismissed. In this case, petitioner, while
still employed with the respondent, was
compelled to resign and forced to go on leave. After being confronted with the comp
laint for sexual abuse lodged by a
subordinate female employee and before being required to explain his side, petition
er, the Acting District Manager of
respondent for the Ilocos District, was no longer allowed to participate
in the activities of respondent company. His
salary was no longer remitted to him. 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. He was required to
explain his side on the issue of sexual abuse as well as the charge of insubordinat
ion only after these things have already
been done to him.
In ruling that he was already constructively dismissed, the High Court observed tha
t these discriminatory acts
were calculated to make petitioner feel that he is no longer welcome nor needed in
respondent company − short of
sending him an actual notice of termination. Despite this holding,
however, the Supreme Court declared that his
dismissal was valid and legal and, therefore, it is impractical and unjust to reins
tate him as there was a just cause for his
dismissal from the service consisting of his sexual abuse of a subordinate female
employee which, although not cited in
the Notice of Termination served on him when he was terminated, was duly proved dur
ing the trial of the case before
the Labor Arbiter. It must be noted that in this case, petitioner was terminated no
t on the ground of sexual abuse but
due to insubordination for his failure to report to the office; failure
to submit reports; and failure to file written
explanations despite repeated instructions and notices. Furthermore, while the dism
issal was adjudged as valid, it was
found that there was non‐compliance with the twin procedural requirements
of notice and hearing for a lawful
dismissal. It was established by evidence that the barrage of letters sent to petit
ioner, starting from a letter dated April
22, 1994 until his termination on May 19, 1994, was belatedly made and
apparently done in an effort to show that
petitioner was accorded the notices required by law in dismissing an employee. As
observed by the Labor Arbiter in her
decision, prior to these letters, petitioner was already constructively dismissed.
Since the dismissal, although for a valid
cause, was done without due process of law, the employer was ordered to indemnify p
etitioner with nominal damages
in the amount of P30,000.00.
e. Instances of constructive dismissal or forced resignation.

The following are examples of constructive dismissal or forced resignation:
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Pasig Cylinder Mfg., Corp. v. Rollo, G.R. No. 173631, Sept. 8, 2010.
New Ever Marketing, Inc. v. CA, G.R. No. 140555, July 14, 2005.
Dynamic Signmaker Outdoor Advertising Services, Inc. v. Potongan, G.R. No. 156589,
June 27, 2005.
539 Unicorn Safety Glass, Inc. v. Basarte, G.R. No. 154689, Nov. 25, 2004.
540 Oriental Mindoro Electric Cooperative, Inc. v. NLRC, G.R. No. 111905, July 31,
1995.
541 Garcia v. NLRC, G.R. No. 116568, Sept. 3, 1999; Oscar Ledesma & Company v.
NLRC, G.R. No. 110930, July 13, 1995, 246 SCRA 47, 51.
542 Globe Telecoms, Inc. v. Florendo-Flores, G.R. No. 150092, Sept. 27, 2002, 390
SCRA 201.
543 C. Alcantara & Sons, Inc. v. NLRC, G.R. No. 73521, Jan. 5, 1994.
544 Zurbano, Sr. v. NLRC, G.R. No. 103679, Dec. 17, 1993.
545545545 Guatson International Travel and Tours, Inc. v. NLRC, G.R. No. 100322,
March 9, 1994.
546 Rizal Memorial Colleges Faculty Union v. NLRC, G.R. No. 59012-13, Oct. 12,
1989.
547 Reyes v. NLRC, G.R. No. 78997, Aug. 31, 1989.
548 Sy v. NLRC, G.R. No. 85365, June 21, 1989.
549 R. P. Dinglasan Construction, Inc. v. Atienza, G.R. No. 156104, June 29, 2004.
550 Litonjua Group of Companies v. Vigan, G.R. No. 143723, June 28, 2001; See also
Suldao v. Cimech System Construction, Inc., G.R. No. 171392, Oct. 30, 2006.
551 Norkis Trading Co., Inc. v. Gnilo, G.R. No. 159730, Feb. 11, 2008.
552 Sapitan v. JB Line Bicol Express, Inc., G.R. No. 163775, Oct. 19, 2007.
553 Star Paper Corp. v. Simbol, Comia and Estrella, G.R. No. 164774, April 12,
2006.
554 Westmont Pharmaceuticals, Inc. v. Samaniego, G.R. Nos. 146653-54, Feb. 20,
2006\.
536
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1.
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.536
2.
Barring the employees from entering the premises whenever they would report for wor
k in the morning
without any justifiable reason, and they were made to wait for a certain employee w
ho would arrive in the
office at around noon, after they had waited for a long time and had left.537
3.
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 wh
ich period his salaries
were withheld.538
4. Implementing a rotation plan for reasons other than business necessity.539
5.
Sending to an employee a notice of indefinite suspension which is tantamount to dis
missal.540
6.
Demoting a worker or reassigning him involving a demotion in rank or diminution of
salaries, benefits and
other privileges.541
7.
Reducing the employee’s functions which were originally supervisory in nature and s
uch reduction is not
grounded on valid grounds such as genuine business necessity.542
8.
Imposing indefinite preventive suspension without actually conducting any investiga
tion. It was only after
almost one (1) year that the employer made known the findings in its investigation
which was conducted ex
parte.543
9.
Threatening a sickly employee with dismissal if he will not retire and promising e
mployment to his son and
daughter. The employee retired and signed two (2) quitclaims entitled “Receipt and
Release” in favor of the
company.544
10.
Forcing the employee to resign with threat that if he will not resign, he will file
charges against him that
would adversely affect his chances for new employment.545
11. 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, makes the cessation fro
m employment of
said employee not voluntary. Such act is in the nature of a
contrivance to effect a dismissal without
cause.546
12.
Asking the employee to file a resignation on the condition or promise that she woul
d 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 employer’s refusal in bad faith t
o reemploy her despite
its promise to do so amounted to illegal dismissal.547
13.
Changing the employee’s status from regular to casual constitutes constructive dism
issal.548
14.
Offer made by a labor contractor to reassign its employees to another company but w
ith no guaranteed
working hours and payment of only the minimum wage. The terms of the redeployment
thus became
unacceptable for said employees and foreclosed any choice but to reject the employe
r’s offer, involving as
it does a demotion in status and diminution in pay.549
15.
Preventing the employee from reporting for work by ordering the guards not to let h
er in. This is clear
notice of dismissal.550
16. 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 holding that there was constructive dismissal, the cou
rt took note of the fact
that the former position is managerial while the latter is clerical in nature.551
17. Reducing the number of trips of the drivers and shortening their
workdays which resulted in the
diminution of their pay.552
18.
Forcing the employee to tender her resignation letter in exchange for her 13th mont
h pay the reason being
that the employee was found by the employer to have violated its no‐employment‐for‐
relatives‐within‐
the‐third‐degree‐policy, she having been impregnated by a married co‐employee.553
19. Transferring unceremoniously the employee from Isabela to Metro
Manila and upon his reassignment
and/or transfer to Metro Manila, he was placed on “floating status,”
demoted in rank and directed to
perform functions not related to his supervisory position. The transfer was held to
be economically and
emotionally burdensome on his part. He was in fact constrained to
maintain two residences – one for
himself in Metro Manila, and the other for his family in Tuguegarao City, Cagayan.5
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(5) Preventive Suspension
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[NOTE: PREVENTIVE SUSPENSION is classified in the Syllabus under the topic of

Dismissal.” It bears stressing, however, that preventive suspension is not a
“relief” as this term is understood
within the context of Labor Law].
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As amended by Article 1, Department Order No. 09, Series of 1997.

Sections 8 and 9, Rule XXIII, Book V, Rules; Artificio v. NLRC, [G.R. No. 172988,
July 26, 2010]; Mandapat v. Add Force Personnel Services, Inc., G.R. No. 180285,
July 6, 2010; Bañez v. De La Salle University, G.R. No. 167177, Sept. 27, 2006.
Philippine National Bank v. Velasco, [G.R. No. 166096, September 11, 2008].
558 Valiao v. Hon. CA, G.R. No. 146621, July 30, 2004.
559 Woodridge School [now known as Woodridge College, Inc.] v. Benito, [G.R. No.
160240, October 29, 2008].
560 Maricalum Mining Corp. v. Decorion, [G.R. No. 158637, April 12, 2006].
561 R.B. Michael Press v. Galit, G.R. No. 153510, Feb. 13, 2008; Tanala v. NLRC,
G.R. No. 116588, Jan. 24, 1996, 252 SCRA 314, 321.
562 Philippine Airlines, Inc. v. NLRC, [G.R. No. 114307, July 8, 1998, 292 SCRA
40].
563 See also Atlas Fertilizer Corporation v. NLRC, G.R. No. 120030, June 17, 1997,
273 SCRA 549.
564 Jo Cinema Corporation v. Abellana, G.R. No. 132837, June 28, 2001.
555
556
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1. PREVENTIVE SUSPENSION.
a. Legal basis.
The Labor Code does not contain any provision on preventive suspension.
The legal basis for the valid
555
imposition thereof is found in Sections 8 and 9, Rule XXIII, Book V of the Rules to
Implement the Labor Code.
b. Purpose and justification for the imposition of preventive suspension.

Preventive suspension may be legally imposed against an errant employee only when h
is alleged violation is the
subject of an investigation. This remedy may thus be resorted to only
while the errant employee is undergoing an
investigation for certain serious offenses. Consequently, its purpose is to prevent
him from causing harm or injury to the
company as well as to his fellow employees. It is justified only in cases where th
e employee’s continued presence in the
company premises during the investigation poses a serious and imminent threat to th
e life or property of the employer
or of the employee’s co‐workers. Without this threat, preventive suspension is not
proper.556
c. Some principles on preventive suspension.

1. 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.557
2. If the basis of the preventive suspension is the employee’s
absences and tardiness, the imposition of
preventive suspension on him is not justified as his presence in the company premis
es does not pose any
such serious or imminent threat to the life or property of the employer or of the e
mployee’s co‐workers
simply “by incurring repeated absences and tardiness.”558
3. The grounds of violation of the school rules and regulations on
the wearing of uniform, tardiness or
absence, and maliciously spreading false accusations against the school, do not jus
tify the imposition of
preventive suspension.559
4. The failure by an employee to attend a meeting called by his
supervisor will not justify his preventive
suspension.560
5. Preventive suspension does not mean that due process may be disregarded.561
6. Preventive suspension is not a penalty.562 Preventive suspension, by
itself, does not signify that the
company has already adjudged the employee guilty of the charges for which she was a
sked to answer
and explain.563
7. Preventive suspension is not equivalent nor tantamount to dismissal.564
8.
Period of preventive suspension should only be for a maximum period of thirty (30)
days. After the lapse
of the 30‐day period, the employer is required to reinstate the worker
to his former position or to a
substantially equivalent position.
9. Extension of period must be justified. During the 30‐
day period of preventive suspension, the employer is
expected to conduct and finish the investigation of the employee’s
administrative case. 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. No extension thereof can
be made based on whimsical,
capricious or unreasonable grounds.
10.
If preventive suspension is extended beyond 30 days, employer must pay salary durin
g the period of
extension. During the 30‐day preventive suspension, the worker is not entitled to h
is wages and other
benefits. However, if the employer decides, for a justifiable reason, to extend the
period of preventive
suspension beyond said 30‐day period, he is obligated to pay the wages
and other benefits due the
worker during said period of extension. In such a case, the worker is not bound to
reimburse the amount
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Relevant Provisions: Sections 8 and 9, Rules XXIII, Book V, Rules to Implement the
Labor Code
[No provision on Preventive Suspension in the Labor Code]
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(6) Quitclaims
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Relevant Provisions: Articles 227 and 221, Labor Code
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1. COMPROMISE AGREEMENT/AMICABLE SETTLEMENT.
A compromise agreement may be forged at any stage of the proceedings, even after a
final judgment has been
rendered therein. This rule holds true in all labor proceedings before any labor au
thority. Neither the Labor Code nor its
implementing rules as well as the NLRC Rules prohibit the amicable
settlement of cases during the pendency of the
proceedings or after a judgment is issued thereupon.573
2. QUITCLAIMS.
a. Concept.
After a compromise agreement has been entered into by the parties to a
suit, the employee is required to
execute a separate document usually denominated as “Quitclaim and Release” or “Waiv
er” or “Quitclaim, Release and
Waiver” setting forth the fact that he has received the amount of
consideration contemplated in the compromise
agreement and that as a consequence thereof, he quits, waives and releases the emp
loyer from any claims that he may
have against the latter by reason of his employment.
b. Requisites for the validity of a quitclaim.

The requisites for a valid quitclaim as follows:
(1) There was no fraud or deceit on the part of any of the parties;
(2) The quitclaim should be executed freely and voluntarily by the employee;
(3) The consideration for the quitclaim is credible and reasonable;
(4)
The contract is not contrary to law, public order, public policy, morals or good cu
stoms or prejudicial to a
third person with a right recognized by law.574
c. Standards for the validity of a quitclaim and waiver.

The standards for determining the validity of a quitclaim or waiver
were enunciated in the leading case of
Periquet v. NLRC, [G.R. No. 91298, June 22, 1990, 186 SCRA 724, 730‐731]. According
ly, not all waivers and quitclaims
are per se invalid as against public policy. If the agreement was voluntarily
entered into and represents a reasonable
settlement, it is binding on the parties and may not later on be disowned simply be
cause of a change of mind. It is only:
(1)
where there is a clear proof that the waiver was wangled from an unsuspecting or gu
llible person, or
(2) where the terms of the settlement are unconscionable on their face,
that the law will step in to annul the questionable transaction. But where it is sh
own that the person making the waiver
did so voluntarily, with full understanding of what he was doing, and the considera
tion for the quitclaim is credible and
Section 9, Rule XXIII, Book V, Rules to Implement the Labor Code, as amended by
Article 1, Department Order No. 09, Series of 1997 [21 June 1997]; See also
Philippine Airlines, Inc. v. NLRC, G.R. No. 114307, July 8, 1998, 292 SCRA 40;
Rural Bank of San Isidro [N.E.], Inc. v. Paez,
[G.R. No. 158707, November 27, 2006].
Hyatt Taxi Services, Inc. v. Catinoy, [G.R. No. 143204, June 26, 2001].
567 Pepsi-Cola Distributors of the Philippines, Inc. v. NLRC, G.R. No. 106831, May
6, 1997, 272 SCRA 267, 277; C. Pido v. NLRC, G.R. No. 169812, Feb. 23, 2007;
Alcantara & Sons, Inc. v. NLRC, G.R. No. 73521, Jan. 5, 1994.
568 Mandapat v. Add Force Personnel Services, Inc., [G.R. No. 180285, July 6,
2010].
569 Progressive Development Corporation - Pizza Hut v. Sarmiento, [G.R. No. 157076,
September 7, 2007].
570 Section 4, Department Order No. 19, Series of 1993.
571 Maricalum Mining Corp. v. Decorion, [G.R. No. 158637, April 12, 2006].
572 Pido v. NLRC, [G.R. No. 169812, February 23, 2007].
573 Loyola Security & Detective Agency v. NLRC, G.R. No. 113287, May 9, 1995, 313
Phil. 750, 754.
574 Danzas Intercontinental, Inc. v. Daguman, [G.R. No. 154368, April 15, 2005]l
Sime Darby Pilipinas, Inc. v. Arguilla, G.R. No. 143542, June 8, 2006.
565
566
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[NOTE: The topic of QUITCLAIMS is classified in the Syllabus under the topic of
Dismissal.” It bears underscoring, however, that quitclaims cannot be considered a
“relief” as this term is
understood within the context of Labor Law].
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paid to him during the extension if the employer decides to dismiss

him after the completion of the
investigation.565
11.
Preventive suspension lasting longer than 30 days, without the benefit of valid ext
ension, amounts to
constructive dismissal.566
12. Indefinite preventive suspension amounts to constructive dismissal. 567
13.
Failure to state the duration of the preventive suspension in the notice does not m
ean it is indefinite.568
14. Salaries should be paid for improperly‐imposed preventive suspension.569
15.
Period of preventive suspension of workers in the construction industry, only 15 da
ys.570
16.
Preventive suspension different from suspension of operation under Article 286 of t
he Labor Code.571
17. Preventive suspension is different from “floating status.”572
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(Mendoza, Jr. v. San Miguel Foods, Inc., G.R. No. 158684, May 16, 2005; See also
Cadalin v. Hon. CA, G.R. No. 168923, Nov. 28, 2008; Espina v. Hon. CA, G.R. No.
164582, March 28, 2007.
Bogo-Medellin Sugarcane Planters Association, Inc. v. NLRC, G.R. No. 97846, Sept.
25, 1998; Galicia v. NLRC, G.R. No. 119649, July 28, 1997.
Magsalin & Coca-Cola Bottlers Phils., Inc. v. National Organization of Working Men
[N.O.W.M.), [G.R. No. 148492, May 9, 2003].
578 Marcos v. NLRC, [G.R. No. 111744, September 08, 1995].
579 Philippine Carpet Employees’ Association v. Philippine Carpet Manufacturing
Corporation, G.R. Nos. 140269-70, Sept. 14, 2000; Cadalin v. Hon. CA, G.R. No.
168923, Nov. 28, 2008.
580 Principe v. Philippine Singapore Transport Services, Inc., G.R. No. 80918, Aug.
16, 1989, 176 SCRA 514.
581 Malinao, v. NLRC, [G.R. No. 119492, November 24, 1999].
582 Unicane Workers Union-CLUP v. NLRC, [G.R. No. 107545, September 9, 1996, 261
SCRA 573, 585-586].
583 Mindoro Lumber and Hardware v. Bacay, [G.R. No. 158753, June 8, 2005].
584 Unicorn Safety Glass, Inc. v. Basarte, [G.R. No. 154689, November 25, 2004].
585 Arellano v. Powertech Corp., [G.R. No. 150861, January 22, 2008].
586 Galicia v. NLRC, [G.R. No. 119649, July 28, 1997, 276 SCRA 381].
575
576
577
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reasonable, the transaction must be recognized as a valid and binding

undertaking.575 Invalid quitclaim and release
agreements are regarded as ineffective to bar the workers from claiming the full me
asure of their legal rights.576
d. Requisites for the validity of quitclaims of overseas Filipino workers (OFWs).

The Supreme Court enunciated in the 2007 case of EDI‐Staffbuilders
International, Inc. v. NLRC, [G.R. No.
14558, October 26, 2007], the requisites in order for the quitclaims and waivers ex
ecuted by overseas Filipino workers
(OFWs) to be valid and for purposes of preventing disputes on the
validity and enforceability of such quitclaims and
waivers under Philippine laws. Thus, a compromise agreement signed by an OFW is req
uired to contain the following:
1. A fixed amount as full and final compromise settlement;
2.
The benefits of the OFW, if possible, with the corresponding amounts which he is gi
ving up in consideration
of the fixed compromise amount;
3.
A statement that the employer has clearly explained to the OFW, in English, Filipin
o, or in the dialect known
to him ‐ that by signing the waiver or quitclaim, he is forfeiting or
relinquishing his right to receive the
benefits which are due him under the law; and
4.
A statement that the OFW signed and executed the document voluntarily and that he h
as fully understood
the contents of the document and that his consent was freely given without any thre
at, violence, duress,
intimidation or undue influence exerted on his persons.
It is advisable that the stipulations be made in English and Tagalog
or in the dialect known to the
employees. There should be two (2) witnesses to the execution of the quitclaim who
must also sign it. The document
should be subscribed and sworn to under oath preferably before any administering of
ficial of the Department of Labor
and Employment or its regional office, the Bureau of Labor Relations,
the NLRC or a Labor Attaché in a foreign
country. Such official should assist the parties regarding the execution of the qu
itclaim and waiver. After complying with
the requisites, the compromise settlement becomes final and binding under Article 2
27 of the Labor Code.
It should be made clear, however, that the foregoing rules on quitclaim or waiver
should apply only to labor
contracts of OFWs in the absence of proof of the laws of the foreign
country agreed upon to govern the
same. Otherwise, the foreign laws should apply.
e. Some principles on quitclaims.

1. Quitclaims are valid if employees received full measure of benefits.577
2.
Employer and employee do not stand on equal footing, hence, quitclaims are commonly
frowned upon as
contrary to public policy, and they are ineffective to bar claims for the full meas
ure of the workers’ legal
rights.578
3.
When the voluntariness of the execution of the quitclaim is put at issue, the claim
of the employee may still
be given due course.579
4.
A quitclaim in which the consideration is “scandalously low and inequitable” cannot
be an obstacle to the
pursuit of a worker’s legitimate claim. It is null and void for being contrary to p
ublic policy.580 Examples:
a.
The settlement of P20,000.00 instead of the Labor Arbiter’s award of P174,379.52 wa
s held shocking to
the mind, unconscionable and contrary to public policy.581
b.
The compromise settlement of only P100,000.00 for the over P2 Million award granted
by the Labor
Arbiter is null and void.582
c.
The private respondents’ individual claims ranging from P6,744.20 to P242,626.90, w
ere declared to be
grossly disproportionate to what each of them actually received (ranging from P3,00
0.00 to P6,000.00)
under the Sama‐samang Salaysay sa Pag‐uurong ng Sakdal. The amount of the settleme
nt is indubitably
unconscionable; hence, ineffective to bar the workers from claiming the
full measure of their legal
583
rights.
d.
The considerations received by the employees were held grossly inadequate consideri
ng the length of
time that they were employed in petitioner company. Basarte worked for
petitioner company for 21
years, that is, from 1976 to 1998, while Flores worked from 1991 to
1998. Basarte and Flores only
received P10,000.00 and P3,000.00, respectively. In contrast, Manongsong
and Soltura, two workers
who opted to settle their respective cases earlier on, both started in 1993 only, b
ut were able to take
home P16,434.00 each after executing their waivers.584
e. The compromise agreement was declared void because the consideration of
P150,000.00 was rather
measly when taken in the light of the more than P2.5 million judgment.585
f.
The compromise agreement was invalidated because it entitled the worker to receive
P12,000.00 in lieu
of a monetary judgment of P108,000.00. The amount was held to be palpably inequitab
le.586
5.
“Dire necessity,” “economic difficulties” or “financial crises” may or may not be a
basis for the annulment
of a quitclaim and release. “Dire necessity” is not a valid and
acceptable ground to annul a quitclaim,
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[NOTE: The topic of RESIGNATION (Termination of Employment by Employee) is

classified in the Syllabus
under the topic of “Reliefs for Illegal Dismissal.” It bears noting, however, that
resignation cannot be
considered a “relief” as this term is understood within the framework of Labor
Law].
1. TERMINATION OF EMPLOYMENT INITIATED BY THE EMPLOYEE (RESIGNATION).
Veloso v. Department of Labor and Employment, G.R. No. 87297, Aug. 5, 1991; Olaybar
v. NLRC, G.R. No. 108713, Oct. 28, 1994, 237 SCRA 819; Sicangco v. NLRC, G.R. No.
110261, Aug. 4, 1994, 235 SCRA 96.
Villar v. NLRC, G.R. No. 130935, May 11, 2000, 387 Phil. 706, 717; Pascua v. NLRC,
G.R. No. 123518, March 13, 1998, 287 SCRA 554.
Galicia v. NLRC, G.R. No. 119649, July 28, 1997, 276 SCRA 381.
590 Philippine Carpet Employees’ Association v. Philippine Carpet Manufacturing
Corporation, [G.R. Nos. 140269-70, September 14, 2000].
591 Aklan v. San Miguel Corp., G.R. No. 168537, December 11, 2008.
592 Sari-Sari Group of Companies, Inc. v. Piglas Kamao [Sari-Sari Chapter], G.R.
No. 164624, Aug. 11, 2008.
593 Sari-Sari Group of Companies, Inc. v. Piglas Kamao [Sari-Sari Chapter], G.R.
No. 164624, Aug. 11, 2008.
594 Agustilo v. CA, [G.R. No. 142875, September 7, 2001].
595 Sicangco v. NLRC, [G.R. No. 110261, August 4, 1994, 235 SCRA 96].
596 Amkor Technology Philippines, Inc. v. Juangco, [G.R. No. 166507, January 23,
2007],
597 Becton Dickinson Phils., Inc. v. NLRC, [G.R. Nos. 159969 & 160116, November 15,
2005]; See also Universal Robina Sugar Milling Corporation [URSUMCO] vs. Caballeda,
[G.R. No. 156644, July 28, 2008].
598 EMCO Plywood Corporation v. Abelgas, G.R. No. 148532, April 14, 2004, 427 SCRA
496, 514.
599 Section 30, Rule 132 of the Rules of Court Alabang Country Club, Inc. v. NLRC,
[G.R. No. 157611, August 9, 2005].
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especially when it has not been shown that the employees concerned have been forced
to execute it.587 But
“dire necessity” may be validly invoked in certain cases to annul a
quitclaim if the acceptance of the
separation pay was brought about by the same. By then, such
acceptance may not be said to have
amounted to estoppel nor as a waiver of the employees’ right to demand benefits to
which they are legally
entitled or to contest the legality of their dismissal.588 Thus, the validity of th
e invocation of the ground of
“dire necessity” to annul a quitclaim and release should be viewed in the light of
the peculiar facts of a case.
The main difference lies on whether there was voluntary acceptance of the agreement
and whether the
consideration for the waiver was reasonable. For if the consideration
is reasonable and the acceptance
thereof is voluntary, the quitclaim and waiver would be intrinsically
valid and binding and the “dire
necessity” excuse would be immaterial and irrelevant.589
6.
Quitclaims are not valid where consent was vitiated by mistake or fraud or when the
re is undue pressure or
duress. The mere fact that the employee was not physically coerced or intimidated d
oes not necessarily
imply that he freely or voluntarily consented to the terms of the quitclaim.590
7.
Absent any evidence that vitiates consent, the quitclaim is valid and binding.591
8.
Receipt of separation pay is not a bar to contest the legality of dismissal and the
acceptance thereof would
not amount to estoppel.592
9.
A quitclaim is not a bar to pursue claims arising from an unfair labor practice.593
10.
Quitclaims executed by persons who do not need special protection are valid. Exampl
es:
a.
A person who holds a master’s degree in library science and is an instructor in pol
itical science at a
university cannot claim that he was merely forced by necessity to accept the separa
tion benefits given
by his employer and that the quitclaim he executed in favor of his employer was not
voluntary. 594
b. A lawyer could not renege on the quitclaim he executed since
lawyers are not easily coerced into
signing legal documents.595
c.
The quitclaim executed by the employee who was the Executive Director of petitioner
company when
she was allegedly made to sign it cannot be nullified on the basis of her claim tha
t she signed it under
duress and intimidation. For signing it, she was paid P3,704,517.98 as
her voluntary retirement
package. Further, she is a woman of high educational attainment and
qualifications and is thus
expected to know the import of everything she executes.596
11.
However, there is no nexus between intelligence and position when it concerns press
ure exerted by the
employer upon the free will of the employee. A lowly employee or a sales manager wh
o is confronted with
the same dilemma of whether signing a quitclaim and accepting what the company offe
rs him, or refusing
to sign and walking out without receiving anything, may do succumb to the same pres
sure, being very well
aware that it is going to take quite a while before he can recover whatever he is e
ntitled to, because it is
only after a protracted legal battle starting from the Labor Arbiter level all the
way to the Supreme Court
can he receive anything at all. Such a risk of not receiving anything
whatsoever, coupled with the
probability of not immediately getting any gainful employment or means of livelihoo
d in the meantime,
constitutes enough pressure upon anyone who is asked to sign a quitclaim in exchang
e for some amount
of money which may be way below what he may be entitled to based on company practic
e or policy or by
law.597
12. Burden of proof on voluntariness of quitclaims lies with the employer.598
13. Notarization of quitclaims is a prima facie evidence of their due execution.599
=============================
(7) Termination of employment
by employee
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Go v. CA, G.R. No. 158922, May 28, 2004.

Shie Jie Corporation v. National Federation of Labor, G.R. No. 153148, July 15,
2005.
Emco Plywood Corporation v. Abelgas, G.R. No. 148532, April 14, 2004; Cheniver Deco
Print Technics Corporation v. NLRC, G.R. No. 122876, Feb. 17, 2000.
603 Article 285[a], Labor Code.
604 Phimco Industries, Inc. v. NLRC, G.R. No. 118041, June 11, 1997, 273 SCRA 286.
605 BMG Records [Phils.], Inc. v. Aparecio, G.R. No. 153290, Sept. 5, 2007; Reyes
v. CA, G.R. No. 154448, Aug. 15, 2003.
606 Rase v. NLRC, G.R. No. 110637, Oct. 07, 1994.
607 Custodio v. Ministry of Labor and Employment, G.R. No. 64374, July 19, 1990;
Philippines Today, Inc. v. NLRC, G.R. No. 112965, Jan. 30, 1997.
608 Intertrod Maritime, Inc. v. NLRC, G.R. No. 81087, June 19, 1991, 198 SCRA 318.
609 Mora v. Avesco Marketing Corporation, [G.R. No. 177414, November 14, 2008].
610 Villafuerte v. Commerce Advertising Corporation, NLRC Case No. AB-9-12298-81,
Jan. 26, 1983.
611 Fortuny Garments v. Castro, G.R. No. 150668, Dec. 15, 2005, 478 SCRA 125, 130.
612 Philippines Today, Inc. v. NLRC, G.R. No. 112965, Jan. 30, 1997, 267 SCRA 202.
613 Great Southern Maritime Services Corporation v. Acuña, [G.R. No. 140189,
February 28, 2005].
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a. Concept.
Article 285, in recognition of the equality of the parties to an employment relatio
nship, grants to an employee
the right to terminate the employment relationship he has with his employer at any
time he wishes and with or without
just cause. Under Articles 282, 283 and 284, the employer is the one granted such
right.
Resignation is the formal pronouncement of relinquishment of an
office.600 It is the voluntary act of an
employee who finds himself in a situation where he believes that personal reasons c
annot be sacrificed in favor of the
exigency of the service so much so that he has no other choice but to dissociate hi
mself from his employment.601
To constitute a resignation, it must be unconditional and with the intent to operat
e as such. There must be an
intention to relinquish an office accompanied by an act of relinquishment or abando
nment.602
b. Resignation and dismissal, distinguished.

Termination of employment by the employer is called “dismissal.” If done
by the employee, it is called
“resignation.”
2. TERMINATION OF EMPLOYMENT BY EMPLOYEE WITHOUT JUST CAUSE.
a. Requisites in termination without just cause.

In case of termination effected by the employee without just cause, the following r
equisites must concur:
1.
A written (not verbal) notice of the termination (commonly known as “resignation le
tter”); and
2. Service of such notice to the employer at least one (1) month in advance.603
If any of the afore‐mentioned requisites is not complied with, the employer may hol
d the employee liable for
damages. Thus, a resignation letter made effective “immediately” violates
the law and may subject the resigning
employee to damages, if there exists no just cause to warrant the
immediate termination of employment by the
employee.
b. Some principles on resignation without just cause.

1. The rationale for the one‐
month prior notice requirement is to afford the employer the opportunity to find
replacement for the resigning employee at least within the 30‐day
period. The purpose is to avoid any
undue disruption of work.
2.
The law affords the employee the right to resign regardless of whether the employer
has found an able and
competent replacement and whether the operation of the company would be affected pr
ovided he serves
a written notice to the employer at least one (1) month in advance.604
3.
Acceptance by the employer of the resignation is necessary.605 However, such accept
ance of a resignation
does not require the conformity of the resigning employee. Such
conformity only indicates that the
employee was forced to resign for which reason her “conformity” was
obtained to make it appear as
voluntary or legal.606
4.
A resignation tendered by an employee, irrespective of whether it was made revocabl
e or irrevocable, may
still be withdrawn anytime before its acceptance by the employer. Once accepted, ho
wever, withdrawal
thereof can no longer be made by the resigning employee, except with the consent or
agreement of the
employer.607
5. If after acceptance of his resignation, the employee changes his
mind, he must ask for approval of the
withdrawal of his resignation from his employer, as if he were re‐applying for the
job. It will then be up to
the employer to determine whether or not his services would be continued.608
6.
Acceptance of resignation should be in writing and must be duly communicated to and
served upon the
resigning employee in order to bind him. If not duly informed of such acceptance, t
he resigning employee
may still validly withdraw his resignation anytime. Thus, the mere
receipt by the employer’s personnel
department of the employee’s resignation letter is not equivalent to acceptance or
approval thereof.609
7. Verbal resignation, once accepted, makes resignation effective.610
8.
Acts of the employee before and after his resignation should be considered to deter
mine its validity.611
9.
Assumption of new job by employee prior to employer’s acceptance of resignation ind
icates his intent to
relinquish his position.612
10. Employment elsewhere during the pendency of a case does not amount
to resignation. It should be
expected that the employee would seek other means of income to tide him over during
the time that the
legality of his termination is under litigation. He should not be faulted for seek
ing employment elsewhere
for his economic survival.613
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3. TERMINATION OF EMPLOYMENT BY THE EMPLOYEE FOR JUST CAUSES.
a. Just causes for termination of employment by employee under Article 285 [b].
An employee may put an end to the employment relationship without need of serving a
ny 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;
2.
Inhuman and unbearable treatment accorded the employee by the employer or his repre
sentative;
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; and
4. Other causes analogous to any of the foregoing.627
b. Written notice not required.

Unlike resignation without just cause under paragraph [a] of Article 285 where the
law requires prior written
notice, the employee may terminate his employment without serving any notice to the
employer if such is occasioned by
any of the just causes mentioned in paragraph [b] of Article 285.
3.1. SERIOUS INSULT ON THE HONOR AND PERSON OF THE EMPLOYEE.
a. Requisites.
In order for serious insult to be considered a just cause to warrant the valid term
ination of employment by the
employee without notice, the following requisites must concur:
1. The insult must be serious in character;
2.
It must be committed by the employer or his representative against the employee; an
d
Philippines Today, Inc. v. NLRC, G.R. No. 112965, Jan. 30, 1997, 267 SCRA 202.
Philippine National Construction Corporation v. NLRC, G.R. No. 120961, Oct. 2,
1997, 280 SCRA 116; Talla v. NLRC, G.R. No. L-79913, July 19, 1989, 175 SCRA 479.
Almario v. Philippine Airlines, Inc., [G.R. No. 170928, September 11, 2007].
617 A’ Prime Security Services, Inc. v. NLRC, [G.R. No. 107320, January 19, 2000];
Mobile Protective & Detective Agency v. Ompad, [G.R. No. 159195, May 9, 2005].
618 Great Southern Maritime Services Corporation v. Acuña, G.R. No. 140189, Feb.
28, 2005.
619 Willi Hahn Enterprises, v. Maghuyop, [G.R. No. 160348, December 17, 2004].
620 Malig-on v. Equitable General Services, Inc., [G.R. No. 185269, June 29, 2010];
Mobile Protective & Detective Agency v. Ompad, [G.R. No. 159195, May 9, 2005, 458
SCRA 308, 323].
621 Willi Hahn Enterprises v. Maghuyop, [supra]; See also Rufina Patis v.
Alusitain, G.R. No. 146202, July 14, 2004.
622 (Cheniver Deco Print Technics Corporation v. NLRC, G.R. No. 122876, Feb. 17,
2000; See also Fungo v. Lourdes School of Mandaluyong, G.R. No. 152531, July 27,
2007; Kay Products, Inc. v. CA, G.R. No. 162472, July 28, 2005.
623 Carlos v. CA, [G.R. No. 168096, August 28, 2007]; Fortuny Garments v. Castro,
G.R. No. 150668, Dec. 15, 2005; bile Protective & Detective Agency v. Ompad, G.R.
No. 159195, May 9, 2005, 458 SCRA 308.
624 Talidano v. Falcon Maritime & Allied Services, Inc., [G.R. No. 172031, July 14,
2008]; See also Oriental Shipmanagement Co., Inc. v. CA, G.R. No. 153750, Jan. 25,
2006, 480 SCRA 100, 110.
625 St. Michael Academy v. NLRC, G.R. No. 119512, July 13, 1998, 292 SCRA 478.
626 Dole Philippines, Inc. v. NLRC, G.R. No. 120009, Sept. 13, 2001.
627 Article 285[b], Labor Code; Section 11, Rule I, Book VI, Rules to Implement the
Labor Code.
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11.
A resigned employee who desires to take his job back has to reapply therefor and he
shall have the status
of a stranger who cannot unilaterally demand an appointment. He cannot arrogate un
to himself the same
position which he earlier decided to leave.614
12.
Once an employee resigns and executes a quitclaim in favor of the employer, he is t
hereby estopped from
filing any further money claims against the employer arising from his employment.
Such money claims
may be given due course only when the voluntariness of the execution of the quitcla
im is put in issue, or
when it is established that there is an unwritten agreement between the employer an
d employee which
would entitle the employee to other remuneration or benefits upon his or her resign
ation.615
13.
A resigning employee has the obligation to reimburse the employer for the cost of t
raining him for higher
position if he has not complied with the conditions imposed on such training such a
s the rendition of a
certain number of years after the training.616
14.
No weight should be given to the employee’s resignation letter which appears to hav
e been written and
submitted at the instance of the employer. Its form is of the company’s and its wo
rdings are more of a
waiver and quitclaim. More so when the supposed resignation was not
acknowledged before a notary
public.617
15.
Resignation letters which were all prepared by the employer and were substantially
similarly worded and
of the same tenor are waivers or quitclaims which are not sufficient to show valid
separation from work or
to bar the employees from assailing their termination. They also constitute eviden
ce of forced resignation
or that they were summarily dismissed without just cause.618
16. Voluntariness of resignation may be inferred from its language.619
17.
The burden to prove voluntariness of the resignation lies with the employer.620
18.
The employee who alleges that he was coerced into resigning should prove such claim
.621
19.
The general rule is that the filing of a complaint for illegal dismissal negates re
signation.622 However, this
rule does not apply to a case where the filing of an illegal dismissal case by the
employee who resigned
was evidently a mere afterthought. It was filed not because she wanted to return t
o work but to claim
separation pay and backwages.623
20.
The filing of a complaint is inconsistent with voluntary repatriation of OFW.624
22.
A resignation letter which contains words of gratitude and appreciation to the empl
oyer can hardly come
from employees who are forced to resign.625
23. Special Voluntary Resignation (SVR) Program, held valid. Employers
may lawfully and effectively reduce
their personnel by offering resignation benefits through a Voluntary
Resignation Program where
employees are afforded the right to voluntarily terminate the employment relationsh
ip. If made in good
faith, such a scheme should be considered a valid form of terminating employment.62
6
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3. Retirement Pay Law
a. Coverage
b. Exclusions from coverage
c. Components of retirement pay
d. Retirement pay under RA 7641
vis-à-vis retirement benefits
under SSS and GSIS laws
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of
Relevant Provision: Article 287 of the Labor Code, as amended by R.A. No. 7641
[January 7, 1993] and
R.A. No. 8558 [February 26, 1998]
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[NOTE: The entire substantive provisions of R.A. No. 7641 (The

Retirement Pay Law) and R.A. No. 7641 (on
underground mine workers) are now found in Article 287 of the Labor Code. Thus, the
re is no need to separately
consult these laws in order to learn their provisions. Reference to R.A. No. 7641 i
n the Syllabus may result in
confusion as it may give the impression to the untrained eyes that R.A. No. 7641 is
separate and distinct from
Article 287 of the Labor Code].
1. COVERAGE OF THE RETIREMENT PAY LAW.
Retirement under Article 287, as amended, applies to:

1. All employees in the private sector, regardless of their position, designation o
r status and irrespective of the
method by which their wages are paid;628
2. Part‐time employees;
3. Employees of service and other job contractors;
4. Domestic helpers or persons in the personal service of another;629
3. Underground mine workers;630
4. Employees of government‐owned and/or controlled corporations organized
under the Corporation Code
(without original charters).631
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3. It must injure the honor and person of the employee.

Conversely, if the insult is not serious or is committed by a co‐employee or a thir
d party like a customer, even if
injurious to the honor and person of the employee, it is not a just cause under Art
icle 285 [b].
3.2. INHUMAN AND UNBEARABLE TREATMENT OF THE EMPLOYEE.
a. Requisites.
This ground may be invoked if the following requisites concur:
1. The treatment is inhuman and unbearable in nature; and
2. It is perpetrated by the employer or his representative against the employee.
An example of inhuman treatment is the act of the employer in not providing safety
gadgets such as gas masks
or safety attire in hazardous jobs requiring their use. An example of unbearable tr
eatment is when the employer does
not provide any toilet, necessitating the employees to go out of the workplace to l
ook for toilet elsewhere to heed the
call of nature.
3.3. COMMISSION OF A CRIME OR OFFENSE AGAINST THE EMPLOYEE OR ANY OF THE IMMEDIATE
MEMBERS OF HIS
FAMILY.
a. Requisites.
The requisites for this ground are as follows:
1. A crime or offense is committed by the employer or his representative; and
2.
It was perpetrated against the person of the employee or any of the immediate membe
rs of his family.
Sexual harassment under Republic Act No. 7877 [Anti‐Sexual Harassment Act of 1995],
is an example of a crime
or offense which may be committed by an employer against his employee.
3.4. OTHER ANALOGOUS CAUSES ‐ CONSTRUCTIVE DISMISSAL OR INVOLUNTARY OR FORCED RESI

GNATION.
[See discussion on the topic of “Constructive Dismissal” above].
Section 1, Rule II, Implementing Rules of the Retirement Pay Law; Labor Advisory on
Retirement Pay Law dated Oct. 24, 1996, issued by Secretary Leonardo A. Quisumbing.
Labor Advisory on Retirement Pay Law dated Oct. 24, 1996. (Note: Under the original
version of the Rules Implementing the New Retirement Pay Law (Republic Act No.
7641), domestic helpers and persons in the personal service of another were
declared not covered thereby.
However, they were subsequently included in its coverage by virtue of Department
Order No. 20, issued by Secretary Ma. Nieves Roldan Confesor on May 31, 1994. On
October 24, 1996, Secretary Leonardo A. Quisumbing issued his Labor Advisory on the
Retirement Pay Law
where they have been expressly and categorically included within the coverage of
this law).
630 R.A. No. 8558.
631 Postigo, et al., v. Philippine Tuberculosis Society, Inc., [G.R. No. 155146,
January 24, 2006]/
628
629
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Section 2, Rule II, Implementing Rules of the Retirement Pay Law; Labor Advisory on
Retirement Pay Law dated Oct. 24, 1996.
Article 287, Labor Code; Section 5.1, Rule II, Implementing Rules of the Retirement
Pay Law; Labor Advisory on Retirement Pay Law dated Oct. 24, 1996 issued by
Secretary Leonardo A. Quisumbing.
Article 287, Labor Code; Section 5.2, Rule II, Implementing Rules of the Retirement
Pay Law.
635 Labor Advisory on Retirement Pay Law dated Oct. 24, 1996, issued by Secretary
Leonardo A. Quisumbing.
636 Section 5.3, Rule II, Ibid..
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633
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2. EXCLUSIONS FROM COVERAGE.
Article 287, as amended, does not apply to the following employees:

1.
Employees of the national government and its political subdivisions, including gove
rnment‐owned and/or
controlled corporations, if they are covered by the Civil Service Law and its regul
ations.
2. Employees of retail, service and agricultural establishments or
operations regularly employing not more
than ten (10) employees. These terms are defined as follows:
a. “Retail establishment” is one principally engaged in the sale of
goods to end‐users for personal or
household use. It shall lose its retail character qualified for exemption if it is
engaged in both retail and
wholesale of goods.
b.
“Service establishment” is one principally engaged in the sale of service to indivi
duals for their own or
household use and is generally recognized as such.
c. “Agricultural establishment/operation” refers to an employer which
is engaged in agriculture. This
term refers to all farming activities in all branches and includes,
among others, the cultivation and
tillage of soil, production, cultivation, growing and harvesting of any
agricultural or horticultural
commodities, dairying, raising of livestock or poultry, the culture of fish and oth
er aquatic products in
farms or ponds, and any activities performed by a farmer or on a farm
as an incident to, or in
conjunction with, such farming operations, but does not include the manufacture and
/or processing of
sugar, coconut, abaca, tobacco, pineapple, aquatic or other farm products.632
3. COMPONENTS OF RETIREMENT PAY.
a. One‐half (½) month salary.

In the absence of a retirement plan or agreement providing for
retirement benefits of employees in the
establishment, an employee, upon reaching the optional or compulsory retirement age
specified in Article 287, shall be
entitled to retirement pay equivalent to at least one‐half (½) month salary for eve
ry year of service, a fraction of at least
six (6) months being considered as one (1) whole year.633
b. Components of one‐half (½) month salary.

For purposes of determining the minimum retirement pay due an employee under Articl
e 287, the term “one‐
half month salary” shall include all of the following:
(a)
Fifteen (15) days salary of the employee based on his latest salary rate. The term
“salary” includes all
remunerations paid by an employer to his employees for services rendered during nor
mal working days
and hours, whether such payments are fixed or ascertained on a time, task, piece or
commission basis, or
other method of calculating the same, and includes the fair and reasonable value, a
s determined by the
Secretary of Labor and Employment, of food, lodging or other facilities
customarily furnished by the
employer to his employees. The term does not include cost of living allowances, pro
fit‐sharing payments,
and other monetary benefits which are not considered as part of or integrated into
the regular salary of
the employees;
(b) The cash equivalent of five (5) days of service incentive leave;
(c) One‐twelfth (1/12) of the 13th month pay due the employee; and
(d) All other benefits that the employer and employee may agree upon
that should be included in the
computation of the employee’s retirement pay.634
c. “One‐half (½) month salary” means 22.5 days.
To dispel any further confusion on the meaning of “one‐half [½] month salary” provi
ded in Article 287, the
Supreme Court, in the case of Capitol Wireless, Inc. v. Confesor, [G.R. No. 117174,
November 13, 1996, 264 SCRA 68,
77], simplified its computation by declaring that it means the total of “22.5 days”
arrived at after adding 15 days plus 2.5
days representing one‐twelfth [1/12] of the 13th month pay plus 5 days of service i
ncentive leave.
Evidently, the law expanded the concept of “one‐half month salary” from the usual o
ne‐month salary divided
by two.635
d. One‐half month salary of employees who are paid by results.

For covered workers who are paid by results and do not have a fixed
monthly rate, the basis for the
determination of the salary for fifteen (15) days shall be their average daily sala
ry (ADS). The ADS is the average salary for
the last twelve (12) months reckoned from the date of their retirement, divided by
the number of actual working days in
that particular period.636
e. Five (5) days of service incentive leave, how reckoned.
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g. Distinction between drivers paid on “boundary system” and conductors paid on com
mission basis.
The said R & E Transport case should be distinguished from the 2010
case of Serrano v. Severino Santos
Transit, [G.R. No. 187698, August 9, 2010], which involves a bus conductor (petitio
ner) who worked for 14 years for
respondent bus company which did not adopt any retirement scheme. It was held here
in that even if petitioner as bus
conductor was paid on commission basis, he falls within the coverage of
R.A. 7641 and its implementing rules. This
means that his retirement pay should include the cash equivalent of the 5‐day SIL a
nd 1/12 of the 13th month pay for a
total of 22.5 days. The affirmance by the Court of Appeals of the reliance by the N
LRC on R & E Transport case was held
erroneous. For purposes of applying the law on service incentive leave
(SIL), as well as on retirement, there is a
difference between drivers paid under the “boundary system” and conductors who are
paid on commission basis. This is
so because in practice, taxi drivers do not receive fixed wages. They retain only t
hose sums in excess of the “boundary”
or fee they pay to the owners or operators of the vehicles. Conductors, on the oth
er hand, are paid a certain percentage
of the bus’ earnings for the day. It bears emphasis that under P.D. 851 or the SIL
Law, the exclusion from its coverage of
workers who are paid on a purely commission basis is only with respect to field per
sonnel. The more recent case of Auto
Bus Transport Systems, Inc., v. Bautista, [G.R. No. 156367, May 16,
2005, 458 SCRA 578, 587‐588], clarifies that an
employee who is paid on purely commission basis is entitled to SIL.
h. Retirement of part‐time employees.

There can be no question that part‐time workers are also entitled to retirement pay
of “one‐half month salary”
for every year of service under Article 287, as amended by Republic
Act No. 7641, after satisfying the following
conditions precedent for optional retirement: (a) there is no retirement plan betwe
en the employer and employee; (b)
the employee should have reached the age of sixty (60) years; and (c) should have r
endered at least five (5) years of
service with the employer. Meanwhile, the compulsory retirement age under the law i
s sixty‐five (65) years. (Explanatory
Bulletin on Part‐Time Employment dated Jan. 02, 1996 issued by Acting DOLE Secretar
y Jose S. Brillantes).
Applying, therefore, the principles under Republic Act No. 7641, the components of
retirement benefits of part‐
time workers may likewise be computed at least in proportion to the salary and rela
ted benefits due them.
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4. RETIREMENT PAY UNDER R.A. 7641 VIS‐À‐VIS RETIREMENT BENEFITS UNDER SSS AND GSIS
LAWS.
638
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a. SSS retirement pay is separate and distinct from the retirement pay under the La
bor Code, as amended.
The employee’s retirement pay under Article 287 of the Labor Code or
under a unilaterally promulgated
retirement policy or plan of the employer or under a CBA, is separate and distinct
from the retirement benefits granted
under Republic Act No. 8282, otherwise known as the “Social Security
Act of 1997” (formerly known as the “Social
Security Law” [Republic Act No. 1161, as amended]) which provides, thus:
“Section 12‐B. Retirement benefits. ‐ (a) A member who has paid at least
one hundred
twenty monthly contributions prior to the semester of retirement; and who (1) reach
ed the age of
sixty years and is already separated from employment or has ceased to be self‐
employed; or (2) has
reached the age of sixty‐five (65) years, shall be entitled for as long as he lives
to the monthly pension:
Provided, That he shall have the option to receive his first eighteen (18) monthly
pensions in lump
sum discounted at a preferential rate of interest to be determined by the SSS.
“(b) A covered member who is sixty (60) years old at retirement and who does not qu
alify for
pension benefits under paragraph (a) above, shall be entitled to a lump sum benefit
equal to the total
637
Enriquez Security Services, Inc. v. Cabotaje, [G.R. No. 147993, July 21, 2006].
Granting the 13th Month Pay.
See also Article 82 of the Labor Code.
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f. 1/12 of 13th month pay and 5 days of service incentive leave (SIL) should not be
included if the employee
was not entitled to 13th month pay and SIL during his employment.
Supposing the retiring employee, by reason of the nature of his work, was not entit
led to 13th month pay or to
the service incentive leave pay pursuant to the exceptions mentioned in the 13th
Month Pay Law and the Labor Code,
should he be paid upon retirement, in addition to the salary equivalent
to fifteen (15) days, the additional 2.5 days
representing one‐twelfth [1/12] of the 13th month pay as well as the five (5) days
representing the service incentive leave
for a total of 22.5 days?
This question was answered in the negative in the case of R & E Transport, Inc. v.
Latag, [G.R. No. 155214,
February 13, 2004]. The Supreme Court in this case ruled that employees who are no
t entitled to 13th month pay and
service incentive leave pay while still working should not be paid the entire “22.5
days” but only the fifteen (15) days
salary. In other words, the additional 2.5 days representing one‐twelfth [1/12] of
the 13th month pay and the five (5)
days of service incentive leave should not be included as part of the retirement be
nefits.
The employee in this case was a taxi driver who was being paid on
the “boundary” system basis. It was
undisputed that he was entitled to retirement benefits after working for fourteen (
14) years with R & E Transport, Inc.
However, he was not entitled to the 13th month pay since Section 3 of the Rules and
Regulations Implementing P. D. N.
851638 exempts from its coverage employers of those who are paid on purely boundary
basis. He was also not entitled to
the 5‐day service incentive leave pay pursuant to Section 1 of Rule V, Book III of
the Rules to Implement the Labor Code
which expressly excepts field personnel and other employees whose performance is un
supervised by the employer.639
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The five (5) days of service incentive leave provided under Article 287 as part of
the retirement benefit of one‐
half (½) month salary for every year of service should be paid in full. It should
not be computed on the basis of 1/12 of
the 5‐day service incentive leave (SIL).637
46

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“Section 13. Retirement benefits. ‐ (a) Retirement benefits shall be:

“(1) the lump sum payment as defined in this Act payable at the time of retirement
plus an old‐age pension benefit equal to the basic monthly pension
payable
monthly for life, starting upon the expiration of the five‐year (5) guaranteed
period covered by the lump sum; or
“(2) cash payment equivalent to eighteen (18) months of his basic monthly pension
plus monthly pension for life payable immediately with no five‐year (5)
guarantee.
“(b) Unless the service is extended by appropriate authorities,
retirement shall be
compulsory for an employee of sixty‐five (65) years of age with at least fifteen (1
5) years of service:
Provided, That if he has less than fifteen (15) years of service, he may be allowed
to continue in the
service in accordance with existing civil service rules and regulations.
“Section 13‐A. Conditions for entitlement. ‐ A member who retires from the service
shall be
entitled to the retirement benefits enumerated in paragraph (a) of Section 13 hereo
f: Provided, That:
“(1) he has rendered at least fifteen (15) years of service;
“(2) he is at least sixty (60) years of age at the time of retirement; and
“(3)
he is not receiving a monthly pension benefit from permanent total disability.
“Section 14. Periodic pension adjustment. ‐ The monthly pension of all pensioners
including
all those receiving survivorship pension benefits shall be periodically
adjusted as may be
recommended by the GSIS actuary and approved by the Board in accordance
with the rules and
regulations prescribed by the GSIS.”
f.
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c. Unique case where employees covered by the GSIS law are also entitled to retirem
ent pay under
the Labor Code.
Postigo v. Philippine Tuberculosis Society, Inc., [G.R. No. 155146, January 24, 200
6], presents quite a unique
case. The employees of respondent are covered by the GSIS Law. Upon
retirement from the service, some of the
petitioners who were compulsory members of the GSIS obtained retirement benefits fr
om the GSIS. Contending that
respondent is a private sector employer, the retired employees also claimed retirem
ent benefits under Article 287 of the
Labor Code, as amended by Republic Act No. 7641. Respondent denied
their claims on the ground that the
accommodation extended by the GSIS to the petitioners removed them from the coverag
e of the law. The Supreme
Court, however, affirmed their entitlement to the retirement benefits under the Lab
or Code since the respondent was
incorporated under the general corporation law and not under a special charter, thu
s making it a private and not a public
corporation. Further, respondent admitted that although its employees are
compulsory members of the GSIS, said
employees are not governed by the Civil Service Law but by the Labor Code. The acc
ommodation under Republic Act
No. 1820 extending GSIS coverage to respondent’s employees did not take
away from petitioners the beneficial
coverage afforded by Republic Act No. 7641. Hence, the retirement pay payable unde
r Article 287 of the Labor Code as
amended by Republic Act No. 7641 should be considered apart from the retirement ben
efit claimable by the petitioners
under the social security law or, as in this case, the GSIS Law.
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b. GSIS retirement applies to government employees only.

For government employees, Republic Act No. 8291, otherwise known as the “Government
Service Insurance
System Act of 1997” [formerly Presidential Decree No. 1146, otherwise known as “The
Revised Government Insurance
Act of 1977”], provides for the following retirement benefits:
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END OF DISCUSSION ON
TOPIC D. TERMINATION OF EMPLOYMENT
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contributions paid by him and on his behalf: Provided, That he is separated from em
ployment and is
not continuing payment of contributions to the SSS on his own.
“(c) The monthly pension shall be suspended upon the reemployment or resumption of
self‐
employment of a retired member who is less than sixty‐five years old. He shall aga
in be subject to
Section Eighteen and his employer to Section Nineteen of this Act.
“(d) Upon the death of the retired member, his primary beneficiaries as of the date
of his
retirement shall be entitled to receive the monthly pension: Provided,
That if he has no primary
beneficiaries and he dies within sixty (60) months from the start of his monthly pe
nsion, his secondary
beneficiaries shall be entitled to a lump sum benefit equivalent to the
total monthly pensions
corresponding to the balance of the five‐year guaranteed period, excluding the depe
ndents’ pension.
“(e) The monthly pension of a member who retires after reaching age sixty (60) shal
l be the
higher of either: (1) the monthly pension computed at the earliest time he could ha
ve retired had he
been separated from employment or ceased to be self‐employed plus all adjustments t
hereto; or (2)
the monthly pension computed at the time when he actually retires.”
oooooooooOoOooooooooo
47

Termination of Employment

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Termination of Employment

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ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

Prof. Joselito Guianan Chan

[These 8-part Notes discuss all topics/sub-topics in the Supreme Court-prescribed

a. Substantive Due Process

(a) Just Causes

(b) Authorized Causes

b. Procedural Due Process

(a) Redundancy, Retrenchment and Closure

c. Reliefs for illegal dismissal

(1) Procedure to be observed in termination cases

TOPICS UNDER THE SYLLABUS

LABOR LAW: D. TERMINATION OF EMPLOYMENT

LABOR LAW: D. TERMINATION OF EMPLOYMENT

1. FOUR‐FOLD TEST OF EMPLOYER‐EMPLOYEE RELATIONSHIP.

b. Control test, the controlling test.

c. Some principles on employer‐employee relationship.

d. Cases where employment relationship exists.

LABOR LAW: D. TERMINATION OF EMPLOYMENT

Relevant Provision: Article 281, Labor Code

Buiser v. Hon. Leogardo, [G.R. No. L‐63316, July 31, 1984].

d. Probationary period, how reckoned and computed.

e. Distinction between probationary employment and fixed‐term employment.

a. Nature of probationary employment.

A probationary employee is one who, for a given period of time, is on observation,

LABOR LAW: D. TERMINATION OF EMPLOYMENT

2. TERMINATION OF PROBATIONARY EMPLOYMENT.

a. Security of tenure of probationary employees.

b. Grounds to terminate probationary employment.

c. Some principles on termination of employment of probationary employees.

Relevant Provision: Article 280, Labor Code

a. Three (3) ways of attaining regular employment.

f. Some principles on probationary employment.

LABOR LAW: D. TERMINATION OF EMPLOYMENT

Relevant Provision: Article 280, Labor Code

b. Principal distinctions between project employment and regular employment.

2. REASONABLE CAUSAL CONNECTION RULE.

a. This rule is used not in connection with regular employment.

b. Some principles on regular employment.

LABOR LAW: D. TERMINATION OF EMPLOYMENT

c. “Work pool” principle.

3. TERMINATION OF PROJECT EMPLOYMENT.

a. Some principles relevant to termination of employment.

2. INDICATORS OF PROJECT EMPLOYMENT.

a. 6 indicators of project employment.

b. Some principles on project employment.

LABOR LAW: D. TERMINATION OF EMPLOYMENT

Relevant Provision: Article 280, Labor Code

b. Regular seasonal employment.

c. Requisites for regularity of employment of seasonal employees.

Tomas Lao Construction, v. NLRC, G.R. No. 116781, Sept. 5, 1997.

LABOR LAW: D. TERMINATION OF EMPLOYMENT

Relevant Provision: Article 280, Labor Code

a. Meaning of casual employment.

a. Requisites for validity of fixed‐term contracts of employment.

b. Some principles on fixed‐term employment.

Relevant Provision: No Labor Code provision on fixed-term employment.94

b. Some principles on casual employment.

LABOR LAW: D. TERMINATION OF EMPLOYMENT

2. FIXED‐TERM EMPLOYMENT OF OVERSEAS FILIPINO WORKERS (OFWs).

1. JOB CONTRACTING AND LABOR‐ONLY CONTRACTING ARRANGEMENT.

Relevant Provisions: Articles 106 to 109, Labor Code

a. “Contracting” or “subcontracting,” defined.