POST

EMPLOYMEN
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ECARMA
ELUMBARING
FIGUES
FONTANOSA
FUENTES
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BASED ON THE 2020 BAR EXAM SYLLABUS
 TABLE OF CONTENT

A.Employer-employee relationship..................3
1. Tests to determine existence....................3
2. Legitimate subcontracting as distinguished from labor-only contracting5
a. Elements................................................5
b. Trilateral relationship...........................10
c. Liabilities..............................................10
3. Kinds of employment..............................11
a. Regular................................................11
b. Casual..................................................12
c. Contractual...........................................13
d. Project..................................................13
e. Seasonal..............................................18
f. fixed term..............................................19
g. probationary; private school teachers. 21
B. Termination by employer...........................25
1. Requisites for validity..............................25
a. Substantive due process.....................25
i. Just Causes.......................................25
ii. Authorized Causes...........................38
b. Procedural due process.......................46
2. Preventive suspension............................49
3. Illegal dismissal.......................................49
a. Kinds....................................................50
i. No just or authorized cause...............50
ii. Constructive dismissal......................50
(a) Burden of proof.......................50
(b) Reliefs from illegal dismissal...50
(c) Liability of officers...................50

Page 2 of 63
4. Money claims arising from employer-employee relationship 51
5. When not deemed dismissed; employee on floating status. 51
C. Termination by employee..........................51
1. With notice to the employer....................53
2. Without notice to the employer...............53
3. Distinguish voluntary resignation and constructive dismissal 53
D. Retirement.................................................54

Page 3 of 63
IV. POST-EMPLOYMENT

A. Employer-employee relationship

Q: Define employer.

A: Any person acting directly or indirectly in the interest of an employer in relation to an employee.
[Art. 97(b); Art. 219(f)]

Any person, natural or juridical, employing the services of the employee. [Art. 173(f)]

Includes:
 The government
 All its branches, subdivisions and instrumentalities
 All government-owned or controlled corporations and institutions
 All nonprofit private institutions, or
organizations. [Art. 97(b)]

Does not include any labor organization or any of its officers or agents except when acting as
employer. [Art. 219(f)]

Q: Define employee.
A: Any individual employed by an employer. [Art. 97(c); Art. 219(g)]

Any person compulsorily covered by the GSIS under C.A. No. 168, as amended.[Art. 173(g)]

Includes:
 The members of the AFP,
 Any person employed as casual, emergency, temporary, substitute or contractual,
 Any person compulsorily covered by the SSS under R.A. No. 1161, as amended. [Art. 173(g)]
 Any individual whose work has ceased as a result of or in connection with any current labor
dispute or because of any unfair labor practice if he has not obtained any other substantially
equivalent and regular employment.
[Art. 219(g)]

The term shall not be limited to the employees of a particular employer, unless the Code so explicitly
states. [Art. 219(g)]

Page 4 of 63
 1. 1. Tests to determine existence

Q: What are the tests used in determining the existence of an employer-employee relationship?
Explain each.

A: The four-fold test, two-tiered test and the control test are the tests used in determining the
existence of an employer-employee relationship.

The four-fold test used in determining the existence of employer-employee relationship are: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal;
and (d) the employer's power to control the employee with respect to the means and method by
which the work is to be accomplished. (Bazar v. Ruizol, G.R. No. 198782, [October 19, 2016])

The control test is commonly regarded as the most important indicator of the presence or absence of
an employer-employee relationship. Under this test, an employer-employee relationship exists where
the person for whom the services are performed reserves the right to control not only the end
achieved, but also the manner and means to be used in reaching that end, which obtains in this
case.||| (Philippine Pizza, Inc. v. Salvador, G.R. No. 248144 (Notice), [August 28, 2019])

This two-tiered test involves: "(1) the putative employer's power to control the employee with respect
to the means and methods by which the work is to be accomplished; and (2) the underlying economic
realities of the activity or relationship".(Valeroso v. Skycable Corp., G.R. No. 202015, [July 13, 2016],
790 PHIL 93-105)

Q: Is a mechanic subject to employer employee relationship?

A: Yes, applying the control test.

Facts: Respondent Ruiz is a mechanic at NDI and repairs the Yamaha units of NDI. He was
terminated and filed an illegal dismissal. Petitioner argues that Ruiz is not their employee
since they don’t have a power of control over him because he is free to use his own means
and methods to get the job done and that the Yamaha manual they gave to him was only to
guide Ruiz in repairing the units.

SC held there is an employer-employee relationship. There was power of control exercised by NDI
over Ruiz because the contract stated that Ruiz should repair the units in accordance with the
manual of the unit, subject to the minimum standards set by NDI and tool kits were provided to Ruiz
which he would use in fixing or repairing the units. (Bazar v. Ruizol, G.R. No. 198782, [October 19,
2016])

Q: Is an employer-employee relationship a question of fact or a question of law?

A: It is a question of fact.
We emphasize at the outset that the existence of an employer-employee relationship is ultimately a
question of fact. (Jo v. NLRC, G.R. No. 121605, [February 2, 2000], 381 PHIL 428-438) (Bazar v.
Ruizol, G.R. No. 198782, [October 19, 2016])
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Q: Is the absence of an employment contract determinative also of an absence of an employer-
employee relationship?

A:No.

Q. What is the implication when an employer-employee relationship is established through four fold
test?

A: The employer may not terminate the service of the employee without a just cause or authorized
cause.

Q. What are some of the competent and relevant evidences which may be considered in proving the
existence of an employer-employee relationship using the four-fold test?

A: Identification cards; cash vouchers; social security registration; appointment letters; employment
contracts; payrolls; organization charts; and personnel list.

Q. What if the name of the employee is not in the payroll? Is testimonial evidence sufficient to prove
its existence?

A: Yes. If only documentary evidence would be required to show that relationship, no scheming
employer would ever be brought before the bar of justice, as no employer would wish to come out
with any trace of the illegality he has authored considering that it should take much weightier proof to
invalidate a written instrument (Opulencia Ice Plant v NLRC GR 111501, 1996).

Q. Among the four (4) elements of the four-fold test, which one is generally the most determinative
indicator of an employer-employee relationship?

A: The 4th element (control); hence, the Control Test. Under this test, an employer-employee
relationship is said to exist where the person for whom the services are performed reserves the right
to control not only the result but also the manner and means utilized to achieve the same.

Q. Is every form of control indicative of an employer-employee relationship, though? ***

A: No. The subjection of the service provider to the client’s rules, regulations, and code of ethics does
not make the service provider an employee when the level of control does not dictate the
methodology in performing the tasks. The client has the right to establish guidelines towards the
achievement of a mutually desired result (Royale Homes Marketing Corp v Fidel P. Alcantara).

Q. Why is it important to determine whether the relationship between the parties is that of employer
and employee or that of principal and independent contractor or of principal-agent?

A: To determine what laws will govern the rights and liabilities of the parties, and what tribunal will
have jurisdiction over their disputes.

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Q. What is the two-tiered test or the economic reality test?

A: It involves the putative employer’s power to control the employee with respect to the means and
methods by which the work is to be accomplished; and the underlying economic realities of the
activity or relationship.

This test would provide us with a framework of analysis, which would take into consideration the
totality of circumstances surrounding the true relationship between the parties.

Q. In what cases is this test most appropriately applied?

A: In cases where there are no written agreement or terms of reference to base the relationship on
while considering the complexities of the relationship based on the various positions and
responsibilities given to the worker over the period of the latter’s employment.

Q. What then is the proper standard of economic dependence?

A: It is whether the worker is dependent on the alleged employer for his continued employment in that
line of business.

Q. How to determine that a person is economically dependent?

A: (1) Number of years in the company; (2) Reported to SSS, good indicator of treating him as an
employee; (3) Registered in the payroll; (4) Identification card; and (5) Company uniform.

2. Legitimate subcontracting as distinguished from labor-only contracting

Q. What is legitimate job contracting or subcontracting?

A: It refers to an arrangement whereby a principal agrees to put out or farm out with the contractor or
subcontractor the performance or completion of a specific job, work, or service within a definite or
predetermined period, regardless of whether such job, work, or service is to be performed or
completed within or outside the premises of the principal.

Q: What is labor-only contracting?

A: It refers to an arrangement where the contractor, who does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among others, supplies
workers to an employer and the workers recruited are performing activities which are directly related
to the principal business of such employer (Article 106, Labor Code).

a. a. Elements

Q: What are the requisites of legitimate job contracting or subcontracting?

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A: A person is considered engaged in legitimate job contracting or subcontracting if the following
conditions concur: (a) the contractor carries on a distinct and independent business and partakes
the contract work on his account under his own responsibility according to his own manner and
method, free from the control and direction of his employer or principal in all matters connected with
the performance of his work except as to the results thereof; (b) the contractor has substantial
capital or investment; and (c) the agreement between the principal and the contractor or
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
welfare benefits.” (Petron Corp. v. Caberte, G.R. No. 182255, [June 15, 2015], 759 PHIL 353-372)

Q: What are the requisites of labor-only contracting?

A: Labor only contracting occurs if a person who undertakes to supply workers to an employer:

(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work
premises and other materials; and

(2) The workers recruited and placed by such person are performing activities which are directly
related to the principal business or operations of the employer in which workers are habitually
employed. (Diamond Farms, Inc. v. Southern Philippines Federation of Labor-Workers Solidarity of
DARBMUPCO/Diamond-SPFL, G.R. Nos. 173254-55 & 173263, [January 13, 2016], 778 PHIL 72-
97)

Q: How is labor-only contracting defined under DO 18-02?

A: Section 5 of DO 18-02 provides that labor-only contracting shall refer to an arrangement where the
contractor or subcontractor merely recruits, supplies, or places workers to perform a job, work or
service for a principal, and any of the following elements [is] present:
i) The contractor or subcontractor does not have substantial capital or investment which relates
to the job, work or service to be performed and the employees recruited, supplied or placed by such
contractor or subcontractor are performing activities which are directly related to the main business of
the principal; or
ii) The contractor does not exercise the right to control over the performance of the work of the
contractual employee. (Daguinod v. Southgate Foods, Inc., G.R. No. 227795, [February 20, 2019])

Q: How can we determine whether a contractor is engaged in labor-only contracting or job

contracting?

A: To determine whether a contractor is engaged in labor-only contracting or permissible

job contracting, "the totality of the facts and the surrounding circumstances of the case are to
be considered." (Petron Corp. v. Caberte, G.R. No. 182255, [June 15, 2015], 759 PHIL 353-372)

Q: Are plantation owners automatically considered as principal or employer?

A: No.

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Facts: DFI offered to give up its rights and interest over the 800-hectare banana plantation in
favor of the government which was accepted by the latter. The awarded plantation was turned
over to qualified agrarian reform beneficiaries ("ARBs") under the CARL. These ARBs are the
same farmers who were working in the original plantation. They subsequently organized
themselves into a multi-purpose cooperative named "DARBMUPCO," (one of the
respondents). DARBMUPCO entered into a Banana Production and Purchase Agreement
("BPPA") with DFI. Under the BPPA, DARBMUPCO and its members as owners of the awarded
plantation, agreed to grow and cultivate only high grade quality exportable bananas to be sold
exclusively to DPI. DFI engaged the services of the respondent-contractors, who in turn
recruited the respondent-workers to assist DARBMUPCO in meeting its production
obligations under the BPPA,

Southern Philippines Federation of Labor ("SPFL")—a legitimate labor organization with a

local chapter in the awarded plantation together with more than 300 workers, filed a case for
underpayment of wages, nonpayment of 13th month pay and service incentive leave pay and
attorney's fees against DFI, DARBMUPCO and the respondent-contractors before the National
Labor Relations Commission ("NLRC").

DARBMUPCO and DFI denied that they are the employers of the respondent-workers. They
claimed, instead, that the respondent-workers are the employees of the respondent-
contractors.

The Supreme Court ruled that DFI is the principal or employer of the respondent-workers.

DFI cannot argue that DARBMUPCO is the principal of the respondent-contractors because it
(DARBMUPCO) owns the awarded plantation where respondent-contractors and respondent-workers
were working. That DARBMUPCO owns the awarded plantation where the respondent-contractors
and respondent-workers were working is immaterial. DFI, as the principal, hired the respondent-
contractors and the latter, in turn, engaged the services of the respondent-workers.

Clearly, DFI is the true employer of the respondent-workers; respondent-contractors are only agents
of DFI. Under Article 106 of the Labor Code, DFI shall be solidarily liable with the respondent-
contractors for the rightful claims of the respondent-workers, to the same manner and extent, as if the
latter are directly employed by DFI. (Diamond Farms, Inc. v. Southern Philippines Federation of
Labor-Workers Solidarity of DARBMUPCO/Diamond-SPFL, G.R. Nos. 173254-55 & 173263,
[January 13, 2016], 778 PHIL 72-97)

Q: Does registration in DOLE by an independent contractor automatically makes one a legitimate

labor contractor?

A: No. Registration with DOLE as an independent contractor does not automatically vest it with the
status of a legitimate labor contractor, it is merely presumptive proof. ||| (Daguinod v. Southgate
Foods, Inc., G.R. No. 227795, [February 20, 2019])

Q: What are the conditions to determine the existence of a legitimate job contracting business?

Page 9 of 63
A: A person is considered engaged in legitimate job contracting or subcontracting if the following
conditions concur:

(NOTE: The following THREE (3) words are very important: MANNER & METHOD and RESULT
in determining the elements of legitimate job contracting arrangement).

(a) The contractor is engaged in a distinct and independent business and undertakes to perform the
job or work on its own responsibility, according to its own manner and method;
(b) The contractor has substantial capital to carry out the job farmed out by the principal on his own
account, manner and method, investment in the form of tools, equipment, machinery and supervision;
(c) In performing the work farmed out, the contractor is free from the control and/or direction of the
principal in all matters connected with the performance of the work EXCEPT as to the result thereto;
and
(d) The Service Agreement ensures compliance with all the rights and benefits for all the employees
of the contractor under labor laws.

Q. What is the amount of SUBSTANTIAL CAPITAL required under the new Rules?

A: According to Department Order No. 174, Series of 2017 (issued on March 16, 2017), the following
consists of substantial capital:
(i) In the case of corporations, partnerships or cooperatives – paid-up capital stocks/shares of at least
P5 Million; or (ii) In the case of single proprietorship - a net worth of at least P5 Million.

NOTE: “Substantial capital” and “investment in tools, etc.” are two separate requirements.

“Substantial capital” and “investment in tools, equipment, implements, machineries and work
premises” should be treated as two (2) distinct and separate requirements in determining whether
there is legitimate job contracting arrangement. It is enough that only one of these two requisites is
complied with to make the job contracting arrangement legitimate and valid.

Q. May individuals engage in legitimate job contracting?

A: Yes. Legitimate job contracting may not only be engaged by corporations, partnerships or single
proprietorships. Individuals may become legitimate job contractors themselves for as long as they
have SPECIAL SKILLS, TALENTS or EXPERTISE which are considered equivalent of the
requirement regarding “INVESTMENT IN TOOLS.”

Q. Are individuals engaged as legitimate job contractors required to fulfill the requisites of legitimate
job contracting as afore-described?

A: NO. They need not be registered as independent contractors with DOLE; they need not have
substantial capital (such as the P5 Million stated above). All that they are required is to have their
tools consisting of SPECIAL SKILLS, TALENT or EXPERTISE.

Q. What are the implications of a labor-only contracting?

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A: The following are the effects of a labor-only contracting:

(i) The labor-only contractor will be treated as the agent or intermediary of the principal. Since the act
of an agent is the act of the principal, representations made by the labor-only contractor to the
employees will bind the principal;
(ii) The principal will become the direct employer as if it directly employed the workers supplied by the
labor- only contractor to undertake the contracted job or service. The principal will be responsible to
them for all their entitlements and benefits under labor laws; and (iii) The principal and the labor-only
contractor will be solidarily treated as the direct employer.

Q: Are cooperatives engaged in labor-only contracting?

A: Yes. A cooperative, despite having a personality separate from its members, is engaged in a labor-
only contracting arrangement based on the following indicators:

1) The cooperative had a measly paid-up capital of P6,600.00 and had only managed to increase the
same by continually engaging in labor-only contracting with its client;

2) The cooperative did not carry out an independent business from its client and its own office and
equipment were mainly used for administrative purposes;

3) The cooperative's members had to undergo instructions and pass the training provided by the
client's personnel before they could start working alongside regular employees;
4) The cooperative was not engaged to perform a specific and special job or service; and
5) The cooperative's members performed activities directly related and vital to the principal
business of its client. (Maricalum Mining Corp. v. Florentino, G.R. Nos. 221813 & 222723, [July 23,
2018] citing Dole Phils., Inc. v. Esteva, G.R. No. 161115, [November 30, 2006], 538 PHIL 817-872)

Q: What is the effect if employees are tasked to undertake activities usually desirable or necessary in
the usual business of the employer?
A: The contractor is considered as a "labor-only" contractor and such employees are considered as
regular employees of the employer. 

Facts: Petitioner SMV Rock Garden Corporation is engaged in the business of

manufacturing or fabricating tiles, hollow blocks and pebbles. Respondents, on the other
hand, worked with petitioners as fabricators, helpers, laborers and hollow block makers.

Respondents filed before the LA a complaint against petitioners for monetary claims,
underpayment of wages, non-payment of salaries, overtime pay, holiday pay, holiday
premium, rest day premium, service incentive leave pay and 13th month pay plus moral and
exemplary damages and attorney's fees.

SC held that there is labor-only contracting when the contractor or sub-contractor merely recruits,

supplies or places workers to perform a job, work or service for a principal and when any of the
following elements are present:
i) The contractor or subcontractor does not have substantial capital or
investment which relates to the job, work, or service to be performed and the
Page 11 of 63
 employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the
principal; or
ii) The contractor does not exercise the right to control the performance of the
work of the contractual employee. 

Respondents' work as tile/hollow block fabricators is clearly indispensable to the principal business
of petitioners. Settled is the rule that where the employees are tasked to undertake activities usually
desirable or necessary in the usual business of the employer, the contractor is considered as a
"labor-only" contractor and such employees are considered as regular employees of the employer. 

There was also no evidence at all to prove that Tumangday and Inola are independent contractors.
No license from the DOLE Regional Office was presented to show this fact, and quite significantly,
there was also no evidence as to their capitalization or of their investment in tools, equipment or
implements actually used in the performance or completion of the job, work, or service that they
were contracted to render. (SMV Rock Garden Corp. v. Ferrer, G.R. No. 207932 (Notice),
[September 11, 2019])

Q: What organic law primarily governs a principal-agent employee?

A: Civil Code.

Q. Can the four-fold test be used to distinguish between a principal-agent relationship and an
employer-employee relationship? Explain.

A: Yes, for the following reasons:

(i) The agent is selected by the principal;
(ii) The agent is compensated by the principal; (iii) Oftentimes, the principal also substitutes his own
judgment for that of the agent; hence, in such a relationship, there is only one party: either the
principal or agent since the latter is merely the former’s extension.
Q. What is the effect of a contractor relationship?
A: If there is a contractor relationship, there is no third party but it is between the principal/agent and
the other party.

Q: Distinguish legitimate subcontracting (or job contracting) from labor-only contracting.

A:
Job Contracting Labor-only
Contracting
The The
employer/principal is employer/principal is
merely an indirect treated as direct
employer, by employer of the
operation of law, of his contractor’s
contractor’s employees in all
employees. instances.
(contractor=agent of
Page 12 of 63
 the employer)
The law creates an The statute creates
employer-employee an employer-
relationship for a employee relationship
limited purpose for a comprehensive
purpose.
The principal The principal
becomes solidarily becomes solidarily
liable. The liability liable with the
however does not contractor not only for
extend to the payment unpaid wages but also
of backwages or for all the rightful
separation pay of claims of the
employees who are employees under the
illegally dismissed Labor Code and
ancillary laws.
Allowed by law Prohibited by law.
Presence of Absence of
substantial capital or substantial capital or
investment. investment.

b. b. Trilateral relationship
c.

Q. What is the legal definition of “Trilateral Relationship”?

A: It refers to the relationship in a contracting or subcontracting arrangement where there is a contract
for a specific job, work or service between the principal and the contractor, and a contract of
employment between the contractor and its workers.

Q. Who are the three parties involved in these arrangements?

A: They are the following: the principal who decides to farm out a job, work or service to a contractor;
the contractor who has the capacity to independently undertake the performance of the job, work or
service; and the contractual workers engaged by the contractor to accomplish the job, work or
service.***

Q. What are the contracts involved in this trilateral relationship?

A: Only two (2) contracts are involved, namely:
1) Service Agreement between the principal and the contractor wherein the obligation arising
therefrom is civil in nature and thus cognizable by the regular courts.
2) Employment contract between the contractor and its workers supplied to the principal.

c. Liabilities
Q: What is the liability of principal in labor-only contracting?
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A: The principal (employer) becomes jointly and severally liable with the job contractor but only for the
payment of the employees' wages whenever the contractor fails to pay the same. Other than that,
the employer is not responsible for any claim made by the contractor's employees. (San Miguel
Foods, Inc. v. Rivera, G.R. No. 220103, [January 31, 2018])

2. 3. Kinds of employment
3.

a. a. Regular
b.

Q: What is a regular employee?

A: One who is engaged to perform activities that are necessary and desirable in the usual business or
trade of the employer as against those which are undertaken for a specific project or are seasonal.

It is not synonymous with permanent employee, because there is no such thing as a permanent
employment. Any employee may be terminated for just cause.

Q: What are the two kinds of regular employees?

A: (1) Those engaged to perform activities which are necessary or desirable in the usual business or
trade of the employer; and
(2) Casual employees who have rendered at least 1 year of service, whether continuous or broken,
with respect to the activity in which they are employed. [Romares v. NLRC, G.R. No. 122327 (1998)]

Q: How does one become a regular employee?

A: Under the Labor Code, regular employment may be attained in either of three (3) ways, namely:

(1) By nature of work. - The employment is deemed regular when the employee has been engaged
to perform activities which are usually necessary or desirable in the usual business or trade of the
employer.

(2) By period of service. - The employment is reckoned as regular when the employee has rendered
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.
(3) By probationary employment. - The employment is considered regular when the employee is
allowed to work after a probationary period.

Q: What are the instances of regular employment?

A: Under the foregoing provision, regular employment exists when the employee is: (a) one engaged
to perform activities that are necessary or desirable in the usual trade or business of the employer;

Page 14 of 63
or (b) a casual employee who has rendered at least one year of service, whether continuous or
broken, with respect to the activity in which he is employed. (OKS Designtech, Inc. v. Caccam, G.R.
No. 211263, [August 5, 2015])

Q: Are routine helpers regular employees?

A: Yes.

Facts: Petitioners filed a complaint for illegal dismissal with money claims against respondent
Coca-Cola Bottlers Philippines alleging that respondent dismissed them without just cause
and prior written notice required by law. Respondent corporation countered that it hired
petitioners as temporary route helpers to act as substitutes for its absent regular route
helpers merely for a fixed period in anticipation of the high volume of work in its plants or
sales offices. As such, petitioners' claims have no basis for they knew that their assignment
as route helpers was temporary in duration.

SC ruled that petitioners are regular employees. As route helpers who are engaged in the service of
loading and unloading softdrink products of respondent company to its various delivery points, which
is necessary or desirable in its usual business or trade, petitioners are considered as regular
employees. That they merely rendered services for periods of less than a year is of no moment since
for as long as they were performing activities necessary to the business of respondent, they are
deemed as regular employees under the Labor Code, irrespective of the length of their service.
(Basan v. Coca-Cola Bottlers Philippines, G.R. Nos. 174365-66, [February 4, 2015], 753 PHIL 74-92)

Q: What is the Reasonable Connection rule?

A: The primary standard to determine regular employment is the reasonable connection between the
activity performed by the employee to the business or trade of the employer.

Test Whether or not: W/N the employee is usually necessary or desirable in the usual business or
trade of the employer.

If the employee has been performing the job for at least one year, even if not continuous or merely
intermittent, the repeated and continuing need for performance is sufficient evidence of necessity, if
not indispensability of that activity to the business of the employer. Hence, the employment is also
considered regular, but only with respect to such activity and while such activity exists. [Forever
Richons Trading Corp. v. Molina, G.R. No. 206061 (2013)]

Q: Is length of time of employment a controlling factor for determining the presence of EER?

A: No; it is merely a badge of regular employment. However, while length of time is not a controlling
test for project employment, it can be a strong factor in determining whether the employee was hired
for a specific undertaking or in fact tasked to perform functions which are vital, necessary and
indispensable to the usual business or trade of the employer. [Tomas Lao Const. v. NLRC, G.R. No.
116781 (1997)]

Page 15 of 63
Q: What is the implication when the hiring of a project employee is extended?

A: Where the employment of project employees is extended long after the supposed project has been
finished, the employees are removed from the scope of project employees and considered regular
employees. [Audion Electric Co., Inc. v. NLRC, G.R. No. 106648 (1999)]

Q: Is the manner or method of paying wage material in determining regularity of employment?

A: No. The manner and method of payment of wage or salary is immaterial to the issue of whether
the employee is regular or not. So, the fact that an employee is paid on a daily basis or monthly basis
is inconsequential on the regularity issue.

b. Casual

Q: What is casual employment?

A: The Court described an employment to be 'casual' when it is irregular, unpredictable, sporadic,

brief in nature and outside the usual business of the employer. Under the present  law,
a casual employee is casual only for one year. His work is neither regular, nor project or seasonal,
but if he has worked for at least one year, whether continuously or not, he becomes a regular
employee. It is not his work but the passage of time that gives him regular status. (Philippines Dong
Yun Plate-Making Corp. v. Montecastro, G.R. No. 229121 (Notice), [August 23, 2017])

Q: When is employment deemed casual?

A: An employment is deemed casual when:
(a) An employee is engaged to perform a job,
work or service 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. [Sec. 5 (b),
Rule I, Book VI, IRR];
(b) The employment has been fixed for a specific project or undertaking, the completion or
termination of which has been determined at the time of the engagement of the employee; or
(c) The work or service to be performed is seasonal in nature and the employment is for the duration
of the season. [Art. 295]

Provided, That any employee who has rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee with respect to the activity in which he
is employed and his employment shall continue while such activity exists [Art. 295].

Q: Can a casual employee be a regular employee?

A: Yes. A casual employee who has rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee with respect to the activity in which he
is employed and his employment shall continue while such actually exists. (Article 280, Labor Code)
(Rimando v. Homesonic Appliance Center, G.R. No. 201063 (Notice), [March 6, 2019])

Page 16 of 63
Q: What are the requirements for a casual employee to become a regular one?

A: The requirements for a casual employee to become a regular are:

(A) One (1) year service, continuous or broken with respect to activity employed, unless he has been
contracted for a specific project. [Tabas v. California Marketing Co., Inc., G.R. No. L-80680 (1989)] ;
and
(B) Employment shall continue while such activity exists.

Q: What determines the kind of employment of a casual employee?

A: Not the employment contract but the nature of the job. If the job is usually necessary or desirable
to the main business of the employer, then employment is regular. [A. M. Oreta and Co., Inc. v.
NLRC, G.R. No. 74004 (1989)]

c. Contractual

Q: Are seafarers contractual employees?

A: Yes. Seafarers are considered contractual employee. Their employment is governed by the

contracts they sign every time they are re[-]hired and their employment is terminated when the
contract expires. Their employment is contractually fixed for a certain period of time. They fall under
the exception of Article 280 whose employment has been fixed for a specific project or undertaking
the completion or termination of which has been determined at the time of engagement of the
employee or where the work or services to be performed is seasonal in nature and the employment is
for the duration of the season.||| (Ceriola v. Naess Shipping Philippines, Inc., G.R. No. 193101, [April
20, 2015])

d. Project

Q: What is project employment?

A: Project employment is an employment fixed for a specific project or undertaking, the completion or

termination of which has been determined at the time of the engagement of the employee.( Article
280, Labor Code) (Basan v. Coca-Cola Bottlers Philippines, G.R. Nos. 174365-66, [February 4,
2015], 753 PHIL 74-92)

Q: What is the test used to determine whether an employee is a project employee or a regular
employee?

A: The principal test for determining whether particular employees are properly characterized as
“project employees” as distinguished from "regular employees" is whether or not
the project employees were assigned to carry out a "specific project or undertaking," the duration and
scope of which were specified at the time the employees were engaged for that  project.||| (Siquinia v.
Penta-Shimizu-Toa Joint Venture, G.R. No. 202833 (Notice), [November 21, 2018])

Page 17 of 63
Q: Are project employees required to perform tasks usually necessary or desirable in the usual
business or trade of the employer?

A: No. It is settled, however, that project-based employees may or may not be performing tasks
usually necessary or desirable in the usual business or trade of the employer. The fact that the job is
usually necessary or desirable in the business operation of the employer does not automatically imply
regular employment; neither does it impair the validity of the project employment contract stipulating a
fixed duration of employment. ||| (Herma Shipyard, Inc. v. Oliveros, G.R. No. 208936, [April 17,
2017], 808 PHIL 668-697)

Q: Is the necessity and desirability of the work performed by the employees determinants in term
employment?

A: No

Facts: Respondent Innodata Philippines, Inc., a domestic corporation engaged in the business
of data processing and conversion for foreign clients, hired the petitioners on various dates
and under a project based contract for a period of one year. After their respective contracts
expired, petitioners filed a complaint for illegal dismissal claiming that Innodata had made it
appear that they had been hired as project employees in order to prevent them from becoming
regular employees. Petitioners maintain that they should be accorded regular status to the
employees because the work they performed were necessary and desirable to the business of
data encoding, processing and conversion.

The court ruled that petitioners are project employees.

The test to determine whether a particular employee is engaged as a project or regular employee is

whether or not the employee is assigned to carry out a specific project or undertaking, the duration or
scope of which was specified at the time of his engagement. There must be a determination of, or a
clear agreement on, the completion or termination of the project at the time the employee is engaged.
Otherwise put, the fixed period of employment must be knowingly and voluntarily agreed upon by the
parties, without any force, duress or improper pressure being brought to bear upon the employee and
absent any other circumstances vitiating his consent, or it must satisfactorily appear that
the employer and employee dealt with each other on more or less equal terms with no moral
dominance whatsoever being exercised by the former on the latter.

The fixing by Innodata of the period specified in the contracts of employment according to the
duration of the projects the company were engaged to perform did not indicate any ill-motive to
circumvent the petitioners’ security of tenure. Furthermore, there is no indication that the petitioners
were made to sign the contracts against their will. Hence, they knowingly agreed to the terms of and
voluntarily signed their respective contracts.

Also, the necessity and desirability of the work performed by the employees are not the determinants
in term employment, but rather the "day certain" voluntarily agreed upon by the parties. It would be
unusual for a company like Innodata to undertake a project that had no relationship to its usual
business.
Page 18 of 63
In fine, the employment of the petitioners who were engaged as project employees for a fixed term
legally ended upon the expiration of their contract. (Jamias v. National Labor Relations Commission,
G.R. No. 159350, [March 9, 2016]

Q: What are indicators of project employment?

A: Either one or more of the following circumstances, among others, may be considered

as indicators that an employee is a project employee.
(a) The duration of the specific/identified undertaking for which the worker is engaged is reasonably
determinable.
(b) 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.
(c) The work/service performed by the employee is in connection with the
particular project/undertaking for which he is engaged.
(d) The employee, while not employed and awaiting engagement, is free to offer his services to any
other employer.
(e) The termination of his employment in the particular project/undertaking is reported to the
Department of Labor and Employment (DOLE) Regional Office having jurisdiction over
the workplace within 30 days following the date of his separation from work, using the
prescribed form on employees' terminations dismissals suspensions.
(f) An undertaking in the employment contract by the employer to pay completion bonus to
the project employee as practiced by most construction companies. (EEI Corp. v. Pagadora,
G.R. No. 239422 (Notice), [August 15, 2018])

Q: What is the effect if there is failure to file termination report to DOLE after completion of project.

A: Employees will be considered regular employees.

Facts: Petitioners filed a complaint against R. Syjuco Construction, INc. (RSCI) and its owner Ryan
Syjuco respondents). They claimed that RSCI, a construction corporation, employed them as
construction workers with shifts from 7:00 pm to 7:00 am every night. Despite this work circumstance,
they purportedly never received a night differential, overtime pay, rest day pay, service incentive
leave pay, ECOLA., 13th month pay as well as holiday premium pay; and neither did they receive the
mandated minimum wage. They added that for more than a year, they worked for respondents on a
no-work-no-pay-basis.

Petitioners were denied entry at the jobsite and were terminated. They filed a case for constructive
dismissal and money claims against respondents.  Petitioners denied having to work for respondents
on a project basis. They claimed that respondents did not present any employment contract
evidencing that petitioners’ work was coterminous with any project that respondents contracted. They
also stressed that respondents did not report to the DOLE the termination of their supposed project
employment. 

SC held that petitioners are regular employees. In Dacuital vs. L.M. Camus Engineering Corp., the
Court stressed that a project employee is assigned to a project that starts and ends at a determined
Page 19 of 63
or determinable time. The Court elucidated therein that the principal test to determine if an employee
is a project employee is — whether he or she is assigned to carry out a particular project or
undertaking, which duration or scope was specified at the time of engagement.
In this case, to ascertain whether petitioners were project employees, as claimed by respondents, it is
primordial to determine whether notice was given them that they were being engaged just for a
specific project, which notice must be made at the time of hiring. However, no such prior notice was
given by respondents.

The Court notes that the summary of project assignments relied by the CA cannot be considered as
the needed notice because it only listed down the projects from where petitioners were previously
assigned but nowhere did it indicate that petitioners were informed or were aware that they were
hired for a project or undertaking only.

Stated differently, the summary only listed the projects after petitioners were assigned to them but it
did not reflect that petitioners were informed at the time of engagement that their work was only for
the duration of a project. Notably, it was only in their Rejoinder (filed with the LA) that respondents
stated that at the time of their engagement, petitioners were briefed as to the nature of their work but
respondents did not fully substantiate this claim.

Moreover, the summary of project assignments even worked against respondents as it established

the necessity and desirability of petitioners' tasks on the usual business of respondents. It is worth
noting that respondents themselves admitted to such essentiality of the work because in their Reply
(also submitted with the LA), respondents confirmed that days or a few months after a repair or
renovation project, they would inform petitioners that they would be called upon when a
new project commences. This matter only shows that petitioners' work for respondents did not end by
the supposed completion of a project because respondents coordinated with and notified them that
their services would still be necessary for respondents.

Also, the fact that respondents did not submit a report with the DOLE (anent the termination of
petitioners’ employment due to alleged project completion) further bolsters that petitioners were not
project employees. In Freyssinet Filipinas Corp. vs. Lapuz, the Court explained that the failure on the
part of the employer to file with the DOLE a termination report every time a project or its phase is
completed is an indication that the workers are not  project employees but regular ones. (Inocentes v.
R. Syjuco Construction, Inc., G.R. No. 237020, [July 29, 2019])

Q: Give a case showing an illustration of valid project employment contract.

A:
Facts: Respondent Ando filed a complaint against petitioner EGI and its President for illegal
dismissal and money claims. He alleged that he was a regular employee working as a finishing
carpenter in the construction business of EGI; he was repeatedly hired from January 21, 2010 until
April 30, 2011 when he was terminated without prior notice and hearing; his daily salary was below
the amount required by law; and wage deductions were made without his consent, such as rent for
the barracks located in the job site and payment for insurance premium.
EGI countered that, as proven by the three (3) project employment contract, Ando was engaged as
a project worker in Bahay Pamulinawen Project from June 1, 2010 to September 30, 2010  and
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from January 3, 2011 to February 28, 2011 as well as in EGI-West Insula Project from February 22,
2011 to March 31, 2011; he was paid the correct salary based on the Wage Order applicable in the
region; he already received the 13th month pay for 2010 but the claim for 2011 was not yet
processed at the time the complaint was filed; and he voluntarily agreed to pay P500.00 monthly for
the cost of the barracks, beds, water, electricity, and other expenses of his stay at the job site.
SC ruled that a project employment contract is valid under the law.

x x x By entering into such a contract, an employee is deemed to understand that his employment is
coterminous with the project. He may not expect to be employed continuously beyond the completion
of the project. It is of judicial notice that project employees engaged for manual services or those for
special skills like those of carpenters or masons, are, as a rule, unschooled. However, this fact alone
is not a valid reason for bestowing special treatment on them or for invalidating a contract of
employment. Project employment contracts are not lopsided agreements in favor of only one party
thereto. The employer's interest is equally important as that of the employee's for theirs is the interest
that propels economic activity. While it may be true that it is the employer who drafts project
employment contracts with its business interest as overriding consideration, such contracts do not, of
necessity, prejudice the employee. Neither is the employee left helpless by a prejudicial employment
contract. After all, under the law, the interest of the worker is paramount.
The Court has upheld the validity of a project-based contract of employment provided that the period
was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper
pressure being brought to bear upon the employee and absent any other circumstances vitiating his
consent; or where it satisfactorily appears that the employer and employee dealt with each other on
more or less equal terms with no moral dominance whatever being exercised by the former over the
latter; and it is apparent from the circumstances that the period was not imposed to preclude the
acquisition of tenurial security by the employee. Otherwise, such contract should be struck down as
contrary to public policy, morals, good custom or public order. 

Here, Ando was adequately notified of his employment status at the time his services were engaged
by EGI for the Bahay Pamulinawen and the West Insula Projects. The contracts he signed
consistently stipulated that his services as a project worker were being sought. There was an
informed consent to be engaged as such. His consent was not vitiated. As a matter of fact, Ando did
not even allege that force, duress or improper pressure were used against him in order to agree. His
being a carpenter does not suffice. (E. Ganzon, Inc. v. Ando, Jr., G.R. No. 214183, [February 20,
2017], 806 PHIL 58-74)

Q: Distinguish project employment from a fixed term employment.

A: While the Project employment requires a project, the duration of a fixed-term employment agreed
upon by the parties may be any day certain which is understood to be "that which must necessarily
come although it may not be known when." The decisive determinant in fixed-term employment is
not the activity that the employee is called upon to perform but the day certain agreed upon by the
parties for the commencement and termination of the employment relationship.

Q: What is the litmus test of project employment?

A: The litmus test of project employment, as distinguished from regular employment, is whether or
not the project employees were assigned to carry out a specific project or undertaking, the duration
Page 21 of 63
and scope of which were specified at the time the employees were engaged for that project.

A true project employee should be assigned to a project which begins and ends at determined or
determinable times and be informed thereof at the time of hiring.

Q: Is the length of service material in determining validity of project employment?

A: No. Length of service is not a controlling determinant of employment tenure.

Q: What are some principles on project employment?

A: (1) Project employees should be informed of their status as such at inception of the employment
relationship.
(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. A written project employment
contract is an
indispensable requirement.
(3) Intervals in employment contracts indicate project employment.
(4) Continuous, as opposed to intermittent, rehiring shows that employee is regular.
(5) “Project-to-project” basis of employment is valid.

Q: Do project employees enjoy security of tenure?

A: Yes but only during the term of their project employment.

Q: When are project employees presumed to be regular employees?

A: 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.

Q: What is the consequence of regular employment of project employees?

A: They can no longer be terminated on the basis of the completion of the project or any phase
thereof to which they were deployed.

d. e. Seasonal
e.

Q: What are seasonal employees?

A: Seasonal employees are those whose work or engagement is seasonal in nature and the
employment is only for the duration of the season. (Article 295, Labor Code)

Q: What is the condition sine qua non to consider that an employee is merely a seasonal employee?
A: He must only be hired for the duration of one season. To be considered seasonal employees, it is
not enough that work or services performed are seasonal in nature. The employees must have been
employed only for the duration of one season. [Hacienda Fatima v. National Federatiom of Sugarcane
Workers, G.R. No. 149440 (2003)]

Q: Are farm workers seasonal employees?

Page 22 of 63
A: Yes. Farm workers generally fall under the definition of seasonal employees. Respondent, as a
farm worker is only a seasonal employee. Since petitioners provided that the cultivation of sugarcane
is only for six months, respondent cannot be considered as regular employee during the months
when there is no cultivation.||| (Villanueva v. Lorezo, G.R. No. 179640, [March 18, 2015], 756 PHIL
263-277)

Q: Can seasonal employees be regular employees?

A: Yes. Seasonal employment becomes regular seasonal employment when the employees are
called to work from time to time. On the other hand, those who are employed only for a single season
remain as seasonal employees. (Universal Robina Sugar Milling Corp. v. Nagkahiusang Mamumuo
sa URSUMCO-National Federation of Labor, G.R. No. 224558, [November 28, 2018])

Q: Is there “regular seasonal” employee?

A: Yes, provided the following requisites are complied with:
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. [Philippine Tobacco Flue-
Curing & Redrying Corp. v. NLRC, G.R. No. 127395, (1998)].

Q: Can a regular seasonal worker file an illegal dismissal case if he is not hired for a succeeding
season?
A: Yes. He is considered a regular or permanent employee. Being a regular seasonal employee, the
employer should re-hire him in the next season. During off-season, his employment is deemed
suspended and he is considered as being on leave of absence without pay until he is re-employed.
Q: Is there an exception to the “one season” rule?
A: Yes. In a case, when the petitioner employees for respondent, but were nevertheless free to
contract their services with other farm owners, the Court was emphatic when it ruled that petitioners
were mere project employees, who could be hired by other farm owners. [Mercado, Sr. v. NLRC, G.R.
No. 79869 (1991)]

f. f. fixed term
g.

Q: What is fixed term employment?

A: It is an employment where a fixed period of employment was agreed upon:
1. Knowingly and voluntarily by the parties;
2. Without any force, duress or improper pressure being brought to bear upon the employee
and business of the employer.

Q: Is employment for a fixed term prohibited by law?

A: No. Article 295 of the Labor Code does not prohibit an employment contract with a fixed period,
provided it is entered into by the parties without any force, duress of improper pressure being brought
to bear upon either party, particularly the employee and absent any other circumstances vitiating
consent.

Page 23 of 63
Such employment for a defined period is allowed even where the duties of the employee consist of
activities usually necessary or desirable in the usual business of the employer.
The decisive determinant in fixed- term employment should not be the activities that the employee is
called upon to perform, but the day certain agreed upon by the parties for the commencement and
termination of their employment relation. This day certain agreed upon by the parties for the
commencement and termination of their employment relationship, is a day certain which is
understood to be that which must necessarily come, although it may not be known when.

A contract of employment for a definite period terminates by its own terms at the end of such period
(Brent School v. Zamora, G.R. No. L-48494, February 5, 1990).

Q: Distinguish fixed-term employment from project employment.

A: While both employments are time bound or for a certain period as agreed upon at the time of
engagement, in project employment, however, the employee is tasked to do specific undertaking,
while such condition is not present in fixed-term employment.

Q: Are seafarers fixed-term employees?

A: Yes if overseas seafarers; no if domestic. The employment of overseas seafarers is governed by
the POEA Standard Employment Contract for Filipino Seamen. Their employment is governed by the
contracts they sign every time they are rehired and their employment is terminated when the contract
expires. It is an accepted maritime industry practice that employment of seafarers is for a fixed period
only.

However, seamen employed in domestic shipping are entitled to security of tenure, can become
permanent employees and can be terminated only for just or authorized causes. Domestic seafarers
are covered by the Labor Code, including its Book VI.

Q: What are the indicators of a valid fixed-term employment?

A: (1) Fixed period of employment was knowingly and voluntarily agreed upon by the parties absent
any circumstance vitiating consent; and
(2) It satisfactorily appears that the employer and employee dealt each other on more or less equal
footing with no moral dominance
exercised by one over the other.

Q: What is the rationale for the “equal footing” indicator?

A: When a prospective employee, on account of special skills or market forces, is in a position to
make demands upon the prospective employer, such prospective employee needs less protection
than the ordinary worker. The level of protection to labor must be determined on the basis of the
nature of the work, qualifications of the employee, and other relevant circumstances. [Fuji Television
Network Inc v. Espiritu, G.R. No. 204944-45 (2014)].

Q: Is fixed-term employment valid if the job is directly related to the principal business of the
employer?
A: Yes. Fixed-term employment is the only exception to the rule that one becomes regular if he is
made to perform activities directly related to the principal business of the employer (Regularity by

Page 24 of 63
virtue of nature of work)

Thus, it was ruled in Philippine Village Hotel v. NLRC,1 that the fact that private respondents were
required to render services necessary or desirable in the operation of petitioner’s business for the
duration of the one-month dry-run operation period, did not in any way impair the validity of their
contracts of employment which specifically stipulated that their employment was only for one (1)
month.

Q: How are fixed-term employees distinguished from project employees?

A: Fixed-term employees are different from project employees, as the former negotiates their
employment contract on more equal footing with the employer than the latter. Furthermore, both kinds
of employment happen within a period. For project employees, the determining factor is the activity
(w/n project) to be performed. For fixed-term employees, the determining factor is the day certain
agreed upon (i.e., the commencement and termination of the EER). [GMA Network v. Pabriga, G.R.
No. 176419 (2013)]

Q:How are fixed-term employees distinguished from independent contractors?

A: No EER exists between independent contractors and their principals; their contracts are governed
by the law on contracts and other applicable law. Employees under fixed-term contracts cannot be
independent contractors because in fixed-term contracts, an EER exists. [Fuji Television Network,
Inc. v. Espiritu, G.R. No. 204944-45 (2014)]

Q: When does a fixed-term employment become regular?

A:
(1) When he is allowed to work beyond the agreed fixed term.
(2) When there are successive renewals of fixed-period contracts.

Where an employee’s contract had been continuously extended or renewed to the same position,
with the same duties and remained in the employ without any interruption, then such employee is a
regular employee. The employee’s contract indicating a fixed-term did not automatically mean that
he/she could never be a regular employee.

Q: Is implied renewal upon termination allowed?

A: No. When the day certain for the termination of employment comes, there is no implied renewal or
extension of employment This must be expressly and mutually-agreed upon. [Unica v. Anscor Swire
Ship Management Corp., G.R. No. 184318 (2014)] In case of pre-termination, due process must be
observed in the pre- termination of fixed-term contracts in order for the employer to not be liable for
illegal dismissal. [Fuji Television Network Inc v. Espiritu, G.R. No. 204944-45 (2014)]

g. probationary; private school teachers

Q: What is Probation?
A: Probation is the period during which the employer may determine if the employee is qualified for
possible inclusion in the regular force.

Elements:
Page 25 of 63
Employment where the employee, upon his engagement:
1. Is made to undergo a trial period,
2. During which the employer determines his fitness to qualify for regular employment,
3. Based on reasonable standards made known to the employee at the time of engagement.

Things to remember regarding probationary employment:

1. Employer shall make known to the employee at the time he is hired, the standards by which
he will qualify as a regular employee;
2. Probationary employment must have been expressly agreed upon; without such explicit
agreement, the employment is considered regular;
3. An employee allowed to continue work after the probationary period shall be considered a
regular employee;
4. During the probationary period, the employee enjoys security of tenure; his services can
only be terminated for just cause or if he fails to meet the standards of work.

Q: What is a probationary employee?

A: One who is made to go on a trial period by an employer during which the employer determines
whether he is qualified for permanent employment, based on reasonable standards made known to
him at the time of engagement. [Robinson’s Galleria et al. v. Ranchez, G.R. No. 177937 (2011)]

Q: What is the purpose of probationary employment?

A: (1) For the employer’s observation – for the employee to demonstrate his skills to the employer
who determines whether the former is qualified.

(2) For restriction - As long as termination was made before the expiration of the 6-month
probationary period, the employer has a
right to sever the EER. [Grand Motor Parts Corp. v. MOLE, G.R. No. L-58958 (1984)]

Q: Is the period of 6 months in the law on probationary employment (Article. 296, Labor Code) the
minimum or maximum period?
A: No. The 6-month period is only the standard period. Meaning, probationary period may be for a
day, a week, a month, or several months, depending on the reasonable discretion of management. A
probationary period of 18 months was considered reasonable by the Supreme Court (Buiser. v
Leogardo).

Q: What are the exceptions to the 6-month standard probationary period?

A: (1) When the duration is covered by an apprenticeship agreement stipulating a longer period. [Art.
296]

(2) When the parties to the employment contract agree otherwise, such as when established by
company policy or required by the nature of the work performed by the employee. [Buiser v.
Leogardo, G.R. No. L- 63316, (1984)]
(3) When it involves the 3-year probationary period of teachers. [Mercado v. AMA Computer College,
G.R. No. 183572, (2010)]

Page 26 of 63
(4) When it involves an act of liberality on the part of his employer affording him a second chance to
make good after having initially failed to prove his worth as an employee. [Mariwasa v. Leogardo,
G.R. No. 74246 (1989)]

Q: How is probationary period computed?

A: It is reckoned from the date of appointment up to the same calendar date of the 6th month
following.

Q: How is probationary period extended?

A: Through a mutual agreement in writing by the employer and the probationary employee.

Q: What is the effect of allowing a probationary employee to work beyond the probationary period?
A: He is considered a regular employee.

Q: What is the effect if there is no written contract providing for the probationary employment?
A: The employee is considered a regular employee. from day one of his employment. And even if
there is one, he is deemed regular if there is no stipulation on the probationary period.

Q: What is the effect of the prohibition on extended/double probation?

A: When the employer renews the employment contract after the lapse of the 6-month probationary
period, the employees thereby became regular employees. No employer is allowed to indefinitely
determine the fitness of its employees. [Bernardo v. NLRC, supra.]

Furthermore, an employee who is merely transferred to his employer’s sister company cannot be
subjected to new probationary employment when he had already attained regular employment under
his original employer. [A Prime Security Services, Inc. v. NLRC, G.R. No. 107023, (2000)]

Q: What is the distinction between probationary employment and fixed-term employment?

A: The distinction lies in the intention of the parties; if the parties intend to make their relationship
regular after the lapse of the period, then what is contemplated is probationary employment. But if
there is no such intention of the parties, then, what they have entered into is simply a fixed-term
contract.

Q: What are the grounds to terminate probationary employment?

A: Under Article 281, a probationary employee may be terminated only on three (3) grounds: For a (1)
just cause; (2) authorized cause; or (3) 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.

Q: Is procedural process required in the termination of probationary employment?

A: Yes, but only in the case of Numbers 1 and 2 above.
Due process for Number 3 is different and unique in the sense that it requires simply the service of a
written notice of termination, not verbal, informing the probationary employee of the termination of his
probationary employment and attaching thereto the result of the performance evaluation conducted
on him.

Page 27 of 63
As clearly pointed out above, it is a fundamental requirement that the reasonable standards expected
of the employee during his probationary employment was made known to him at the time of his
engagement. Necessarily, at the termination thereof, the supposed performance evaluation should be
presented to him. As a matter of due process, an employee has the right to know whether he has met
the standards for which his performance was evaluated. Should he fail, he also has the right to know
the reasons therefor.

Q: When should the termination of probationary employment be made?

A: Termination to be valid must be done prior to lapse of probationary period. Termination a day or a
few days after the lapse of the probationary period cannot be done without just or authorized cause
as he has already become a regular employee by that time.

Q: What governs a private school teacher’s security of tenure?

A: Manual of Regulations for Private Schools and not the Labor Code. Thus, for a private school
teacher to acquire permanent employment (security of tenure), these must be present:
(1) Must be a full-time teacher;
(2) Must have rendered 3 consecutive years of
service; and
(3) Service must have been satisfactory. [La Salette of Santiago v. NLRC, G.R. No. 82918 (1991)]

Q: Do the above-mentioned requirements guarantee regular employment for private teachers?

A: No. Mere completion of the 3-year probation, even with an above-average performance, does not
guarantee that the employee will automatically acquire a permanent employment status. The
probationer can only qualify upon fulfillment of the reasonable standards set for permanent
employment as a member of the teaching personnel. [Herrera-Manaois v. St. Scholastica’s College,
G.R. No. 18891 (2013)]
Q: How long may the period of probation be?
A: It shall not exceed 6 months. Unless:
1. Covered by an Apprenticeship or Learnership agreement stipulating a different period;
2. Voluntary agreement of parties (especially when the nature of work requires a longer
period). By voluntarily agreeing to such an extension, the employee waived any benefit
attaching to the completion of the period if he still failed to make the grade during the period
of extension (Mariwasa Mfg. Inc. v. Hon. Leogardo, G.R. No. 74246, January 26, 1989);
3. The employer gives the employee a second chance to pass the standards set (Mariwasa
Manufacturing, Inc. v. Leogardo, Jr., G.R. No. 74246, January 26, 1989);
4. When the same is required by the nature of the work, e.g. the probationary period set for
professors, instructors and teachers is 3 consecutive years of satisfactory service pursuant
to DOLE Manual of Regulations for Private Schools;
5. When the same is established by company policy.
Probationary employees may be dismissed for cause before end of the probationary period.

Q: When is the probationary period deemed to have started?

A: Period of probation shall be reckoned from the date the employee actually started working.

Q: May the period of probation be extended upon its expiration?

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A: No. As a general rule, an employee who continues or is suffered to work after the probation period
shall be considered as a regular employee. The exceptions are:
1. When the nature of the job requires extensive training; or
2. If it is a company policy that the period of probationary employment should be an extended
period.
Any extension of period should always be reasonable in consideration of the nature of the work the
amount of time required for an ordinary worker to learn the job.

Q: When is a probationary employee considered to be a regular one?

A: When:
1. If he is allowed to work after a probationary period; or
2. If no standards, under which he will qualify as a regular employee, are made known to him at
the time of his engagement.

Q: Is a probationary employee entitled to security of tenure?

A: Yes. Although on probationary basis, however, the employee still enjoys the constitutional
protection on security of tenure. During his tenure of employment, therefore, or before his contract
expires, the employee cannot be removed except for cause as provided for by law.
Thus, in one case, the Supreme Court held a dismissal as illegal when such was made a day before
the expiration of the probationary period (Manila Hotel Corp. v. NLRC, G.R. No. L-53453, January 22,
1986).

Probationary employment of private school teachers

The probationary employment of academic teaching personnel shall not be more than a period of 6
consecutive semesters or 9 consecutive trimesters of satisfactory service, as the case may be.
An academic teaching personnel, who does not possess the minimum academic qualifications under
Section 35 and 36 of the Manual of Regulations for Private Higher Education shall be considered as a
part-time employee, and therefore can not avail of the status and privileges of a probationary
employment. A part-time employee cannot acquire a regular permanent status, and hence, may be
terminated when a qualified teacher becomes available (Manual of Regulations for Private Higher
Education).

Full-time Teacher
One whose total working day is devoted to school, no other regular remunerative employment and is
paid on a regular monthly basis regardless of the number of teaching hours.
In college, the normal teaching load of a full-time instructor shall be eighteen (18) hours a month.

Q: When may a teacher be considered a regular employee?

A: When the following requisites are met:
1. The teacher is a full-time teacher;
2. Who has rendered 3 consecutive years of service; and
3. Such service must be satisfactory.

B. Termination by employer
Applies to all establishments or undertakings whether for profit or not (LC, Art. 293, as renumbered).
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Termination is a broader concept that is used to denote dismissal or lay-off. It may also imply
complete severance of employer-employee relationship.

On the other hand, dismissal is a form of ending an employer-employee relationship initiated either by
the employee or employer.

Lay-off is a termination initiated by the employer without prejudice to reinstatement or recall of an

employee who has been temporarily separated brought about by adverse economic conditions.

Q: Is the right of an employer to terminate employment absolute in view of the principle of

management prerogative?
A: No. An employer can dismiss or lay-off an employee only for just and authorized causes. The right
of an employer to freely discharge his employees is subject to regulation by the State, in the exercise
of its paramount police power (Manila Electric Company v. NLRC, G.R. No. 78763, July 12, 1989).

The employer is bound to exercise caution in terminating the services of his employees especially so
when it is made upon the request of a labor union pursuant to the CBA. Dismissal must not be
arbitrary and capricious (Rance et al., v. NLRC, G.R. No. 68147, June 30, 1988).

1. Requisites for validity

2-fold requirements for a valid dismissal:
Substantive due process means that the termination must be based on just and/or authorized causes
for dismissal. On the other hand, procedural due process requires the employer to effect the
dismissal in a manner specified in the Labor Code and its implementing rules (Deoferio v. Intel
Technology Philippines, Inc., G.R. No. 202996, June 18, 2014).

Q: Who bears the burden of proof to show that the termination was for just or authorized cause?
A: Employer.

Q: Does the employer have the right to place an employee on preventive suspension?
A: Yes. The employer may place the employee under preventive suspension, during the pendency of
the investigation, if his continued employment poses a serious and imminent threat to life and
property of the employer or his employees. However, it must not be more than 30 days; otherwise it
will amount to constructive dismissal.

a. Substantive due process

i. Just Causes
Under Article 297 (previously Art. 282) of the Labor Code, as amended, the following are deemed just
causes to terminate an employee:
1. Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work;
2. Gross and habitual neglect by the employee of his duties:
3. Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;

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 4. Commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorize representative; and
5. Other causes analogous to the foregoing.

Serious misconduct
It is an improper or wrong conduct; the transgression of some established and definite rule of action,
a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere
error in judgment. To be serious within the meaning and intendment of the law, the misconduct must
be of such grave and aggravated character and not merely trivial or unimportant (Villamor Golf Club
v. Pehid, G.R. No. 166152, October 4, 2005).

Q: What are the elements of serious misconduct?

A:
1. It must be serious or of such a grave and aggravated character;
2. Must relate to the performance of the employees’ duties;
3. employee has become unfit to continue working for the employer (Philippine Aeolus
Automotive United Corp. v. NLRC, G.R. No. 124617, April 28, 2000).

Examples:
1. Sexual harassment;
2. Fighting within the company premises;
3. Uttering obscene, insulting, or offensive words against a superior;
4. Falsification of time records;
5. Gross immorality.

Q: Is the utterance of the obscene words and threats of bodily harm gross and willful misconduct?

A: Yes. The repeated utterances by Escando of obscene, insulting, or offensive words against a
superior were not only destructive of the morals of his co-employees and a violation of the company
rules and regulations, but also constitute gross misconduct which is one of the grounds provided by
law to terminate the services of an employee (Autobus Workers Union v. NLRC, G.R. No. 117453,
June 26, 1998).

Q: X was a non-teaching personnel employed in A School (A). X and her boyfriend conceived a child
out of wedlock. A dismissed her on the ground that her pregnancy out of wedlock constitutes
disgraceful and immoral conduct and ran counter to the moral principles that A stands for and
teaches its students. Does pregnancy out of wedlock (without a legal impediment to marry)
constitutes immoral conduct as a ground for dismissal contemplated by law?

A: No. It is an immoral conduct if such does not conform to what society generally views as
respectable or moral. Substantial evidence must be presented to prove that such conduct is
considered immoral. The two-step process to determine whether or not the conduct is immoral:
1) Consideration of the totality of the circumstances surrounding it; and
2) assessment of said circumstances based on the prevailing norms of conduct.

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Pre-marital sexual relations between two consenting adults who have no impediment to marry each
other, and, consequently, conceiving a child out of wedlock, does not amount to a disgraceful or
immoral conduct (Leus v. SSCW, G.R. No. 187226, January 28, 2015).

A teacher engaging in an extra-marital affair with another married person is a serious misconduct, if
not an immoral act. But a teacher falling in love with her pupil and, subsequently, contracting a lawful
marriage with him, though there is a disparity in their ages and academic level cannot be considered
as a defiance of contemporary social mores(Chua-Qua vs. Clave. G.R. No. 49549; August 30, 1990).

Willful Disobedience
There is willful disobedience when there is wanton disregard to follow orders of the employer. Willful
is characterized by a wrongful perverse mental attitude rendering the employee’s act inconsistent with
the proper subordination. The employee’s disobedience must relate to substantial matters, not merely
to trivial or unimportant matters. Disobedience to be considered willful must be resorted to without
regard to its consequences (DOLE Manual; BLTB Co. v CA 71 SCRA 470; Family Planning Org. of
the Phil. Inc. v. NLRC, G.R. No. 75907, March 23, 1992).
Q: What are the requisites for a finding of willful disobedience?
A: Requisites:
1. The employees assailed conduct must have been willful or intentional, the willfulness being
characterized by a wrongful and perverse attitude; and
2. The disobeyed orders, regulations, or instructions of the employer must be:
a. Reasonable and lawful
b. Sufficiently known to the employee
c. In connection with the duties which the employee has been engaged to discharge
(Cosep v. NLRC, G.R. No. 124966, June 16, 1998).

Q: Does management have the right to transfer employees?

A: Management has the right to transfer or reassign an employee. The right of the employer to
transfer the employees in the interest of the efficient and economic operation of its business cannot
be seriously challenged.
However, where the transfer is vitiated by improper motive and is merely a disguised attempt to
remove or punish the employee sought to be transferred (Associated Labor Unions v. NLRC, G.R.
Nos. 76916-17, March 31, 1983).

Gross and Habitual Negligence

It implies a want or absence of or failure to exercise diligence that an ordinary prudent man would use
in his own affairs. However, such neglect must not only be gross but must also be habitual in
character (DOLE Manual).

Q: What is gross and habitual negligence?

A:
a. Gross neglect has been defined as the want or absence of or failure to exercise slight care
or diligence, or the entire absence of care. It evinces a thoughtless disregard of
consequences without exerting any effort to avoid them (NBS vs. Court of Appeals. G.R.
No. 146741; February 27, 2002).

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 b. Habitual neglect implies repeated failure to perform one’s duties over a period of time,
depending upon the circumstance (JGB and Associates v. NLRC, GR No. 10939, March 7,
1996). Such neglect must not only be gross but also habitual in character. Hence, the
penalty of dismissal is quite severe considering that Antiola committed the infraction for the
first time (Judy Phils. v. NLRC, G.R. No. 111934, April 29, 1998).
However, an employee who was grossly negligent in the performance of his duty, though such
negligence committed was not habitual, may be dismissed especially if the grossly negligent act
resulted in substantial damage to the company (LBC Express vs. Mateo. G.R. No. 168215; June 9,
2009).

Q: May poor performance be a just cause for termination?

A: Yes. Requisites:
1. Employer must prove that it has set standards of performance expected of the employee;
2. These standards must be reasonable and in connection with the employee’s work; and
3. There must be proof that the employee failed to meet the standards despite the given
reasonable opportunity to meet the same.

As a general concept “poor performance” is equivalent to inefficiency and incompetence in the

performance of official duties. The fact that an employee’s performance is found to be poor or
unsatisfactory does not necessarily mean that the employee is grossly and habitually negligent of his
duties. Gross negligence implies a want or absence of or failure to exercise slight care of diligence or
the entire absence or care. He evinces a thoughtless disregard of consequences without exerting any
effort to avoid them (Eastern Overseas Employment Center Inc. v. Bea, G.R. 143023, November 29,
2005).

Q: B was a quality control inspector of A Manufacturing. B was allegedly caught by the company
president of sleeping and was dismissed from employment. Did B’s act of sleeping on the job
constitute a valid cause of dismissal?
A: No. Sleeping on the job as a valid ground for dismissal only applies to security guards whose duty
necessitates that they be awake and watchful at all times. B’s single act of sleeping further shows that
the alleged negligence or neglect of duty was neither gross nor habitual (VH Manufacturing v. NLRC,
G.R. No. 130957, January 19, 2000).

Q: Is abandonment a just cause for termination?

A: Yes. Two (2) factors must be present:
1. The failure to report for work, or absence without valid or justifiable reason; and
2. A clear intention to sever employer-employee relationship, with the 2nd element as the
more determinative factor, being manifested by some overt acts (Sta. Catalina College v.
NLRC, G.R. No. 144483, November 19, 2003).
Abandonment means deliberate and unjustified refusal of an employee to resume his employment.
However, the employer is still required under the law to notify the employee of his termination. There
is still a need to observe the two-notice rule and opportunity to be heard requirement (New Puerto
Commercial v Lopez, G.R. NO. 169999, July 26, 2010).

Q: Y, a barber at A Shop, had an altercation with a fellow employee which resulted in his subsequent
turning over the duplicate keys of the shop to the cashier and took away all his belongings there from
Page 33 of 63
and worked at different barbershop. Y was dismissed which cause him to file an illegal dismissal case
but did not seek reinstatement as a relief. Did Y commit abandonment?
A: Yes. Y’s acts such as surrendering the shop’s keys, not reporting to the shop anymore without any
justifiable reason, his employment in another barber shop, and the filing of a complaint for illegal
dismissal without praying for reinstatement clearly show that there was a concurrence of the intention
to abandon and some overt acts from which it may be inferred that the employee concerned has no
more interest in working (Jo v. NLRC, G.R. No. 121605, February 2, 2000).

Fraud or Willful Breach of Trust

Any act, omission, or concealment which involves a breach of legal duty, trust, or confidence justly
reposed and is injurious to another. Fraud must be committed against the employer or representative
and in connection with the employee’s work

Q: May loss of trust and confidence be a valid cause for dismissal?

A: Yes. Requisites:
1. It applies only to cases involving:
a. employees occupying positions of trust and confidence
o Confidential and managerial employees: to this class belong managerial
employees, i.e., those vested with the powers or prerogatives to lay down
management policies and/or to hire, transfer, suspend, lay-off, recall, discharge,
assign or discipline employees or effectively recommend such managerial
actions
b. employees routinely charged with the care and custody of the employer’s money or
property – To this class belong cashiers, auditors, property custodians, etc., or those
who, in the normal and routine exercise of their functions, regularly handle significant
amounts of money or property (Mabeza v. NLRC, G.R. No. 118506, April 18, 1997).
2. The loss of trust and confidence must be based on willful breach.
o A breach is willful if it is done intentionally, knowingly, and purposely without justifiable
excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly, or
inadvertently (De la Cruz v. NLRC, G.R. No. 119536, February 17, 1997).
3. The act constituting the breach must be “work- related” such as would show the employee
concerned to be unfit to continue working for the employer (Gonzales v. NLRC, G.R. No.
131653, March 26, 2001).
4. It must be substantial and founded on clearly established facts sufficient to warrant the
employee’s separation from employment (Sulpicio Lines Inc. v. Gulde, G.R. No. 149930,
February 22, 2002).
5. Fraud must be committed against the employer or his representatives, e.g.:
a. Falsification of time-cards
b. Theft of company property
c. Unauthorized use of company vehicle

Q: What is a position of trust and confidence?

A: Position of trust and confidence is one where a person is entrusted with confidence on delicate
matters, or with the custody, handling, or care and protection of the employer’s property (Pandoy v.
NLRC, G.R. No. 67664, May 20, 1992) and/or funds (Gonzales v NLRC, 355 SCRA 197).

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The mere existence of a basis for the loss of trust and confidence justifies the dismissal of the
managerial employee because when an employee accepts a promotion to a managerial position or to
an office requiring full trust and confidence, such employee gives up some of the rigid guaranties
available to ordinary workers (Cecilia T. Manese v. Jollibee Foods Corporation, G.R. No. 1704 54,
October 11, 2012).

Guidelines For The Doctrine Of Loss Of Confidence To Apply

1. Loss of confidence should not be simulated (reasonable basis for loss of trust and
confidence);
2. Not used for subterfuge for causes which are improper and/or illegal or unjustified;
3. Not arbitrarily asserted in the face of overwhelming evidence to the contrary;
4. 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 (Ramos v. Court of
Appeals, G.R. No. 145405, June 29, 2004).

Commission of a crime or offense

This refers to an offense committed by the employee against the person of his employer or any
immediate member of his family or his duly authorized representative and thus, conviction of a crime
involving moral turpitude is not analogous thereto as the element of relation to his work or to his
employer is lacking.
A criminal case need not be actually filed. Commission of acts constituting a crime itself is sufficient
(National Labor Union, Inc. v. Standard Vacuum Oil Company. G.R. No. L-48170, October 10, 1941).

Q: Must the employee have been convicted by a court prior to his dismissal?
A: No. The conviction of an employee in a criminal case is not indispensable to warrant his dismissal
by his employer (Starlite Plastic Industrial Corporation v. NLRC. G.R. No. 78491, March 16, 1989).
Furthermore, the quantum of evidence needed is merely substantial evidence to terminate an
employee under these grounds.

Analogous Cases
For an act to be included in analogous cases of just causes of termination, it must be due to the
voluntary and/or willful act or omission of the employee (Nadura v. Benguet Consolidated, G.R. No. L-
17780, August 24, 1962).
To fall within the ambit of “analogous cases” the act or omission must have an element similar to
those found in the specific Just cause enumerated under Art. 282 (International Rice Research
Institute v. NLRC, G.R. No. 97239, May 12, 1993).
Examples:
1. Violation of company rules and regulations
2. Immorality, Drunkenness or Fighting inside the premise
3. Gross inefficiency
4. Illegally diverting employer’s products
5. Failure to heed an order not to join an illegal picket
6. Violation of safety rules and code of discipline
7. Theft of company property

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Q. What is the legal definition of “Trilateral Relationship”?
A: It refers to the relationship in a contracting or subcontracting arrangement where there is a contract
for a specific job, work or service between the principal and the contractor, and a contract of
employment between the contractor and its workers.

Q. Who are the three parties involved in these arrangements?

A: They are the following: the principal who decides to farm out a job, work or service to a contractor;
the contractor who has the capacity to independently undertake the performance of the job, work or
service; and the contractual workers engaged by the contractor to accomplish the job, work or
service.***

Q. What are the contracts involved in this trilateral relationship?

A: Only two (2) contracts are involved, namely:
1) Service Agreement between the principal and the contractor wherein the obligation arising
therefrom is civil in nature and thus cognizable by the regular courts.
2) Employment contract between the contractor and its workers supplied to the principal.

Q: What are the just causes under the Labor Code?

A: The just causes in the Labor Code are found in the following provisions thereof:
(1) Article 297 [282] - (Termination by the Employer) which provides for the following grounds:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representatives; and
(e) Other causes analogous to the foregoing.

(2) Article 279(a) [264(a)] - (Prohibited Activities) which provides for the termination of the following:
(a) Union officers who knowingly participate in an illegal strike and therefore deemed to have lost their
employment status.
(b) Any employee, union officer or ordinary member who knowingly participates in the commission of
illegal acts during a strike (irrespective of whether the strike is legal or illegal), is also deemed to have
lost his employment status.

(3) Article 278(g) [263(g)] - (National Interest Cases) where strikers who violate orders, prohibitions
and/or injunctions as are issued by the DOLE Secretary or the NLRC, may be imposed immediate
disciplinary action, including dismissal or loss of employment status.

(4) Article 259(e) [248(e)] - (Union Security Clause) where violation of the union security agreement in
the CBA may result in termination of employment. Under this clause, the bargaining union can
demand from the employer the dismissal of an employee who commits a breach of union security
arrangement, such as failure to join the union or to maintain his membership in good standing therein.
The same union can also demand the dismissal of a member who commits an act of disloyalty
against it, such as when the member organizes a rival union.
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Q: Is dismissal based on Company Code of Discipline or Company Rules and Regulations illegal?
A: No. In Sampaguita Auto Transport Corporation v. NLRC, the Supreme Court pronounced that the
Court of Appeals erred in ruling that the dismissal of private respondent, a bus driver of petitioner,
was illegal because the “grounds upon which petitioners based respondent’s termination from
employment, viz.: ‘hindi lahat ng schedule nailalabas,’ [‘]mababa ang revenue ng bus, laging kasama
an[g] asawa sa byahe’ and ‘maraming naririnig na kwento tungkol sa kanya, nag-uutos ng conductor
para kumita sa hindi magandang paraan[,]’ xxx are not among those enumerated under Article 297
[282] of the Labor Code as just causes for termination of employment.” The irregularities or infractions
committed by private respondent in connection with his work as a bus driver constitute serious
misconduct or, at the very least, conduct analogous to serious misconduct, under the above-cited
Article 297 [282] of the Labor Code. The requirement in the company rules that: ‘3. to obey traffic
rules and regulations as well as the company policies. 4. to ensure the safety of the riding public as
well as the other vehicles and motorist (sic)’ is so fundamental and so universal that any bus driver is
expected to satisfy the requirement whether or not he has been so informed.

Q: What are the requisites of serious misconduct?

A: 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 he has become unfit to continue working for the employer.

All the above three (3) requisites must concur.

Q: What are some principles of serious misconduct?

A:
1. Serious misconduct implies that it must be of such grave and aggravated character and not merely
trivial or unimportant.
2. Simple misconduct would not justify termination of employment.
3. Possession or use of shabu or other drugs is a valid ground to terminate employment.
4. Immorality, as a general rule, is not a just ground to terminate employment. The exception is when
such immoral conduct is prejudicial or detrimental to the interest of the employer.
5. Immoral conduct committed beyond office hours.
6. Sexual intercourse inside company premises.
7. The act of a 30-year old lady teacher in falling in love with a 16-year old student is not immoral.
8. 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.
9. Challenging superiors to a fight is a just cause for termination.
10. Assaulting another employee is a just cause for termination.
11. Utterance of obscene, insulting or offensive words constitutes serious misconduct.
12. Gambling within company premises is a serious misconduct.
13. Rendering service to business rival is a just cause to terminate employment.
14. Selling products of a competitor is a just cause for termination.
15. Organizing a credit union by employees in a bank is a serious misconduct.
16. Deceiving a customer for personal gain is a just cause for termination.
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17. Contracting work in competition with employer constitutes serious misconduct.
18. Intoxication which interferes with the employee’s work constitutes serious misconduct.
19. The act of a teacher in pressuring a colleague to change the failing grade of a student is serious
misconduct.
20. Sexual harassment is a just ground to dismiss.
21. Sleeping while on duty is a ground for termination.
22. Dismissal is too harsh a penalty for eating while at work.
23. Pilferage or theft of company-owned property is a just cause to terminate.
24. Theft of funds or property not owned by employer is not a ground to terminate.
25. Act of falsification is a valid ground to terminate employment.
26. Punching-in of time cards of other employees is a just cause for termination.

Q: What are the requisites for insubordination or willful disobedience of lawful orders?
A: One of the fundamental duties of an employee is to obey all reasonable rules, orders and
instructions of the employer. In order to validly invoke this ground, the following requisites must be
complied with, to wit:
(1) The employee’s assailed conduct must have been willful or intentional, the willfulness being
characterized by a wrongful and perverse attitude; and
(2)The order violated must be based on a reasonable and lawful company rule, regulation or policy
and made known to the employee and must pertain to the duties for which he has engaged to
discharge.

Q: What are principles on insubordination?

A:
• Making false allegations in complaint does not constitute insubordination.
• Failure to answer memo to explain constitutes willful disobedience.
• Another notice is required in case of termination on the ground of failure to answer memo to explain.
• Refusal to render overtime to meet production deadline constitutes insubordination.
• Refusal to comply with a lawful transfer constitutes insubordination.
• Refusal to undergo random drug testing constitutes both serious misconduct and insubordination.

Q: What are requisites for gross and habitual neglect of duties?

A: The following are the requisites:
(1) There must be negligence which is gross and/or habitual in character; and (2) It must be work-
related as would make him unfit to work for his employer.

Q: What are some principles on gross and habitual neglect of duties?

A:
 Simple negligence is not sufficient to terminate employment.
 The negligence must be gross in character which means absence of that diligence that an ordinarily
prudent man
would use in his own affairs.
 As a general rule, negligence must be both gross and habitual to be a valid ground to dismiss.
Habituality may be disregarded if negligence is gross or the damage or loss is substantial.“ Habitual
negligence ”implies repeated failure to perform one’s duties for a period of time, depending upon the
circumstances.
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 Actual damage, loss or injury is not an essential requisite.
 Absences, if authorized, cannot be. cited as a ground to terminate employment.
 Tardiness or absenteeism,if habitual, may be cited as a ground to terminate employment.
 Tardiness or absenteeism, if habitual, may be tantamount to serious misconduct.
 Absences or tardiness due to emergency, ailment or fortuitous event are justified and may not be
cited as just cause to terminate employment.
 Unsatisfactory or poor performance, inefficiency and incompetence are considered just causes for
dismissal only if they amount to gross and habitual neglect of duties.

Q: What is abandonment of work?

A: Abandonment is not provided for in the Labor Code but it is jurisprudentially considered a form of
neglect of
duty; hence, a just cause for termination of employment under Article 297(b) [282(b)] of the Labor
Code.

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 valid 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.

Q: Can you dismiss an employee on the basis of failure to meet sales or work quotas?
A: The Supreme Court answered this question in the affirmative in ARMANDO
ALILING, Petitioner, vs. JOSE B. FELICIANO, MANUEL F. SAN MATEO III, JOSEPH R. LARIOSA,
and WIDE WIDE WORLD EXPRESS CORPORATION, Respondents. (G.R. No. 185829; April 25,
2012). An employee’s failure to meet sales or work quotas falls under the concept of gross
inefficiency, which in turn is analogous to gross neglect of duty that is a just cause for dismissal under
Article 282 of the Code.

In Lim v. National Labor Relations Commission, the Court considered inefficiency as an analogous
just cause for termination of employment under Article 282 of the Labor Code:

We cannot but agree with PEPSI that "gross inefficiency" falls within the purview of "other causes
analogous to the foregoing," this constitutes, therefore, just cause to terminate an employee under
Article 282 of the Labor Code. One is analogous to another if it is susceptible of comparison with the
latter either in general or in some specific detail; or has a close relationship with the latter. "Gross
inefficiency" is closely related to "gross neglect," for both involve specific acts of omission on the part
of the employee resulting in damage to the employer or to his business. This Court ruled that failure
to observed prescribed standards to inefficiency may constitute just cause for dismissal. (Buiser vs.
Leogardo).

Q: What is gross inefficiency within the meaning provided by the Supreme Court?
A: It closely related to “gross neglect,” for both involve specific acts of omission on the part of the
employee resulting in damage to the employer or to his business (Lim v. National Labor Relations
Commission). Such inefficiency is understood to mean failure to attain work goals or work quotas,
either by failing to complete the same within the allotted reasonable period, or by producing
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unsatisfactory results (Philippine American Embroideries vs. Embroidery and Garment Workers, 26
SCRA 634, 639).

Q. What is the consequence for an employee’s failure to observed prescribed standards to

inefficiency?
A: It constitutes just cause for dismissal (Buiser v Leogardo). ***

Q. Does the same rule apply even if there is already a permanent or probationary status of the
employee’s employment?
A: Yes (Philippine American Embroideries vs. Embroidery and Garment Workers, 26 SCRA 634,
639). ***

Q: What are some principles on abandonment?

A: SOME PRINCIPLES ON ABANDONMENT.
 Mere absence is not enough to constitute abandonment.
 Clear intention to sever employment relationship is necessary.
 Due process in abandonment cases consists only of the service of 2 notices to the employee,viz.:
a. First notice directing the employee to explain why he should not be declared as having abandoned
his job; and
b. Second notice to inform him of the employer’s decision to dismiss him on the ground of
abandonment.
 No hearing is required to validly dismiss an employee for abandonment.
 Notices in abandonment cases must be sent to employee’s last known address per record of the
company. The
employer need not look for the employee’s current whereabouts.
 Immediate filing of a complaint for illegal dismissal praying for reinstatement negates abandonment.
 Lapse of time between dismissal and filing of a case is not a material indication of abandonment.
Hence, lapse of 2 years and 5 months or 20 months or 9 months or 8 months before filing the
complaint for illegal dismissal is not an indication of abandonment. Under the law, the employee has
a 4-year prescriptive period within which to institute his action for illegal dismissal.
 Filing of a case to pre-empt investigation of the administrative case is tantamount to abandonment.
 When what is prayed for in the complaint is separation pay and not reinstatement, the filing of
complaint does not negate abandonment.
 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.
 Employment in another firm coinciding with the filing of complaint does not indicate abandonment.
 Offer of reinstatement by employer during proceedings before Labor Arbiter and refusal by
employee does not indicate abandonment but more of a symptom of strained relations between the
parties.
 An employee may be absolved from the charge of abandonment of work but adjudged guilty of
AWOL. These two grounds are separate and distinct from each other.
 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.
 An employee who failed to comply with the order for his reinstatement is deemed to have
abandoned his work.
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 An employee who, after being transferred to a new assignment, did not report for work anymore is
deemed to have abandoned his job.
 An employee who deliberately absented from work without leave or permission from his employer
for the purpose of looking for a job elsewhere is deemed to have abandoned his work.
 Imprisonment or detention by military does not constitute abandonment.
 Absence to evade arrest is not a valid justification. To do so would be to place an imprimatur on the
employee’s attempt to derail the normal course of the administration of justice.

Q: What are the requisites of fraud?

A: The following are the requisites of this ground:
1. There must be an act, omission, or concealment;
2. The act, omission or concealment involves a breach of legal duty, trust, or confidence justly
reposed; 3. It must be committed against the employer or his/her representative; and
4. It must be in connection with the employees' work

SOME PRINCIPLES ON FRAUD:

 Failure to deposit collection constitutes fraud.
 Lack of damage or losses is not necessary in fraud cases. The fact that the employer did not suffer
losses from the dishonesty of the dismissed employee because of its timely discovery does not
excuse the latter from any culpability.
 Lack of misappropriation or shortage is immaterial in case of unauthorized encashment of personal
checks byteller and cashier.
 Restitution does not have absolutory effect.

Q: What are the requisites of a willful breach of trust and confidence?

A: For the doctrine of loss of trust and confidence to apply, the following requisites must be satisfied:
(1) The employee holds a position of trust and confidence;
(2) There exists an act justifying the loss of trust and confidence, which means that the act that
betrays the employer’s trust must be real, i.e., founded on clearly established facts;
(3) The employee’s breach of the trust must be willful, i.e., it was done intentionally, knowingly and
purposely, without justifiable excuse; and
(4) The act must be in relation to his work which would render him unfit to perform it.

As a safeguard against employers who indiscriminately use “loss of trust and confidence” to justify
arbitrary dismissal of employees, the Supreme Court, in addition to the above elements, came up with
the following guidelines for the application of the doctrine:
(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 unjustified;
(3) It may not be arbitrarily asserted in the face of overwhelming evidence to the contrary; and
(4) It must be genuine, not a mere afterthought, to justify earlier action taken in bad faith.
The foregoing guidelines have been prescribed by the Supreme Court due to the subjective nature of
this ground which makes termination based on loss of trust and confidence prone to abuse.

Q: How do the rules on termination of managerial and supervisory employees different from those
applicable to rank-and-file employees?

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A: 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 he has breached the trust of his employer
would suffice for his dismissal.

Q: What are the requisites for a valid invocation of the ground of commission of crime or offense?
A: The following are the requisites for the valid invocation of this ground:
(1) A crime or offense was committed by the employee;
(2) It was committed against any of the following persons:
(a) His employer;
(b) Any immediate member of his employer’s family; or
(c) His employer’s duly authorized representative.

Q: Is work relation necessary to invoke this ground to terminate employment?

A: No. Because of its gravity, work-relation is not necessary. Neither is it necessary to show that the
commission of the criminal act would render the employee unfit to perform his work for the employer.

Q: What are analogous cases?

A: The following may be cited as analogous causes:
1) Violation of company rules and regulations.
2) Theft of property owned by a co-employee, as distinguished from theft of property owned by the
employer.
3) Incompetence, inefficiency or ineptitude.
4) Failure to attain work quota.
5) Failure to comply with weight standards of employer.
6) “Attitude problem” is analogous to loss of trust and confidence.

Q: What is a union security clause?

A: The “union security clause” is a stipulation in a CBA which allows the parties thereto to enter into
an agreement requiring compulsory membership in the sole and exclusive bargaining agent (SEBA)
which successfully negotiated said CBA as a condition for continued employment with the exception
of employees who are already members of other union/s at the time of the signing of the CBA. Hence,
they cannot be compelled to resign from their minority union/s to join the SEBA.

Q: What are the effects of application of this clause?

A: The following are the effects:
a. On members of the SEBA. They are not allowed to resign or terminate their membership
therefrom. Any member of the SEBA who resigns or is expelled therefrom may be recommended to
the employer by the SEBA for termination of his employment.
b. On non-members of the SEBA but members of the minority union/s. They are not bound by the
union security clause if they are members of the minority or other unions at the time of the signing of
the CBA. Hence, they cannot be compelled to resign from their union/s in order to join the SEBA.
c. On non-members of the SEBA or of any minority union/s. If not a member of the SEBA 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
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SEBA. (E.g., Religious objectors and confidential employees under the Confidential Employee Rule).
d. On new employees hired after the signing of the CBA containing the union security clause. They
can be compelled to join the SEBA. If they refuse, they can be recommended for termination by the
SEBA to the employer as such refusal is deemed a violation of this clause.
Q: Is there an exception to this rule?
A: Yes. An employee cannot be compelled to join any union based on religious ground (Religious
Objectors). For example: members of the Iglesia ni Kristo (INK) cannot be compelled to join a union;
hence, they are not bound by the union security doctrine.

Q: Can religious objectors be denied membership in a union or be disallowed from participating in a

certification election?
A: No. Religious objectors, if they choose to, cannot be denied membership in a union or prevented
from participating in a certification election.

Q: What are the requisites in order to validly terminate employees based on this clause?
A: All the foregoing requisites should be complied with to justify the termination of employment.
(1) The union security clause is applicable;
(2) The bargaining union is requesting for the termination of employment due to enforcement of the
union
security provision in the CBA; and
(3) There is sufficient evidence to support the union’s decision to expel the employee from the union.
(Alabang Country Club, Inc. v. NLRC,1).

Q: Is due process required for a valid termination on the ground of violation of the union security
clause?
A: Yes, the employer should afford both substantive and procedural due process to the employee. It
cannot terminate his employment merely on the basis of the recommendation of the union.

Q: Can the employer adopt the due process afforded by the SEBA to the employee in expelling him
from his membership in the SEBA?
A: No. The employer cannot adopt the due process afforded by the SEBA as its own due process for
the simple reason that such due process concerns the termination of membership of the employee
from the SEBA. The due process in above-cited Alabang Country Club, Inc. v. NLRC,2 is required for
a different purpose - to terminate his employment.

Q: What is the effect when an employee is found positive for use of dangerous drugs?
A: He shall be dealt with administratively which shall be a ground for suspension or termination.

Q: How about if he has actual, perceived or suspected HIV virus or Hepatitis B status?
A: He shall not be terminated from employment on such basis.

Q: What are the measures done when an employee has or had tuberculosis?
A: He shall not be discriminated against but shall be entitled to work for as long as they are certified
by the company's accredited health provider as medically fit and shall be restored to work as soon as
his/her illness is controlled.

Page 43 of 63
Q: May an employee be also terminated based on the grounds provided for under the CBA?
A: Yes.

ii. Authorized Causes

The following are the authorized causes of termination under Articles 298 and 299 (previously Arts.
283 and 284, respectively) of the Labor Code:
1. Installation of labor-saving devices;
2. Redundancy;
3. Retrenchment to prevent losses;
4. Closing or cessation of operation of the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of the Title; and
5. Suffering from any disease and whose continued employment is prohibited by law or is
prejudicial to his health as well as to the health of his co-employees.

Installation of Labor-Saving Devices (Automation)

Automation – is a management prerogative of replacing manpower with machine power in order to
effect more economy and greater efficiency in method of production
Requisites for a valid automation:
1. Written notice to the employee and to the DOLE at least one (1) month before the intended
date of termination;
2. Payment of separation pay of at least one (1) month for every year of service;
3. Good faith in the discharge of employees; and
4. Reasonable criteria to be used in implementing automation
Reduction of the number of workers in a company’s factory made necessary by the introduction of
machinery in the manufacture of its products is justified. There can be no question as to the right of
the manufacturer to use new labor- saving devices with a view to affecting more economy and
efficiency in its method of production (Philippine Sheet Metal Workers’ Union vs. CIR. G.R. No. L-
2028; April 28, 1949).

Redundancy

Q: What is redundancy?

A: It is the superfluity in the performance of a particular work. It exists where the services of an
employee are in excess of what is reasonably demanded by the actual requirements of the enterprise
(Wiltshire File Co., Inc. v. NLRC, G.R. No. 82249, February 7, 1991).

Q: Is redundancy synonymous with duplication of work?

A: Redundancy in an employer’s personnel does not necessarily or even ordinarily refer to duplication
of work. The characterization of services as no longer necessary or sustainable and therefore
properly terminable, was an exercise of business judgment on the part of the employer. The employer
has no legal obligation to keep in its payroll more employees that are necessary for the operation of
its business (Wiltshire File Co., Inc. v. NLRC, G.R. No. 82249, February 7, 1991).
A position is redundant when it is superfluous. Superfluity is the outcome of some factors:
Page 44 of 63
 1. Over-hiring of workers
2. Decline in volume of business
3. Closure of a particular line of an economic activity previously engaged by the
employer.

Requisites of a Valid Redundancy

1. Written notice served on both the employees and the DOLE at least 1 month prior to
separation from work
2. Payment of separation pay equivalent to at least 1 month pay or at least 1 month pay for
every year of service, whichever is higher.
3. Good faith in abolishing redundant position
4. Fair and reasonable criteria in ascertaining what positions are to be declared redundant:
a. Less preferred status, e.g. temporary employee
b. Efficiency and
c. Seniority (DAP v. Court of Appeals. G.R. No. 165811; December 14, 2005).
The losses which the company may suffer or is suffering may be proved by financial statements
audited by independent auditors (Asian Alcohol Corporation v. NLRC, G.R. No. 131108, March 25,
1999).

Retrenchment
It is the reduction of personnel usually due to poor financial returns as to cut down on costs of
operations in terms of salaries and wages to prevent bankruptcy of the company.
Cutting of expenses includes the reduction of personnel. It is a management prerogative, a
means to protect and preserve the employer’s viability and ensure his survival. To be an authorized
cause it must be effected in good faith and for the retrenchment, which is after all a drastic recourse
with serious consequences for the livelihood of the employee’s or otherwise laid-off.
The kind of losses contemplated under the Labor Code is actual or anticipated/impending losses.

Q: Is preventive retrenchment legal?

A: Yes. “To prevent losses” justifies retrenchment. Such phrase means that retrenchment or
termination of the services of some employees is authorized to be undertaken by the employer
sometime before the losses anticipated are actually sustained or realized. It is not the intention of the
lawmaker to compel the employer to stay his hand and keep all his employees until sometime after
losses shall have been materialized (Lopez Sugar Corporation v. Federation of Free Workers, et al.,
G.R. Nos. 75700- 01. August 30, 1990).

Standards of Preventive Retrenchment

1. The losses expected should be substantial and not merely de minimis in extent;
2. The substantial loss apprehended must be reasonably imminent;
3. It must be reasonably necessary and likely to effectively prevent the expected losses; and
4. Alleged losses if already realized, and the expected imminent losses sought to be
forestalled, must be proven by sufficient and convincing evidence (Lopez Sugar
Corporation v. Federation of Free Workers, et al., G.R. Nos. 75700-01. August 30, 1990).

Causes of Retrenchment
1. Lack of Work
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 2. Business Recession
3. Fire
4. Conservatorship

Q: Enumerate the requisites for a valid retrenchment.

A:
1. Written notice served on both the employee and the DOLE at least 1 month prior to the
intended date of retrenchment;
2. Payment of separation pay equivalent to at least one month pay or at least 1/2 month pay
for every year of service, whichever is higher;
3. Good faith in effecting retrenchement;
4. Proof of expected or actual losses;
5. To show that the employer first instituted cost reduction measures in other measures in
other areas of production before undertaking retrenchment as a last resort; and
6. The employer used fair and reasonable criteria in ascertaining who would be retained
among the employees, such as status, efficiency, seniority, physical fitness, age, and
financial hardship of certain workers (FASAP v. PAL, G.R. No. 178083, October 2, 2009).

Criteria in selecting employees to be retrenched

There must be fair and reasonable criteria to be used in selecting employees to be dismissed such
as:
1. Less preferred status;
2. Efficiency rating;
3. Seniority (Phil. Tuberculosis Society, Inc. v. National Labor Union, G.R. No. 115414,
August 25, 1998).

“Last In First Out” (LIFO) Rule

It applies to termination of employment in the same line of work. What is contemplated in the LIFO
rule is that when there are two or more employees occupying the same position in the company
affected by the retrenchment program, the last one employed will necessarily be the first one to go
(Maya Farms Employees Organization v. NLRC, G.R. No. 106256, December 28, 1994).

Q: Is the LIFO Rule mandatory?

A: Yes. In cases of installation of labor-saving devices, redundancy and retrenchment, the LIFO rule
shall apply. However, when an employee volunteers to be separated from employment. (DOLE
Department Order 147-15, Series of 2015)

Evidence to Prove Losses

Alleged losses if already realized and the expected imminent losses must be proved by sufficient and
convincing evidence. Evidence presented in NLRC Prooceedings must have modicum of
admissibility.

Closure of Business
It must be done in good faith and not for the purpose of circumventing pertinent labor laws.

Page 46 of 63
A change of business ownership does not create an obligation on the part of the new owner to absorb
the employees of the previous owner, unless expressly assumed. Labor contracts being in personam,
are generally not enforceable against a transferee(Fernando v. Angat Labor Unit, 5 SCRA 248).
Closure contemplated is a unilateral and voluntary act on the part of the employer to close the
business establishment.

Two kinds of closure:

1. Partial Closure – although grounded on economic losses, partial closure is a form of
retrenchment. Requirements:
a. Written notice to the EE and to the DOLE at least 1 month before the intended date
of termination
b. Separation pay equivalent to atleast ½ month pay for every year of service.
c. Cessation of business is bonafide in character.
2. Total Closure due to economic reverses or losses.
Requirements:
a. Written notice to the EE and to the DOLE at least 1 month before the intended date of
termination.
b. Cessation of business is due to serious economic reverses or losses.
Requisites:
a. Written notice served on both the employees and the DOLE at least 1 month prior to the
intended date of closure
b. Payment of separation pay equivalent to at least one month pay or at least 1/2 month pay
for every year of service, whichever is higher, except when closure is due to serious
business losses
c. Good faith
d. No circumvention of the law
e. No other option available to the Er

To be a valid ground for termination the following must be present:

1. There must be a decision to close or cease operation of the enterprise by the management;
2. The decision was made in good faith; and
3. There is no other option available to the employer except to close or cease operation

Q: Is separation pay required to be paid in case of closure?

A: Payment of separation pay is required only where closure is neither due to serious business losses
nor due to an act of Government (North Davao Mining Corp v. NLRC, G.R. No. 112546, Mar. 13,
1996; NFL v. NLRC, G.R. No. 127718, March 2, 2000).
Basis for computation: latest salary rate, unless reduced by the employer to circumvent the law, in
which case, it shall be based on the rate before its deduction (Sec. 10, Rule 1, Book IV, Rules and
Regulations Implementing the Labor Code).

There is no obligation to pay separation pay:

1. When the closure of the business is due to serious business loss
2. Where closure of business is by compulsion of law because closure of business is not
attributed to Er’s will (e.g.: the land where the building is situated was declared covered by
the Comprehensive Agrarian Reform Law).
Page 47 of 63
Q: Does the written notice posted on a bulletin board sufficiently comply with the notice requirement
under Art. 283 of the LC in case of closure?
A: No. In order to meet the purpose, service of the written notice must be made individually upon
each and every employee of the company. However, the Supreme Court held that where the
dismissal is for an authorized cause, non- compliance with statutory due process should not nullify
the dismissal, or render it illegal, or ineffectual. Still, the Er should indemnify the employee, in the
form of nominal damages, for the violation of his right to statutory due process (Galaxie Steel
Workers Union v. NLRC, G.R. No. 165757, October 17, 2006).

Q: Is the transferee of a closed business required to absorb the employees of the old business?
A: There is no law requiring a bona fide purchaser of assets of an on-going concern to absorb in its
employ the employees of the transferor. However, the following are the exceptions:
1. When the transaction between the parties is colored or clothed with bad faith
(Sundowner Dev’t Corp. v. Drilon, G.R. No. 82341, December 6, 1989).
2. Where the transferee was found to be merely an alter ego of the different merging
firms (Filipinas Port Services, Inc. v. NLRC, G.R. No. 97237, August 16, 1991).
3. Where the transferee voluntarily agrees to do so (Marina Port Services, Inc. v.
Iniego, G.R. No. 77853, January 22, 1990).

Disease
It must be incurable within 6 months and the continued employment is prohibited by law or prejudicial
to his health as well as to the health of his co-employees with a certification from the public health
officer that the disease is incurable within 6 months despite due to medication and treatment.

Requisites for disease as a ground for dismissal:

When the employee suffers from a disease, and:
1. His continued employment is prohibited by law or prejudicial to his health or to the health of
his co-employees (IRR, Book VI, Rule I, Sec.8).
2. With a certification by competent public health authority that the disease is incurable within
6 months despite due medication and treatment (Solis v. NLRC, GR No. 116175, October
28, 1996).

Q: May the requirement of a medical certificate be dispensed with?

A: No. The requirement for a medical certification cannot be dispensed with; otherwise, it would
sanction the unilateral and arbitrary determination by the Er of the gravity or extent of the employee’s
illness and thus defeat the public policy on the protection of labor (Manly Express v. Payong, G.R.
No. 167462, October 25, 2005).

Procedure in terminating an employee’s employment on the ground of disease

1. The Er shall not terminate his employment unless:
a. There is a certification by a competent public health authority;
b. That the disease is of such nature or at such a stage that it cannot be cured within a
period of 6 months even with proper medical treatment.
2. If the disease or ailment can be cured within the period, the Er shall not terminate the
employee’s employment but shall ask the employee to take a leave. The Er shall reinstate
Page 48 of 63
 such employee to his former position immediately upon the restoration of his normal health
(IRR, Book VI, Rule I, Sec.8).

Q: Is disability a ground for termination?

A: No. Dismissing or terminating the services of a disabled employee by reason of his disability is not
a valid ground. Unless the employer can prove that the employee impairs the satisfactory
performance of the work involved to the prejudice of the business entities. Provided, however, that
the employer first sought provide reasonable accommodations for disabled persons.

Other authorized causes

1. Total and permanent disability of employee
2. Valid application of union security clause
3. Expiration of period in term of employment
4. Completion of project in project employment
5. Failure in probation
6. Relocation of business to a distant place
7. Defiance of return-to work-order
8. Commission of Illegal acts in strike
9. Violation of contractual agreement
10. Retirement

Q: Distinguish just from authorized causes.

A: Termination for just cause is initiated by the employee, while termination for authorized causes is
by the employer in the exercise of management prerogative. There is generally no required to pay
separation pay, while such is required to be paid in the latter.
Q: What are the 2 classes of authorized cause termination?
A: Under the Labor Code, authorized causes are classified into two (2) classes, namely:
(1) Business-related causes. – Referring to the grounds specifically mentioned in Article 298 [283], to
wit:
a. Installation of labor-saving device;
b. Redundancy;
c. Retrenchment;
d. Closure or cessation of business operations NOT due to serious business losses or financial
reverses; and
e. Closure or cessation of business operations due to serious business losses and financial reverses.

(2) Health-related causes. – Referring to disease covered by Article 299 [284] of the Labor Code.

Q: What are the two (2) kinds of requisites in the case of business-related causes?
A:
(1) COMMON requisites applicable to all the authorized causes; and
(2) UNIQUE requisites applicable to each of the authorized causes.

Q: What are the COMMON REQUISITES applicable to the BUSINESS-RELATED causes under
Article 298 [283]?
A: The following are the five (5) common requisites applicable to the ALL the business-related
Page 49 of 63
causes:
(1) There is good faith in effecting the termination;
(2) The termination is a matter of last resort, there being no other option available to the employer
after resorting to cost-cutting measures;
(3) Two (2) separate written notices are served on both the affected employees and the DOLE at
least one (1) month prior to the intended date of termination;
(4) Separation pay is paid to the affected employees, to wit:

(a) If based on (1) installation of labor-saving device, or (2) redundancy. - One (1) month pay or 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.

(b) If based on (1) retrenchment, or (2) closure NOT due serious business losses or financial
reverses. - One (1) month pay or at least one-half (1⁄2) 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.

(c) If closure is due to serious business losses or financial reverses, NO separation pay is required to
be paid.
(d) In case the CBA or company policy provides for a higher separation pay, the same must be
followed through instead of the one provided in Article 298 [283].

(5) Fair and reasonable criteria in ascertaining what positions are to be affected by the termination,
such as, but not limited to: nature of work; status of employment (whether casual, temporary or
regular); experience; efficiency; seniority; dependability; adaptability; flexibility; trainability; job
performance; discipline; and attitude towards work. Failure to follow fair and reasonable criteria in
selecting who to terminate would render the termination invalid.

Q: What are the UNIQUE REQUISITES applicable to each of the BUSINESS-RELATED causes
under Article 298 [283]?
A: The following are the unique requisites of each authorized cause:

(1) Installation of labor-saving device: In addition to the five (5) common requisites above, the unique
requisites are as follows:
(i) There must be introduction of machinery, equipment or other devices; and
(ii) The purpose for such introduction must be valid such as to save on cost, enhance efficiency and
other
justifiable economic reasons.

(2) Redundancy: The additional requisites are as follows:

(i) There must be superfluous positions or services of employees;
(ii) The positions or services are in excess of what is reasonably demanded by the actual
requirements of the enterprise to operate in an economical and efficient manner; and
(iii) There must be an adequate proof of redundancy such as but not limited to the new staffing
pattern, feasibility studies/proposal, on the viability of the newly created positions, job description and
the approval by the management of the restructuring.

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(3) Retrenchment: Per latest issuance of the DOLE, the following are the additional requisites:
(i) The retrenchment must be reasonably necessary and likely to prevent business losses;
(ii) The losses, if already incurred, are not merely de minimis, but substantial, serious, actual and real,
or if only expected, are reasonably imminent;
(iii) The expected or actual losses must be proved by sufficient and convincing evidence; and
(iv) The retrenchment must be in good faith for the advancement of its interest and not to defeat or
circumvent
the employees' right to security of tenure.
This is the only business-related cause under Article 298 [283] which requires proof of losses or
imminent losses. The other grounds of closure or cessation of business operations may be resorted
to with or without losses.

(4) Closure or cessation of business operations: (a) When NOT due to serious business losses or
financial reverses; or
(b) When due to serious business losses or financial reverses
It is only in the first that payment of separation pay is required. No such requirement is imposed in the
second.

Q: What are some principles on closure?

A: (i) Principle of closure under Article 283 applies in cases of both total and partial closure or
cessation of business
operations. Management may choose to close only a branch, a department, a plant, or a shop.
(ii) Closure of department or section and hiring of workers supplied by independent contractor as
replacements is valid.
(iii) Relocation of business may amount to cessation of operations.
(iv) Closure of business to merge or consolidate with another or to sell or dispose all of its assets,
held valid.
(v) Audited financial statements necessary only in closure due to losses.

Q: What does the phrase “retrenchment to prevent losses” mean?

A: It means that retrenchment may be undertaken by the employer before the losses anticipated are
actually sustained or realized. The employer need not keep all his employees until after his losses
shall have materialized. Otherwise, the law could be vulnerable to attack as undue taking of property
for the benefit of another.

Q: What are the best evidence of losses?

A: Best evidence of losses - financial statements audited by independent auditors (not by internal
auditors). Best evidence of losses in a government-controlled corporation - financial statements
audited by COA.

TAKE NOTE: Income tax returns and mere affidavits are not valid since they are self-serving
documents.

Q: What are some grounds which do not affect the validity of retrenchment?
A: Past profitable operations and liquidity problem do not affect the validity of a retrenchment.

Page 51 of 63
Q: What are the doctrines on termination due to disease?
A: Such doctrines are the ones enunciated in Deoferio and Fuji on the matter of due process as
discussed below. The due process applicable to disease, although an authorized cause, is similar to
the one applicable to just cause termination and not to authorized cause termination.

According to said doctrine, the following requisites must be complied with before termination of
employment due to disease may be justified namely:
(1) Substantive requisites — (i) An employee has been found to be suffering from any disease;
(ii) His continued employment is prohibited by law or prejudicial to his health, as well as to the health
of his co-employees; and
(iii) A competent public health authority issues a medical certificate that the disease is of such nature
or at such a stage that it cannot be cured within a period of six (6) months even with proper medical
treatment.

(2) Procedural requisites — (i) The notice to apprise the employee of the ground for which his
dismissal is sought; and
(ii) The notice informing the employee of his dismissal, to be issued after the employee has been
given
reasonable opportunity to answer and to be heard on his defense.

In other words, due process in termination due to disease is similar to due process for just cause
termination but different from authorized cause termination under Article 298 [283].

Q: What is the Fuji rule?

A: That the employee should be given the chance to present countervailing medical certificates.

(i) If the disease or ailment can be cured within the period of six (6) months with proper 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.

(ii) 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 insubordination
or willful disobedience of lawful order.

(iii) A medical certificate issued by a company’s own physician is not an acceptable certificate for
purposes of terminating an employment based on Article 284, it having been issued not by a
“competent public health authority,” the person referred to in the law.

(iv) A “competent public health authority” refers to a government doctor whose medical specialization
pertains to the disease being suffered by the employee. For instance, if the employee suffers from
tuberculosis, the medical certificate should be issued by 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 cardiologist.

(v) The medical certificate should be procured by the employer and not by the employee.
Page 52 of 63
 b. Procedural due process
Q: How is the due process required of an employer different from that which must be observed by the
labor authorities/tribunals or courts?
A: The former (called the company-level due process) requires compliance with both the statutory
and contractual due process as discussed below; while the latter (called the court-level due process)
requires observance of the constitutional due process.

Q: What is the latest rule on due process?

A: Due process means compliance with BOTH STATUTORY DUE PROCESS and CONTRACTUAL
DUE PROCESS.

CONSTITUTIONAL DUE PROCESS is not applicable (Per Agabon doctrine).

Statutory due process refers to the one prescribed in the Labor Code (Article 292[b] 277[b]); while
contractual due process refers to the one prescribed in the Company Rules and Regulations (Per
Abbott Laboratories doctrine).

It is now required that in addition to compliance with the statutory due process, the employer should
still comply with the (contractual) due process procedure prescribed in its own company rules. The
employer’s failure to observe its own company-prescribed due process will make it liable to pay an
indemnity in the form of nominal damages, the amount of which is equivalent to the P30,000.00
awarded under the Agabon doctrine (Abbott Laboratories, Philippines v. Pearlie Ann F. Alcaraz).

Q: Are the twin-notice requirement and hearing required in all cases of termination?
A: No. The two-notice requirement and hearing are required only in case of just cause termination
BUT NOT IN AUTHORIZED CAUSE TERMINATION (EXCEPT ON THE GROUND OF DISEASE
PER DEOFERIO DOCTRINE).

Q: What is the order in which the twin-notice requirement and hearing are implemented by the
employer?
A: The requirement should be implemented in the following order:
1. Service of first written notice;
2. Conduct of hearing; and
3. Service of second written notice.

Q: Are the twin-notice requirement and hearing applicable to authorized cause termination?
A: No. Due process in authorized cause termination is deemed complied with upon the separate and
simultaneous
service of a written notice of the intended termination to both:
(1) the employee to be terminated; and
(2) the appropriate DOLE Regional Office, at least one (1) month before the intended date of the
termination specifying the ground/s therefor and the undertaking to pay the separation pay required
under Article 283 of the Labor Code.

Page 53 of 63
Hearing is not required.

As an exception, termination on the ground of disease requires the just cause due process.

Q: Are the twin-notice requirement and hearing applicable to abandonment as a just cause to
terminate employment?
A: No; it is an exception to the rule that just causes warrant the twin notice before termination.
Although considered as a just cause to terminate employment, the procedural due process
requirement for abandonment is different. No hearing is required (since the employee has already
abandoned his job) but the following notices should be complied with:
(1) First notice asking the employee to explain why he should not be declared as having abandoned
his job; and
(2) Second notice informing him of the employer’s decision to dismiss him on the ground of
abandonment.

To comply with procedural due process when terminating an employee for a just cause, the following
should be done:
1. The first written notice to be served on the employees should contain the specific causes or
grounds for termination against them, and a directive that the employees are given the
opportunity to submit their written explanation within a reasonable period or at least five (5)
calendar days; two-notice rule.
2. After serving the first notice, the employers should schedule and conduct a hearing or
conference wherein the employees will be given the opportunity to: (1) explain and clarify their
defenses to the charge against them; (2) present evidence in support of their defenses; and (3)
rebut the evidence presented against them by the management.
3. 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 against the employees have been considered; and (2) grounds have been established
to justify the severance of their employment. [King of Kings Transport, Inc. v. Mamac, 553 Phil.
108 (2007)].

Q: Does hearing require a full-blown trial?

A: No. The Supreme Court held that what is important is that the parties are given the opportunity
to be heard unless they request for a hearing. What is required is that the complainant is given the
opportunity to be heard (Perez v Philippine Telegram and Telephone Company, G.R. 152048,
April 7, 2009).

Q: If the employer fails to observe procedural due process, does it give rise to a right on the part
of the employee to demand reinstatement?
A: Where the employer had a valid reason to dismiss the employee but has failed to comply with
the due process requirement, the dismissal may be upheld but the employer will be penalized to
pay an indemnity to the employee (Wenphil Corp. v. NLRC, G.R. No. 80587, February 8, 1989).
For non-compliance by the employer of due process in just cause dismissal, the employer is liable
to pay indeminity or nominal damages amounting to Php 30,000 (Agabon v NLRC, G.R. No.
158693, November 17, 2004).
Page 54 of 63
 To comply with procedural due process when terminating an employee for authorized causes, the
following must be observed:
1. Written Notice to DOLE 30 days prior to the intended day of termination. This is to enable
DOLE to ascertain the veracity of the cause of termination.
2. Written notice to Ee concerned 30 days prior the intended date of termination.
3. Payment of separation pay – Serious business losses do not excuse the Er from complying
with the clearance or report required in Art. 283 of the LC and its IRR before terminating the
employment of its workers. In the absence of justifying circumstances, the failure of the Er
to observe the procedural requirements under Art. 284 of the LC taints their actuations with
bad faith if the lay-off was temporary but then serious business losses prevented the
reinstatement of respondents, the Er’s should have complied with the requirements of
written notice.

Q: May notice be dispensed with?

A: Yes. When the employee:
1. Consented to his retrenchment; or,
2. Voluntarily applied for retrenchment.

Instances when Ee is entitled to separation pay

1. When the termination of employment is due to causes authorized by law (Art. 284, LC).
2. When the severance of employment is caused by a disease, particularly when the Ee is
found to be suffering from any disease and whose continued employment is prohibited by
law or is prejudicial to his health and of his co-Ees (LC, Art. 284).
3. When the termination from service has been declared illegal, but his reinstatement to his
former position is no longer feasible for some valid reason (Gabuay v. Oversea Paper
Supply, G.R. No. 148837, August 13, 2004).
4. In case of pre-termination of employment contract in job-contracting arrangement (D.O 18-
02, Rules Implementing Art. 106 – 109, LC).
5. Where separation pay is awarded as a measure of social or compassionate justice (PLDT
v. NLRC, G.R. No. L-80609, August 23, 1988).
A fraction of at least 6 months shall be considered 1 whole year. There is no separation pay when the
closure is due to an act of the Government.

Q: A was dismissed from X Corporation due to retrenchment and received separation pay. Later, he
filed a case for illegal dismissal against X Corporation. The latter raised the defense that the former
had already received separation pay and was, therefore, barred from assailing the legality of his
dismissal. Is X Corporation correct?
A: No. A dismissed employee who has accepted his separation pay is not necessarily estopped from
assailing the illegality of his dismissal. In fact, he filed the complaint for illegal dismissal with prayer
for reinstatement a month after his separation from service — a fact which strongly indicates that he
never waived his right to reinstatement (Solis v. NLRC. G.R. No. 116175, October 28, 1996).

2. Preventive suspension

Page 55 of 63
Q: What is Preventive Suspension?
A: Preventive suspension is a disciplinary measure for the protection of the company’s property
pending investigation of any alleged malfeasance or misfeasance committed by the employee.
[Gatbonton v. NLRC, G.R. No. 146779 (2006)]

Q: What is the purpose of Preventive Suspension?

A: It is to prevent him from causing harm or injury to the company as well as to his fellow employees.

Q: Jose was employed as security guard by RP Guardians Security Agency, Inc. He had a heated
argument with a fellow security guard, Edu. Edu submitted a confidential report to Andres,
Administration & Operations Manager, requesting that Jose be investigated for maliciously
machinating Edu’s hasty relief from his post and for leaving his post during night shift duty to see his
girlfriend at a nearby beerhouse.

Another security guard, Err, sent a report to Andres stating that Jose arrived at the office of RP
Guardians Security Agency, Inc. under the influence of liquor. When Jose learned that no salaries
would be given that day, he bad-mouthed the employees of RP Guardians Security Agency, Inc. and
threatened to "arson" their office.

Andres issued a Memorandum temporarily relieving Jose from his post and placing him under
preventive suspension pending investigation for conduct unbecoming a security guard. In another
memorandum, Andres informed Jose that a hearing will be held. Was there a valid preventive
suspension imposed on Jose?

A: Yes, there was a valid preventive suspension imposed on Jose. Preventive suspension is justified
where the employee’s continued employment poses a serious and imminent threat to the life or
property of the employer or of the employee’s co-workers. Without this kind of threat, preventive
suspension is not proper. In this case, Jose’s preventive suspension was justified since he was
employed as a security guard tasked precisely to safeguard his employer’s client. His continued
presence poses a serious threat.

3. Illegal dismissal
Q: What constitutes illegal dismissal?
A: Illegal dismissal is committed when the employer terminates or dismisses an employee without just
or authorized causes as provided under the law.

a. Kinds
i. No just or authorized cause
Q: What is the liability of an employer who dismissed an employee without just or authorized causes?
A: An employer who dismisses an employee without just or authorized cause is liable for:
1. Reinstatement or separation pay if reinstatement is not possible; and
2. Full backwages.

ii. Constructive dismissal

Q: What constitutes constructive dismissal?
Page 56 of 63
A: This occurs when there is, to wit:
(1) involuntary resignation;
(2) demotion;
(3) discrimination, insensibility or disdain

Q: When is transfer of an employee deemed as constructive dismissal?

A: Transfer constitutes constructive dismissal when it is unreasonable, inconvenient or prejudicial to
the employee, or involves a demotion in rank or diminution of salaries, benefits and other privileges,
or when the acts of discrimination, insensibility or disdain on the part of the employer become
unbearable for the employee, forcing him to forego her employment (Chateau Royale Sports and
Country Club, Inc. vs Rachelle Balba, et al. [G.R. No. 197492, 18 January 2017]).

(a) Burden of proof

Q: Where shall the burden of proof rest for constructive dismissal?

A: The burden of proof shall rest the burden of proof shall rest on the employee who is complaining of
constructive dismissal and shall prove that the dismissal was not voluntary but rather a constructive
dismissal with clear and convincing evidence.

Q: Who has the burden of proving that the transfer of employee was valid?
A: In a case for constructive dismissal, the burden of proof lies in the petitioner as the employer to
prove that the transfer of the employee from one area of operation to another was for a valid and
legitimate ground, like genuine business necessity. We are satisfied that the petitioner duly
discharged its burden, and thus established that, contrary to the claim of the respondents that they
had been constructively dismissed, their transfer had been an exercise of the petitioner’s legitimate
management prerogative.

(b) Reliefs from illegal dismissal

Q: Are the reliefs available for illegal dismissal cumulative or alternative?
A: The reliefs sought are cumulative, under the following:
1. Reinstatement
2. Options Given to Employers
a. Actually reinstate the dismissed employees or,
b. Constructively reinstate them in the payroll.

3. Backwages
4. Damages and Attorney’s Fees
5. Separation Pay

(c) Liability of officers

Q: What are the liabilities of officers regarding illegal dismissal of employees?
A: For the officers to be personally liable, the following must be present:
1. the complaint must allege that the director or officer assented to the patently unlawful acts of the
corporation, or that the director or officer was guilty of gross negligence or bad faith; and
2. there must be proof that the director or officer acted in bad faith.
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4. Money claims arising from employer-employee relationship

5. When not deemed dismissed; employee on floating status.

Q: What are the cases where the employee is not deemed terminated?
A: ARTICLE 301. [286] When Employment not Deemed Terminated. — The bonafide suspension of
the operation of a business or undertaking for a period not exceeding six (6) months, or the fulfillment
by the employee of a military or civic duty shall not terminate employment. In all such cases, the
employer shall reinstate the employee to his former position without loss of seniority rights if he
indicates his desire to resume his work not later than one (1) month from the resumption of
operations of his employer or from his relief from the military or civic duty.
Under this provision, when the bona fide suspension of the operation of a business or undertaking
exceeds six (6) months, then the employment of the employee shall be deemed terminated.
(International Hardware, Inc. vs. National Labor Relations Commission, G. No. 80770, August 10,
1989)

Q: What is “floating status” and when does it constitute dismissal?

A: Placing an employee on temporary "off-detail" is not equivalent to dismissal provided that such
temporary inactivity should continue only for a period of six (6) months. In security agency parlance,
being placed "off-detail" or on "floating status" means "waiting to be posted." In Salvaloza v.
NLRC, the Court further explained the nature of the "floating status," to wit:

Temporary "off-detail" or "floating status" is the period of time when security guards are in between
assignments or when they are made to wait after being relieved from a previous post until they are
transferred to a new one. It takes place when the security agency's clients decide not to renew their
contracts with the agency, resulting in a situation where the available posts under its existing
contracts are less than the number of guards in its roster. It also happens in instances where
contracts for security services stipulate that the client may request the agency for the replacement of
the guards assigned to it even for want of cause, such that the replaced security guard may be placed
on temporary "off-detail" if there are no available posts under the agency's existing contracts. During
such time, the security guard does not receive any salary or any financial assistance provided by law.
It does not constitute a dismissal, as the assignments primarily depend on the contracts entered into
by the security agencies with third parties, so long as such status does not continue beyond a
reasonable time. When such a "floating status" lasts for more than six (6) months, the
employee may be considered to have been constructively dismissed. (G.R. No. 206942,
February 25, 2015 - VICENTE C. TATEL, Petitioner, v. JLFP INVESTIGATION SECURITY AGENCY)

C. Termination by employee
Q: What is resignation?
A: Resignation is the voluntary act of an employee who "finds himself in a situation where he believes
that personal reason cannot be sacrificed in favor of the exigency of the service, then he has no other
choice but to dissociate himself from his employment." The employer has no control over resignations
and so the notification requirement was devised in order to insure that no disruption of work would be
involved by reason of the resignation. This practice has been recognized because "every business
enterprise endeavors to increase its profits by adopting a device or means designed towards that
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goal." (Intertrod Maritime, Inc. vs. National Labor Relations Commission, G.R. No. 81087, June 19,
1991)

Q: May a resignation be withdrawn?

A: Resignations, once accepted and being the sole act of the employee, may not be withdrawn
without the consent of the employer. In the instant case, the Master had already accepted the
resignation and, although the private respondent was being required to serve the thirty (30) days
notice provided in the contract, his resignation was already approved. Private respondent cannot
claim that his resignation ceased to be effective because he was not immediately discharged in Port
Pylos, Greece, for he could no longer unilaterally withdraw such resignation. When he later signified
his intention of continuing his work, it was already up to the petitioners to accept his withdrawal of his
resignation. The mere fact that they did not accept such withdrawal did not constitute illegal dismissal
for acceptance of the withdrawal of the resignation was their (petitioners') sole prerogative.
Once an employee resigns and his resignation is accepted, he no longer has any right to the job. If
the employee later 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 service would be continued. If the employer accepts said withdrawal, the employee
retains his job. If the employer does not, as in this case, the employee cannot claim illegal dismissal
for the employer has the right to determine who his employees will be. To say that an employee who
has resigned is illegally dismissed, is to encroach upon the right of employers to hire persons who will
be of service to them. (Intertrod Maritime, Inc. vs. National Labor Relations Commission, G.R. No.
81087, June 19, 1991)

Q: What constitutes a valid resignation?

A: "Resignation is the formal pronouncement or relinquishment of an office.” The overt act of
relinquishment should be coupled with an intent to relinquish, which intent could be inferred from the
acts of the employee before and after the alleged resignation.
It appears that petitioners, on their own volition, decided to resign from their positions after being
informed of the management’s decision that the Cebu branch would eventually be manned by a mere
skeletal force. As proven by the email correspondences presented, petitioners were fully aware and
had, in fact, acknowledged that Cebu branch has been incurring losses and was already unprofitable
to operate. Note that there was evidence produced to prove that indeed the Cebu branch’s
productivity had deteriorated as shown in a Profit and Loss Statement for the years 2001 and 2002.
Also, there was a substantial reduction of workforce as all of the Cebu branch staff and personnel,
except one, were not retained. On the other hand, petitioners’ assertions that the Cebu branch was
performing well are not at all substantiated. What they presented was a document entitled "1999
Performance Standards", which only provides for performance objectives but tells nothing about the
branch’s progress. Likewise, the Cebu Performance Reports submitted which showed outstanding
company performance only pertained to the year 1999 and the first quarter of year 2000. No other
financial documents were submitted to show that such progress continued until year 2002.
Contrary to their assertions, petitioners were not lured by any misrepresentation by
respondents. Instead, they themselves were convinced that their separation was inevitable and for
this, they voluntarily resigned. As aptly observed by the CA, no element of force can be deduced from
their letters of resignation as the same even contained expressions of gratitude and thus contradicting
their allegations that same were prepared by their employer. In Globe Telecom v. Crisologo,  we held
that allegations of coercion are belied by words of gratitude coming from an employee who is just
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forced to resign. (G.R. No. 175481 November 21, 2012 DIONISIO F. AUZA, JR., ADESSA F.
OTARRA, and ELVIE JEANJAQUET, vs. MOL PHILIPPINES, INC. and CESAR G. TIUTAN)

1. With notice to the employer

Q: Must an employee give notice of his resignation to his employer? If he does not, what are the
consequences?
A: ARTICLE 300. [285] Termination by Employee. — (a) An employee may terminate without just
cause the employee-employer relationship by serving a written notice on the employer at least one
(1) month in advance. The employer upon whom no such notice was served may hold the employee
liable for damages.
The employer has no control over resignations and so, the notification requirement was devised in
order to ensure that no disruption of work would be involved by reason of the resignation. ( Intertrod
Maritime, Inc. vs. National Labor Relations Commission, G.R. No. 81087, June 19, 1991)

2. Without notice to the employer

Q: When may an employee resign without giving notice to the employer?
A: ARTICLE 300. [285] Termination by Employee-
(b) An employee may put an end to the relationship without serving any notice on the employer
for any of the following just causes:
1. Serious insult by the employer or his representative on the honor and person of the
employee; 2. Inhuman and unbearable treatment accorded the employee by the employer or
his representative;
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.

3. Distinguish voluntary resignation and constructive dismissal

Q: What is constructive dismissal and how does it differ from voluntary resignation?
A: To begin with, constructive dismissal is defined as quitting or cessation of work because continued
employment is rendered impossible, unreasonable or unlikely; when there is a demotion in rank or a
diminution of pay and other benefits. It exists if an act of clear discrimination, insensibility, or disdain
by an employer becomes so unbearable on the part of the employee that it could foreclose any
choice by him except to forego his continued employment. There is involuntary resignation due to the
harsh, hostile, and unfavorable conditions set by the employer. The test of constructive dismissal is
whether a reasonable person in the employee's position would have felt compelled to give up his
employment/position under the circumstances.
On the other hand, "resignation is the voluntary act of an employee who is in a situation where one
believes that personal reasons cannot be sacrificed in favor of the exigency of the service, and one
has no other choice but to dissociate oneself from employment. It is a formal pronouncement or
relinquishment of an office, with the intention of relinquishing the office accompanied by the act of
relinquishment. As the intent to relinquish must concur with the overt act of relinquishment, the acts of
the employee before and after the alleged resignation must be considered in determining whether he
or she, in fact, intended to sever his or her employment." (June 5, 2017 G.R. No. 215627 LUIS S.
DOBLE, JR. vs. ABB, INC./NITIN DESAI)
Page 60 of 63
Q: Who has the burden of proof that the resignation was voluntary?
A: Even if the employer claims that the employee resigned, the employer still has the burden of
proving that the resignation was voluntary.  It is constructive dismissal when resignation "was made
under compulsion or under circumstances approximating compulsion, such as when an employee's
act of handing in his [or her] resignation was a reaction to circumstances leaving him [or her] no
alternative but to resign."
"Resignation is the voluntary act of an employee who is in a situation where one believes that
personal reasons cannot be sacrificed in favor of the exigency of the service, and one has no other
choice but to dissociate oneself from employment." In order to prove that resignation is voluntary, "the
acts of the Employee before and after the alleged resignation must be considered in determining
whether he or she, in fact, intended to sever his or her employment." (January 31, 2018 G.R. No.
191460 PERFECTO M. PASCUA, vs. BANK WISE, INC. and PHILIPPINE VETERANS BANK)

D. Retirement
Q: What is retirement?
A: Retirement is the result of a bilateral act of the parties, a voluntary agreement between the
employer and the employee whereby the latter, after reaching a certain age, agrees to sever his or
her employment with the former.24 

Article 301 [287] of the Labor Code is the primary provision which governs the age of retirement and
states:

Art.302[287]Retirement.xxx

In the absence of a retirement plan or agreement providing for retirement benefits of employees in the
establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-
five (65) years which is hereby declared the compulsory retirement age, who has served at least five
(5) years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at
least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being
considered as one whole year.
Doubtless, under this provision, the retirement age is primarily determined by the existing agreement
or employment contract. Only in the absence of such an agreement shall the retirement age be fixed
by law, which provides for a compulsory retirement age at 65 years, while the minimum age for
optional retirement is set at 60 years.

Q: Who are the employees covered by the retirement pay provision?

A: The retirement pay law under this article applies to private sector employees who have served the
employer establishment for at least five years and reached age sixty (for optional retirement) or sixty-
five (for compulsory retirement). It covers either full-time or part-time employees, regular or non-
regular.

Q: Who are not covered?

A: It does not cover government employees and employees of retail, service and agricultural
establishments or operations that regularly employ not more than ten (10) employees.

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Q: what are the two kinds of retirement under this provision?
A: Article 302[287], as amended, provides for two types of retirement: (a ) compulsory, and (b)
optional. The first takes place at age 65, while the second is primarily determined by the collective
bargaining agreement or other employment contract or employer's retirement plan. In the absence of
any provision on optional retirement in a collective bargaining agreement, other employment contract,
or employer's retirement plan, an employee may optionally retire upon reaching the age of 60 years
or more, but not beyond 65 years, provided he has served at least five years in the establishment
concerned. That prerogative is exclusively lodged in the employee.

Q: Is Compulsory Retirement Below Age 60 Allowable?

A: In Pantranco North Express vs. NLRC and U. Suniga, G.R. No. 95940, July 24, 1996, the court
held that: Arguing that the law on compulsory retirement age is open-ended, as indicated by the use
of the word "may", the Solicitor General maintains that there is no prohibition against parties fixing a
lower age for compulsory retirement. Additionally, the Solicitor General and the petitioner contend
that a CBA provision lowering compulsory retirement age to less than sixty (60) is not contrary to law
because it does not diminish the employee's benefits.

Q: What is the retirement age of underground mining employees?

A: Art. 302 [287] provides that an underground mining employee upon reaching the age of fifty (50)
years or more, but not beyond sixty (60) years which is hereby declared the compulsory retirement
age for underground mine workers, who has served at least Ave (5) years as underground mine
worker, may retire and shall be entitled to all the retirement benefits provided for in this Article.

Q: What is the amount of retirement pay?

A: The retirement pay is equal to half-month's pay per year of service. But "half-month's pay" is
"expanded" because it means not just the salary for 15 days but also one-twelfth of the 13th-month
pay and the cash value of five-day service incentive leave, totalling 22.5 days. This is the minimum.
The retirement pay package can be improved upon by voluntary company policy, or particular
agreement with the employee, or through a collective bargaining agreement.

Q: What is the distinction between separation pay and retirement benefits?

A: Separation pay is required in the cases enumerated in Articles 283 and 284 of the Labor Code,
which include retrenchment, and is computed at least one month salary or at the rate of one-half
month salary for every year of service, whichever is higher. We have held that it is a statutory right
designed to provide the employee with the wherewithal during the period that he is looking for another
employment. (Santos vs. NLRC, 154 SCRA 166, 172.)
On the other hand, retirement benefits, where not mandated by law, may be granted by agreement of
the employees and their employer or as a voluntary act on the part of the employer. Retirement
benefits are intended to help the employee enjoy the remaining years of his life, lessening the burden
of worrying for his financial support, and are a form of reward for his loyalty and service to the
employer. (Laginlin vs. WCC, 159 SCRA 91, 99.)

Q: Is separation pay and retirement pay mutually exclusive?

A:  As stated before, the award of separation pay is distinct from the award of backwages. The award
of separation pay is also distinct from the grant of retirement benefits. These benefits are not mutually
exclusive as "retirement benefits are a form of reward for an employee’s loyalty and service to an
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employer and are earned under existing laws, [Collective Bargaining Agreements], employment
contracts and company policies."Separation pay, on the other hand, is that amount which an
employee receives at the time of his severance from employment, designed to provide the employee
with the wherewithal during the period that he is looking for another employment. ( April 13, 2016 G.R.
No. 195155 DIVINE WORD COLLEGE OF LAOAG vs. SHIRLEY B. MINA, as heir-substitute of the
late DELFIN A. MINA)

Q: Can an employees’ service be extended upon reaching the age of compulsory retirement?
A: It is important to state that upon the compulsory retirement of an employee or official in the public
or private service his employment is deemed terminated. The matter of extension of service of such
employee or official is addressed to the sound discretion of the employer. It is a privilege only the
employer can grant. (G.R. No. 89885 August 6, 1990 UST FACULTY UNION vs.NATIONAL LABOR
RELATIONS COMMISSION, UNIVERSITY OF SANTO TOMAS NORBERTO CASTILLO, NORMA
LERMA, TERESITA CENDANA and DIONISIO CABEZON)

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