Termination by Employer based on

Authorized Causes
Under Article 298 of the Labor Code:

1.Installation of labor-saving devices

2.Redundancy
3.Retrenchment to prevent losses
4.Closure or cessation of operations

Note: Reduction of personnel should not be abused by the

employer.
Installation of labor-saving devices
the reduction of the number of workers in any workplace made necessary by the introduction of
labor-saving machinery or devices.
To be a valid ground for termination, the following must be present:
1. There must be introduction of machinery, equipment or other devices;
2. The introduction must be done in good faith;
3. The purpose for such introduction must be valid such as to save on cost, enhance efficiency
and other justifiable economic reasons;
4. There is no other option available to the employer than the introduction of machinery,
equipment or device and the consequent termination of employment of those affected
thereby; and
5. There must be fair and reasonable criteria in selecting employees to be terminated.

• The "Last-In, First-Out Rule" shall apply except when an employee volunteers to be separated
from employment.
 Redundancy
the condition when the services of an employee are in excess of what is reasonably
demanded by the actual requirements of the enterprise or superfluous
To be a valid ground for termination, the following must be present:
1.There must be superfluous positions or services of employees
2.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;
3.There must be good faith in abolishing redundant positions;
4.There must be fair and reasonable criteria in selecting the employees to be
terminated; and
5.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.
• The "Last-In, First-Out Rule" shall apply except when an employee volunteers to be
separated from employment.
 Redundancy

Q: What situations justify a redundancy program?

A: These situations include but are not limited to:

•Over hiring of workers

•Decreased volume of business
•Dropping of a particular product line or service activity
•Duplication of functions

PMFSL Labor Law Lecture

 Termination by Employer based on
Authorized Causes

Q: : What is the basis for selection of employees to be terminated due to

redundancy or installation of labor-saving device?

A: There should be “fair and reasonable” criteria in determining who

among the employees should be terminated due to redundancy or
installation of labor-saving devices. Examples of which are:
i. Less-preferred status
ii. Seniority
iii. Efficiency Rating /Performance
 Retrenchment
the economic ground for dismissing employees and is resorted to primarily to
avoid or minimize business losses.
To be a valid ground for termination, the following must be present:
1.The retrenchment must be reasonably necessary and likely to prevent business
losses;
2.The losses, if already incurred, are not merely de minimis, but substantial,
serious, actual and real, or if only expected, are reasonably imminent;
3.The expected or actual losses must be proved by sufficient and convincing
evidence;
4.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; and
5.There must be fair and reasonable criteria in ascertaining who would be
dismissed and who would be retained among the employees, such as status,
efficiency, seniority, physical fitness, age, and financial hardship for certain
workers
• The "Last-In, First-Out Rule" shall apply except when an employee volunteers
to be separated from employment.
 Closure or cessation of operation
the complete or partial cessation of the operations and/or shut-
down of the establishment of the employer

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 se or
cease operations.

Note: It is the prerogative of management to get out of business

even if it is not suffering from serious business losses or financial
reverses
 Required Notices and Separation Pay for the Validity of
Termination due to Authorized Causes
Cause of Notice Requirement Separation Pay
Termination
Installation of labor- One (1) month written notice at least one
saving devices to employee and the DOLE (1) month pay or at least one (1) month pay for every year of service,
whichever is
higher, a fraction of six (6) months service is considered as one (1) whole
year.

Redundancy One (1) month written notice at least one

to employee and the DOLE (1) month pay or at least one (1) month pay for every year of service,
whichever is
higher, a fraction of six (6) months service is considered as one (1) whole
year.

Retrenchment to One (1) month written notice one (1) month pay or at least one-half (1/2) month pay for every year of
prevent losses; to employee and the DOLE service, whichever is higher, a fraction of six (6) months service is
Closure or cessation considered as one (1) whole year
of operations not due
to losses

Closure to serious One (1) month written notice Employer not obligated to pay separation benefits
business losses to employee and the DOLE
 Termination by Employer based on
Disease
To be a valid ground for termination, the following must be present:
1.The employee must be suffering from any disease;
2.The continued employment of the employee is prohibited by law or
prejudicial to his/her health as well as to the health of his/her co-
employees; and
3.There must be certification by a competent public health authority that
the disease is incurable within a period of six (6) months even with
proper medical treatment.
4.An employee terminated due to disease shall be paid by the employer a
separation pay equivalent to at least one (1) month salary or one-half
(1/2) month salary for every year of service, whichever is higher, a
fraction of six (6) months service is considered as one (1) whole year

Note: If disease can be cured within a six-month period, employee cannot

be validly terminated but should instead be asked to go on sick leave
 Post-Employment: Procedural Due
Process

 
Procedural Due Process
• Compliance with requirements of notice and
hearing to ensure that the employee concerned
is given an opportunity to air his side
 Post-Employment: Procedural Due
Process

Requirements: Notice and Hearing – Termination for Just Cause

Twin-notice rule

• Philippine labor laws and jurisprudence require the employer to furnish

the worker sought to be dismissed or disciplined with at least two (2)
written notices before termination of his employment or any
disciplinary action is taken:
 Post-Employment: Procedural Due
Process
The first written notice should contain:

• The specific causes or grounds for termination as provided for under Article 297 of the Labor Code,
as amended, and company policies, if any;
• Detailed narration of the facts and circumstances that will serve as basis for the charge against the
employee. A general description of the charge will not suffice
• A directive that the employee is given opportunity to submit a written explanation within a
reasonable period

• "Reasonable period" should be construed as a period of at least five (5) calendar days
from receipt of the notice to give the employee an opportunity to study the accusation,
consult or be represented by a lawyer or union officer, gather data and evidence, and
decide on the defenses against the complaint

• Note that an employee cannot be dismissed if the charges mentioned in the notice which he
was required to explain and for which he was heard were different from the ones cited for his
termination.
 Post-Employment: Procedural Due
Process

After serving the first notice, the employer should afford the employee ample
opportunity to be heard and to defend himself/herself with the assistance of
his/her representative if he/she so desires

• "Ample opportunity to be heard" means any meaningful opportunity (verbal or

written) given to the employee to answer the charges against him/her and
submit evidence in support of his/her defense, whether in a hearing,
conference or some other fair, just and reasonable way. A formal hearing or
conference becomes mandatory only when requested by the employee in
writing or substantial evidentiary disputes exist or a company rule or practice
requires it, or when similar circumstances justify it

Note that additional requirements may also apply such as where the employee is a
union member and a Collective Bargaining Agreement (CBA) or policy exists
requiring among others, the presence of a union official and/or counsel.
 Post-Employment: Procedural Due
Process
After determining that termination of employment is
justified, the employer shall serve the employee a
written notice of termination indicating that:
• All circumstances involving the charge against the
employee have been considered; and
• The grounds have been established to justify the
severance of their employment

The first and the second notice shall be served

personally to the employee or to the employee’s
last known address.