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IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR
LABOR STANDARDS AND SOCIAL LEGISTLATION
A SUMMARY REPORT
ON
POST EMPLOYMENT,
LAW ON TERMINATION,
RETIREMENT,
AND RELATED LAWS
SUBMITTED BY:
De Jesus, Justine
Mangune, Jeffrey
Mateo, Almond
Pabilona, Jocet Consisa
Quinto, Vinilla Germina
Salgado, Mary Antonnete
SUBMITTED TO:
ATTY. PORFIRIO DG. PANGANIBAN, J.R.
LAW ON TERMINATION OF EMPLOYMENT
i. SECURITY OF TENURE
1. The Policy of the state is to assure the right of workers to security
of tenure. The guaranty is an act of social justice. Security of
tenure is one of the cardinal rights of workers guaranteed by the
constitution under Sec 3, Art. 13 of the 1987 Constitution to wit;
Section 3. The State shall afford full protection to
labor, local and overseas, organized and
unorganized, and promote full employment and
equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-
organization, collective bargaining and
negotiations, and peaceful concerted activities,
including the right to strike in accordance with law.
They shall be entitled to security of tenure,
humane conditions of work, and a living wage. They
shall also participate in policy and decision-making
processes affecting their rights and benefits as may
be provided by law.
The State shall promote the principle of shared
responsibility between workers and employers and
the preferential use of voluntary modes in settling
disputes, including conciliation, and shall enforce
their mutual compliance therewith to foster
industrial peace.
The State shall regulate the relations between
workers and employers, recognizing the right of
labor to its just share in the fruits of production and
the right of enterprises to reasonable returns to
investments, and to expansion and growth.
Moreover this right is also guaranteed in the Declaration of
Basic Policy (Art. 3) under PD 442 otherwise known as the Labor
Code of the Philippines provising;
“The State shall afford protection to labor, promote
full employment, ensure equal work opportunities
regardless of sex, race or creed and regulate the
relations between workers and employers. The
State shall assure the rights of workers to self-
organization, collective bargaining, security of
tenure, and just and humane conditions of work.”
The great mass of the population is almost wholly dependent on
their employment for their livelihood. The alternative of returning or
turning to farming as a secondary occupation is no longer feasible.
When a worker losses his job, his family faces deprivation, if not
starvation. Hence, the demand for job security (Azucena, 2010).
Both the Constitution and the Labor Code enunciate this right
as available to an employee. In a host of cases, the Court has upheld
the employee's right to security of tenure in the face of oppressive
management behaviors and management prerogatives. Security of
tenure is a right which may nor be denied on mere speculation of any
unequivocal and nebulous basis.
When a person has no property, his job may possibly be his only
possession or means of livelihood and those of his dependents. When
a person loses his job, his dependents suffer as well.(Philips
Semiconductors [Phils.] v. Fadriquela, G.R. No. 141717, April 14,
2004) Therefore, he should be protected against any arbitrary
deprivation of his job. Article 279 of the Labor Code has Construed
security of tenu8re as;
In cases of regular employment, the
employer shall not terminate the services of an
employee except for a just cause or when
authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive
of allowances, and to his other benefits or their
monetary equivalent computed from the time his
compensation was withheld from him up to the time
of his actual reinstatement.
1. Concept of Security of tenure:
Management and labor, or the employer and employee, are
more often not situated on the same level of playing field, so speak.
Recognizing this reality, the state has seen fir to adopt measures
envisaged to give this who have less in life more in law. Article 279
which grants security of tenure to employees, is one playing field
levelling measures. (Philippine Daily Inquirer, Inc. v. Magtibay, Jr.,
G.R. No. 164532, July 24. 2007)
Security of tenure is a paramount right of every employee that
is held sacred by the constitution. The reason for this is that labor is
deemed to be “property” within the meaning of constitutional
guarantees (Art3, Sec. 1, 1987 Constitution). Indeed, as it is the
policy of the State to guarantee the right of every worker to security
of tenure as an act of social justice.
Schemes which preclude acquisition of tenurial security should
be struck down and condemned as contrary to public policy, public
morals, good customs or public order. No member of the workforce
should be allowed to be taken advantage of by the employer (Sevidad
v. NLRC, G.R. No. 128682, March 18, 1999)
In the case of Baguio Country Club Corporation vs. NLRC G. R.
No. 71664, Feb. 28, 1992, it was held that;
“A contract which states that the employment of the
worker “shall be on a day-to-day basis for a
temporary period” and that the same may be
terminated at any time without liability to the
employer other than for salary actually earned up to
and including the date of last service, is a contract
which has the purpose of circumventing the
employee’s security of tenure. The court
rigorously disapproves such contracts which
demonstrate a clear attempt to exploit the employee
and deprive him of the protection sanctioned by the
Labor Code. Owing to the worker’s length of service
with the company and considering that the nature of
his work is usually necessary or desirable in the
usual trade or business of the company, he became a
regular employee, by operation of law, one year
after he was employed.”
In the 2003 case of Magsalin & Coca-Cola Bottlers Phils.,
Inc. vs. National Organization of Working Men (N.O.W.M.), [G.
R. No. 148492, May 9, 2003], Coca-Cola Bottlers Phils., Inc.,
engaged the services of respondent workers as “sales route helpers”
for a limited period of five months. After five months, respondent
workers were employed by petitioner company on a day-to-day basis.
According to petitioner company, respondent workers were hired to
substitute for regular sales route helpers whenever the latter would
be unavailable or when there would be an unexpected shortage of
manpower in any of its work places or an unusually high volume of
work. The practice was for the workers to wait every morning
outside the gates of the sales office of petitioner company. If thus
hired, the workers would then be paid their wages at the end of the
day. Ultimately, respondent workers asked petitioner company to
extend to them regular appointments. Petitioner company refused. In
declaring that the workers have become regular employees, the
Supreme Court reasoned that the repeated rehiring of respondent
workers and the continuing need for their services clearly attest to
the necessity or desirability of their services in the regular conduct
of the business or trade of petitioner company. More so here where
the Court of Appeals has found each of respondents to have worked
for at least one year with petitioner company. The pernicious
practice of having employees, workers and laborers, engaged for a
fixed period of few months, short of the normal six-month
probationary period of employment, and, thereafter, to be hired on a
day-to-day basis, mocks the law. Any obvious circumvention of the
law cannot be countenanced. The fact that respondent workers have
agreed to be employed on such basis and to forego the protection
given to them on their security of tenure, demonstrate nothing more
than the serious problem of impoverishment of so many of our people
and the resulting unevenness between labor and capital.
Such schemes are anathema to the underlying principles which
give life to our Labor statutes because it would be tantamount to
likening an employer-employee relationship to a salesman and a
purchaser of a commodity. It is an archaic abolition. To quote what
has been aptly stated by former Governor General Leonard Wood in
his inaugural message before the 6th Philippine Legislature on
October 27, 1922 “labor is neither chattel nor a commodity, but
human and must be dealt with from the standpoint of human
interest. (Cited in the dissenting opinion of Chief Justice Reynato
Puno in Serrano v. NLRC, G.R. No. 117040, Jan. 27, 2000)
iii. Application of security of tenure:
Article 279 itself is defective because it recognizes security of
tenure only “in cases of regular employment”. Such specification is
not found in the constitution which entitles “all workers” to the right
to security of tenure. Moreover, the Code itself and the court ruling
do not limit security of tenure to regular employees. Clearly, the
Court said: “As probationary and contractual employees, private
respondents [complainant employees] enjoyed security of tenure but
only to limited extent – i.e., they remained secure in their
employment during the period of time their respective contracts of
employment remained in effect. Indeed, security of tenure – the right
not to be removed from one's job without valid cause and valid
procedure – is so fundamental it extends to regular as well as non-
regular employment.
Generally, employer's are allowed a wider latitude of discretion
in terminating the employment of managerial personnel or those
who, while not of similar rank, perform functions which by their
nature require the employer's full trust and confidence. This should
be distinguished from the case of ordinary ran-and-file employees,
whose termination on the basis of the same grounds require a higher
proof of involvement in the events in question.
But while managerial employee may be dismissed merely on the
ground of loss of confidence, the matter of determining whether the
cause for dismissing an employee is justified on ground of loss of
confidence, cannot be left entirely to the employer. The fact that one
is a managerial employee does not by itself exclude him from the
protection of the constitutional guaranty of security of tenure
(Maglutac vs. NLRC, Commart [Phil] Inc., G.R. No. 78345,
September 21, 1990).
Managerial employees also enjoy security of tenure. The
principle of security of tenure applies not only to rank-and-file
employees but also to managerial employees. (PLDT vs. Tolentino, G.
R. No. 143171, Sept. 21, 2004).
The right to security of tenure cannot be blotted out by an
employment contract.
In trying to justify the employee's dismissal, the employer did
not cite any of the just or authorized causes. Instead, it merely
insisted that the dismissal was authorized in the employment
contract that the employee had voluntarily signed. Through Justice
Panganiban, The Court responded:
“Truly, the contracting parties may establish such
stipulations, clauses, terms and conditions as they
want, and their agreement would have the force of
law between them. However, petitioner [employer]
overlooks the qualification that those terms and
conditions agreed upon must not be contrary to law,
morals, customs, public policy or public order. As
explained earlier, the employment contract between
employer and employee is governed by the
Philippine labor laws. Hence, the stipulations,
clauses and terms and conditions of the contract
must not contravene our labor law. (Philippine
national Bank vs. Cabansag, G.R. No. 157010, June
21, 2005.”
Moreover, a contract of employment is imbued with
public interest. The court has time and time again
reminded parties that they “are not at liberty to
insulate themselves and their relationships from the
impact of labor laws and regulations by simply
contracting with each other.” Also, law that regulate
such contracts are deemed included and shall limit
and govern the relations between the parties. (ibid)
ii. MANAGEMENT RIGHTS AND PREROGATIVES
While the constitution is committed to the policy of social justice
and the protection of the working class, it should not be supposed
that every labor disputes will be automatically decided in favor for
labor. Management also has its own rights which, as such, are
entitled to respect and enforcement in the interest of simple fair
play. Out of its concern for those with less privileges in life, the
Supreme Court has inclined more often than not toward the worker
and upheld his cause in his conflict with employer. Such favoritism,
however, has not blinded the Court to the rule that justice is in every
case for the deserving, to be dispensed with in the light of the
established facts and the applicable law and doctrine.
The Secreatary of Labor is duly mandated to equally protect and
respect not only the laborer or worker's side but also the
management and/or employer's side. The law, in protecting the
rights of the laborer, authorizes neither oppression nor self-
destruction of the employer. Management prerogatives, however are
subject to limitations provided by (1) law, (2) contract or collective
bargaining agreement, (3) general principles of fair play and justice.
The following are the most fundamental of the management
rights:
1. Right to Return of Investment
2. Right to prescribe rules e.g., management's
prerogative to prescribe working method, time, place,
manner and other aspects of work.
3. Right to select employees
4. Right to transfer or discharge employees e.g.,
reorganize, promote & demote
For purposes of discussion of post-employment particularly the
law on termination, the second and fourth right only will be further
elucidated.
Our laws recognize and respect the exercise by management of
certain rights and prerogatives. For this reason, courts often decline
to interfere in legitimate business decisions of employers. In fact,
labor laws discourage interference in employers’ judgment
concerning the conduct of their business. (Philippine Industrial
Security Agency Corporation vs. Aguinaldo, G. R. No. 149974, June
15, 2005; Mendoza vs. Rural Bank of Lucban, G.R. No. 155421, July
7, 2004).
An employer can regulate, generally without restraint,
according to its own discretion and judgment, every aspect of its
business. (Deles, Jr. vs. NLRC, G. R. No. 121348, March 9, 2000).
This privilege is inherent in the right of employers to control and
manage their enterprise effectively. (Mendoza vs. Rural Bank of
Lucban, G.R. No. 155421, 07 July 2004).
The right to prescribe rules
Employers have the right to make reasonable rules and
regulations for the government of their employees, and when
employees, with knowledge of an established ru8le, enter the service,
the rule becomes part of the contract of employment. Company
policies and regulations are, unless shown to be grossly oppressive or
contrary to law, generally binding and valid on the parties.
Employers have the freedom and prerogative, according to their
discretion and best judgment, to regulate and control all aspects of
employment in their business organizations. Such aspects of
employment include hiring, work assignments, working methods,
time, place and manner of work, tools to be used, processes to be
followed, supervision of workers, working regulations, transfer of
employees, work supervision, lay-off of workers and the discipline,
dismissal and recall of workers. (Philippine Airlines, Inc. vs. NLRC,
G. R. No. 115785, Aug. 4, 2000).
Thus, as held in one case, management retains the prerogative,
whenever exigencies of the service so require, to change the working
hours of its employees. (Sime Darby Pilipinas, Inc. vs. NLRC, G.R.
No. 119205, 15 April 1998, 289 SCRA 86).
Right to transfer or discharge employees
An employer has the perfect right to transfer, reduce or lay-off
personnel in order to minimize expenses and to insure the stability of
the business, and even close to the business, and this right has been
consistently upheld even in the present era of multifarious reforms in
the relationship of capital and labor, provided the transfer or
dismissal us not abused but is done in good faith and is due course
beyond control. To hols otherwise would be oppressive and inhuman.
A. Transfer; Concept and meaning;
A transfer means a movement (1) from one position to another
of equivalent rank, level or salary, without a break in the service; or
(2) from one office to another within the same business
establishment. (Sentinel Security Agency, Inc. vs. NLRC, G. R. No.
122468, Sept. 3, 1998).
The Supreme Court has recognized and upheld the prerogative
of management to transfer an employee from one office to another
within the business establishment, provided there is no demotion in
rank or diminution of salary, benefits, and other privileges; and the
action is not motivated by discrimination, made in bad faith, or
effected as a form of punishment or demotion without sufficient
cause. This is a privilege inherent in the employer’s right to control
and manage its enterprise effectively. (Mendoza vs. Rural Bank of
Lucban, G. R. No. 155421, July 7, 2004; Benguet Electric Cooperative
vs. Fianza, G. R. No. 158606, March 9, 2004).
B. Test to determine the validity of transfer;
But like all other rights, there are limits. The managerial
prerogative to transfer personnel must be exercised without grave
abuse of discretion and putting to mind the basic elements of justice
and fair play. Having the right should not be confused with the
manner that right is exercised. Thus, it cannot be used as a
subterfuge by the employer to rid himself of an undesirable worker.
In particular, the employer must be able to show that the transfer is
not unreasonable, inconvenient or prejudicial to the employee.
Should the employer fail to overcome this burden of proof, the
employee’s transfer is tantamount to constructive dismissal. (The
Philippine American Life and General Insurance Co. vs. Gramaje, G.
R. No. 156963, Nov. 11, 2004; Globe Telecom, Inc. vs. Florendo-
Flores, G. R. No. 150092, Sept. 27, 2002).
In Dusit Hotel Nikko vs. NUWHRAIN – Dusit Hotel Nikko
Chapter, [G. R. No. 160391, August 9, 2005], it was held that the
several offers made by the employer to transfer an employee was
indicative of bad faith. More so when the contemplated transfer was
from a higher position to a much lower one. Further, the offers were
made after said employee was dismissed due to redundancy under a
Special Early Retirement Program (SERP). The employer tried to
recall the termination when it was learned that she was going to file
a complaint with the NLRC for illegal dismissal. As a ploy to stave off
the filing of said case, the offers were made to the employee but she
had not been transferred to another position at all. Six months from
the time the employer made the offers to her, the latter never heard
from the former again. Certainly, good faith cannot be attributed on
the part of the hotel. More importantly, the offers made could not
have the effect of validating an otherwise arbitrary dismissal.
But, in the case of Zafra vs. Hon. CA, [G. R. No. 139013,
September 17, 2002], despite the petitioner-employees’ agreement in
their application for employment to be transferred or assigned to any
branch, their refusal to be transferred from Cebu to Manila which
was made a condition for their training abroad (Germany) was held
valid. According to the High Court, the fact that petitioners, in their
application for employment, agreed to be transferred or assigned to
any branch should not be taken in isolation, but rather in conjunction
with the established company practice in PLDT (the respondent
employer) of disseminating a notice of transfer to employees before
sending them abroad for training. This should be deemed necessary
and later to have ripened into a company practice or policy that could
no longer be peremptorily withdrawn, discontinued, or eliminated by
the employer. Fairness at the workplace and settled expectations
among employees require that this practice be honored and this
policy commended. Despite their knowledge that the lone operations
and maintenance center of the 33 ALCATEL 1000 S12 Exchanges for
which they trained abroad would be “homed” in Sampaloc, Manila,
PLDT officials neglected to disclose this vital piece of information to
petitioners before they acceded to be trained abroad. On arriving
home, they did not give complaining workers any other option but
placed them in an either/or straightjacket that appeared too
oppressive for those concerned. Needless to say, had they known
about their pre-planned reassignments, petitioners could have
declined the foreign training intended for personnel assigned to the
Manila office. The lure of a foreign trip is fleeting while a
reassignment from Cebu to Manila entails major and permanent
readjustments for petitioners and their families.
While transfer of an employee ordinarily lies within the ambit of
management prerogatives, however, a transfer amounts to
constructive dismissal when the transfer is unreasonable,
inconvenient, or prejudicial to the employee, and involves a demotion
in rank or diminution of salaries, benefits, and other privileges. In the
present case, petitioners were unceremoniously transferred,
necessitating their families’ relocation from Cebu to Manila. This act
of management appears to be arbitrary without the usual notice that
should have been done even prior to their training abroad. From the
employees’ viewpoint, such action affecting their families are
burdensome, economically and emotionally. It is no exaggeration to
say that their forced transfer is not only unreasonable, inconvenient,
and prejudicial, but also in defiance of basic due process and fair play
in employment relations.
C. Constructive Dismissal
The transfer of an employee may constitute constructive
dismissal when it amounts to “an involuntary resignation resorted to
when continued employment is rendered impossible, unreasonable or
unlikely; when there is a demotion in rank and/or a diminution in pay;
or when a clear discrimination, insensibility or disdain by an
employer becomes unbearable to the employee.” (Floren Hotel vs.
NLRC, G. R. No. 155264, May 6, 2005; Mendoza vs. Rural Bank of
Lucban, G.R. No. 155421, July 7, 2004).
As the High Court explained in Globe Telecom, Inc. vs.
Florendo-Flores, [G. R. No. 150092, September 27, 2002, 390 SCRA
201] and in Philippine Industrial Security Agency Corporation vs.
Aguinaldo, [G. R. No. 149974, June 15, 2005]:
“In constructive dismissal, the employer has the
burden of proving that the transfer and demotion of
an employee are for just and valid grounds such as
genuine business necessity. The employer must be
able to show that the transfer is not unreasonable,
inconvenient, or prejudicial to the employee. It must
not involve a demotion in rank or a diminution of
salary and other benefits. If the employer cannot
overcome this burden of proof, the employee’s
demotion shall be tantamount to unlawful
constructive dismissal.”
D. Prerogative to reorganize
The Supreme Court, in a number of cases, has recognized and
affirmed the prerogative of management to implement a job
evaluation program or a reorganization for as long as it is not
contrary to law, morals or public policy. (Hongkong and Shanghai
Banking Corporation Employees Union vs. NLRC, G. R. No. 125038,
Nov. 6, 1997).
If the purpose of a reorganization is to be achieved, changes in
the positions and rankings of the employees should be expected. To
insist on one’s old position and ranking after are organization would
render such endeavor ineffectual. (Arrieta vs. NLRC, G. R. No.
126230, Sept. 18, 1997, 279 SCRA 326).
It is hard to accept the claim that an employer would go through
all the expenditure and effort incidental and necessary to a
reorganization just to dismiss a single employee whom they no longer
deem desirable. (Ibid.).
E. Promotion and demotion
Promotion is the advancement from one position to another
involving increase in duties and responsibilities as authorized by law,
and increase in compensation and benefits. (Millares vs. Subido, 20
SCRA 954).
Apparently, the indispensable element for there to be a
promotion is that there must be an “advancement from one position
to another” or an upward vertical movement of the employee’s rank
or position. Any increase in salary should only be considered
incidental but never determinative of whether or not a promotion is
bestowed upon an employee. This can be likened to the upgrading of
salaries of government employees without conferring upon them, the
concomitant elevation to the higher positions.
There is demotion where there is reduction in position, rank or
salary as a result of a transfer. (Philippine Wireless, Inc. [Pocketbell]
vs. NLRC, G. R. No. 112963, July 20, 1999).
There is demotion when an employee occupying a highly
technical position requiring the use of an employee’s mental faculty,
is transferred to another position where she performed mere
mechanical work - virtually a transfer from a position of dignity to a
servile or menial job. (Blue Dairy Corporation vs. NLRC, G. R. No.
129843, Sept. 14, 1999).
In addition to the comparison involving nature of work, another
aspect of comparison to determine the existence of demotion is the
workplaces themselves. Hence, there is also demotion if there is a
change in the workplace such as in the case of transfer of an
employee from the laboratory - the most expensive work area, on a
per square-meter basis in the company’s premises - to the vegetable
processing section which involves processing of vegetables alone.
Definitely, a transfer from a workplace where only highly trusted
authorized personnel are allowed to access to a workplace that is
not as critical is another reason enough for the employee to howl a
protest. (Blue Dairy Corporation vs. NLRC).
F. Right to discipline.
The employer’s right to conduct the affairs of his business,
according to its own discretion and judgment, includes the
prerogative to instill discipline in its employees and to impose
penalties, including dismissal, upon erring employees. This is a
management prerogative where the free will of management to
conduct its own affairs to achieve its purpose takes form. The only
criterion to guide the exercise of its management prerogative is that
the policies, rules and regulations on work-related activities of the
employees must always be fair and reasonable and the
corresponding penalties, when prescribed, commensurate to the
offense involved and to the degree of the infraction. (St. Michael’s
Institute vs. Santos, G. R. No. 145280, Dec. 4, 2001; Consolidated
Food Corporation vs. NRLC, 315 SCRA 129, 139 [1999]).
Instilling discipline among its employees is a basic management
right and prerogative. Management may lawfully impose reasonable
penalties such as dismissal upon an employee who transgresses the
company rules and regulations. (Deles, Jr. vs. NLRC, G. R. No.
121348, March 9, 2000).
The employer cannot be compelled to maintain in his employ the
undeserving, if not undesirable, employees. (Shoemart, Inc. vs.
NLRC, G. R. No. 74229, Aug. 11, 1989).
G. Right to dismiss.
The right of the employer to dismiss its erring employees is a
measure of self-protection. (Reyes vs. Minister of Labor, G. R. No.
48705, Feb. 9, 1989).
The law, in protecting the rights of the laborer, authorizes
neither oppression nor self-destruction of the employer. While the
constitution is committed to the policy of social justice and the
protection of the working class, it should not be supposed that every
labor dispute will be automatically decided in favor of labor.
Management also has its own rights which, as such, are entitled to
respect and enforcement in the interest of simple fair play. Out of its
concern for those with less privileges in life, the Supreme Court has
inclined more often than not towards the worker and upheld his
cause with his conflicts with the employer. Such favoritism, however,
has not blinded the Court to rule that justice is, in every case, for the
deserving, to be dispensed in the light of the established facts and
applicable law and doctrine. (Sime Darby Pilipinas, Inc. vs. NLRC,
119205, April 15, 1998).
C. DUE PROCESS
Contrary to the time-honored principle that the right to due
process of law is a constitutionally-guaranteed right, it being a basic
constitutional tenet that “no person shall be deprived of life, liberty
or property without due process of law, nor shall any person be
denied the equal protection of the laws” (Section 1, Article III [Bill of
Rights], 1987 Constitution), however, the 2004 case of Agabon vs.
NLRC, [G. R. No. 158693 November 17, 2004], distinguished
constitutional due process and statutory due process, to wit:
“To be sure, the Due Process Clause in Article III, Section 1 of the
Constitution embodies a system of rights based on moral principles
so deeply imbedded in the traditions and feelings of our people as to
be deemed fundamental to a civilized society as conceived by our
entire history. Due process is that which comports with the deepest
notions of what is fair and right and just. It is a constitutional
restraint on the legislative as well as on the executive and judicial
powers of the government provided by the Bill of Rights.
“Due process under the Labor Code, like
Constitutional due process, has two aspects:
substantive, i.e., the valid and authorized causes of
employment termination under the Labor Code;
and procedural, i.e., the manner of dismissal.
Procedural due process requirements for dismissal
are found in the Implementing Rules of P.D. 442, as
amended, otherwise known as the Labor Code of
the Philippines in Book VI, Rule I, Sec. 2, as
amended by Department Order Nos. 9 and 10.
(Department Order No. 9 took effect on 21 June
1997. Department Order No. 10 took effect on 22
June 1997). Breaches of these due process
requirements violate the Labor Code. Therefore,
statutory due process should be differentiated from
failure to comply with constitutional due process.
“Constitutional due process protects the individual
from the government and assures him of his rights in
criminal, civil or administrative proceedings; while
statutory due process found in the Labor Code and
Implementing Rules protects employees from being
unjustly terminated without just cause after notice
and hearing.”
REGULAR AND CASUAL EMPLOYMENT
ARTICLE 280 of the Labor Code of the Philippines provides –
The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties,
an employment shall be deemed to be regular where the employee
has been engaged to perform activities which are usually necessary
or desirable in the usual business or trade of the employer, except
where the employment has been fixed for specific project or
undertaking the completion or termination of which has been
determined at the time of the 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.
An employment shall be deemed to be casual if it is not covered
by the preceding paragraph. 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.
This provision of law tackles about different kinds of employment or
employees. The first paragraph discusses about the “regular” employment
and the exception which are project and seasonal employees. The second
paragraph is regarding the law on casual employment. Other kinds of
employment may be classified as fixed period and part-time employment.
Article 281 – Probationary Employment, will be later on discussed in the
paper, which is also another type of employment.
REGULAR EMPLOYEES
A regular employee or permanent employee is a person who passed
through a probationary period of employment. Regular employee is placed
on the regular rolls/activity of the company or one who is assigned to
perform work directly related to the regular operations of the firm. A
regular employee is employed without a definite period and the employer
may not terminate his services except for a just cause or when authorized
by law. And they even receive benefits like healthcare, holidays, sick leave,
etc.
The first paragraph of Article 280 defines the regular employment. In
the case of De Leon vs. NLRC (G.R. 70705, August 21, 1989), wherein
Moises was employed by La Tondeña as a maintenance personnel whose
work consisted mainly of painting the company building and equipment and
other odd jobs relating to maintenance. He was compensated on a daily
basis through petty cash vouchers. After a year of service, he requested that
he be included in the payroll. But the response of La Tondeña was the
dismissal of Moises and claimed that Moises was contracted on a casual
basis. The NLRC ruled that “painting the factory building is not part of La
Tondeña’s manufacturing or distilling process of wines.”
The court granted the petition and it was held that it is not tenable to
argue that the painting and maintenance work of Moises are not necessary
in La Tondeña’s business of manufacturing liquors; otherwise, there would
be no need for the regular maintenance section of the company’s
engineering department.
It is of no moment that Moises was told when he was hired that his
employment would only be casual, that he was paid through cash vouchers,
and that he did not comply with regular employment procedure.
It was stated that the primary standard to determine a regular
employment is the reasonable connection between the particular activity
performed by the employee in relation to the usual business or trade of the
employer. The test is whether the former is usually necessary or desirable
in the usual business or trade of the employer.
Also, the case laid down the following basis for regular employment:
a. The employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer.
b. The employee has rendered at least one 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.
c. The employee is allowed to work after probationary period.
Another determination on whether an employment is regular or casual
in not the will and word of the employer, to which the worker often accedes,
much less the procedure in hiring the employee or the manner of paying his
salary. It is the nature of the activities performed in relation to the
particular business or trade considering all circumstances, and in some
cases the length of time of its performance and its continued existence.
A casual employee, project employee, fixed term or probationary
employment could be regular employment, provided that such instance may
fall within the definition of regularity of such employment.
PROJECT EMPLOYMENT
Based on Article 280, a project employee is one whose employment
has been fixed for a specific project or undertaking, the completion or
termination of which has been determined at the time of the engagement of
the employee or where the work or service to be performed is seasonal in
nature and the employment is for the duration of the season. The project
undertaking may or may not have an ordinary or normal relationship to the
usual business of the employer. Also, “project employees” are distinguished
with “regular employees” so long as the duration and scope of the project
were determined or specified at the time of the engagement of the “project
employees.”
An employee hired to perform work in a specific project, job, or
period, upon completion of which the worker’s employment is terminated.
Failure to terminate the employee on or before the expiration of the period
of contract or completion of the job, in the case of temporary or casual
employment, or of a probationary employment may qualify the employee for
regular or permanent employment.
The principal test on whether or not it is a project employment is
whether or not the “project employees” were assigned to carry out “specific
project or undertaking,” the duration (and scope) of which were specified at
the time the employees were engagned in the project. (ALU-TUCP, et al. vs.
NLRC, August 2, 1994).
A project employee, according to Maraguinot Jr., vs. NLRC (284 SCRA
539, 556, 1998) may acquire the status of a regular employee when the
following factors concur:
a) There is a continuous (as opposed to intermittent) rehiring of
project employees even cessation of a project for the same tasks or
nature of tasks;
b) The task performed by the alleged, “project employee” are vital,
necessary and indispensible to usual business or trade of the em-
ployer.
To be exempted from the presumption of regularity of employment,
therefore, the agreement between a project employee and his employer
must strictly conform with the requirements and conditions provided in
Article 280. It is not enough that an employee is hired for a specific project
or phase of work. 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 if the objective of Article 280 is to be achieved.
Department Order No. 19
This department order is about the Project Employees in the
Construction Industry. The Policy Instruction also requires an employer
company to report to the nearest Public Employment Office the fact of
termination of a project employee as result of the completion of the project
or any phase thereof in which he is employed. Department Order No. 19,
issued on April 1, 1993, superseded D.O. No. 20 of 1977. It does not totally
dispense with the notice of requirement but, instead, makes provisions
therefore and considers it one of the “indicators” that a worker is a project
employee. (Samson vs. NLRC and AG&P Co., G.R. No. 113166, February 1,
1996)
Section 2.2 of Department Order No. 19 States:
“Either one or more the following circumstances , among others, may
be considered as indicators that an employee in of 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 per-
formed, 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 waiting engagement, is free
to offer his services to any other employer’
e) The termination of his employment in the particular project/under-
taking 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, us-
ing the prescribed form on employees’ terminations/dismissals/sus-
pensions;
f) An undertaking employment contract by the employer to pay com-
pletion bonus to the project employee as practice by most construc-
tion companies.”
SEASONAL EMPLOYMENT
Seasonal employment is where the employment has been fixed for a
specific period or undertaking the completion or termination of which has
been determined at the time of the engagement of the employee. Seasonal
employees are considered regular employees. Regular seasonal employees
are those called to work from time to time. The nature of their relationship
with the employer is such that during off season they are temporarily laid
off during summer season they are reemployed, or when their services are
need. They are not, strictly speaking, separated from the service but are
merely considered as on leave of absence without pay until they are
reemployed. Their employment relationship is never severed but only
suspended. As such those employees can be considered as in regular
employment of the employer. (Manila Hotel Co. vs. CIR, et al. G.R. No. L-
18875, September 30, 1963).
In the celebrated case of Hacienda Fatima vs. National Federation of
Sugarcane Workers-Food and General Trade (G.R. No. 149440, January 28,
2003), reiterated the rule on seasonal employment. The respondent-workers
were excluded from those classified as regular employees, it is not enough
that they perform work or services that are seasonal in nature. They must
have been employed only for the duration of one season. If the evidence
proves the existence of the first, but not the second, condition, then, the
workers have become regular employees. The fact that the employees
repeatedly worked as sugarcane workers for petitioner-employer for several
years is not denied by the petitioners. Evidently, petitioners employed
respondents for more than one season. Therefore, the general rule of
regular employment is applicable.
The refusal of the employer to furnish work to regular seasonal
workers would amount to illegal dismissal. Where there is no showing of
clear, valid and legal cause for the termination of employment, the law
considered the matter a case of illegal dismissal and the burden to prove
that the termination was for a valid and authorized cause.
CASUAL EMPLOYMENT
A casual employment is also defined in Article 280 of the Labor Code
of the Philippines and in Section 5 (b), Book VI of the Of the Omnibus Rule
Implementing the Labor Code, as “employment shall be deemed as
casual in nature if it is not covered by the preceding paragraph;
Provided, That any employee who has rendered at least one year of
service, whether such service is continuous or not, 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.”
Casual employment which is not in the nature of a regular, project or
seasonal employment as these kinds of employment defined under Article
280 of the Labor Code. There is casual employment where 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 the engagement;
provided, that any employee who has rendered at least one year of service,
whether such service is continuous or not, 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.
It is another type of regular employee, who, after one year of service,
becomes regular. But he is “regular” only for that work activity for which he
was hired. His employment may be on and off, but every time the particular
work activity occurs, he is one to be rehired. In this sense he is a “regular
casual.” A casual may become regular even it he is not issued a “regular”
appointment.
An employee hired for only a few days or few months at a time to
work/perform a unit of work or to fill a gap in the absence of another
employee, or a worker who is hired occasionally and intermittently
especially during peak production periods. Casual employees may or may
not possess special trade skills or qualifications; they are not in the
permanent payroll of the same employer.
FIXED PERIOD /CONTRACTUAL EMPLOYMENT
These contracts are not limited to those by nature, seasonal, or for
specific projects with pre-determined dates of completion, provided under
the Labor Code. They also include contracts to which the parties by free
choice, have assigned a specific date of termination. A contractual employee
is hired on an individual employment contract basis to perform work on a
specific project. The duration of such employment is indicated in the
employment contract, which may not exceed six months. It is an
employment based on contract.
In the case of Philips Semiconductors [Phils.], Inc. vs. Fadriquela
(G.R. No. 141717, April 14, 2004) The criteria for fixed contracts of
employment was set down by the Supreme Court set down two (2) criteria
under which fixed contracts of employment cannot be said to be in
circumvention of security of tenure, and if the foregoing criteria are not
present, the contract should be struck down for being illegal. Such criteria
are as follows:
1) The fixed period of employment was 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 cir-
cumstances vitiating his consent; or
2) It satisfactorily appears that the employer and employee dealt with
each other on more or less equal terms with no moral dominance
whatever being exercised by the former on the latter.
In a fixed-period employment, lack of notice of termination is of no
consequence because when the contract specifies the period of its duration,
it terminates on the expiration of such period. A contract for employment
for a definite period terminates by its own term at the end of such period.
Thus, notice to terminate is not necessary in fixed term employment.
PART TIME EMPLOYMENT
Part time employment is a single, regular or voluntary form of
employment with hours of work substantially shorter than those considered
as normal in the establishment. Using the legal principle enunciated in
Article 281 of the Labor Code on probationary employment vis-à-vis Article
13 of the Civil Code on the proper reckoning of periods, a part-time
employee shall become regular in status after working for such number of
hours or days which equates to or completes a six-month probationary
period in the same establishment doing the same job under the employment
contract.
If the part-time employee becomes a regular employee, he is entitled
to security of tenure under the law and he can only be separated for a just
authorized cause and after due process.
One may know if a part-time worker is a regular employee if any of
the following conditions exists:
a. The terms of his employment show that he is engaged as a regular or
permanent employee;
b. The terms of his employment indicate that he is employed for an in-
definite period;
c. He has been engaged for a probationary period and has continued in
his employment even after the expiration of the probationary period;
or
d. The employee perform activities which are usually necessary or desir-
able in the usual business or trade of the employer.
On the other hand, where the employment
PROBATIONARY EMPLOYMENT
Art. 281 of the Labor Code of the Philippines provides -
Probationary employment shall not exceed six (6) months from
the date the employee started working, unless it is covered by an
apprenticeship agreement stipulating a longer period. The services
of an employee who has been engaged on a probationary basis may
be terminated for a just cause or when he fails to qualify as a regular
employee in accordance with reasonable standards made known by
the employer to the employee at the time of his engagement. An
employee who is allowed to work after a probationary period shall be
considered a regular employee.
Also, Section 6.Book VI Of the Omnibus Rule Implementing the
Labor Code, wherein there is probationary employment where the
employee upon his engagement, is made to undergo trial period
during which the employer determines his fitness to qualify for
regular employment based on “reasonable standards” made known
to him at the time of the engagement.
Probationary employment shall be governed by the following rules:
(a) Where the work for which an employee has been engaged is
learnable or apprenticeable in accordance with the standards
prescribed by the Department of Labor, the probationary
employment period of the employee shall be limited to the
authorized learnership or apprenticeship period, whichever is
applicable.
(b) Where the work is neither learnable nor apprenticeable, the
probationary employment period shall not exceed six (6)
months reckoned from the date the employee actually started
working.
(c) The services of an employee who has been engaged on
probationary basis may be terminated only for a just cause or
when authorized by existing laws, or when he fails to qualify as
a regular employee in accordance with reasonable standards
prescribed by the employer.
(d) In all cases involving employees engaged on probationary
basis, the employer shall make known to the employee the
standards under which he will qualify as a regular employee at
the time of his engagement.
A probationary employee is one who, for a given period of time, is on
observation, evaluation and trial by an employer during which the employer
determines whether or not he is qualified for permanent employment.
During the probationary period, the employer is given the opportunity to
observe the skill, competence, attitude and fitness of the employee, while
the latter seeks to probe to the employer that he has the qualifications to
meet the reasonable standards for permanent employment. (De la
Cruz, Jr. vs. NLRC, G.R. No. 145417, Dec. 11, 2003).
A probationary employee or worker is a person hired to occupy
permanent or regular position in the company for a specified trial period to
prove if he is acceptable for the job. The probationary period is usually from
three to six months or even a year. This period is important to determine
employee’s fitness for the job or for learning the job.
The probationary period is a span/period of time during which the
employee is under observation on his actual job. It aims to help the new
employee learn valuable concepts and to prove or show his potential on the
company’s job or for regularization during his first several months of work
experience. Probationary Employee could be dismissed without a probable
cause. Also, the employer and the employee should agree or there will be an
agreement between the two regarding the probationary period.
As a general rule, probationary period should not exceed six(6)
months from the date the employee started working. One becomes a regular
employee upon completion of his six (6) month period of probation.
Exceptions to the six (6) month period provided in the law such as:
1) When the employer and the employee mutually agree on a shorter or
longer period;
2) When the nature of work to be performed by the employee requires a
longer period;
3) When a longer period is required and established by company policy.
This indicates that also an employer can also extend the probationary
period. In the case of Busier vs. Leogardo, the Supreme Court considered
the probationary period of employment of eighteen (18) months as valid
since it was shown that the company needs at least 18 months to determine
the character and selling capabilities of the employees as sales
representatives.
However, if there is not stipulation on probationary period, employee
is deemed regular. It was ruled that in the absence of any evidence that
there is no provision in the employment contract providing for a
probationary status and the requirements that they should comply with in
order to qualify as regular employees, no other conclusion can be drawn but
that they were regular employees at the time they were dismissed. (ATCI
Overseas Corporation vs. C.A. (G.R. No. 143949, August 9, 2001).
Regarding the “reasonable standards,” it should be made known to
the employee at the start of the engagement. It is in the rudiments of due
process to demand that an employee should be appraised beforehand of the
conditions of his employment and the basis for his advancement. (Servidad
vs. NLRC, G.R. No. 128682, March 18, 1999).
There are limitations in the power of the employer to terminate a
probationary employment. The following are:
1) it must be exercised in accordance with the specific requirements of
the contract;
2) if a particular time is prescribed, the termination must be within such
time and if formal notice is required, then that from must be used;
3) the employer’s dissatisfaction must be real and in good faith not
feigned so as to circumvent the contract or the law;
4) there must be no unlawful discrimination in the dismissal.
Termination by Employer
Under Article 282, an employer may terminate an employment for any of the following jus causes:
A. Serious misconduct or wilful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;
For serious misconduct to be a just cause for dismissal the following requisites must concur:
i. It must be serious; ii. It must relate to the performance of the employee’s duties; andiii. It must show that the employee has become unfit to continue working for the employer.
Roquero vs. PAL, Inc. G.R. No. 152329, April 22, 2003PAL’s two ground equipment mechanics, Alejandro Roquero and
Rene Pabayo were caught red-handed possessing and using Methampethamine Hydrochloride or shabu in a raid conducted by PAL security officers and NARCOM personnel. The two alleged that they did not voluntarily indulge in the said act but were instigated. Both were dismissed by PAL. The Supreme Court affirmed the validity of the dismissal. “Serious misconduct is defined as "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." For serious misconduct to warrant the dismissal of an employee, it (1) must be serious; (2) must relate to the performance of the employee's duty; and (3) must show that the employee has become unit to continue working for the employer.
It is of public knowledge that drugs can damage the mental faculties of the user. Roquero was tasked with the repair and maintenance of PAL's airplanes. He cannot discharge that duty if he is a drug user. His failure to do his job can mean great loss of lives and properties. Hence, even if he was instigated to take drugs he has no right to be reinstated to his position. He took the drugs fully knowing that he was on duty and more so that it is prohibited by company rules. Instigation is only a defense against criminal liability. It cannot be used as a shield against dismissal from employment especially when the position involves the safety of human lives.”
Chua – Cua vs. Clave G.R. No. L-49549 August 30, 1990Evelyn Chua was a teacher in Tay Tung High School, Bacolod
City. She was the teacher of Bobby Qua, the one she fell in love with and married, the latter being at that time sixteen (16) years old and the former thirty (30) years old. The school terminated Chua’s employment for an allegedly abusive and unethical conduct unbecoming of a dignified school teacher and that her continued employment is inimical to the best interest, and would downgrade the high moral values, of the school.
The issue of the case is whether the act of Chua being a teacher, falling in love with her student constitutes serious misconduct that is substantial to terminate her employment.
The court held that there is no substantial evidence of the imputed immoral acts; it follows that the alleged violation of the Code of Ethics governing school teachers would have no basis. The school utterly failed to show that petitioner took advantage of her position to court her student. If the two eventually fell in love, despite the disparity in their ages and academic levels, this only lends substance to the truism that the heart has reasons of its own which reason does not know. But, definitely, yielding to this gentle and universal emotion is not to be so casually equated with immorality. The deviation of the circumstances of their marriage from the usual societal pattern cannot be considered as a defiance of contemporary social mores. The charge against petitioner not having been substantiated, the court declared her dismissal as unwarranted and illegal.
The requisites to validly invoke willful disobedience are:
i. The employee’s assailed conduct must have been wilful or intentional, the wilfulness being characterized by a “wrongful and perverse attitude;” and
ii. The order violated must have been reasonable and lawful and made known to the employee and must pertain to the duties which he had been engaged to discharge.
In order that wilful disobedience by the employee of the orders, regulations or instructions of the employer may constitute a just cause for terminating his employment, said orders, regulations, or instructions must be:
i. Lawful and reasonable;ii. Sufficiently known to the employee; andiii. In connection with the duties which the employee has been
engaged to discharge.
Coca – Cola Bottlers Philippines, Inc, vs. VitalDominic E. Vital, respondent, was employed by Coca-Cola
Bottlers Philippines, Inc., petitioner, as route driver/helper at its Antipolo Plant, and was also assigned to perform the duties of a salesman. Sometime in October, 1995, petitioner, intending to increase the sale of its products, implemented "Operation Rurok," a local marketing campaign that allows its trusted wholesaler outlets to retrieve foreign empties and/or bottles of petitioner’s competitors, such as Pepsi Cola and Cosmos, from regular customer outlets, in exchange for Coca-Cola containers and products. Respondent admitted that on three separate incidents his supervisor, Lagula instructed him to deliver the Coca-Cola products to other outlets. Eventually, his service was terminated for loss of trust and confidence. Petitioner Coca – Cola Bottlers contends that his termination is lawful since he admitted that he wilfully defied or violated the company disciplinary rules and regulations.
The court has to say that respondent’s delivery of the products of petitioner to other places not indicated in the orders was actually done in good faith, being in compliance with the instructions of his supervisor. Where a violation of company policy or breach of company rules and regulations was found to have been tolerated by management, as in the instant case, then the same could not serve as a basis for termination.6 Clearly, the dismissal of respondent from the service on the ground of willful disobedience or violation of company rules and regulations is not justified.
B. Gross and habitual neglect by the employee of his duties;
The ground of gross and habitual neglect of duties by the employee must constitute the following:
i. Element of habituality may be disregarded where loss is substantial.
ii. Element of habituality may be disregarded if totality of evidence justifies dismissal.
iii. Element of actual loss or damage, not an essential requisite.iv. Habitual tardiness or habitual absenteeism may be a ground for
termination.
Reyes vs. maxim’s tea house G. R. No. 140853, February 27, 2003Ariel Tres Reyes, petitioner was an employee of Maxim’s Tea
House, respondent. Allegedly, petitioner was temporarily suspended due to his involvement in a vehicular accident on board the company vehicle with a ten – wheeler truck where in several were physically injured. However, he was terminated for a cause almost one month after suspension.
The issue of the case is whether or not the petitioner’s dismissal from employment is valid and legal?
The Court said the test to determine the existence of negligence is as follows: Did petitioner in doing the alleged negligent act use that reasonable care and caution which an ordinarily prudent person would use in the same situation? It is not disputed that petitioner tried to turn left to avoid a collision. To put it otherwise, petitioner did not insist on his right of way, notwithstanding the green light in his lane. Still, the collision took place as the ten-wheeler careened on the wrong lane. Clearly, petitioner exerted reasonable effort under the circumstances to avoid injury not only to himself but also to his passengers and the van he was driving. To hold that petitioner was grossly negligent under the circumstances goes against the factual circumstances shown. It appears to us he was more a victim of a vehicular accident rather than its cause. There being no clear showing that petitioner was culpable for gross negligence, petitioner’s dismissal is illegal.”
Under this cause one ground for validly terminating an employee would be to invoke abandonment of work which has two requisites namely:
i. The failure to report for work or absence without valid or justifiable reason; and
ii. A clear intention to sever the employer – employee relationship.In order to invoke the above ground validly, the employer is required to
send to the employee’s last known address a notice which consists of (1) notice to apprise the employee of the particular acts or omissions for which his dismissal is sought; and (2) subsequent notice to inform him of the employer’s decision to dismiss him.
As in the case of Agabon vs. NLRC, [G.R. No. 158693, November 17, 2004], while the validity of the dismissal based on abandonment was upheld, however, the employer was deemed to have violated due process when it did not follow the notice requirements and instead argued that sending notices to the last known addresses would have been useless because they did not reside there anymore. Unfortunately for the employer, this is not a valid excuse because the law mandates the twin notice requirements be sent to the employee’s last known address. Thus, it should be held liable for non – compliance with procedural requirements of due process.
C. Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;
De la Cruz, Jr. vs. NLRC G. R. No. 145417, December 11, 2003
Petitioner Florencio M. de la Cruz, Jr. was allegedly illegally dismissed by the Shemberg Marketing Corporation (Shemberg), respondent. Shemberg claim that petitioner failed to meet the required company standards and for loss of trust and confidence because of the unauthorized reimbursement of the plane tickets of his wife and child. The issue raised by the petitioner is whether his act constituted fraud or deceit enough to cause the company to lose trust and confidence in him.
The Court held that Petitioner was holding a managerial position in which he was tasked to perform key functions in accordance with an exacting work ethic. His position required the full trust and confidence of his employer. While petitioner could exercise some discretion, this obviously did not cover acts for his own personal benefit. As found by the court aquo, he committed a transgression that betrayed the trust and confidence of his employer — reimbursing his family's personal travel expenses out of company
funds. Petitioner failed to present any persuasive evidence or argument to prove otherwise. His act amounted to fraud or deceit which led to the loss of trust and confidence of his employer.
Charles Joseph U. Ramos vs. The Honorable Court of Appeals and the Union Bank of the Philippines G. R. No. 145405, June 29, 2004
Petitioner Ramos was an employee of respondent Bank. He started out as a post audit clerk and eventually became branch manager of respondent’s J.P. Rizal Branch, Makati City. In October 1993, Area Head, verbally designated petitioner as the OIC branch manager of the J.P. Rizal Branch and assigned Mr. Rudy Paras from the reserve pool took over petitioner’s previous position as branch cashier. On March 15, 1994, petitioner was formally appointed as branch manager through a notice of personnel movement dated March 9, 1994.
On August 21, 1995, the Central Accounting Division of the Bank reported certain unreconciled statements of cash deliveries from the Central Cash Unit to the J.P. Rizal Branch. Based on the bank’s investigation, branch cashier Paras was found accountable for the alleged loss of P10.1 million. However, by the time the act was discovered, Paras had long resigned from respondent Bank and could no longer be found by the National Bureau of Investigation (NBI). On August 29, 1995, petitioner was appointed as Area Operations Officer of Legaspi Village, Makati and Quezon City while the investigation was going on. On April 12, 1996, petitioner was dismissed due to gross negligence/serious dereliction of duty resulting in loss of trust and confidence by management.
The issue was whether petitioner was functioning as the branch manager of the branch during the time scam was perpetrated.
The Court held that to validly dismiss an employee on the ground of loss of trust and confidence, the following guidelines must be followed:
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;
4. It must be genuine, not a mere afterthought, to justify earlier action taken in bad faith; and
5. The employee involved holds a position of trust and confidence.
In the case at bar, petitioner held a position of trust and confidence as the regular branch cashier and acting branch manager of respondent’s J.P. Rizal branch. Petitioner was utterly negligent in performing his duties as acting branch manager.
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;
The commission of a crime or offense by the employee may justify the termination of his employment, if such crime or offense is committed against any of the following persons:
i. His employer;ii. Any immediate member of his employer’s family; oriii. His employer’s duly authorized representatives.
E. Other causes analogous to the foregoing.
The following are the instances considered to be analogous causes:
1. The ground of inefficiency2. Violation of safety rules3. Ban on one’s employees imposed by another company4. Violation of the company code of conduct or company rules and
regulations
Authorized causes for termination of employment
Articles 283 and 284 provides the following:
a. Installation of labor – saving devices;
Requisites:i. The introduction of the machinery, equipment or other devices
must be in good faith;ii. The purpose for such introduction must be valid such as to save on
cost, enhance efficiency and other justifiable economic reasons;iii. There is no other option available to the employer than the
introduction of those machinery, equipment or device and the consequent termination of employment of those affected thereby;
iv. The 30 – day notice requirement under Article 283 should be complied with;
v. There should be reasonable and fair standards or criteria in selecting who to terminate such as nature of work, status of the employee (whether casual, temporary, or regular), experience, efficiency rating and seniority, among other considerations; and
vi. Separation pay under the law or company policy or Collective Bargaining Agreement or similar contract, when appropriate, must be paid to the affected employees.
In the case of Abapo vs. CA G. R. No. 142405, September 30, 2004, Respondent SMC conducted a viability study of its business operations and adopted a modernization program. Respondent then brought into the Mandaue plant high-speed machines to be used in the manufacture of its beer.The Supreme Court held that the installation of labor-saving devices by SMC at the Mandaue plant was a proper ground for terminating employment.
b. Redundancy;
Requisites:iii. Written notice served on both the affected employees and the
Department of Labor and Employment at least one (1) month prior to the intended date of termination;
iv. Payment of separation pay equivalent to at least one (1) month pay for every year of service, whichever is higher;
v. Good faith in abolishing the redundant positions; andvi. Fair and reasonable criteria in ascertaining what positions are to be
declared redundant and accordingly abolished.
In the case of Santos vs. Pepsi – Cola Products Phils., Inc., G.R. No. 141947, July 5, 2001, respondent Pepsi, based on the fact that its Metro Manila Sales Operations were not meeting its sales targets, and on the fact that there were new positions created, wanted to restructure its organization in order to include more complex positions that would either absorb or render completely unnecessary the positions it had previously declared redundant. The soundness of this judgment has been assailed by petitioners, arguing that it is more logical to implement new procedures in physical distribution, sales quotas, and other policies aimed at improving the performance of the division rather than to reduce the number of employees and create new positions.
The Court, however, said that this argument cannot be accepted. While it is true that management may not, under the guise of invoking its prerogative, ease out employees and defeat their constitutional right to security of tenure, the same must be respected if clearly undertaken in good faith and if no arbitrary or malicious action is shown.
c. Retrenchment;
Requisites:i. That the retrenchment is reasonably necessary and likely to prevent
business losses which, if already incurred, are not merely de minimis but substantial, serious, actual and real or, if only expected, are reasonably imminent as perceived objectively and in good faith by the employer;
ii. That the employer serves a written notice both to the employees and to the Department of labor and Employment at least one (1) month prior to the intended date of retrenchment;
iii. That the employer pays the retrenched employees separation pay equivalent to one (1) month pay or at least one – half (1/2) month’s pay for every year of service, whichever is higher;
iv. That the employer exercises its prerogative to retrench employees in good faith for the advancement of its interest and not to defeat or circumvent the employee’s right to security of tenure; and
v. That the employer uses fair and reasonable criteria in ascertaining who would be dismissed and who would be retained among the
employees, such as status, efficiency, seniority, physical fitness, age, and financial hardship for certain workers.
Standards to be observed in retrenchment:1. The losses expected should be substantial and not merely de
minimis in extent. If the loss purportedly sought to be forestalled by retrenchment is clearly shown to be insubstantial and inconsequential in character, the bona – fide nature of the retrenchment would appear to be seriously in question.
2. The substantial loss apprehended must be reasonably imminent, as much imminence can be perceived objectively and in good faith by the employer. There should, in other words, be a certain degree of urgency for the retrenchment which is, after all, a drastic recourse with serious consequences for the livelihood of the employees retrenched or otherwise laid off.
3. Retrenchment, because of its consequential nature, must be reasonably necessary and likely to effectively prevent the expected losses. The employer should have taken other measures prior or parallel to retrenchment to forestall losses.
4. But certainly not the least important, the alleged losses, if already realized, and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence. The reason for requiring this quantum of proof is apparent; any less exacting standard of proof would render too easy the abuse of this ground for termination of services of employees.
Philippine Tuberculosis Society vs. NLRC G.R. No. 115414, August 25, 1998
Due to worsening financial difficulties The Philippine Tuberculosis Society, Inc., a non-stock and non-profit domestic corporation implemented the retrenchment of one hundred sixteen (116) employees. The issue is whether the retrenchment was validly invoked.
The Court invalidated the retrenchment program for its improper implementation despite proof of financial losses. It had said that retrenchment is the termination of employment initiated by the employer through no fault of the employees and without prejudice to the latter, resorted to by management during periods of business
recession, industrial depression, or seasonal fluctuations, or during lulls occasioned by lack of orders, shortage of materials, conversion of the plant for a new production program or the introduction of new methods or more efficient machinery or of automation. Simply put, it is an act of the employer of dismissing employees because of losses in the operation of a business, lack of work, and considerable reduction on the volume of his business, a right consistently recognized and affirmed by this Court.
Petitioner claims that the retrenchment of employees was based on a number of criteria, to wit: 1) whether the positions of the employees are to be retained or abolished; 2) the qualifications required by the positions to be retained, modified, or created; and 3) the attitude, discipline, efficiency, flexibility, and trainability of the employees. Petitioner has not shown however, that the four employees were selected for retrenchment because they did not meet these criteria. Petitioner has not explained why the said employees had to be laid off without considering their many years of service to the Society. The fact that these employees had accumulated seniority credits indicates that they had been retained in the employ of the Society because of loyal and efficient service. The burden of proving the contrary is on petitioner.
d. Closure or cessation of business;
Requisites:i. The decision to close or cease operations should be made in good
faith;ii. The purpose should not be to circumvent the provisions of Title I
Book Six of the Labor Code;(Note: If the ground is serious business losses or financial reverses, there should be clear proof thereof since no separation pay to the employees is required to be paid under the law, if such is the cause invoked. If not due to serious business losses, this requisite becomes relevant.)iii. There is no other option available to the employer except to close
or cease operations;iv. The notice requirement under article 283 should be complied with,
whether or not the closure or cessation of operations is due to serious business losses or financial reverses; and
v. Separation pay under the law. When not due to serious business losses or company policy or Collective Bargaining Agreement or similar contract, when appropriate, must be paid to the affected employees.
J.A.T. General Services vs. NLRC G.R. No. 148340, January 26, 2004
Petitioner Jesusa Adlawan Trading & General Services (JAT) is a single proprietorship engaged in the business of selling second-hand heavy equipment. In October 1997, the sales of heavy equipment declined because of the Asian currency crisis. Consequently, JAT temporarily suspended its operations. It advised its employees, including private respondent, not to report for work starting on the first week of March 1998. JAT indefinitely closed shop effective May 1998.
Whether or not private respondent was illegally dismissed from employment due to closure of petitioners’ business
The Court distinguished retrenchment from closure of business. Closure of business, on one hand, is the reversal of fortune of the employer whereby there is a complete cessation of business operations and/or an actual locking-up of the doors of establishment, usually due to financial losses. Closure of business as an authorized cause for termination of employment aims to prevent further financial drain upon an employer who cannot pay anymore his employees since business has already stopped. On the other hand, retrenchment is reduction of personnel usually due to poor financial returns so as to cut down on costs of operations in terms of salaries and wages to prevent bankruptcy of the company. It is sometimes also referred to as down-sizing. Retrenchment is an authorized cause for termination of employment which the law accords an employer who is not making good in its operations in order to cut back on expenses for salaries and wages by laying off some employees. The purpose of retrenchment is to save a financially ailing business establishment from eventually collapsing.
In this case, the Court is persuaded that the issues and contentions are more centered on closure of business operation rather than retrenchment. Closure or cessation of operation of the establishment
is an authorized cause for terminating an employee under Article 283 of the Labor Code the closure of JAT’s business is not unjustified. Further we hold that private respondent was validly terminated, because the closure of business operations is justified.
e. Disease.
Requisites: ii. The employee is suffering from a disease;iii. His continued employment is either:
a. Prohibited by law;b. Prejudicial to his health; orc. Prejudicial to the health of his co-employers.
iv. There is a certification by a competent public health authority that the disease is of such nature or at such stage that it cannot be cured within a period of six months even with proper medical treatment.
v. Notice of termination based on this ground should be served to the employee; and
vi. Separation pay shall be paid to him in the amount equivalent to at least one (1) month salary or one – half (1/2) month’s salary for every year of service, whichever is greater, a fraction of at least six (6) months being considered as one (1) whole year;
In invoking the ground of disease in terminating the employment of an employee the burden of proof rets on the employer, the company physician is not a competent public health authority and medical certificates issued by company doctor is not sufficient. In addition, said medical certificate is an indispensable requisite.
Sy vs. CA G.R. No. 142293, February 27, 2003Private respondent, Jaime Sahot, continuously served the
trucking business of petitioner Vicente Sy for 36 years. Sahot had been incurring absences as he was suffering from various ailments. Particularly causing him pain was his left thigh, which greatly affected the performance of his task as a driver. He filed a week-long leave sometime in May 1994. On May 27th, he was medically examined and treated for EOR, presleyopia, hypertensive retinopathy G II HPM, UTI, Osteoarthritis and heart enlargement. Sahot applied for extension of his leave for the whole month of June, 1994. Petitioner dismissed him
from work, effective June 30, 1994. The issue to be answered is whether or not there was valid dismissal.
In termination cases, the burden is upon the employer to show by substantial evidence that the termination was for lawful cause and validly made. Article 284 of the Labor Code authorizes an employer to terminate an employee on the ground of disease. However, in order to validly terminate employment on this ground, Book VI, Rule I, Section 8 of the Omnibus Implementing Rules of the Labor Code requires:
Sec. 8. Disease as a ground for dismissal- Where the employee suffers from a disease and his continued employment is prohibited by law or prejudicial to his health or to the health of his co-employees, the employer shall not terminate his employment unless there is a certification by competent public health authority 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. If the disease or ailment can be cured within the period, the employer shall not terminate the employee but shall ask the employee to take a leave. The employer shall reinstate such employee to his former position immediately upon the restoration of his normal health.
As this Court stated in Triple Eight integrated Services, Inc. vs. NLRC, the requirement for a medical certificate under Article 284 of the Labor Code cannot be dispensed with; otherwise, it would sanction the unilateral and arbitrary determination by the employer of the gravity or extent of the employee’s illness and thus defeat the public policy in the protection of labor. In the case at bar, the employer clearly did not comply with the medical certificate requirement before Sahot’s dismissal was effected
Termination by employee under Article 285 provides that:
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.
Termination of employment by employee, or otherwise understood as the resignation, requires the employee to comply with the requisites namely: written notice of the termination or resignation letter and the service of such notice to the employer at least one (1) month in advance. As per the case of Shie Jie Corp. vs. National Federation of Labor, the acceptance of the resignation letter is necessary to make the resignation effective. On the other hand, in the case of Philippine National Construction Corporation vs. NLRC, once resignation is accepted, the employee no longer has any right to the job. Resignation terminates the employer – employee relationship.
It is a well settled rule that a resignation tendered by an employee may still be withdrawn anytime before its acceptance by the employer. Once accepted, withdrawal can no longer be made by the resigning employee, except with the consent of the employer. A resigned employee who wishes to have his previous job has to reapply therefor.
1. An employee may put an end to the relationship without serving any notice on the employer for any of the following just causes:2. Serious insult by the employer or his representative on the honor and
person of the employee;
Requisites:
ii. The insult must be serious in character;iii. It must be committed by the employer or his representative; andiv. It must injure the honor and person of the employer.
3. Inhuman and unbearable treatment accorded the employee by the employer or his representative;
Requisites:
i. The treatment is inhumane and unbearable in nature; andii. It is perpetrated by the employer or his representative.
4. 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;
Requisites:
i. A crime or offense is committed;
ii. It was committed by the employer or his representative; andiii. It was perpetrated against the person of the employee or any of
the immediate members of his family
5. Other causes analogous to any of the foregoing.
Constructive dismissal Forced resignation
Situations and Remedies in Termination Disputes
The rules on termination disputes are applicable to the following scenarios:
1. The dismissal is for a just cause under Article 282, for an authorized cause under Article 283, or for health reasons under Article 284, and due process was observed – the dismissal is legal.
2. The dismissal is without just or authorized cause but due process was observed – THE DISMISSAL IS ILLEGAL.
3. The dismissal is without just or authorized cause and there was no due process – THE DISMISSAL IS ILLEGAL.
4. The dismissal is for just or authorized cause but due process was not observed – THE DISMISSAL IS LEGAL BUT THE EMPLOYER IS LIABLE TO PAY INDEMNITY IN THE FORM OF NOMINAL DAMAGES (PER AGABON CASE). THE AMOUNT OF NOMINAL DAMAGES VARY FROM CASE TO CASE.
5. The dismissal is for a cause which later on is proven to be non-existent – THE DISMISSAL IS NOT EFFECTIVE, HENCE, THE EMPLOYEE SHOULD BE REINSTATED. THE EMPLOYER IS NOT LIABLE TO PAY ANY BACKWAGES OR DAMAGES.
6. The dismissal is not supported by evidence – NO DISMISSAL TO SPEAK OF; SO EMPLOYEE SHOULD BE REINSTATED (BUT NOT AS A RELIEF). THE EMPLOYER IS NOT LIABLE TO PAY ANY BACKWAGES OR DAMAGES.
Art. 286. When employment not deemed terminated. The bona-fide 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.
From the above provision the following instances are found:
i. Bona-fide suspension by the employer of the operation of business or undertaking for a period not exceeding six (6) months;
ii. Fulfillment by the employee of a military duty; oriii. Fulfillment by the employee of civic duty.
The following are the essential requisites for the valid suspension of the operation of a business or undertaking:
a. The suspension of the operation of the business should be made in good faith;
b. The period of such suspension should not exceed six (6) months;c. The employer should resume operations on or before the lapse of said
six months period;d. Upon resumption of operations, the employer should reinstate the
employees to their former position without loss of seniority rights if the employees indicate their desire to resume their work not later than one (1) month from the said resumption of operations;
e. In the event that the employer, instead of resuming its operations, decides to retrench or close or cease its business before the lapse of the six-month period, it shall fully comply with the requirements of the retrenchment or closure or cessation of business operations, as the case may be, under Article 283 to wit:
i. Service of written notice of termination on the workers and the Department of Labor and Employment at least one (1) month before the intended date thereof; and
ii. Payment to the affected employees of separation pay equivalent to 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 considred one (1) whole year.
According to De Guzman vs. NLRC G.R. No. 167701, December 12, 2007, when the bona-fide suspension of the operation of business or undertaking exceeds six (6) months, the employment of the affected employees is deemed terminated. By the same token and applying said rule by analogy, if the employee was forced to remain without work or assignment for a period exceeding six (6) months, he is then in effect constructively dismissed.
SEPARATION PAY AND BACKWAGES
Separation pay is intended to provide the employee with the wherewithal
during the period he is looking for another employment. (See Gabuay v.
Oversea Paper Supply, G.R. No. 148837, August 13, 2004.)
Instances when Separation Pay is due to Employee
1. The first is provided under Article 283 of the Labor Code.
Separation pay is due when the termination of employment is based
on causes authorized by law, such as installation of labor-saving
devices, redundancy, retrenchment to prevent losses or the closing
or cessation of operation of the establishment
The installation of labor-saving devices contemplates the installation of
machinery to effect economy and efficiency in the method of production.
The case of General Milling Corporation vs. Violeta L. Viajar. G.R. No.
181738. January 30, 2013 enumerated the requisites of a valid redundancy
program:
(a) the employer must serve a written notice to the affected employees and
to the Department of Labor and Employment (DOLE) at least one month
before the intended date of termination;
(b) the employer must pay the employees separation pay equivalent to at
least one month pay or at least one month pay for every year of service,
whichever is higher;
(c) the employer must abolish the redundant positions in good faith; and
(d) the employer must set fair and reasonable criteria in ascertaining which
positions are redundant and may be abolished.
The Supreme Court has also held that a company cannot simply declare
redundancy without basis. To exhibit its good faith and to show that there
were fair and reasonable criteria in ascertaining redundant positions, a
company claiming to be over manned must produce adequate proof of the
same.
Retrenchment is the termination of employment initiated by the employer
through no fault of and without prejudice to the employees. It is resorted to
during periods of business recession, industrial depression, or seasonal
fluctuations or during lulls occasioned by lack of orders, shortage of
materials, conversion of the plant for a new production program or the
introduction of new methods or more efficient machinery or of automation.
It is an act of the employer of dismissing employees because of losses in the
operation of a business, lack of work, and considerable reduction on the
volume of his business. In this case, the closure of a department or division
of a company constitutes retrenchment by, and not closure of, the company
itself. Petitioner has not totally ceased its business operations. It merely
ceased operations of a department. Waterfront Cebu City Hotel vs. Ma.
Melanie P. Jimenez, et al. G.R. No. 174214, June 13, 2012.
2. Article 284 mandates that when the severance of employment is
caused by a disease, particularly when the employee is found to be
suffering from any disease and whose continued employment is
prohibited by law or is prejudicial to his health as well as the health
of his co-employees.
Section 8, Title I, Book VI, Implementing Rules ans Regulation provides the
requisites for termination on the ground of disease:
1. The employee suffers from a disease;
2. His continued employment is prohibited by law or prejudicial to his
health or to the health of his co-employees; and
3. The disease is of such nature and at such a stage that it cannot be cured
within a period of six months even with proper medical treatment as
certified by competent public health authority.
The recently decided case of Eleazar S. Padillo vs. Rural Bank of
Nabunturan, Inc., et al. (G.R. No. 199338. January 21, 2013) held that it
must be the employer who initiates the termination of the employee’s
services. The aforementioned provision cannot be applied in this case,
considering that it was the late petitioner Padillo, and not the Rural Bank of
Nabunturan, Inc. (Bank), who severed the employment relations. With his
memory impaired after suffering a mild stroke due to hypertension, Padillo
wrote a letter to the Bank, expressing his intention to avail of an early
retirement package. The clear import of Padillo’s letter and the fact that he
had stopped reporting for work even before sending the said letter shows
that he voluntarily retired. Given the inapplicability of the Labor Code
provision on disease as a ground for termination, it necessarily follows that
Padillo’s claim for separation pay must be denied.
3. Termination from service of the employee has been declared
illegal, but his reinstatement to his former position is no longer
feasible for some valid reason such as closure of business, or when
the relationship between employer and employee has become
strained. (doctrine of strained relations)
The case of Apo Chemical Manufacturing and Michael Cheng vs. Ronaldo A.
Bides. G.R. No. 186002. September 19, 2012 emphasized the doctrine of
strained relation:
Reinstatement is the rule and, for the exception of “strained relations” to
apply, it should be proved that it is likely that, if reinstated, an atmosphere
of antipathy and antagonism would be generated as to adversely affect the
efficiency and productivity of the employee concerned. Under the doctrine
of strained relations, the payment of separation pay is considered an
acceptable alternative to reinstatement when the latter option is no longer
desirable or viable. On one hand, such payment liberates the employee
from what could be a highly oppressive work environment. On the other
hand, it releases the employer from the grossly unpalatable obligation of
maintaining in its employ a worker it could no longer trust. Moreover, the
doctrine of strained relations has been made applicable to cases where the
employee decides not to be reinstated and demands for separation pay.
Bides has consistently maintained, from the proceedings in the Labor
Arbiter up to the Court of Appeas, his refusal to be reinstated due to his
fear of reprisal which he could experience as a consequence of his return.
By doing so, Bides unequivocally foreclosed reinstatement as a relief.
4. In case of pre-termination of employment contract in job-
contracting arrangement. ( Department Order 18-02, Rules Implementing
Article 106 to 109 of the Labor Code.)
Section 10 of the Department Ordeebprovides the effect of Termination of
Contractual Employment:
In cases of termination of employment prior to the expiration of the
contract between the principal and the contractor or subcontractor, the
right of the contractual employee to separation pay or other related benefits
shall be governed by the applicable laws and jurisprudence on termination
of employment. Where the termination results from the expiration of the
contract between the principal and the contractor or subcontractor, or from
the completion of the phase of the job, work or service for which the
contractual employee is engaged, the latter shall not be entitled to
separation pay. However, this shall be without prejudice to completion
bonuses or other emoluments, including retirement pay as may be provided
by law or in the contract between the principal and the contractor or
subcontractor.
5. In exceptional cases, where separation pay is awarded as a measure of
social or compassionate justice.
The case of PCIB vs Abad (G.R. No. 158045. February 28, 2005) reiterated
that:
As an exception, allowing the grant of separation pay or some other
financial assistance to an employee dismissed for just causes is based on
equity. The Court has granted separation pay as a measure of social justice
even when an employee has been validly dismissed, as long as the dismissal
was not due to serious misconduct or reflective of personal integrity or
morality.
This equitable principle was explained in San Miguel Corporation v. Lao as
follows:
“In Soco vs. Mercantile Corporation of Davao [148 SCRA 526,
March 16, 1987], separation pay was granted to an employee who
had been dismissed for using the company vehicle for a private
purpose. In Tanala vs. National Labor Relations Commission [322
Phil. 342, January 24, 1996] the payment of separation pay to an
employee who had been dismissed for quarreling with a fellow
worker outside the company premises was sustained. Likewise,
in Filipro, Inc. vs. NLRC [229 Phil. 150, October 16, 1999], an
award of separation pay was decreed in favor of an employee who
had been validly dismissed for preferring certain dealers in
violation of company policy. The Court, however, disallowed the
grant of separation pay to employees dismissed for serious
misconduct or for some other causes reflecting on his moral
character. In the case of Philippine Long Distance Telephone Co.
(PLDT) vs. NLRC and Abucay [164 SCRA 671, 682, August 23,
1988], the Court clarified a perceived incongruence in its several
pronouncements by stating thusly:‘We hold that henceforth
separation pay shall be allowed as a measure of social justice only
in those instances where the employee is validly dismissed for
causes other than serious misconduct or those reflecting on his
moral character. Where the reason for the valid dismissal is, for
example, habitual intoxication or an offense involving moral
turpitude, like theft or illicit sexual relations with a fellow worker,
the employer may not be required to give the dismissed employee
separation pay, or financial assistance, or whatever other name it
is called, on the ground of social justice.
‘The policy of social justice is not intended to countenance
wrongdoing simply because it is committed by the underprivileged.
At best it may mitigate the penalty but it certainly will not condone
the offense.’The dictum was followed in Philippine National
Construction Corporation vs. NLRC [170 SCRA 207, February 9,
1989], where the Court deleted an award of separation pay to an
employee who had been found guilty of dishonesty for having stolen
company property. Cosmopolitan Funeral Homes, Inc. vs.
Maalat [187 SCRA 108, July 2, 1990] disallowed the grant of
separation pay to an employee who was dismissed for dishonesty
for an understatement of reported contract price against the actual
contract price charged to and paid by the customers and for
misappropriation of funds or collections. A similar holding was
reached in Zenco Sales, Inc. vs. NLRC [234 SCRA 689, August 3,
1994], where the dismissed employee was found guilty of gross
misconduct for having used his employer's property, equipment and
personnel in his personal business. The Court reversed the decision
of the NLRC in San Miguel Corporation vs. NLRC [325 Phil. 940,
March 29, 1996], granting an employee, dismissed for dishonesty,
the privilege to retire from the company with a right to avail himself
of 100% of the benefits the company had offered to retiring
employees. Quite recently, in Edge Apparel, Inc. vs. NLRC [349
Phil. 972, February 12, 1998], the Court, categorizing the two
causes for the dismissal of an employee — ‘just causes’ under
Article 282 of the Labor Code and ‘authorized causes’ under Article
283 and 284 of the same code — reiterated that an employee whose
employment was terminated for a just cause would not be so
entitled as a matter of right to the payment of separation benefits.”
In line with San Miguel, separation pay depends on the cause of the
dismissal and the circumstances of each case. The dismissal should not be
due to serious misconduct or to causes reflective of moral character.
Notwithstanding a valid dismissal, an employee’s lack of moral depravity
could evoke compassion and thereby compel an award of separation pay.
Computation of Separation Pay
Separation pay may be computed based on the terms provided in the
employment contract, company policy, or collective bargaining agreement.
Company practice may likewise be used as basis for computation, if such
practice has been established for years and has already ripened into a
demandable right. In the absence of contract or agreement, or when the
existing agreement or policy provides for a lower benefit, separation pay
shall be computed based on the provision of the Labor Code.
The amount of separation pay under the Labor Code depends on the
following factors:
1. The employee’s last salary
2. The employee’s length of service
3. The reason for employee’s separation from service.
Employee’s last salary
The employee’s last salary refers to the salary rate of the employee at the
time of his termination from service. It determines the based to be used in
the computation of separation pay.
When there is a reduction of the employee’s salary prior to his termination,
e.g., the employee has been demoted resulting to a reduction of salary, such
reduced salary rate, which is his ‘last salary’ shall be the basis of the
computation. But, if the reduction of salary was made to circumvent the
provision of the Labor Code, that is, to avoid payment of higher separation
pay, the salary rate before the reduction shall be used in the computation of
separation pay.
For employee’s receiving salary below the minimum wage, the separation
pay shall be computed based on the minimum wage in effect at the time of
separation from service. In addition, the employee affected is also entitled
to payment of salary differential equivalent to the difference between the
employees actual salary and applicable minimum wage.
Employee’s length of service
Employee’s length of service refers to the duration of time that the
employee has been under the employ of the same employer or company. It
is computed beginning from the time of his engagement up to the date of
his termination. A fraction of at least 6 months shall be considered as one
whole year. However, only the employee’s last continuous years of service
should be considered in the computation (Phil. Tobacco Flue-Curing vs.
NLRC.)
The reason for the employee’s separation from service
The reason for the employee’s separation from service is an important
factor in the computation of separation pay. The amount of separation pay
may vary depending on the specific ground relied upon for the
termination.An employee terminated based on installation of labor-saving
devices or redundancy is entitled to at least one-month salary or to at least
one-month salary for every year of service, whichever is higher. (Article
283, Labor Code)
For termination based on retrenchment to prevent losses and closure
of business, the employee affected is entitled to at least one month salary
or 1/2 month salary for every year of service, whichever is higher. (Article
283, Labor Code).)
An employee terminated for health reasons (disease) under Article
284 should be paid separation pay equivalent to at least one-month salary
or to at least one-month salary for every year of service, whichever is
higher.
In case of illegal termination, separation pay in lieu of reinstatement has
been consistently computed at one month salary for every year of service.
The phrase “at least one month salary or 1/2 month salary for every year of
service, whichever is higher”, means that the employee is entitled
whichever is higher of the employee’s:one month salary; or1/2 month salary
for every year of service.
Example: If the retrenched employee’s salary is P8,000, and he has been
working for 3 years, he is entitled to separation pay equivalent to whichever
is higher of his:
one month salary = P8,000; or
1/2 month salary for every year of service = (1/2) x P8,000 x 3 years =
P12,000
Here, the employee is entitled to P12,000, which is the higher amount.
Following the same rule, if the length of service is only one year, his
separation would be whichever is higher of the following:
one month salary = P8,000; or
1/2 month salary for every year of service = (1/2) x P8,000 x 1 year =
P4,000
Here, separation pay is P8,000 or one month salary, the higher amount.
Actually, we will arrive at the same result even if the length of service is
only 10 months or 7 1/2 months, etc., as long as it is 6 months or more. This
is because a fraction of at least 6-months is considered as 1 whole year.
If the employee has served for less than 6 months:
one month salary = P8,000; or
1/2 month salary for every year of service = (1/2) x P8,000 x 0 year = 0.
So, it’s still P8,000 or one month salary.
Minimum Separation Pay is equivalent to one month salary. This is
actually consistent with the phrase “at least one month salary”, which
simply means that the separation must not be less than the employee’s one
month salary.
in a recently decided case of Radio Mindanao Network, Inc. and Eric S.
Canoy vs. Domingo Z. Ybarola, et al. G.R. No. 198662. September 12, 2012,
the release/quitclaim affidavits are deemed invalid for being against public
policy for two reasons:
(1) petitioners are given only half of the amount they were legally entitled
to; and
(2) where there is an absence of voluntariness when the employees signed
the document, a settlement under these terms is not and cannot be a
reasonable one, given especially the respondent’s length of service – 25
years for Ybarola and 19 years for Rivera.
When Separation Pay is Tax Exempt
Under Section 32(B)(6)(b) of the 1997 Tax Code, any amount received by an
official or employee or by his heirs from the employer as a consequence of
separation of such official or employee from the service of the employer due
to death, sickness or other physical disability or for any cause beyond the
control of the said official or employee is exempt from taxes regardless of
age or length of service.
BIR Ruling No. 131-10, December 1, 2010 reiterated the requisites in
order that the employee benefits may be granted tax exemption, namely:
(1) the employee is separated from the service of the employer due to death,
sickness or other physical disability or for any cause beyond the control of
the said official or employee; and
(2) the employer pays benefits to the official or employee or his heirs as a
consequence of such separation.
Backwages
An employee who is unjustly dismissed from work shall be entitled to his
full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement.
Backwages is the restitution of earnings unduly withheld from the
employee because of illegal termination. It partakes the nature of a penalty
the employer has to pay for illegally dismissing an employee.
Computation of Backwages.
Full backwages is to be computed from the time compensation was
withheld from the employee up to the time of his actual reinstatement.Base
figure. The computation shall include not just the basic salary, but also
regular allowances and other benefits or their monetary equivalent, i.e.,
transportation, emergency living allowance, 13th-month pay, etc.
It may be based either on the current wage rate or the wage rate at the
time of the dismissal. If current wage rate is awarded, it must be expressly
stated in the decision. If not expressly stated, the wage rate at the time of
the dismissal should be used. (Paramount Vinyl vs. NLRC, G.R. No. 81200,
October 17, 1990.)
Methods of Computing Backwages.
The rule now is that the employees are entitled to full backwages
without deduction or qualification.
Illegal Dismissal without Backwages
As a general rule, an employee who is dismissed due to the unlawful act
of the employer or to the latter’s bad faith is entitled to backwages as a
matter of right, backwages being a direct and necessary consequence of
finding of illegal dismissal. However, there are instances where despite
illegal dismissal, the illegally dismissed employee is not entitled to
backwages. This happens in cases where good faith is evident on the part of
the employer in dismissing the employee, i.e., there is just cause to dismiss
employee, but the dismissal is found by the court to be too harsh a penalty.
Effect of Failure to Claim Backwages.
The award of backwages resulting from illegal dismissal of employee is a
substantive right. Thus, it has been held that the employee does not forfeit
his right to claim backwages even if he failed to claim for the same in his
complaint.
The case of Golden Ace Builders and Arnold Azul vs. Jose A. Talde, G.R. No.
187200; 5 May 2010 provides an instance where an employee is enitled to
both backwages and seaoration pay. The case noted that an illegally
dismissed employee is entitled to two reliefs: backwages and
reinstatement. The two reliefs are separate and distinct. When
reinstatement is no longer feasible because of strained relations between
the employee and the employer, separation pay equivalent to one (1) month
salary for every year of service should be awarded as an alternative. The
payment of separation pay is in addition to payment of backwages. In
effect, an illegally dismissed employee is entitled to either reinstatement, if
viable, or separation pay if reinstatement is no longer
viable, andbackwages. Strained relations must be demonstrated as a fact
and must be supported by substantial evidence showing that the
relationship between the employer and the employee is indeed strained as a
necessary consequence of the judicial controversy.
Backwages are taxable per Revenue Memorandum Circular No. 39-
2012.
The back wages, allowances and benefits received by an employee from
a labor dispute as remunerations for services by the employee during the
period of his dismissal from service; these remunerations are subject to
income tax, and consequently, to withholding tax. For income tax and
withholding purposes, the employee is required to report as income and pay
the corresponding income taxes by allocating or spreading the back wages,
allowances and benefits through the years from his separation up to the
final decision of the court awarding the back wages.
Title II
RETIREMENT FROM THE SERVICE
Article 287. Retirement. Any employee may be retired upon reaching the
retirement age established in the collective bargaining agreement or other
applicable employment contract.
In case of retirement, the employee shall be entitled to receive such
retirement benefits as he may have earned under existing laws and any
collective bargaining agreement and other agreements: Provided, however,
that an employee’s retirement benefits under any collective bargaining and
other agreements shall not be less than those provided therein.
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.
Unless the parties provide for broader inclusions, the term ‘one-half (1/2)
month salary’ shall mean fifteen (15) days plus one-twelfth (1/12) of the
13th month pay and the cash equivalent of not more than five (5) days of
service incentive leaves.
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 five (5) years as underground mine workers, may retire and shall be
entitled to all the retirement benefits provided for in this Article. (R.A. No.
8558, approved on February 26, 1998.)
Retail, service and agricultural establishments or operations employing not
more than ten (10) employees or workers are exempted from the coverage
of this provision.
Violation of this provision is hereby declared unlawful and subject to the
penal provisions under Article 288 of this Code.
PREVIOUS LAW AND ITS AMENDMENTS
Article 287 was previously worded as:
Article 287. Retirement. Any employee may be retired upon reaching the
retirement age established in the collective bargaining agreement or other
applicable employment contract.
In case of retirement, the employee shall be entitled to receive such
retirement benefits as he may have earned under existing laws and any
collective bargaining agreement and other agreements.
In the case of Llora Motors, Inc. vs. Drilon, the Supreme Court
declared that “under Article 287 [before amendment by R.A. 7641]
entitlement to retirement benefits may accrue either (a) under existing laws
or (b) under a collective bargaining agreement or other employment
contract. It is at once apparent that Article 287 does not itself purport to
impose any obligation upon employers to set up a retirement scheme for
their employees over and above that already established under existing
laws. In other words, Article 287 recognizes that existing laws already
provide for a scheme by which retirement benefits may be earned or accrue
in favor of employees, as part of a broader social security system that
provides not only for retirement benefits but also death and funeral
benefits, permanent disability benefits, sickness benefits and maternity
leave benefits.”
The Supreme Court deemed the old provision as not a source of
retirement benefit if there was (1) no collective bargaining agreement or (2)
voluntary company policy granting such benefit.
To overturn the effect of the Llora Motors ruling, R.A. No. 7641, “An
act amending Article 287 of Presidential Decree. 422, as amended,
otherwise known as the Labor Code of the Philippines, by providing for
retirement pay to qualified private sector employees in the absence of any
retirement plan in the establishment” or the “Retirement Pay Law” which
took effect on January 7, 1993.
The provision was further amended by R.A. No. 8558, lowering the
retirement age of mine workers to 50, approved on February 26, 1998.
This article applies to private sector employees who have served the
employer establishment for at least five years and reached age sixty or
sixty-five. It covers:
1. Full time of part-time employees
2. Regular or non-regular employees
RETIREMENT DEFINED
Retirement is the withdrawal from office, public station, business,
occupation, or public duty. It 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 and/or consents to sever his
employment with the former.
Pension schemes while initially humanitarian in nature, now
concomitantly serve to secure loyalty and efficacy on the part of employees,
and to increase continuity og service and decrease the labor turnover, by
giving to the employees some assurance of security as they approach and
reach the age at which earning ability and earnings are materially impaired
or at an end.
The employer and employee are free to stipulate on the retirement
benefits, as long as these do not fall below the floor limits provided by law.
(Brion vs. South Philippine Union Mission of the Seventh Day Adventist
Church)
Coverage of the Retirement Pay Law
The Retirement Pay Law applies to all employees in the private sector,
regardless of their position, designation, or status and irrespective of the
method by which their wages are paid, except those specifically exempted.
It also includes and covers part-time employees of service and other job
contractors and domestic helpers persons in the personal service of
another.
Employees not covered by the Retirement Pay Law
1. Employees of the National Government and its political subdivisions,
including government-owned and/or controlled corporations, if they
are covered by the Civil Service Law and its regulations.
2. Employees of retail, service and agricultural establishments or opera-
tions regularly employing not more than ten employees.
Conditions for Entitlement to Retirement, Not Continuing
Because retirement ends employment, the employer cannot demand
continuing service from the retiree as a condition to the receipt and
enjoyment of the retirement benefit.
Retirement means to withdraw from one’s office, occupation, or duty.
It is an oxymoron to retire an employee and yet require him to continue
working for the same employer.
TWO TYPES OF RETIREMENT
1. Compulsory Retirement – takes places when the employee reaches
the age of 65.
2. Optional Retirement – primarily determined by the collective bar-
gaining agreement or other employment contract or employer’s retire-
ment 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. The option to retire at age below 65 is
given to the employee, not to the employer.
Minimum 5-year Service Requirement
The minimum 5-year service requirement includes the following:
1. Authorized absences, vacations, regular holidays included.
2. Only actual services included.
Employees Retiring Under the CBA or Employment Contract
Any employee may retire or be retired by his employer upon reaching
the retirement age established in the CBA or other applicable employment
contract and he shall be entitled to the benefits thereunder. Provided that
the amount is not less than those provided by law, otherwise, the employer
shall pay the difference.
Option to Retire
In the absence of any provision on optional retirement in a CBA, 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 (5) years in the establishment
concerned. That prerogative is exclusively lodged in the employee.
Employer’s Option
The law recognizes as valid any retirement plan, agreement or
management policy regarding retirement at an earlier or older age.
Where the CBA itself gives the option to retire to either the employer
of the employee, such provision is valid, and the employer’s act of retiring
an employee who is of retirable age as defined in the CBA is a valid exercise
of the option. It is not illegal dismissal and not union busting.
The Court ruled that Article 287 of the Labor Code as worded permits
employers and employees to fix the applicable retirement age at below 60
years.
A non-contributory retirement plan under which the employer may
retire an employee, regardless of age, with twenty years of service is
similarly valid. Such retirement plan, made known to the employees and
accepted by them, forms part of the employment contract.
Effect of Employee’s Assent to the Retirement Plan
If the employer can prove that the employee has freely assented to the
retirement plan, said employee may be compelled to retire before reaching
sixty or sixty-five years of age, upon reaching the stipulated years of service
to be automatically retired.
NEW RETIREMENT LAW GIVEN RETROACTIVE EFFECT
R.A. 7641 has been enacted as a labor protection measure and as a
curative statute that – absent a retirement plan devised by, an agreement
with or a voluntary grant, an employer – can respond, in part at least, to the
financial well-being of workers during their twilight years soon following
their life in labor. The law can apply to labor contracts still existing at the
time the statute has taken effect, and that its benefits can be reckoned not
only from the date of the law’s enactment but retroactively to the time said
employment contracts have started.
Thus, the Retirement Pay Law is applicable to services rendered prior
to January 7, 1993.
Conditions for Retroactive Application of R.A. 7641:
1. The claimant for retirement benefits was still the employee of the em-
ployer at the time the statute took effect.
2. The claimant was in compliance with the requirements for eligibility
under the statute for such retirement benefits.
AMOUNT OF RETIREMENT PAY
Retirement pay is equal to half-month’s pay per year of service.
“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 may be improved upon by:
1. Voluntary company policy
2. Particular agreement with the employee
3. Collective bargaining agreement
The basis of the computation of the retirement amount should be the
CBA between the parties where such CBA or the company’s retirement plan
provides for retirement benefit greater than that under the Labor Code.
On the other hand, the basis of the computation of the salary for
fifteen days for covered workers who are paid by results and do not have a
fixed monthly salary rate shall be their average daily salary (ADS). The
ADS can be derived by dividing the total salary or earnings for the twelve
months reckoned from the date of retirement by the number of actual
working days in the particular period, provided that the determination of
rates of payment by results is in accordance with the regulations.
Should 1/12 of 13th month pay and 5 days of service incentive leave
be included if the employees are not entitled thereto?
A question may be posed. Supposing the retiring employee, by reason
of the nature of his work, was not entitled to 13th month pay or to the
service incentive leave pay pursuant to the exceptions mentioned in the 13th
-Month Pay Law and the Labor Code, should he be paid upon retirement, in
addition to the salary equivalent to fifteen (15) days, the additional 2.5 day
representing one-twelfth [1/12] of the 13th month pay as well as the five (5)
days representing the service incentive leave for a total of 22.5 days?
This question was answered in the negative in the 2004 case of R & E
Transport, Inc. vs. Latag, [G. R. No. 155214, February 13, 2004]. The
Supreme Court ruled that employees who are not entitled to 13th month pay
and service incentive leave pay while still working should not be paid the
entire “22.5 days” but only the fifteen (15) days salary. In other words, the
additional 2.5 days representing one-twelfth [1/12] of the 13th month pay
and the five (5) days of service incentive leave should not be included as
part of the retirement benefits.
Interruption in the Service, Effect
The decision of the Supreme Court in the 2003 case of Sta. Catalina
College vs. NLRC, [G. R. No. 144483, November 19, 2003] is instructive on
the issue of interruption in the service. In this case, the teacher was hired
by the Sta. Catalina College in June 1955 as an elementary school teacher.
In 1970, she applied for and was granted a one-year leave of absence
without pay on account of the illness of her mother. After the expiration in
1971 of her leave of absence, she had not been heard from by petitioner
school. In the meantime, she was employed as a teacher in another school -
the San Pedro Parochial School during school year 1980-1981 and later, at
the Liceo de San Pedro, Biñan, Laguna during school year 1981-1982. In
1982, she applied anew at petitioner school which hired her. In 1997, the
teacher reached compulsory retirement age. The threshold issue is whether
the teacher’s services for petitioner school during the period from 1955 to
1970 should be factored in the computation of her retirement benefits.
The Supreme Court ruled that she cannot be credited for her services
in 1955-1970 in the determination of her retirement benefits. For, after her
one year leave of absence expired in 1971 without her requesting for
extension thereof as in fact she had not been heard from until she
resurfaced in 1982 when she reapplied with petitioner school, she
abandoned her teaching position as in fact she was employed elsewhere in
the interim and effectively relinquished the retirement benefits accumulated
during the said period. As the teacher was considered a new employee
when she rejoined petitioner school upon re-applying in 1982, her
retirement benefits should thus be computed only on the basis of her years
of service from 1982 to 1997.
Service in another Firm, Excluded in the Computation of Retirement
Benefits
In the 2002 case of Gamogamo vs. PNOC Shipping and Transport
Corp., it was held that since the retirement pay solely comes from the
employer company’s funds, it is but natural that the employee’s length of
service in another company be disregarded in the computation of his
retirement benefits.
FORCED RETIREMENT
If the intention to retire is not clearly established or if the retirement
is involuntary, it is to be treated as a discharged.
PAG-IBIG AS A SUBSTITUTE RETIREMENT PLAN
As provided in R.A. 7742, a private employer shall have the option to
treat the coverage of the Pag-IBIG Fund as a substitute retirement benefit,
provided such option does not contravene an existing collective bargaining
agreement or other employment agreement.
SSS, SEPARATE AND DISTINCT FROM RETIREMENT PAY
The employee’s retirement pay under Article 287 of the Labor Code or
under a unilateral promulgated retirement policy or plan of the employer or
under a Collective Bargaining Agreement, is separate and distinct from the
retirement benefits granted under R.A. No. 8282, otherwise known as the
Social Security Act of 1997.
RETIREMENT BENEFITS ASIDE FROM SEPARATION PAY;
DISTINCTION
May an employee claim retirement benefits and separation pay
simultaneously?
The Supreme Court ruled in the affirmative in the case of University
of the East vs. UE Faculty Association. The award for retirement benefits
was ordered pursuant to the CBA provisions regardless of the cause of
separation.
The employer has the right to recover from the employer whatever
benefits he is entitled to under the Termination Pay Law in addition to other
benefits conferred upon him by the aforesaid labor agreement.
DISTINCTION BETWEEN RETIREMENT BENEFITS
AND SEPARATION PAY
RETIREMENT BENEFITS SEPARATION PAY
A contractual right due to many
years of faithful service.
Arises from forced termination.
Where not mandated by law, may be
granted by agreement on the part of
the employees and their employer or
as a voluntary act on the part of the
employer.
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.
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.
A statutory right designed to provide
the employee with the wherewithal
during the period that he is looking
for another employment.
Gratuity Pay Distinguished From Retirement benefits
Gratuity pay, also called (voluntary) resignation pay, is separate and
distinct from retirement benefits. It is paid purely out of generosity.
Gratuity pay is paid to the beneficiary for the past services or favour
rendered purely out of the generousity of the giver or grantor to reward
employees who have rendered satisfactory services to the company.
Retirement benefits, on the other hand, are intended to help the
employee enjoy the remaining years of his life, releasing him from the
burden of worrying for his financial support, and are a form of reward for
his loyalty to the employer.
UNJUSTIFIED DENIAL OF RETIREMENT BENEFIT
Facts: In the case of E. Razon, Jr., et. al. vs. NLRC, when Razon discovered
the loss of vital books of account and found employee “guilty of breach of
trust,” he claims to have a valid ground to terminate Garzota’s services
without retirement benefits.
Contention: Whether the management is vested with discretion to approve
or disapprove an employee’s claim for retirement under the Retirement
Plan, which states that “any official and employee who is 65 years old and
upon discretion of the management, shall be qualified to compulsory
retirement from the company with benefits as provided for in this plan.”
Ruling: The words “upon discretion of the management” are not
synonymous with absolute or unlimited discretion. Management discretion
may not be exercised arbitrarily or capriciously especially with regard to
the implementation of the retirement plan.
Having rendered 20 years of services, Garzota acquired a vested right
to the retirement fund, and a right which can only be withheld upon clear
showing of good and compelling reasons. Petitioners found Garzota no
longer worthy of trust and confidence and abruptly dismissed him without
giving him a chance to explain his side. Had petitioners conducted an
investigation, they would have found that in 1982 a fire gutted a portion of
Razon’s warehouse destroying books, records and vouchers.
Razon then argued that the discharged employee impliedly withdrew
his intention to retire when he joined Marina Port Services, Inc. But the fact
that he sought employment elsewhere should not hinder him from claiming
his retirement services.
Separation Disguised as Retirement
In S. Villena vs. NLRC and Batangas, Laguna, Tayabas Bus Co., the
Court ruled: “having been illegally dismissed, employee is entitled to
receive full compensation for the remaining three years of his work life.
Upon reaching age sixty (60), he may be retired and shall be entitled to
receive the normal retirement benefits under the company’s applicable
bona fide retirement plan or established company policy or as provided in
Section 14, Book IV [now] of the Implementing Regulations of the Labor
Code.
Dismissal to Avoid Retirement Benefits
If it is wrong to obstensibly retire an employee who actually is
retrenched, it is likewise wrong, and probably more reprehensible, to
dismiss an employee to avoid paying his retirement benefits.
EXTENTION OF SERVICE OF RETIREE
Upon the compulsory retirement of an employee or official in the
public or private service, his employment is deemed terminated. The
manner of extension of service is addressed to the sound discretion of the
employer. It is a privilege only the employer can grant. The employer would
be the best judge as to the grounds that may warrant a grant or denial of
the extension of services of an employee or official.
CASE:
Obusan V. Philippine National Bank G.R. No. 181178
Facts: In 1979, petitioner Amelia R. Obusan (Obusan), was hired by PNB . During this time, PNB is still a government owned or controlled corporation. Its retirement benefit is governed by the Government Insurance Service System pursuant to the Revised Government Service Insur-ance Act of 1977 (Presidential Decree No. 1146).
On May 27, 1996, PNB was privatized. Consequent to the privatization, all PNB employees, in-cluding Obusan, were deemed retired from the government service.Obusan continued to be an employee of PNB.Later, the PNB Board of Directors, through Resolution No. 30 dated Decem-ber 22, 2000, as amended, approved the PNB Regular Retirement Plan (PNB-RRP). It provides that the retirement date of a member shall be 60 years of age or if the employee has rendered 30 years of service, regardless of age, whichever of the said conditions comes first and shall be au-tomatically entitled to receive the retirement benefits under the Plan.
On February 11, 2002, PNB informed Obusan that her last day of employment would be on March 3, 2002, as she would reach the mandatory retirement age of 60 years on March 4, 2002. Obusan questioned her compulsory retirement. She contended that PNB could not compulsorily retire her at the age of 60 years, with her having a vested right to be retired only at 65 years old pursuant to civil service regulations.
Issue: Whether or not Obusan shall be governed under the retirement system provided by GSIS or by the Labor Code.
Ruling:As a result of the privatization of PNB, all of its officers and employees were deemed retired from the government service. As such, they are now covered by the provisions of the Labor Code.
“..Retirement plans allowing employers to retire employees who have not yet reached the
compulsory retirement age of 65 years are not per se repugnant to the constitutional guaranty of
security of tenure. By its express language, the Labor Code permits employers and employees to
fix the applicable retirement age at 60 years or below, provided that the employees’ retirement
benefits under any CBA and other agreements shall not be less than those provided therein.[25] By this yardstick, the PNB-RRP complies.
However, company retirement plans must not only comply with the standards set by
existing labor laws, but they should also be accepted by the employees to be commensurate to
their faithful service to the employer within the requisite period.”
SOURCES:
Azucena, Cesario Alvero, Jr. Labor Code with Comments and Cases
Volume II.
Chan, Joselito Guianan. Labor Relations