Group 3

Termination of Employment
Labor Law Review

Submitted by:
BACUS, Billie Girl
BAUTISTA, Angelique
LIDASAN, Katrina Maria
PAMPO, Ann Karen
PARAS, Christine Mae
PREGLO, Mimosa Diviena
SANGALANG, John Norbert
TULDANES, Maya Angela

Submitted to:
Atty. Panganiban

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 TABLE OF CONTENTS
Termination of Employment

A. Employer-employee relationship 5

1. Four-fold test 5
a. Important Test 5
b. Other test used to determine relationship 6

2. Kinds of employment 6
a. Probationary 6
b. Regular 7
c. Project employment 7
d. Seasonal 8
e. Casual 9
f. Fixed-term 9
g. Apprentices and trainees. 10
h. Commission Based Employees 11
i. Piece Rate employees 11

3. Levels of Employment 11

a. First-Level Management. 11
b. Middle-Level Management. 12
c. Senior, Executive or Top-Level Management and Chiefs. 12

4. Independent Contracting 13

a. Articles 106 to 109 of the Labor Code 13

b. Job Contracting vs. Labor Only Contracting 14
c. Department Order No. 18-A 15
d. Department Circular No. 01-12 17
e. Effects of Labor-Only Contracting 18
f. Trilateral relationship in job contracting 18

B. Dismissal from employment 19

1. Just Causes 19
2. Authorized Causes 23
3. Other Causes 27
4. Due Process 29
a. Procedural 29
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 b. Substantial 30
c. Administrative Due Process 31
d. Twin-notice Requirement/Rule 31
e. Hearing; meaning of opportunity to be heard 32
f. When notices may be dispensed 33
g. Primary Rights in an Administrative Proceeding 33
h. Absent Without Leave – Procedure undertaken 33
i. Abandonment – Procedure undertaken. 33

C. Reliefs for Illegal Dismissal 34

1. Reinstatement 34
a. Pending appeal (Art. 223, Labor Code) 34
b. Separation pay in lieu of reinstatement 34

2. Backwages – Awards 36
a. Computation 36
b. Limited backwages 37

3. Valid and Law Management Remedies. 38

D. Preventive Suspension 40

1. When valid
2. When unlawful.

E. Constructive Dismissal 42

F. Retirement – RA 7641 and Labor Code of the Philippines. 51

1. Eligibility and Benefits 51

2. Resignation 54
a. Voluntary
i. Effects and Consequences
ii. Remedy
iii. Tax Repercussions
b. Involuntary/Forced Resignation 59
i. Effects and Consequences
ii. Remedy
iii. Tax Repercussions

3. Mandatory Retirement 61

a. Violations on requiring employees to retire on the guise

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optional retirement age
b. Penalties
c. Remedies of Employees
d. FILOMENO N. LANTION, CLARITA C. LANTION, and
JUANA C. FUENTES, petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION, GREGORIO
ARANETA UNIVERSITY FOUNDATION and OBED JOSE MENESES,
respondents. G.R. No. 82028, January 29, 1990. 62

e. GREGORIO ARANETA UNIVERSITY FOUNDATION and

OBED JOSE MENESES, petitioners, vs.NATIONAL LABOR
RELATIONS COMMISSION, PEDRO L. REYES, ROSARIO D.
REYES, BILLY T. VICARIO, CORAZON D. VICARIO, LUIS ALMAZAN
and JULIAN R. MAIMBAN JR, G.R. No. 75925-26, October 29, 1987 63

4. Entitlement to Social Insurance Benefits and Company Retirement

Benefits 73

5. Tax and legal ramifications of: 85

a. Voluntary Resignation 85
b. Involuntary Resignation 85
c. Optional Retirement 86
d. Mandatory Retirement 86

REPORTING QUESTIONS AND ANSWERS 88

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Paras, Christine Mae C.
2018-0419
Labor Law Review
Group 3 Written Report

3. Termination of Employment

A. Employer-employee relationship
Employer is any person, natural or juridical, domestic or foreign, who carries on it the
Philippines any trade, business, industry, undertaking or activity of any kind and uses the
services of another person who is under his orders as regards the employment, except
the Government and any of its political subdivisions, branches or instrumentalities,
including corporations owned or controlled by the Government.

Employee is any person who performs services for an employer in which either or both
mental and physical efforts are used and who receives compensation for such services,
where there is an employer‐employee relationship (RA No. 8282, Social Security Law).

Existence of an employment relationship

Employment relationship is determined by law and not by contract (Insular Life Assurance
Co. Ltd. v. NLRC, G.R. No. 119930, March 12, 1998)

1. Four-fold test
TESTS OF EMPLOYMENT RELATIONSHIP

Factors determining the existence of an employer-employee relationship The four–fold

test (indicia of determination):
1. Selection and engagement of the employee;
2. Payment of wages;
3. Power of dismissal; and
4. Power of control (1 Azucena, 2016 p. 189)

It is the so-called “control test” that is the most important element. Absent the power to
control to the employee with respect to the means and methods of accomplishing his
work, there is no employeremployee relationship between the parties (Continental Marble
Corp., et.al v. NLRC, G.R. No. 43825, May 9, 1988).

a. Important Test
Control test
The control test assumes primacy in the overall consideration. There is an Employer-
Employee relationship when the person for whom the services are performed reserves
the right to control not only the end achieved but also the manner and means used to
achieve that end (Television and Production Exponents Inc. v. Servana, 542 SCRA 578).

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The control test calls merely for the existence of the right to control the manner of doing
the work, not the actual exercise of the right.

b. Other test used to determine relationship

ECONOMIC DEPENDENCY (TWO-TIERED TEST)

This two-tiered test would provide us with a framework of analysis, which would take into
consideration the totality of circumstances surrounding the true nature of the relationship
between the parties. This is especially appropriate in this case where there is no written
agreement or terms of reference to base the relationship on and due to the complexity of
the relationship based on the various positions and responsibilities given to the worker
over the period of the latter’s employment (Francisco v. NLRC, G.R. No. 170087, August
31, 2006).

Elements:
1. The putative Employer’s power to control the Employee with respect to the means and
methods by which the work is to be accomplished (Four-fold test);
2. The underlying economic realities of the activity or relationship (economic reality test).

2. Kinds of employment
a. Probationary

Probationary employment
Employment where the Employee, upon his engagement:
1. Is made to undergo a trial period
2. During which the Employeer determines his fitness to qualify for regular
employment,
3. Based on reasonable standards made known to the Employee at the time of
engagement (IRR, Book VI, Rule I, Sec 6).

NOTE: 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 (IRR, Book VI, Rule
I, Sec 6[d]).

Characteristics of probationary employment

1. It is an employment for a trial period;
2. It is a temporary employment status prior to regular employment;
3. It arises through a contract with the following elements:
a. The Employee must learn and work at a particular type of work
b. Such work calls for certain qualifications
c. The probation is fixed d. The Employee r reserves the power to terminate during
or at the end of the trial period e. And if the Employee has learned the job to the
satisfaction of the Employee r, he becomes a regular Employee.
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Period of probationary employment
GR: It shall not exceed 6 months.
XPNs:
1. Covered by an Apprenticeship or Learnership agreement stipulating a different
period;
2. Voluntary agreement of parties (especially when the nature of work requires a
longer period)

NOTE: By voluntarily agreeing to such an extension, the Employee waived any

benefit attaching to the completion of the period if he still failed to make the grade
during the period of extension (Mariwasa Mfg. Inc. v. Hon. Leogardo, G.R. No.
74246, January 26, 1989);

3. The Employee r gives the Employee a second chance to pass the standards set
(Mariwasa Manufacturing, Inc. v. Leogardo, Jr., G.R. No. 74246, January 26,
1989);
4. When the same is required by the nature of the work, e.g. the probationary
period set for professors, instructors and teachers is 3 consecutive years of
satisfactory service pursuant to DOLE Manual of Regulations for Private Schools;
5. When the same is established by company policy.

b. Regular

Types of regular employment

1. As to nature of work – 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 Employee r, the provisions of written
agreements to the contrary notwithstanding and regardless of the oral agreements
of the parties (IRR, Book VI, Rule I, Sec. 5 [a]).
2. As to length of service – Any Ee who has rendered at least one (1) 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 (IRR, Book VI, Rule I, Sec. 5
[b]).

c. Project employment

Project employment is employment that has been fixed for:

1. Specific undertaking – a specific project or undertaking the completion; or
2. Time-bound – termination of which has been determined at the time of
engagement of the Employee (IRR, Book VI, Rule I, Sec. 5[a]).
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The period is not the determining factor, so that even if the period is more than 1
year, the Employee does not necessarily become regular.

NOTE: Where the employment of a project Employee is extended long after the
supposed project has been finished, the Employees are removed from the scope
of project Employees and considered as regular Employees.

Requisites in determining whether an Employee is a project Employee

1. Designation of named Employees as “Project Employees”;
2. The project Employee was assigned to carry out a specific project or
undertaking;
3. The duration and scope of which were specified at the time the Employee was
engaged for that project (Imbuido v. NLRC, G.R. No. 114734, May 31, 2000);
4. The Employee must have been dismissed every after completion of his project
or phase;
5. Report to the DOLE of Employee’s dismissal on account of completion of
contract(Policy Inst. No. 20; D.O. 19 [1997]).

d. Seasonal

Seasonal employment
Employment where the job, work or service to be performed is seasonal in nature
and the employment is for the duration of the season [IRR, Book VI, Rule I, Sec.5
(a)].

An employment arrangement where an Employee is engaged to work during a

particular season on an activity that is usually necessary or desirable in the usual
business or trade of the Employer.

NOTE: For Seasonal Employees, their employment legally ends upon completion
of the project or the season. The termination of their employment cannot and
should not constitute an illegal dismissal (Mercado v. NLRC, G.R. No. 79869,
September 5, 1991).

Seasonal Employees as regular Employees

Seasonal Employees can be considered regular Employees. The fact that
Seasonal Employees do not work continuously for one whole year but only for the
duration of the season does not detract from considering them in regular
employment. Seasonal workers who are called to work from time to time and are
temporarily laid off during off-season are not separated from service in that period,
but merely considered on leave until re-employed. If the Employee e has been
performing the job for at least a year, even if the performance is not continuous
and merely intermittent, the law deems repeated and continuing need for its
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performance as sufficient evidence of the necessity if not indispensability of that
activity to the business. Hence, the employment is considered regular, but only
with respect to such activity and while such activity exists (Benares v. Pancho,
G.R. No. 151827, April 29, 2005).

e. Casual

Casual employment
It is an employment where the Employee is engaged in an activity which is not
usually necessary or desirable in the usual business or trade of the Employer,
provided: such employment is neither Project nor Seasonal (LC, Art. 281). He
performs only an incidental job in relation to the principal activity of the Employer.

NOTE: But despite the distinction between regular and casual employment, every
Employee shall be entitled to the same rights and privileges and shall be subject
to the same duties as may be granted by law to regular Employees during the
period of their actual employment.

An Employee is engaged to perform a job, work or service which is merely

incidental to the business of the Employer, and such job, work or service is for a
definite period made known to the Employee at the time of engagement [IRR, Book
Vi, Rule I, Sec. 5 (b)].

Casual Employee becoming a regular Employee

If he has rendered at least 1 year of service, whether such service is continuous
or broken, he is considered as regular Employee with respect to the activity in
which he is employed, and his employment shall continue while such activity
exists. A casual Employee is only casual for 1 year, and it is the passage of time
that gives him a regular status (KASAMMA-CCO v. CA, G.R. No. 159828, April 19,
2006).

f. Fixed-term

Fixed term employment

It is an employment where a fixed period of employment was agreed upon:
1. Knowingly and voluntarily by the parties;
2. Without any force, duress or improper pressure being brought to bear upon the
Ee and business of Er (Philips Semiconductor v. Fadriquela, G.R. No. 141717,
April 14, 2004).

Fixed-term employment v. Project Employment

Both employments are time bound or for a certain period as agreed upon at the
time of engagement, however in project employment, the employee is tasked to
do specific undertaking, which is not present in fixed-term employment.
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Brent Doctrine
Article 295 of the Labor Code does not prohibit an employment contract with a
fixed period, provided it is entered into by the parties without any force, duress of
improper pressure being brought to bear upon either party, particularly the
employee and absent any other circumstances vitiating consent. Such
employment for a defined period is allowed even where the duties of the employee
consist of activities usually necessary or desirable in the usual business of the
employer.

g. Apprentices and trainees

Apprentice
Any worker who is covered by a written apprenticeship agreement with an
individual Employer or any of the entities recognized under the Labor Code.

General Rule: Apprenticeship programs shall be primarily voluntary.

XPNs: Compulsory Apprenticeship:

1. National security or economic development so demand, the President may
require compulsory training;
2. Services of foreign technicians are utilized by private companies in
apprenticeable trades (LC, Art. 70).

Apprenticeable occupation
Any trade, form of employment or occupation which requires more than three (3)
months of practical training with theoretical instruction officially endorsed by the
tripartite body and approved for apprenticeship by the TESDA.

Employment status of apprentices

They are contractual workers whose length of service depends on the term
provided for in the apprenticeship agreement. Thus, the employer is not obliged to
employ the apprentice after the completion of his training.

Learners
1. They are persons hired as trainees in semi-skilled and other industrial
occupations
2. Which are non-apprenticeable and
3. Which may be learned through practical training on the job in a relatively short
period of time
4. Which shall not exceed 3 months
5. Whether or not such practical training is supplemented by theoretical
instructions (IRR, Book II, Rule VII, Sec. 1[a]).

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 Employment of learners
Learners may be employed when:
1. No experienced worker is available
2. It is necessary to prevent curtailment of employment opportunities; and
3. Employment does not create unfair competition in terms of labor costs or impair
or lower working standards.

h. Commission Based Employees

Commission-based employees receive pay based on the revenue they take in for
the business. A commission is a sum of money that is payable to an employee
after they complete a service or a task for a business.

i. Piece Rate employees

Piece-Rate Workers refers to those who are paid a standard amount for every
piece or unit of work produced that is more or less regularly replicated without
regard to the time spent in producing the same.

3. Levels of Employment

a. First-Level Management

First level is also known as supervisory / operative level of management. First-level

managers are also called first-line managers or supervisors. First-line managers are
responsible for the daily management of line workers—the employees who actually
produce the product or offer the service. There are first-line managers in every work unit
in the organization. It consists of supervisors, foreman, section officers, superintendent
etc. According to R.C. Davis, “Supervisory management refers to those executives whose
work has to be largely with personal oversight and direction of operative employees”. In
other words, they are concerned with direction and controlling function of management.
Their activities include -

a. Assigning of jobs and tasks to various workers.

b. They guide and instruct workers for day to day activities.
c. They are responsible for the quality as well as quantity of production.
d. They are also entrusted with the responsibility of maintaining good relation in the
organization.
e. They communicate workers problems, suggestions, and recommendatory appeals
etc to the higher level and higher-level goals and objectives to the workers.
f. They help to solve the grievances of the workers.
g. They supervise & guide the sub-ordinates.
h. They are responsible for providing training to the workers.
i. They arrange necessary materials, machines, tools etc for getting the things done.
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 j. They prepare periodical reports about the performance of the workers.
k. They ensure discipline in the enterprise.
l. They motivate workers.
m. They are the image builders of the enterprise because they are in direct contact
with the workers.

b. Middle-Level Management

Middle-level managers, or middle managers, are those in the levels below top managers.
Middle managers' job titles include: General manager, Plant manager, Regional manager,
and Divisional manager.

Middle-level managers are responsible for carrying out the goals set by top management.
They do so by setting goals for their departments and other business units. Middle
managers can motivate and assist first-line managers to achieve business objectives.
Middle managers may also communicate upward, by offering suggestions and feedback
to top managers. Because middle managers are more involved in the day-to-day workings
of a company, they may provide valuable information to top managers to help improve
the organization's bottom line.

The branch managers and departmental managers constitute middle level. They are
responsible to the top management for the functioning of their department. They devote
more time to organizational and directional functions. In small organization, there is only
one layer of middle level of management but in big enterprises, there may be senior and
junior middle level management. Their role can be emphasized as -

a. They execute the plans of the organization in accordance with the policies and
directives of the top management.
b. They make plans for the sub-units of the organization.
c. They participate in employment & training of lower-level management.
d. They interpret and explain policies from top level management to lower level.
e. They are responsible for coordinating the activities within the division or
department.
f. It also sends important reports and other important data to top level management.
g. They evaluate performance of junior managers.
h. They are also responsible for inspiring lower-level managers towards better
performance.

c. Senior, Executive or Top-Level Management and Chiefs.

Top-level managers, or top managers, are also called senior management or executives.
These individuals are at the top one or two levels in an organization and hold titles such
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as: Chief Executive Officer (CEO), Chief Financial Officer (CFO), Chief Operational
Officer (COO), Chief Information Officer (CIO), Chairperson of the Board, President, Vice
president, corporate head.

It consists of board of directors, chief executive or managing director. The top

management is the ultimate source of authority, and it manages goals and policies for an
enterprise. It devotes more time on planning and coordinating functions.

The role of the top management can be summarized as follows -

a. Top management lays down the objectives and broad policies of the enterprise.
b. It issues necessary instructions for preparation of department budgets,
procedures, schedules etc.
c. It prepares strategic plans & policies for the enterprise.
d. It appoints the executive for middle level i.e. departmental managers.
e. It controls & coordinates the activities of all the departments.
f. It is also responsible for maintaining a contact with the outside world.
g. It provides guidance and direction.
h. The top management is also responsible towards the shareholders for the
performance of the enterprise.

4. Independent Contracting

a. Articles 106 to 109 of the Labor Code

Article 106. Contractor or subcontractor. Whenever an employer enters into a

contract with another person for the performance of the former’s work, the
employees of the contractor and of the latter’s subcontractor, if any, shall be paid
in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his
employees in accordance with this Code, the employer shall be jointly and
severally liable with his contractor or subcontractor to such employees to the extent
of the work performed under the contract, in the same manner and extent that he
is liable to employees directly employed by him.

The Secretary of Labor and Employment may, by appropriate regulations, restrict

or prohibit the contracting-out of labor to protect the rights of workers established
under this Code. In so prohibiting or restricting, he may make appropriate
distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among the

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parties involved shall be considered the employer for purposes of this Code, to
prevent any violation or circumvention of any provision of this Code.

There is "labor-only" contracting where the person supplying workers to an

employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers recruited
and placed by such person are performing activities which are directly related to
the principal business of such employer. In such cases, the person or intermediary
shall be considered merely as an agent of the employer who shall be responsible
to the workers in the same manner and extent as if the latter were directly
employed by him.

Article 107. Indirect employer. The provisions of the immediately preceding article
shall likewise apply to any person, partnership, association or corporation which,
not being an employer, contracts with an independent contractor for the
performance of any work, task, job or project.

Article 108. Posting of bond. An employer or indirect employer may require the
contractor or subcontractor to furnish a bond equal to the cost of labor under
contract, on condition that the bond will answer for the wages due the employees
should the contractor or subcontractor, as the case may be, fail to pay the same.

Article 109. Solidary liability. The provisions of existing laws to the contrary
notwithstanding, every employer or indirect employer shall be held responsible
with his contractor or subcontractor for any violation of any provision of this Code.
For purposes of determining the extent of their civil liability under this Chapter, they
shall be considered as direct employers.

b. Job Contracting vs. Labor Only Contracting

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

“Labor-Only” Contracting
It is a prohibited act, an arrangement where the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or service for a principal.

Job Contracting vs. Labor-only Contracting

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

c. Department Order No. 18-A

Department Order No. 18-A, series of 2011: Rules Implementing Articles 106 to
109 of the Labor Code, as amended

On December 4, 2011, Department of Labor and Employment (DOLE) Department

Order No. 18-A (D.O. 18-A), the new Rules Implementing Articles 106 to 109 of
the Labor Code of the Philippines, on contracting out of services, became effective.
Contracting is defined as an arrangement whereby a principal agrees to put out or
farm out with a contractor the performance or completion of a specific job or service
within a definite or predetermined period, regardless of whether such job, work or
service is to be performed or completed within or outside the premises of the
principal.
Among the more important and substantive developments under D.O. 18-A are the
following:
• Coverage – it covers a trilateral arrangement among the principal, the contractor
and the latter’s employees. It does not cover the following: a) an individual who is
himself an independent contractor; b) the vendor-vendee relationship for entire
business processes; c) information technology-enabled services involving entire
business processes, e.g. business process outsourcing (BPO), knowledge
process outsourcing, legal process outsourcing, hardware and/or software
support, medical transcription, animation services, back office operations/support;
and d) contractors licensed by the Philippine Contractors Accreditation Board
(PCAB) in the construction industry.

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• In-house Agency – the definition of an in-house agency was expanded to refer to
a contractor which is owned, managed, or controlled directly or indirectly by the
principal or one where the principal owns/represents any share of stock, and which
operates solely or mainly for the principal. It is prohibited to engage the services
of an in-house agency.
• Capitalization/Financial Capacity of Contractors – the concept of “Net Financial
Contracting Capacity (NFCC)” was introduced, which refers to the formula to
determine the financial capacity of the contractor. NFCC is the current assets
minus current liabilities multiplied by K, which stands for contract duration
equivalent to: 10 for one year or less; 15 for more than one (1) year up to two (2)
years; and 20 for more than two (2) years, minus the value of all outstanding or
ongoing projects including the contracts to be started.
“Substantial capital” refers to paid-up capital stocks/shares of at least Three Million
Pesos (P3,000,000.00) in the case of corporations, partnerships and cooperatives;
and at least 3M Pesos for single proprietorship.
• Labor-only contracting – this is prohibited. It refers to an arrangement where: (a)
the contractor does not have substantial capital or investments in the form of tools,
equipment, machineries, work premises, among others, and the employees
recruited and placed are performing activities which are usually necessary or
desirable to the operation of the company, or directly related to the main business
of the principal within a definite or predetermined period, regardless of whether
such job, work or service is to be performed or completed within or outside the
premises of the principal; or (b) The contractor does not exercise the right to control
over the performance of the work of the employee.
• Service Fee – it is at least 10 percent of the total contract cost.
• Registration – it is mandatory for contractors to register with the DOLE, the failure
of which shall give rise to the presumption that the contractor is a labor-only
contractor.
• Prohibited Activities – the Order expanded the list of prohibited acts.
• Service Agreement – D.O. 18-A enumerated what should be the contents of a
Service Agreement and provided a template for the same.

the Department of Labor & Employment (“DOLE”) issued Department Order No. 18-
A, Series of 2011 (“DO 18-A”). Section 4 of DO 18-A states that contracting or
subcontracting shall be legitimate if all the following circumstances concur:

(a) The contractor is registered with DOLE and carries a distinct and independent
business and undertakes to perform the job, work or service on its own responsibility,
according to its own manner and method, and free from control and direction of the
principal in all matters connected with the performance of the work except as to the
results thereof;

(b) The contractor has substantial capital and/or investment; and

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(c) The Service Agreement ensures compliance with all the rights and benefits under
Labor Laws.

Furthermore, the contractor’s employees shall be entitled to all the rights and
privileges as provided for in the Labor Code to include the following:

(a) Safe and healthful working conditions;

(b) Labor standards such as but not limited to service incentive leave, rest days,
overtime pay, holiday pay, 13th month pay, and separation pay as may be provided
in the Service Agreement or under the Labor Code;
(c) Retirement benefits under the SSS or retirement plans of the contractor, if there is
any;
(d) Social security and welfare benefits;

(e) Self-organization, collective bargaining and peaceful concerted activities; and

(f) Security of tenure.

In fact, it is required that the Employment Contract between the Contractor and
Employee include the following terms and conditions:

(a). The specific description of the job, work or service to be performed by the
employee;

(b). The place of work and terms and conditions of employment, including a statement
of the wage rate applicable to the individual employee; and

(c). The term or duration of employment that must be co-extensive with the Service
Agreement or with the specific phase of work for which the employee is engaged.

A salient feature of DO 18-A is the mandatory registration of all contractors with the
DOLE. A Certificate of Registration is good for 3 years. Failure to register shall give
rise to the presumption that the contractor is engaged in labor-only contracting, which
is prohibited. Hence, it is strongly advised that contractors register with DOLE, not
only in compliance with DO 18-A but also as a preventive measure to avoid problems
in the future concerning labor claims and cases filed by employees.

d. Department Circular No. 01-12

This Circular is being used in response to queries on whether firms or companies
in the Business Process Outsourcing (BPO) or Knowledge Process Outsourcing
(KPO) and in the Construction Industry are covered by D.O. No. 18-A, Series of
2011 or the Rules Implementing Articles 106 to 109 of the Labor Code.

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In the implementation of Articles 106 to 109 of the Labor Code, as amended
Department Order No. 18-A, Series of 2011, states in Section 3© that contracting
or subcontracting is “an arrangement whereby a principal agrees to put out or farm
out with a contractor the performance or completion of a specific job, work or
service within a definite or predetermined period, regardless of whether such job ,
work or service is to be performed or completed within or outside the premises of
the principal”.

e. Effects of Labor-Only Contracting

A finding that a contractor is a labor-only contractor, as opposed to permissible job

contracting, is equivalent to declaring that there is an employer-employee
relationship between the principal and the employees of the supposed contractor,
and the labor-only contractor is considered as a mere agent of the principal, the
real employer. [G.R. No. 219435, January 17, 2018 Allied Banking Corporation v.
Reynold Calumpang]

f. Trilateral relationship in job contracting

Trilateral Relationship
In legitimate contracting, there exists a trilateral relationship under which there is
a contract for a specific job, work or service between the principal and the
contractor or subcontractor, and a contract of employment between the contractor
or subcontractor and its workers.

There are three parties involved in these arrangements:

1. Principal – any employer who decides to farm out a job or service to a contractor
or subcontractor;
2. Contractor or subcontractor – has the capacity to independently undertake the
performance of the job, work or service; and,
3. Contractual workers –engaged by the contractor or subcontractor to accomplish
the job, work or service (Aliviado et. al., v. Procter & Gamble Phils., Inc., and
Promm-Gem, Inc., G.R. No. 160506, June 6, 2011) pursuant to the agreement
between the latter and the principal.

18
Lidasan, Katrina Maria A.
2018-0420
Labor Law Review
Group 3 Written Report

B. Dismissal/Severance from Employment

Termination of Employment means to sever the employer-employee relationship, and

put an end on an employee’s current work. It can be made by the Employee through
Resignation or by the Employer for just or authorized causes, as provided in the Labor
Code of the Philippines.

Coverage
All establishments or undertakings, whether for profit or not. [Art. 293]

Exception
Government and its political subdivisions including GOCCs without original charter. [Sec.
1, Rule 1, Book VI, IRR]

Security of Tenure [Art. 294]

In case of regular employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title.

1. JUST CAUSES
A dismissal based on a just cause means that the employee has committed a wrongful
act or omission.

ART. 297. [282] Termination by Employer. – An employer may terminate an

employment for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or
duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer
or any immediate member of his family or his duly authorized representatives; and
(e) Other causes analogous to the foregoing.

Basis

19
As a measure of self-protection against acts inimical to the employer’s interest. An
employer cannot be compelled to continue employing an employee guilty of acts inimical
to the employer’s interest, justifying loss of confidence in him. [Yabut v. Meralco, GR No.
190436 (2012)]

(a) SERIOUS MISCONDUCT OR WILLFUL DISOBEDIENCE

Requisites of Serious Misconduct

1. There must be misconduct;
2. The misconduct is of such grave and aggravated character;
3. It must relate to the performance of the employee’s duties;
4. A showing that the employee becomes unfit to continue working for the employer. [Sec.
5.2(a), D.O. No. 147-15]

Misconduct refers to the improper or wrong conduct that transgresses 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. [Northwest Airlines Inc v. Del
Rosario, GR No. 157633 (2014)]

Requisites of Willful Disobedience

1. There must be disobedience or insubordination;
2. The disobedience or insubordination must be willful or intentional characterized by a
wrongful and perverse attitude;
3. The order violated must be reasonable, lawful and made known to the employee [Mirant
Philippines Corp v. Sario, GR No. 197598 (2012)]; and
4. The order must pertain to the duties which he has been engaged to discharge. [Sec.
5.2(b), D.O. No. 147-15]

The employee’s initial reluctance to prepare the checks which was seemingly an act of
disrespect and defiance, was for honest and well-intentioned reasons to protect the
company from liability under the Bouncing Checks Law. It was not wrongful nor willful.
Neither can it be considered an obstinate defiance of company authority. [Lores Realty
Enterprises v. Paria, GR No. 171189 (2011)]

(b) GROSS AND HABITUAL NEGLECT OF DUTIES

Requisites
1. There must be a neglect of duty;
2. The neglect must be both gross and habitual in character.

Gross negligence has been defined as the want or absence of or failure to exercise
slight care or diligence, or the entire absence of care. It evinces a thoughtless disregard
of consequences without exerting any effort to avoid them. In order to constitute just
cause for an employee’s dismissal due to negligence, it must be both gross and habitual.
20
A single or an isolated act cannot be categorized as habitual. [National Bookstore v. CA,
GR No. 146741 (2002)]

Gross negligence - want of care in the performance of one’s duties.

Habitual neglect - repeated failure to perform one’s duties for a period of time.

Gross negligence includes gross inefficiency

Gross and habitual neglect of duty includes gross inefficiency, negligence and
carelessness. [Century Iron Works, Inv. c. Banas, GR No. 184116 (2013)]

(c) FRAUD/WILLFUL BREACH OF TRUST

Requisites of fraud or willful breach of trust:

1. There must be an act, omission or concealment;
2. The act, omission or concealment involves a breach of legal duty, trust, or confidence
justly reposed;
3. It must be committed against the employer or his/her representative; and
4. It must be in connection with employee’s work. [Sec. 5.2 (d), DO No. 147-15]

When dismissal is proper for fraud/willful breach of trust

Such breach is willful if it is done intentionally, knowingly, and purposely, without
justifiable excuse as distinguished from an act done carelessly, thoughtlessly, heedlessly
or inadvertently. The act complained of must be work-related and shows that the
employee is unfit to continue working. In addition, it must be premised on the fact that the
employee concerned holds a position of responsibility, trust and confidence or is
entrusted with confidence with respect to delicate matters such as handling or case and
protection of the property and assets of the employer. [Villanueva, Jr. v. NLRC, GR No.
176893 (2012)]

Requisites of loss of confidence

1. There must be an act, omission or concealment;
2. The act, omission or concealment justifies the loss of trust and confidence of the
employer to the employee;
3. The employee concerned must be holding a position of trust and confidence;
4. The loss of trust and confidence should not be simulated;
5. It should not be used as a subterfuge for causes which are improper, illegal or
unqualified; and
6. It must be genuine and not a mere afterthought to justify an earlier action taken in bad
faith. [Sec. 5.2(e), DO No. 147-15]

When dismissal is proper for loss of trust/confidence

The employee is one holding a position of trust and confidence (e.g. managerial or
fiduciary employees). There must be an act that justifies the loss of trust and confidence

21
based on a willful breach of trust and founded on clearly established facts. [Wesleyan
University - Philippines v. Reyes, GR No. 208321 (2014)]

Moreover, the act complained must be related to the performance of the duties of the
employee such as would show him to be thereby unfit to continue working for the
employer. [Equitable Banking Corp. v. NLRC, GR No. 102467 (1997)]

Positions of trust and confidence

1. Managerial employees - vested with powers or prerogatives to lay down management
policies and to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline
employees or effectively recommend such managerial actions.

2. Fiduciary Rank and File - those who in the normal and routine exercise of their
functions, regularly handle significant amounts of money or property. Ex. cashiers,
auditors, property custodians. [Prudential Guarantee and Assurance Employee Labor
Union v. NLRC, GR No. 185335 (2012)].

(d) COMMISSION OF A CRIME

Requisites:
1. There must be an act or omission punishable or prohibited by law; and
2. The act or omission was committed by the employee against the person of the
employer, his immediate family member, or his duly authorized representative. [Sec.
5.2(f), D.O. No. 147-15]

The employer may validly dismiss for loss of trust and confidence an employee who
commits an act of fraud prejudicial to the interest of the employer. Neither a criminal
prosecution nor a conviction beyond reasonable doubt for the crime is a requisite for the
validity of the dismissal. [Concepcion v. Mimex Import Corporation, GR No. 153569
(2012)]

(e) ANALOGOUS CAUSES

Requisites
1. There must be an act or omission similar to those specified just causes; and
2. The act or omission must be voluntary and/or willful on the part of the employees.

No act or omission shall be considered as analogous cause unless expressly specified in

the company rules and regulations or policies. [Sec 5.2. (g), D.O. No. 147-15]

Analogous means susceptible of comparison with another either in general or in some

specific detail; or has a close relationship with the latter.

Other causes
22
1. Abandonment
2. Courtesy resignation
3. Change of ownership
4. Habitual absenteeism/tardiness
5. Poor performance
6. Past offenses
7. Habitual infractions
8. Immorality
9. Totality of infractions
10. Pregnancy out of wedlock
11. Conviction/commission of a crime
12. Temporary “off-detail” or “floating status”

2. AUTHORIZED CAUSES

A dismissal based on an authorized cause means that there exists a ground which the
law itself allows or authorizes to be invoked to justify the termination of an employee even
if he has not committed any wrongful act or omission, such as installation of labor-saving
devices, redundancy, retrenchment, closure of cessation of business operations or
disease.

ART. 298. [283] Closure of Establishment and Reduction of Personnel. - The

employer may also terminate the employment of any employee due to the installation of
labor-saving devices, redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless the closing is for the
purpose of circumventing the provisions of this Title, by serving a written notice on the
workers and the Ministry of Labor and Employment at least one (1) month before the
intended date thereof. In case of termination due to the installation of labor-saving devices
or redundancy, the worker affected thereby shall be entitled to a separation pay
equivalent to at least his one (1) month pay or to at least one (1) month pay for every year
of service, whichever is higher. In case of retrenchment to prevent losses and in cases of
closures or cessation of operations of establishment or undertaking not due to serious
business losses or financial reverses, the separation pay shall be 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 considered one (1) whole year.

The authorizes causes provided in the Labor Code may generally be classified into
two (2), namely:
(1) Business-related causes – Referring to the grounds specifically mentioned in Article
298 [283], to wit:
a) Installation of labor-saving device;
b) Redundancy;
23
 c) Retrenchment;
d) Closure or cessation of business operations NOT due to serious business losses or
financial reverses; and
e) Closure or cessation of business operations due to serious business losses and
financial reverses.
(2) Health-related causes – Referring to disease under Article 299 [284] of the Labor
Code.

Basis
Employment is the lifeblood upon which the worker and his family owe their survival.
[Flight Attendants and Stewards Ass’n of the Philippines v. PAL, GR. No. 178083 (2009)]

Written notice
For all authorized causes, a written notice served on both the employees and the DOLE
at least one month prior to the intended date of termination is required.

(a) INSTALLATION OF LABOR-SAVING DEVICES

This refers to the installation of machinery to effect efficiency and economy in the
employer’s method of production. [Edge Apparel Inc v. NLRC, GR No. 121314 (1998)]

Requisites
1. There must be introduction of machinery, equipment, or other devices;
2. The introduction must be done in good faith;
3. The purpose for such introduction must be valid such as to save on cost, enhance
efficiency and other justifiable economic reasons;
4. There is no other option available to employer than the introduction of machinery,
equipment or device and the consequent termination of employment of those affected
thereby; and
5. There must be fair and reasonable criteria in selecting employees to be terminated.

General Rule: In cases of installation of laborsaving devices, redundancy and

retrenchment, the Last-In, First-Out Rule shall apply.

Exception: Employee volunteers to be separated from employment. [Sec. 5.2(a), D.O.

No. 147-15]

(b) REDUNDANCY
Redundancy exists when the service capability of the workforce is in excess of what is
reasonably needed to meet the demands of the business enterprise.

A position is redundant when it is superfluous and superfluity of a position or positions

could be the result of a number of factors such the over hiring of workers, a decrease in
24
the volume of business or dropping of a particular line or service previously manufactured
or undertaken by the enterprise. [Morales v. Metrobank, GR No. 182475 (2012)]

Requisites
1. There must be superfluous positions or services of employees;
2. The positions or services are in excess of what is reasonably demanded by the
actual requirements of the enterprise to operate in an efficient and economical manner;
3. There must be good faith in abolishing redundant positions;
4. There must be fair and reasonable criteria in selecting the employees to be terminated;
and
5. There must be adequate proof of redundancy such as but not limited to the new staffing
pattern, feasibility studies/proposal, on the viability of newly created positions, job
description and the approval by the management of the restructuring. [Sec. 5.4(b), D.O.
No. 147- 15]

In implementing a redundancy program, the employer is required to adopt fair and

reasonable criteria taking into consideration factors such as (a) preferred status, (b)
efficiency, and (c) seniority among others. [Morales v. Metrobank, GR No. 182475 (2012)]

(c) RETRENCHMENT TO PREVENT SERIOUS LOSS

Requisites
1. The retrenchment is reasonably necessary and likely to prevent business losses;
2. The losses, if already incurred, are not merely de minimis, but substantial, serious,
actual and real, or if only expected are reasonably imminent as perceived objectively and
in good faith by the employer;
3. The expected or actual losses must be proved by sufficient and convincing evidence;
4. The retrenchment must be in good faith for the advancement of its interest and not to
defeat or circumvent the employees’ right to security of tenure; and
5. There must be fair and reasonable criteria in ascertaining who would be dismissed and
would be retained among the employees such as status, efficiency, seniority, physical
fitness, age and financial hardship for certain workers. [Sec. 5.4(c), D.O. No. 147-15]

The employer bears the burden of proving the existence of the imminence of substantial
losses with clear and satisfactory evidence that there are legitimate business reasons
justifying a retrenchment. [Mount Carmel College Employees Union v. Mount Carmel
College, GR No. 187621 (2014)]

Two kinds of losses justifying retrenchment

1. Incurred losses - substantial, serious actual and real.
2. Expected losses - reasonably imminent.
[Sanoh Fulton Phils v. Bernardo Tagohoy, GR No. 187214 (2013)]

(d) CLOSING OR CESSATION OF BUSINESS NOT DUE TO SERIOUS LOSS

25
Requisites
1. There must be a decision to close or cease operation of the enterprise by the
management;
2. The decision was made in good faith; and
3. There is no other option available to the employer except to close or cease operations.
[Sec 5.4(d), DO No. 147-15]

Unless the closing is for the purpose of circumventing the provisions of this Title [Art. 298]
By serving a written notice on the workers and the Ministry of Labor and Employment at
least 1 month before the intended date thereof. [Art. 298]

(e) DISEASE

An employer may terminate the services of an

employee:
1. Who has been found to be suffering from any disease; and
2. Whose continued employment is prohibited by law or is prejudicial to his health as well
as the health of his co-employees. [Art. 299]

Separation Pay
An employee terminated on the ground of disease shall be paid separation pay equivalent
to at least 1 month salary or to ½ month salary for every year of service, whichever is
greater. [Art. 299]

Requisites
1. The employee must be suffering from a disease which cannot be cured within 6
month, even with proper medical treatment;
2. Continued employment is either:
a. Prohibited by law or
b. Prejudicial to his health or
c. Prejudicial to the health of his coemployees; and
3. A certification to that effect issued by a competent public health authority, which must
state 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 [Sec. 8, Rule I, Book VI;
Crayons Processing v. Pula, GR No. 167727 (2007), Sec. 5.2(f), D.O. 147-15]

Burden of proof with employer

The burden of proof falls upon the employer to establish the requisites. In the absence of
such certification, the dismissal must be necessarily declared illegal.

Prior certification required

It is only where there is a prior certification from a competent public authority that the
disease afflicting the employee sought to be dismissed is of such nature or at such stage
26
that it cannot be cured within 6 months even with proper medical treatment that the latter
could be validly terminated from his job. [Crayons Processing v. Pula, GR No. 167727
(2007)]

(f) ENFORCEMENT OF UNION SECURITY CLAUSE IN CBA

The law authorizes the enforcement of union security clauses, provided it is not
characterized by arbitrariness and always with due process.

In terminating the employment of an employee by enforcing the Union Security

Clause, the employer needs only to determine and prove that:
1. The union security clause is applicable;
2. The union is requesting for the enforcement of the union security provision in the CBA;
3. There is sufficient evidence to support the union’s decision to expel the employee from
the union or company.

(g) DISMISSAL OF UNION OFFICERS FOR THE CONDUCT OF AN ILLEGAL STRIKE;

DISMISSAL OF UNION MEMBERS FOR PARTICIPATING IN THE COMMISSION
OF ILLEGAL ACTS IN A STRIKE
Any union officer who knowingly participates in an illegal strike, and any worker or union
officer who knowingly participates in the commission of illegal acts during a strike may be
declared to have lost employment status. [Art. 279 (a)]

(h) TERMINATION IN CONFORMITY WITH EXISTING STATUTE/QUALIFICATION

REQUIREMENTS

While the right of workers to security of tenure is guaranteed by the Constitution, its
exercise may be reasonably regulated pursuant to the police powers of the State to
safeguard health, morals, peace, education, order, safety, and the general welfare of the
people.

Consequently, persons who desire to engage in the learned professions requiring

scientific or technical knowledge may be required to take an examination as a prerequisite
to engaging in their chosen careers. [St. Luke's Medical Center Employees Assn v. NLRC,
GR No. 162053 (2007)]

3. OTHER CAUSES

Other causes (Just cause):

1. Abandonment
2. Courtesy resignation
3. Change of ownership
27
4. Habitual absenteeism/tardiness
5. Poor performance
6. Past offenses
7. Habitual infractions
8. Immorality
9. Totality of infractions
10. Pregnancy out of wedlock
11. Conviction/commission of a crime
12. Temporary “off-detail” or “floating status”

Abandonment
It is the deliberate and unjustified refusal of an employee to resume his employment. It is
a form of neglect of duty.

Courtesy resignation
Resignation per se means voluntary relinquishment of a position or office. Adding the
word ‘courtesy’ did not change the essence of the resignation. [Batongbacal v. Associated
Bank, GR No. 184517 (2013)]
Change of ownership
A mere change in the equity composition of a corporation is neither just nor an authorized
cause that would legally permit the dismissal of the corporation’s employees en masse.
[SME Bank Inc. v. De Guzman, GR No. 184517, 186641 (2013)]

Habitual absenteeism/tardiness
It is a form of neglect of duty. Lack of initiative, diligence and discipline to come to work
on time everyday exhibit the employee’s deportment towards work. It is inimical to the
general productivity and business of the employer. This is especially true when the
tardiness and/or absenteeism occur frequently and repeatedly within an extensive period
of time. [RB Michael Press v. Galit, GR NO. 153510 (2008)]

Poor performance
It is tantamount to inefficiency and incompetence in the performance of official duties. An
unsatisfactory rating can be a just cause for dismissal only if it amounts to gross and
habitual neglect of duties. Poor or unsatisfactory performance of an employee does not
necessarily mean he is guilty of gross and habitual neglect of duty. [Shipmanagement
Inc. v. Campo-Redondo, GR No. 199931 (2015)]

Past offenses
Previous offenses may be used as a valid justification for dismissal only if the infractions
are related to the subsequent offense upon which the basis of termination is decreed.
[Century Canning Corporation v. Ramil, GR No. 171630 (2010)

Habitual infractions

28
A series of irregularities when put together may constitute serious misconduct, under
which Art. 297 of the Labor Code is a just cause for dismissal. [Gustilo v. Wyeth Phil Inc.,
GR No. 149629 (2004)]

Immorality
DECS Order No. 92 provides that disgraceful or immoral conduct can be used as a basis
for termination of employment. [Santos, Jr. v. NLRC, GR No. 116795 (1998)]

Standard of morality
It is public and secular, not religious. Whether a conduct is considered disgraceful or
immoral should be made in accordance with the prevailing norms of conduct, which as
stated in Leus, refer to those conducts which are proscribed because they are detrimental
to conditions upon which depend the existence of and progress of human society.

Totality of infractions
The totality of infractions or the number of violations committed during the period of
employment shall be considered in determining the penalty to be imposed upon an erring
employee. Fitness for continued employment cannot be compartmentalized into tight little
cubicles of aspects of character, conduct and ability separate and independent of each
other.

Pregnancy out of wedlock

When the law speaks of immoral or necessarily, disgraceful conduct, it pertains to
public and secular morality.

Pre-marital sexual relations between two consenting adults, who have no impediment to
marry each other, and consequently, conceiving a child out of wedlock, gauged from a
purely public and secular view of morality does NOT amount to an immoral conduct.
[Cheryl Leus v. St. Scholastica College Westgrove, GR No. 187226 (2015)]

Conviction/commission of a crime
The charge of drug abuse within the company’s premises and during work hours
constitutes serious misconduct which is a just cause for termination. [Bughaw Jr. v.
Treasure Island Industrial, GR No. 173151 (2008)]

Temporary “off-detail” or “floating status”

This is the period of time when security guards are in between assignments or when they
are made to wait after being relieved from a previous post until they are transferred to a
new one.

4. DUE PROCESS

a. PROCEDURAL REQUIREMENT
29
Procedural: an opportunity to be heard and to defend oneself must be observed before
an employee may be dismissed [Metro Eye Security v. Salsona, G.R. No. 167367 (2007)]

The employer shall:

1. Furnish the worker, whose employment is sought to be terminated, a written notice
containing a statement of the causes for termination; and
2. Afford the latter ample opportunity to be heard and to defend himself, with the
assistance of his representative if he so desires, in accordance with company rules and
regulations promulgated pursuant to guidelines set by the DOLE. [Art. 292 (b)]

Procedural Due Process - manner in which the dismissal was effected.

1. The first written notice to be served on the employees should contain the specific
causes or grounds for termination against them, and a directive that the employees
are given the opportunity to submit their written explanation within a reasonable
period.
2. The requirement of a hearing is complied with as long as there was an opportunity to
be heard, and not necessarily an actual hearing was conducted.
3. After determining that termination of employment is justified, the employers shall serve
the employees a written notice of termination indicating that:
a. All circumstances involving the charge against the employee have been considered,
and
b. The grounds have been established to justify the severance of the employment.
[Inguillo v. First Phil Scales, GR No. 165407 (2019)]

The procedure can be summarized as follows:

1. Employer must furnish the employee with a written notice containing the cause for
termination.
2. The employer must give the employee an opportunity to be heard. This can be done
either through:
a. Position paper or
b. Clarificatory hearing.
3. The employee MAY also be assisted by a representative or counsel.
4. The employer must give another written notice apprising the employee of its findings
and the penalty to be imposed against the employee, if any.

In labor cases, these requisites meet the constitutional requirement of procedural due
process, which contemplates, “notice and opportunity to be heard before judgment is
rendered affecting one’s person or property”. [Montinola v. PAL, GR No. 198656 (2014)]

b. SUBSTANTIAL/SUBSTANTIVE REQUIREMENT

Substantive Due Process - whether the termination was based on the provisions of the
Labor Code or in accordance with jurisprudence.
30
The dismissal must be for any of the causes provided for in Art. 297-299.

Two requisites must concur:

(1) the dismissal must be for a just or authorized cause; and
(2) the employee must be afforded an opportunity to be heard and to defend

c. ADMINISTRATIVE DUE PROCESS

In administrative proceedings, procedural due process has been recognized to

include the following:
(1) the right to actual or constructive notice of the institution of proceedings which may
affect a respondent’s legal rights;
(2) a real opportunity to be heard personally or with the assistance of counsel, to present
witnesses and evidence in one’s favor, and to defend one’s rights;
(3) a tribunal vested with competent jurisdiction and so constituted as to afford a person
charged administratively a reasonable guarantee of honesty as well as impartiality; and
(4) a finding by said tribunal which is supported by substantial evidence submitted for
consideration during the hearing or contained in the records or made known to the parties
affected.

d. TWIN NOTICE REQUIREMENT/RULE

The employer has the burden of proving that a dismissed worker has been served
two notices:
1. First written notice: specifying the ground(s) for termination and giving the employee
the reasonable opportunity within which to explain his side.
2. Second written notice: indicating that upon due consideration of all circumstances,
grounds have been established to justify his termination.

Reasonable opportunity for the first written notice should be construed at least 5 calendar
days from receipt of the notice.

Ratio: to give the employee an opportunity to study the accusation against him, consult
a union official or lawyer, gather data and evidence, and decide on his defenses. [King of
Kings Transport v. Mamac, GR No. 166208 (2007); Puncia v. Toyota Shaw/Pasig, GR
No. 214399 (2016)]

CONTENTS OF FIRST NOTICE

1. Specific causes or grounds for termination against the employee;
2. Directive that the employee is given the opportunity to submit his written explanation
within a “reasonable period” or every kind of assistance that management must accord to

31
enable him to prepare adequately for his defense. This should be construed as a period
of at least 5 calendar days from receipt of notice;
3. Detailed narration of the facts and circumstances that will serve as basis for the charge
against the employees. A general description of the charge will not suffice; [Unilever v.
Rivera, GR No. 201701 (2013)]
4. The company rules, if any, violated and/or the grounds under Art. 288 being charged
against the employee. [United Tourist Promotions v. Kemplin, GR No. 205453 (2014)]

CONTENTS OF SECOND NOTICE

1. All circumstances involving the charge against the employee considered;
2. Grounds established to justify the severance of employment. [United Tourist
Promotions v. Kemplin, GR No. 205453 (2014)]

PRE-DISMISSAL NOTICE GROUNDS

An employee may be dismissed only if the grounds mentioned in the pre-dismissal notice
were the ones cited for termination of employment. [Erector Advertising Sign Groups v.
Cloma, GR No. 167218 (2010)]

e. HEARING; MEANING OF OPPORTUNITY TO BE HEARD

In employee dismissal cases, the essence of due process is simply the opportunity to be
heard, it is the denial of this that constitutes a violation of due process of law. [Technol
Eight Philippines Corporation v. NLRC, GR No. 187605 (2010)]

While a formal hearing or conference is ideal, it is not an absolute, mandatory or exclusive

avenue of due process. [Perez v. PT&T, GR No. 152048 (2009)]

Requirement of a Hearing
The requirement of a hearing is complied with as long as there was an opportunity to be
heard, and not necessarily that an actual hearing was conducted.

Guidelines in hearing requirements

1. “Ample opportunity to be heard” means any meaningful opportunity (verbal or
written) given to the employee to:
a. Answer the charges against him and
b. Submit evidence in support of his defense, whether in a hearing, conference or some
other fair, just and reasonable way.
2. A formal hearing or conference becomes mandatory when:
a. Requested by the employee in writing,
b. Substantial evidentiary disputes exist
c. A company rule or practice requires it, or
d. When similar circumstances warrant.

32
3. The “ample opportunity to be heard” standard in the Labor Code prevails over the
“hearing or conference” requirement in the implementing rules and regulations. [Perez
v. PT&T, supra]

f. WHEN NOTCIES MAY BE DISPENSED

Notice is NOT NEEDED when employee consented to the retrenchment or voluntarily

applied for one. [International Hardware Inc v. NLRC, GR No. 80770 (1989)]

g. PRIMARY RIGHTS IN AN ADMINISTRATIVE PROCEEDING

The Court has already set forth what is now known as the “cardinal primary”
requirements of due process in administrative proceedings, to wit:
(1) the right to a hearing which includes the right to present one’s case and submit
evidence in support thereof;
(2) the tribunal must consider the evidence presented;
(3) the decision must have something to support itself;
(4) the evidence must be substantial, and substantial evidence means such evidence as
a reasonable mind might accept as adequate to support a conclusion;
(5) the decision must be based on the evidence presented at the hearing, or at least
contained in the record and disclosed to the parties affected;
(6) the tribunal or body of any of its judges must act on its or his own independent
consideration of the law and facts of the controversy, and not simply accept the views of
a subordinate;
(7) the board or body should, in all controversial questions, render its decisions in such a
manner that the parties to the proceeding can know the various issues involved, and the
reason for the decision rendered.”

h. ABSENCE WITHOUT LEAVE – PROCEDURE TAKEN

Due process in Absence Without Leave

1. First notice directing the employee to explain why his absences are valid and with
permission
2. Second notice to inform him of the employer’s decision to dismiss him on the ground
of his absences without leave

i. ABANDONMENT – PROCEDURE TAKEN

Abandonment
It is the deliberate and unjustified refusal of an employee to resume his employment. It is
a form of neglect of duty.

Requisites:

33
1. The employee must have failed to report for work or must have been absent without
valid or justifiable reason; and
2. There must have been a clear intention on the part of the employee to sever the
employer-employee relationship manifested by some overt act.

Due process in Abandonment:

1. First Notice to apprise the employee of the particular acts or omissions for which his
dismissal is sought;
2. Second Notice to inform him of the employer’s decision to dismiss him on the ground
of abandonment.

Notices in abandonment cases must be sent to employee’s last known address.

The burden to prove whether the employee abandoned his work rests on the employer.
[Protective Maximum Security Inc. v. Celso E. Fuentes, GR No. 169303 (2015)]

Absence must be accompanied by overt acts unerringly pointing to the fact that the
employee simply does not want to work anymore. The employer has the burden of proof
to show a deliberate and unjustified refusal of the employee to resume employment
without any intention of returning. [Tan Brothers Corp v. Escudero, GR No. 188711
(2013)]

C. Reliefs for Illegal Dismissal

1. Reinstatement
Reinstatement means restoration to a state or condition from which one had been
removed or separated. The person reinstated assumes the position he had occupied prior
to his dismissal. [Asian Terminals, Inc. v. Villanueva, G.R. No. 143219 (2006)]

a. PENDING APPEAL (Art. 223, Labor Code)

Article 229 [223] which provides for reinstatement of an employee whose dismissal is
declared illegal by the Labor Arbiter. This form of reinstatement is self-executory and must
be implemented even during the pendency of the appeal that may be instituted by the
employer.

b. SEPARATION PAY IN LIEU OF REINSTATEMENT

Article 294 [279] expressly mandates only actual reinstatement and never the alternative
remedy of separation pay in lieu thereof. But jurisprudence clearly enunciates the award
of separation pay in the event actual reinstatement is not possible nor feasible.
Undeniably, it is a recourse based on equity that has been sanctioned by the Supreme
Court in a catena of cases.
34
Separation Pay and Reinstatement, Exclusive Remedies
The payment of separation pay and reinstatement are exclusive remedies. The payment
of separation pay replaces the legal consequences of reinstatement to an employee who
was illegally dismissed. [Bani Rural Bank, Inc. v. De Guzman, G.R. No. 170904 (2013)]

It is now well-settled that separation pau in lieu of reinstatement should be awarded

in the following situations:
(1) Where the continued relationship between the employer and the employee is no
longer viable due to the strained relations and antagonism between them (Doctrine of
Strained Relations).
(2) When reinstatement proves impossible, impracticable, not feasible or unwarranted for
varied reasons and thus hardly in the best interest of the parties such as:
(a) Where the employee has already been replaced permanently as when his position
has already been taken over by a regular employee and there is no substantially
equivalent position to which he may be reinstated.
(b) Where the dismissed employee's position is no longer available at the time of
reinstatement for reasons not attributable to the fault of the employer.
(c) When there has been long lapse or passage of time that the employee was out of
employer's employ from the date of the dismissal to the final resolution of the case! or
because of the realities of the situation.
(d) By reason of the injury suffered by the employee.
(e) The employee has already reached retirement age under a Retirement Plan.
(f) When the illegally dismissed employees are over-age or beyond the compulsory
retirement age and their reinstatement would unjustly prejudice their employer.
(g) When reinstatement of a security guard can no longer be ordered because he was
past the age qualification for a security guard license.
(h) When the general sales agency contract between the employer and its client has been
terminated and reinstatement is no longer feasible.
(i) Takeover of the business of the employer by another company and there is no
agreement regarding assumption of liability by the acquiring company.

(3) Where the employee decides not to be reinstated as when he does not pray for
reinstatement in his complaint or position paper but asked for separation pay instead.
(4) When reinstatement is rendered moot and academic due to supervening events, such
as:
(a) Death of the illegally dismissed employce
(b) Declaration of insolvency of the employer by the court.'
(c) Fire which gutted the employer's establishment and resulted in its total destruction.
(d) In case the establishment where the employee is to be reinstated has closed or ceased
operations.
(5) To prevent further delay in the execution of the decision to the prejudice of private
respondent.

35
(6) Other circumstances, such as (a) when reinstatement is inimical to the employer's
interest; (b) reinstatement does not serve the best interests of the parties involved;10 (c)
the employer is prejudiced by the workers' continued employment;" or (d) that it will not
serve any prudent purpose as when supervening facts transpired which made execution
unjust or inequitable.

2. Backwages
Definition
Backwages are:
1. Earnings lost by a worker due to his illegal dismissal;
2. A form of relief that restores the income lost by reason of such unlawful dismissal;
3. In the nature of a command to the employer to make a public reparation for illegally
dismissing an employee.
a. It is not private compensation or damages;
b. Nor is it a redress of a private right. [St. Theresa's School of Novaliches Foundation v.
NLRC, G.R. No. 122955 (1998)]

Backwages and reinstatement are two reliefs that should be given to an illegally
dismissed employee. They are separate and distinct from each other.

An illegally dismissed employee is entitled to (1) either reinstatement, if viable, or

separation pay if reinstatement is no longer viable, and (2) backwages. [Aurora Land
Projects Corp. v. NLRC, G.R. No. 114733 (1997)]

Effect of failure to order backwages

A “plain error” which may be rectified, even if employee did not bring an appeal regarding
the matter. [Aurora Land Projects Corp. v. NLRC, supra.]

Extent of Entitlement
General rule: An illegally dismissed employee is entitled to full backwages.
Exceptions
a. The Court awarded limited backwages where the employee was illegally dismissed but
the employer was found to be in good faith. [San Miguel Corporation v. Javate, Jr., G.R.
No. L-54244 (1992)]
b. Delay of the EE in filing the case for illegal dismissal [Mercury Drug Co., Inc. v. CIR,
supra]

a. COMPUTATION
Full backwages means exactly that, i.e., without deducting from backwages the earnings
derived elsewhere by the concerned employee during the period of his illegal dismissal.
[Bustamante v. NLRC, G.R. No. 111651 (1996)]

36
The formula of awarding reasonable net backwages without deduction or qualification
relieves the employees from proving or disproving their earnings during their lay-off and
the employers from submitting counterproofs, and obviates the twin evils of:
1. Idleness on the part of the employee who would "with folded arms, remain inactive in
the expectation that a windfall would come to him" [Itogon Suyoc Mines, Inc. v. Sangilo-
Itogon Workers Union, G.R. No. L- 24189 (1968), as cited in Diwa ng Pagkakaisa v. Filtex
International Corp., G.R. No. 23960-61 (1972)]; and
2. Attrition and protracted delay in satisfying such award on the part of unscrupulous
employers who have seized upon the further proceedings to determine the actual
earnings of the wrongfully dismissed or laid-off employees [See La Campana Food
Products, Inc. v. CIR, G.R. No. L-27907 (1969); and Kaisahan ng Mga Manggagawa v.
La Campana Food Products, Inc., G.R. No. L-30798 (1970)].

The salary base properly used should be the basic salary rate at the time of dismissal
plus the regular allowances; allowances include:
a. Emergency cost of living allowances (ECOLA), transportation allowances, 13 th month
pay. [Paramount Vinyl Product Corp. v. NLRC, G.R. No. 81200 (1990)]
b. Also included are vacation leaves, service incentive leaves, and sick leaves.

The effects of extraordinary inflation are not to be applied without an official declaration
thereof by competent authorities. [Lantion v. NLRC, G.R. No. 82028 (1990)]

Note that according to Nacar v. Gallery Frames, when the judgment of the court awarding
a sum of money becomes final and executory, the rate of legal interest shall be 6% per
annum from such finality until its satisfaction, this interim period being deemed to be by
then an equivalent to a forbearance of credit. [Nacar v. Gallery Frames, G.R. No. 189871,
(2013)]

Indemnity of Employer
Period Doctrine in Effect Validity of Liability of
dismissal Employer
Prior 1989 Pre-Wenphil Illegal Reinstatement +
Back wages
Feb 1989-1999 Wenphil Valid Dismiss now,
indemnity pay later
Jan. 2000 – Oct. Serrano Ineffectual Full back wages up
2004 to reinstatement
finality of decision
Nov. 2004 - present Agabon Valid Nominal damages

b. LIMITED BACKWAGES

37
• Illustrative cases where award of backwages was limited to 1 year:
(a) In San Miguel Corporation v. Javate, Jr., the High Court affirmed the consistent
findings and conclusions of the Labor Arbiter, the NRC, and the Court of Appeals that the
employee was illegally dismissed since he was still fit to resume his work; but the
employer's liability was mitigated by its evident good faith in terminating the employee's
services based on the teums of its Health, Welfare and Retirement Plan. Hence, the
employee was ordered reinstated to his former position without loss of seniority and other
privileges appertaining to him prior to his dismissal, but the award of back wages was
limited to only one (1) year considering the mitigating circumstance of good faith attributed
to the employer.

(b) In Procer and Gamble Philippines v. Bondesto, the Supreme Court, while affirming
the illegality of the dismissal of the employee, did not grant him full back wages because
it agreed with the findings of the NIRC and the Court of Appeals that in view of the
employee's absences that were not wholly justified; he should be entitled to back wages
limited to one (1) year only.

• Illustrative case where award of back wages was limited to 2 years;

In Dolores u. NRC, the employee was terminated for her continuous absences without
permission. Although it was found that the employee was indeed guilty of breach of trust
and violation of company rules, the High Court still declared the employee's dismissal
illegal as it was too severe a penalty considering that she had served the employer
company for 21 years, it was her first offense, and her leave to study the French language
would ultimately benefit the employer who no longer had to spend for translation services.
Even so, other than ordering the employee's reinstatement, the said employee was
awarded back wages limited to a period of two (2) years, given that the employer acted
without malice or bad faith in terminating the employee's services.

• Illustrative case where award of back wages was limited to 5 years:

In its resolution on the motion for reconsideration filed by the petitioner in Victory Liner,
Inc: v. Race, the High Tribunal reduced and limited the original award of full back wages
to five (5) years in the light of the evident good faith of the employer. While petitioner's
argument that respondent had already abandoned his job in 1994 was not upheld, the
Court conceded that petitioner, given the particular circumstances of this case, had
sufficient basis to reasonably and in good faith deem respondent resigned by 1998.

3. Valid and Law Management Remedies

• Options Given to Employers

a. Actually reinstate the dismissed employees or,
b. Constructively reinstate them in the payroll.

Either way, this must be done immediately upon the filing of their appeal, without need of
any executory writ.
38
If the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on
the part of the employer to reinstate and pay the wages of the dismissed employee during
the period of appeal until reversal by the higher court.

The Labor Arbiter's order of reinstatement is immediately executory and the employer has
to either re-admit them to work under the same terms and conditions prevailing prior to
their dismissal, or to reinstate them in the payroll, and that failing to exercise the options
in the alternative, employer must pay the employee's salaries [Magana v. Medicard
Philippines, Inc., G.R. No. 174833 (2010)]

No refund doctrine
An employee cannot be compelled to reimburse the salaries and wages he received
during the pendency of his appeal, notwithstanding the reversal by the NLRC of the LA's
order of reinstatement. [College of the Immaculate Conception v. NLRC, G.R. No. 167563
(2010)]

39
Sangalang, John Norbert P.
Labor Law Review Written Report
Group 3 – Termination of Employment

D. Preventive Suspension
a) Definition – Rule XIV, SECTION 3. Of the Omnibus Rules of the Labor
Code provides that “Preventive suspension. — The employer may place the
worker concerned under preventive suspension if his continued
employment poses a serious and imminent threat to the life or property of
the employer or of his co-workers.”

b) Suspension as Administrative Penalty - Suspension is considered as an

administrative penalty when an employee violates the company policies or
code of conduct such as excessive absences, tardiness or other similar acts
which are prejudicial to the employer. Instead of imposing outright
dismissal, a preventive suspension served as an administrative penalty may
give ample warning to the employees that further violations of the company
policies, code of conduct or other misfeasance may lead their dismissal
from their services.

c) Preventive Suspension pending investigation

An employee who allegedly committed serious offenses in the workplace, and in violation
of company policies and code of conduct, may be subjected to preventive suspension
pending his or her investigation. Such preventive suspension is to prevent him from
causing harm or injury to the company and to other employees. In the case of Maula vs
XIMEX Delivery Express Inc., the Supreme Court held that preventive suspension is
justified only in cases where the employee’s continued employment poses serious threat
and imminent threat to the life or property of the employer or of the employee's co-
workers. Without this kind of threat, preventive suspension is not proper. (Maula vs
XIMEX Delivery Express Inc, GR No. 207838)
The pertinent rules dealing with preventive suspension are found in Section 8 and Section
9 of Rule XXIII, Book V of the Omnibus Rules Implementing the Labor Code, as amended
by Department Order No. 9, Series of 1997, which read as follows:

Section 8. Preventive suspension. The employer may place the worker concerned under
preventive suspension only if his continued employment poses a serious and imminent
threat to the life or property of the employer or of his co-workers.
40
Section 9. Period of suspension. No preventive suspension shall last longer than thirty
(30) days. The employer shall thereafter reinstate the worker in his former or in a
substantially equivalent position or the employer may extend the period of suspension
provided that during the period of extension, he pays the wages and other benefits due
to the worker. In such case, the worker shall not be bound to reimburse the amount paid
to him during the extension if the employer decides, after completion of the hearing, to
dismiss the worker.
When preventive suspension exceeds the maximum period allowed without reinstating
the employee either by actual or payroll reinstatement or when preventive suspension is
for indefinite period, only then will constructive dismissal set in”.
It is to be noted that preventive suspension is not a penalty nor is it a rush judgment that
the erring employee is already adjudged guilty once placed under preventive suspension.
When the suspension of an erring employee exceeds the maximum 30-day preventive
suspension or it is imposed indefinitely, it will be tantamount to constructive dismissal.
An example of which is in the case of Premiere Development Bank v. NLRC, G.R. No.
114695, July 23, 1998 wherein the private respondent’s preventive suspension is without
valid cause since she was outrightly suspended by petitioner. As of the date of her
preventive suspension on March 13, 1986 until the date when the last investigation was
rescheduled on April 23, 1986, more than 30 days had expired. The Court further upheld
the decision of the NLRC to wit:
“By placing her on indefinite suspension, complainant was unduly deprived of her right to
security in employment which is her only means of livelihood. It is very evident that
complainant was already placed on constructive dismissal status as of March 13, 1986
when she was placed on preventive suspension indefinitely. The actuation of respondents
since no other sound interpretation but a predetermined effort of dismissing complainant
from the service in the guise of preventive suspension”.
d) Preventive Suspension tantamount to Constructive Dismissal
When the suspension of an erring employee exceeds the maximum 30-day preventive
suspension, or it is imposed indefinitely, it will be tantamount to constructive dismissal.

In the case of Premiere Development Bank vs NLRC (GR No. 114695), the court held
that “by placing an employee on an indefinite suspension, the complainant was unduly
deprived of her right to security of employment which is her only means of livelihood. In
the same case, the complainant-employee was placed on preventive suspension for more
than 30 days. The court interpreted this as a predetermined effort of dismissing
complainant from the service in the guise of preventive suspension.

41
Pampo, Ann Karen F.
Labor Review TH 6:00-9:00 pm
Atty. Panganiban

TERMINATION OF EMPLOYMENT

CONSTRUCTIVE DISMISSAL

It is the cessation of work because continued employment is either

1. rendered impossible, unreasonable or unlikely;
2. when there is a demotion in rank or diminution in pay or both; or
3. when a clear discrimination, insensibility, or disdain by an employer becomes
unbearable to the employee

The law recognizes and resolves this situation in favor of employees in order to protect
their rights and interests from the coercive acts of the employer.

Constructive dismissal has often been defined as a "dismissal in disguise" or "an act
amounting to dismissal but made to appear as if it were not." It exists where there is
cessation of work because continued employment is rendered impossible, unreasonable
or unlikely, as an offer involving a demotion in rank and a diminution in pay. In some
cases, while no demotion in rank or diminution in pay may be attendant, constructive
dismissal may still exist when continued employment has become so unbearable because
of acts of clear discrimination, insensibility or disdain by the employer, that the employee
has no choice but to resign. Under these two definitions, what is essentially kicking is the
voluntariness in the employee's separation from employment.

42
 ILLUSTRATIVE CASES OF CONSTRUCTIVE DISMISSAL

Ernesto Galang & Ma. Olga Jasmin Chan

v.
Boie Takeda Chemicals, Inc. and/or Kazuhiko Nomura
G.R. No. 183934, July 20, 2016

FACTS:
Galang and Chan were Regional Sales Managers of Boie Takeda Chemicals, Inc. (BTCI).
Kazuhiko Nomura, the General Manager, asked Petitioners, together with the other two
Group Product Managers to apply for a Marketing Director position. In the end, Nomura
hired an outsider for the said position, while the position of National Sales Director
remained vacant.
Later, Villanueva, one of the two Group Product Managers, was promoted as Sales
Manager. Petitioners believed that Villanueva did not apply for the position; has only three
years of experience in sales; and was reportedly responsible for losses in the marketing
department. After Villanueva's promotion, petitioners claimed that Nomura threatened to
dismiss them from office if they failed to perform well under the newly appointed National
Sales Director.This prompted petitioners to inquire if they could avail of early retirement
package due to health reasons. Nomura, however, insisted that such retirement package
does not exist. With this, petitioners intimated their intention to retire in a joint written letter
of resignation.

Upon petitioners' retirement, the positions of Regional Sales Manager were abolished,
and a new position of Operations Manager was created. Petitioners filed the complaint
for constructive dismissal and money claims before the NLRC Regional Arbitration
Branch.
Labor Arbiter ruled that petitioners were constructively dismissed. The Labor Arbiter
explained that petitioners were forced to retire because Villanueva's appointment
constituted an abuse of exercise of management prerogative; and that subsequent
events, such as the abolition of the positions of Regional Sales Managers and the creation
of the position of the Operations Manager show that petitioners' easing out from service

43
were orchestrated. It also found that petitioners were discriminated as to their retirement
package.

BTCI appealed the LA Decision with the NLRC which reversed and set aside the LA
Decision, and dismissed the complaint. NLRC ruled that petitioners failed to prove that
they were constructively dismissed.

Hence, this petition.

ISSUE:
Whether petitioners were constructively dismissed from service?

RULING:
No. Petitioners voluntarily retired from the service, thus were not constructively dismissed.

Constructive dismissal has often been defined as a "dismissal in disguise" or "an act
amounting to dismissal but made to appear as if it were not. It exists where there is
cessation of work because continued employment is rendered impossible, unreasonable
or unlikely, as an offer involving a demotion in rank and a diminution in pay. In some
cases, while no demotion in rank or diminution in pay may be attendant, constructive
dismissal may still exist when continued employment has become so unbearable because
of acts of clear discrimination, insensibility or disdain by the employer, that the employee
has no choice but to resign. Under these two definitions, what is essentially lacking
is the voluntariness in the employee's separation from employment.

In this case, petitioners were neither demoted nor did they receive a diminution in pay
and benefits. Petitioners also failed to show that employment is rendered impossible,
unreasonable or unlikely. The circumstances which petitioners claim to have forced them
into early retirement are not of such character that rendered their continued employment
with BTCI as impossible. Petitioners' resignation was prompted by their general
disagreement with the appointment of Villanueva, and not by the acts of discrimination by
the management.

44
Also, managerial positions are offices which can only be held by persons who have the
trust of the corporation and its officers. The promotion of employees to managerial or
executive positions rests upon the discretion of management. Labor Arbiters, the different
Divisions of the NLRC, and even courts, are not vested with managerial authority. The
employer's exercise of management prerogatives, with or without reason, does not per
se constitute unjust discrimination, unless there is a showing of grave abuse of
discretion. In this case, there is none.

The other acts of discrimination complained of by petitioners refer to post-employment

matters, or those that transpired after their retirement. These include payment of alleged
"lesser" retirement package, and the abolition of the positions of Regional Sales Manager.
These events transpired only after they voluntary availed of the early retirement. The
circumstances contemplated in constructive dismissal cases are clear acts of
discrimination, insensibility or disdain which necessarily precedes the apparent
"voluntary" separation from work. If they happened after the fact of separation, it could
not be said to have contributed to employee's decision to involuntary resign, or in this
case, retire.

Here, records show that petitioners failed to establish the fact of their dismissal when they
failed to prove that their decision to retire is involuntary. Consequently, no constructive
dismissal can be found.

Diwa Asia Publishinig, Inc. & Saturnino Belen

v.
Mary Grace De Leon
G.R. No. 203587, August 13, 2018

FACTS:
Diwa Learning Systems, Inc. (DLSI) is a subsidiary of Diwa Asia Publishing,
Inc. Respondent began working as its Human Resource Manager.

45
On one instance, the employment status of an editor (Salvan) who had been working for
Diwa for two continuous years, was converted into contractual status for the sole reason
of 'incompetence.' As HR Manager, De Leon gave her opinion on the matter. The
management found her opinion unacceptable and even construed it as an insult. From
then on, her working relationship with the company turned sour. The management even
made imputations that she took part in inciting employees to file labor cases against Diwa.

Later, respondent was informed that the Executive Director would assume the position of
Diwa's President as her immediate supervisor. However, the company's hierarchical
structure showed that she was under the supervision of no officer other than the
President, and such was the situation for the past two years, before the incident involving
Salvan. Respondent perceived that she was being demoted. She nonetheless carried on
with her job but management remained hostile towards her.

The sour relationship was followed by incidents that were allegedly well-outlined in the
exchanges of e-mails among Asuncion (the VP), respondent and other parties. In support
of her claim of a hostile and unbearable work environment, respondent submitted the
affidavit of one Mary Grace A. Lusterio (Lusterio), a former Diwa employee.

Asuncion advised her that the management wanted her out because things were "not
working out," but it was willing to give her separation pay. She rejected the offer,
convinced she did nothing to warrant the termination of her employment. Asuncion then
told respondent that she could go on vacation leave to think about the management's
offer, but respondent declined. Respondent was twice offered a separation pay but she
declined to quit her employment.

Respondent filed a Complaint against petitioners for constructive dismissal.

Petitioners countered that respondent was dismissed for cause, i.e., for her unauthorized
absences. Petitioners argued that the e-mails submitted by respondent did not prove a
hostile attitude of management towards her. They described the communications as mere
replies to queries, opinions, advice, instructions, comments and a few reprimands
couched in mild terms in response to respondent's oversight in the course of her work as
HR Manager. They asserted that the occasional reprimands should be viewed as

46
constructive criticisms that came with respondent's position which commanded great
responsibility.

LA dismissed respondent's complaint. It sustained petitioners' argument that if negative

feedbacks and reprimand were a form of harassment, an employer would virtually be
powerless to call the attention of and correct their officers. On appeal, NLRC affirmed
LA’s dismissal. However, CA ruled in favor of respondent. Hence, this petition.

ISSUE:
Whether the issuance of communications to reprimand and/or correct an erring employee
as part of the employer's management prerogatives tantamount to harassment, let alone
illegal dismissal.

RULING:
Yes. Constructive dismissal is a cessation of work because continued employment is
rendered impossible, unreasonable or unlikely; when there is a demotion in rank or
diminution in pay or both; or when a clear discrimination, insensibility, or disdain by an
employer becomes unbearable to the employee. It is an act amounting to dismissal but
made to appear as if it were not. In other words, it is a dismissal in disguise.

The test of constructive dismissal is whether a reasonable person in the employee's

position would have felt compelled to give up his position under the circumstances.

Petitioners would have this Court believe that they were mere replies, instructions and
comments couched in "mild terms," to be viewed as constructive criticisms, but the
communications, both as to language and tone, indicate a pattern of fault-finding and
nitpicking, and an attitude of disdain. The correspondence between respondent and
Asuncion also reveals that Asuncion had purposely left respondent out on HR matters.

The circumstances mentioned in the e-mail clearly depict an atmosphere of "open disdain
and hostility" towards respondent, which is further established by the Affidavit of
respondent's co-employee, Lusterio, who corroborated respondent's assertion that the
management made work difficult and unbearable for her.
47
In constructive dismissal cases, the employer is, concededly, charged with the burden of
proving that its conduct and actions were for valid and legitimate grounds. Absent
convincing evidence showing any cogent reason why Lusterio should falsely testify, her
testimony may be accorded full faith and credit. Besides, in judging the legality of an
employee's dismissal, proof beyond reasonable doubt is not required. Neither is
preponderance of evidence expected. It is sufficient that the finding of illegal dismissal is
established by substantial evidence which is such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion.

Jonald O. Torreda
v.
Investment and Capital Corporation of the Philippines
G.R. No. 229881, September 5, 2018

FACTS:
Jonald O. Torreda, petitioner, was an IT Senior Manager in Investment and Capital Corp.
Petitioner claimed that he instituted reforms in the IT management because the system
was outdated and the staff members were unproductive. He had a falling out with the
senior management as the Senior Vice President for he wanted to interfere with the
functions of the IT department.

Later, petitioner went to the office of Valtos (officer in charge of IT dept and to whom he
reported) for a closed-door conference meeting supposedly regarding his IT projects.
Valtos told him that if his performance were to be appraised at that time, Valtos would
give him a failing grade because of the negative feedback from the senior management
and the IT staff. Valtos then gave petitioner a prepared resignation letter and asked him
to sign; otherwise, the company would terminate him. Petitioner refused to sign the
resignation letter but Valtos did not accept his refusal. However, because of Valtos’
insistence, petitioner placed his initials in the resignation letter to show that the letter was
not official. Valtos then accompanied petitioner to his room to gather his belongings and

48
escorted him out of the building. Petitioner was not allowed to report for work anymore
and his company e-mail address was deactivated.

Six days after the incident, petitioner filed the instant complaint for illegal dismissal
(constructive) before the LA which ruled in favor of petitioner. On appeal, NLRC affirmed
the decision of LA. However, CA reversed the decision. Hence, this petition.

ISSUE:
Whether or not petitioner is constructively dismissed.

RULING:
Yes. Constructive dismissal is an involuntary resignation resorted to when continued
employment is rendered impossible, unreasonable or unlikely; or when there is a
demotion in rank and/or a diminution in pay. It exists when there is a clear act of
discrimination, insensibility or disdain by an employer, which makes it unbearable for the
employee to continue his/her employment. In cases of constructive dismissal, the
impossibility, unreasonableness, or unlikelihood of continued employment leaves an
employee with no other viable recourse but to terminate his or her employment

By definition, constructive dismissal can happen in any number of ways. At its core,
however, is the gratuitous, unjustified, or unwarranted nature of the employer's action. As
it is a question of whether an employer acted fairly, it is inexorable that any allegation of
constructive dismissal be contrasted with the validity of exercising management
prerogative.

There is a difference between illegal and constructive dismissal. Illegal dismissal is

readily shown by the act of the employer in openly seeking the termination of an employee
while constructive dismissal, being a dismissal in disguise, is not readily indicated by any
similar act of the employer that would openly and expressly show its desire and intent to
terminate the employment relationship

In Tuason v. Bank of Commerce, et al., it was explained that the law resolves constructive
dismissal in favor of employees in order to protect their rights and interests from the
coercive acts of the employer. In that case, the employer communicated to the employee
therein to resign to save her from embarrassment, and when the latter did not comply,

49
the employer hired another person to replace the employee. The Court ruled that it was
a clear case of constructive dismissal.

In Fortuny Garments/Johnny Co v. Castro, the Court clarified the procedure to determine

the voluntariness of an employee's resignation, viz.:
xxx the intention to relinquish an office must concur with the overt act of
relinquishment. The act of the employee before and after the alleged resignation
must be considered to determine whether in fact, he or she intended to relinquish
such employment. If the employer introduces evidence purportedly executed by
an employee as proof of voluntary resignation and the employee specifically
denies the authenticity and due execution of said document, the employer is
burdened to prove the due execution and genuineness of such document.

Before the alleged resignation of petitioner, several circumstances would show that he
did not contemplate or had no intention of resigning from the company

Further, Valtos prepared the resignation letter, which contained the name and details of
petitioner. Verily, it was respondent, not petitioner, which had a prior contemplation of
removing the latter as its employee. Through Valtos, respondent wanted petitioner to sign
the prepared resignation letter so that it could effortlessly get rid of him.

Clearly, petitioner had no intention of abandoning his work when he filed the complaint
and questioned his purported dismissal.

Based on the foregoing circumstances, which transpired before and after the signing of
the prepared resignation letter, it is clear that petitioner was constructively dismissed.
Respondent forced petitioner to sign the prepared resignation letter. In fact, he was not
given any viable option; it was either he sign the resignation letter or he would be
terminated from the company. Doubtless, the resignation of petitioner was involuntary
and not genuine.

50
RETIREMENT- RA 7641

Retirement- the result of a bilateral act of the parties, a voluntary agreement between the
employer and the employee whereby the latter, after reaching a certain age agrees to
sever his or her employment with the former

Eligibility
General Rule: All employees in the private sector, regardless of their position,
designation, or status, and irrespective of the method by which their wages are paid [Sec.
1, IRR, RA 7641]

Exceptions:
a. Employees covered by the Civil Service Law;
b. Domestic helpers and persons in the personal service of another, and
c. Employees in retail, service and agricultural establishments or operations regularly
employing not more than ten employees [Sec. 2, IRR, RA 7641]

Exclusions from coverage

RA 7641 only applies in a situation where:
a. there is no collective bargaining agreement or other applicable employment contract
providing for retirement benefits for an employee; or
b. there is a collective bargaining agreement or other applicable employment contract
providing for retirement benefits for an employee, but it is below the requirements set for
by law.

The reason for the first situation is to prevent the absurd situation where an employee,
who is otherwise deserving, is denied retirement benefits by the nefarious scheme of
employers in not providing for retirement benefits for their employees. The reason for the
second situation is expressed in the Latin maxim pacta private juri public derogare non

51
possunt. Private contracts cannot derogate from the public law. [Oxales v. Unilab, G.R.
No. 152991 (2008)]

Age of retirement
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 (and have served the establishment for at least 5 years). [Sec. 1, IRR, RA
7641]

Optional retirement – in the absence of a retirement plan or other applicable agreement

providing for retirement benefits of EEs in an establishment, an EE
may retire upon reaching the age of 60 or more if he has served for at least 5 years in
said establishment.
Compulsory retirement – in the absence of a retirement plan or other applicable
agreement providing for retirement benefits of EEs in an establishment, an EE shall be
retired at the age of 65 years. [Sec. 4, IRR, RA 7641]

Note: For surface mine workers, the optional retirement age is 50, while the mandatory
retirement age is now 60. [Sec. 2, RA 10757]

Retirement Benefits of Workers Who are Paid By Results

For covered workers who are paid by result and do not have a fixed monthly salary rate,
the basis for the determination of the salary for 15 days shall be their average daily salary
(ADS). The ADS is derived by dividing the total salary or earning for the last 12months
reckoned from the date of retirement by the number of actual working days in that
particular period, provided that the determination of rates of payment by results are in
accordance with established regulations.

For covered workers who are paid by result and do not have a fixed monthly salary rate,
the basis for the determination of the salary for 15 days shall be their average daily salary
(ADS). The ADS is derived by dividing the total salary or earning for the last 12 months
reckoned from the date of retirement by the number of actual working days in that
52
particular period, provided that the determination of rates of payment by results are in
accordance with established regulations.

Retirement Benefit of Part Time Workers

Part-time workers are also entitled to retirement pay of “one-half month salary” for every
year of service under RA 7641 after satisfying the following conditions precedent for
optional retirement:
a. There’s no retirement plan between the ER and the EE; and,
b. The EE should have reached the age of 60 years, and should have rendered at least
5 years of service with the ER.

Applying the foregoing principle, the components of retirement benefit of part-time

workers may likewise be computed at least in proportion to the salary and related benefits
due them.

Any provision of law to the contrary notwithstanding, the retirement benefits received by
officials and employees of private firms, whether individual or corporate, in accordance
with a reasonable private benefit plan maintained by the employer
a. shall be exempt from all taxes and
b. shall not be liable to attachment, garnishment, levy or seizure by or under any legal
or equitable process whatsoever. [Intercontinental Broadcasting Corp. v Amorilla,
G.R. No. 162775 (2006)]

Exception: Except to pay a debt of the official or employee concerned to the private
benefit plan or that arising from liability imposed in a criminal action:

Additional conditions
a. That the retiring official or employee has been in the service of the same employer
for at least ten (10) years and is not less than fifty years of age at the time of his
retirement;
b. That the retirement benefits shall be availed of by an official or employee only once

Coverage from Income Tax of Retirement Pay

53
Exempted from taxation are the retirement benefits received under RA 7641 (now Article
302 of LC) and those received by officials and employees of private firms, whether
individual or corporate, in accordance with a reasonable private benefit plan maintained
by the employer: Provided,
a. That the retiring official or employee has been in the service of the same employer
for at least ten (10) years; and
b. is not less than fifty (50) years of age at the time of his retirement:

Provided, further, That the benefits granted under this subparagraph shall be availed of
by an official or employee only once.

TWO KINDS OF TERMINATION UNDER ARTICLE 300 [285]

An employee may terminate his employment in either of two ways, to wit:

1. Voluntary resignation- without just just cause as provided in paragraph a; or
2. Involuntary resignation- with just cause as provided in paragraph b thereof.

Resignation is defined as the voluntary act of an employee who finds himself in a

situation where he believes that personal reasons cannot be sacrificed in favor of the
exigency of the service so much so that he has no other choice but to dissociate himself
from his employment.

In other words, resignation must show the concurrence of two things:

1. The intent to relinquish; and
2. The over act of relinquishment

Consequently, the acts of the employee before and after the alleged resignation must be
considered in determining whether he or she, in fact, intended to sever his or her
employment.

To constitute a valid resignation, it must be unconditional and with the intent to operate
as such.

54
Involuntary resignation is the termination initiated by the employee based on the just
causes described and enumerated in paragraph b of Article 300.

COMMON DENOMINATOR

Involuntary and forced resignations are embraced within the general concept of
constructive dismissal. The common character pervading involuntary or forced
resignation or constructive dismissal is the act of “quitting” from employment by the
employee because of the attendant just causes, acts, facts or circumstances which render
the continued employment impossible, unreasonable or unlikely. Thus, if there is no
cessation of work, there can be no constructive dismissal.

Question: What is the difference between Resignation and Constructive Dismissal

Answer: Resignation is voluntary act of an employee who is in a situation where one

believes that personal reasons cannot be sacrificed in favor of the exigency of the service.
It is a formal pronouncement or relinquishment of an office, with the intention to relinquish
accompanied by an act of relinquishment.

On the other hand, Constructive dismissal is involuntary or forced resignation due to the
harsh, hostile, and unfavorable conditions set by the employer. It is essentially quitting or
cessation of work because continued employment is rendered impossible, unreasonable
or unlikely or when there is demotion in rank or diminution of pay and other benefits. It
exists if an act of clear discrimination, insensibility, or disdain by an employer becomes
so unbearable on the part of the employee that it could foreclose any choice by him except
to forego his continued employment.

Question: How to determine the voluntariness of an act?

Answer:
Jonald Torreda v. Investment and Capital Corporation of the Philippines
55
G.R. No. 229881, September 5, 2018

Before the alleged resignation of petitioner, several circumstances would show that
he did not contemplate or had no intention of resigning from the company

Further, Valtos (officer in charged) prepared the resignation letter, which contained
the name and details of petitioner. Verily, it was respondent, not petitioner, which
had a prior contemplation of removing the latter as its employee. Through Valtos,
respondent wanted petitioner to sign the prepared resignation letter so that it could
effortlessly get rid of him.

In Fortuny Garments/Johnny Co v. Castro, the Court clarified the procedure to determine

the voluntariness of an employee's resignation, viz.:

xxx the intention to relinquish an office must concur with the overt act of
relinquishment. The act of the employee before and after the alleged
resignation must be considered to determine whether in fact, he or she intended
to relinquish such employment. If the employer introduces evidence purportedly
executed by an employee as proof of voluntary resignation and the employee
specifically denies the authenticity and due execution of said document, the
employer is burdened to prove the due execution and genuineness of such
document.

Question: How to determine if the dismissal is constructive?

Answer:
Diwa Asia Publishing, Inc. v. Mary Grace De Leon
G.R. No. 203587, August 13, 2018

56
 The test of constructive dismissal is whether a reasonable person in the
employee's position would have felt compelled to give up his position under the
circumstances.

Petitioners would have this Court believe that they were mere replies, instructions
and comments couched in "mild terms," to be viewed as constructive criticisms,
but the communications, both as to language and tone, indicate a pattern of fault-
finding and nitpicking, and an attitude of disdain. The correspondence between
respondent and Asuncion also reveals that Asuncion had purposely left
respondent out on HR matters.

The circumstances mentioned in the e-mail clearly depict an atmosphere of "open

disdain and hostility" towards respondent, which is further established by the
Affidavit of respondent's co-employee, Lusterio, who corroborated respondent's
assertion that the management made work difficult and unbearable for her.

Question: What is the difference between Constructive dismissal and illegal dismissal?

Answer:
Jonald Torreda v. Investment and Capital Corporation of the Philippines
G.R. No. 229881, September 5, 2018

There is a difference between illegal and constructive dismissal. Illegal

dismissal is readily shown by the act of the employer in openly seeking the
termination of an employee while constructive dismissal, being a dismissal in
disguise, is not readily indicated by any similar act of the employer that would
openly and expressly show its desire and intent to terminate the employment
relationship

More concretely, the employer in illegal dismissal cases would normally defend and justify
the termination but in constructive dismissal, there being no open and express dismissal
to speak of, the employer would normally contend that there was no termination at all.

57
As to evidence, in illegal dismissal cases, documentary, testimonial and other forms of
evidence are adduced by the employer to secure affirmation from the courts of the validity
of the termination; in constructive dismissal, the employer, who normally denies the
termination, would present evidence and advance arguments against the circumstantial
evidence being presented by the employee to prove his constructive dismissal.

Question: May a transfer of an employee from one position to another or from one
workplace to another within the same establishment constitute constructive dismissal?

Answer: Generally, it does not amount constructive dismissal. However, it may be

considered constructive dismissal when any or all of the following conditions concur:

1. When the transfer is unreasonable, inconvenient or prejudicial to the employee;

2. When the transfer involves a demotion in rank or diminution of salaries, benefits and
other privileges; or
3. When the employer performs a clear act of discrimination, insensibility, or disdain
towards the employee, which forecloses any choice by the latter except to forego his
continued employment.

The Philippine Americal Life and General Insurance Co. V. Gramaje

G.R. No. 156963, November 11, 2004
The transfer of the respondent assistant vice president from the Pensions
department to the legal department was declared not a legitimate exercise of
management prerogative on the part of petitioner. Before the order to transfer was
made, discrimination, bad faith, and disdain towards respondent were already
displayed by petitioner leading to the conclusion that she was constructively
dismissed.

Question: What are some principles on constructive dismissal or involuntary or forced

resignation?

Answer:
✓ Mere allegations of threat or force do not constitute evidence to support a finding of
forced resignation or constructive dismissal.
58
✓ A threat to sue the employee through competent authority, if the claim is just or legal,
is not unjust and will not amount to forced resignation or constructive dismissal.
✓ Employee who alleges that he was coerced or intimidated into resigning has the
burden to prove such claim.
✓ Giving the employee the choice or option between resignation and investigation is not
illegal.
✓ An employee who tendered her voluntary resignation and signed the quitclaim after
receiving all the benefits due her for her separation cannot claim that she was
constructively dismissed.

Involuntary/Forced Resignation

Involuntary resignation amounts to constructive dismissal. In the case of Philippine

Wireless Inc., vs NLRC, the Court defined constructive dismissal as “is 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.

Involuntary or forced resignation also occurs when an employee is forced to retire

before reaching the age of retirement, as provided by the collective bargaining
agreement, employment contract or other agreements.

The retirement age is that specified in the following:

1. The Collective Bargaining Agreement;
2. Employment Contract;
3. Retirement plan Sec. 3, Rule II, Book VI, IRR)

In the absence of provisions from the CBA, Employment contract or of a

Retirement Plan, the compulsory retirement age is 65 years old, regardless of
years of service. (Section 4, Rule II, Book VI, IRR)

In the case of Alfredo Laya Jr., vs Court of Appeals, wherein petitioner Alfredo
Laya Jr. was hired by respondent Philippine Veteran’s Bank as its Chief Legal
Counsel with a rank of Vice President. The petitioner signed a letter of
appointment which stated that he shall have “Membership in the Provident
Fund Program/Retirement Program.”

Petitioner Alfredo Laya was then alleged that he was merely informed of the
provisions of the Provident Fund Program/Retirement Program belatedly, when
he received a letter pertaining to his retirement.

59
 The issue is whether or not Petitioner was validly retired by the Philippine
Veteran’s Bank at the age of 60.

The court held yes. “The mere mention of the retirement plan in the letter of
appointment did not sufficiently inform the petitioner of the contents or details of
the retirement program. To construe from the petitioner's acceptance of his
appointment that he had acquiesced to be retired earlier than the compulsory
age of 65 years would, therefore, not be warranted. This is because retirement
should be the result of the bilateral act of both the employer and the employee
based on their voluntary agreement that the employee agrees to sever his
employment upon reaching a certain age.” *Laya vs Court of Appeals, GR No.
205813, 10 January 2018).

The act of PVB retiring petitioner amounts to illegal dismissal. The court
ordered respondent PVB to pay the petitioner backwages computed from the
time of his illegal dismissal until his compulsory age of retirement, and
separation pay.

i. Effects and Consequences

In the same case of Alfredo Laya vs CA, the Court held that “the employers and
employees may agree to fix the retirement age for the latter, and to embody their
agreement in either their collective bargaining agreements (CBAs) or their
employment contracts. 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, provided that the
retirement benefits are not lower than those prescribed by law.”

ii. Remedy
An employee who was forced to resign or constructively dismissed from
employment is entitled to either reinstatement or separation pay and back wages.

iii. Tax Repercussions

60
Tuldanes, Maya Angela

MANDATORY RETIREMENT

Separation in the guise of retirement

Retirement is the result of a bilateral act of the parties, it includes a voluntary agreement
between the employer and the employees whereby the latter, after reaching a certain
age, agrees and/or consents to sever his employment with the former. There are different
kinds of retirement schemes which includes: (a) compulsory and contributory in nature,
(b) one set up by agreement between the employer and the employees in the CBA or
other agreements between them, and (c) one that is voluntarily given by the employer,
expressly as an announced company policy or impliedly as in failure to contest the
employee’s claim for retirement benefits.

The retirement age is the one specified in the CBA or in the employment contract. When
not specified in the CBA or by agreement, the optional retirement age is 60 but not less
than 65, for compulsory retirement, the retirement age is 65. A retirement age below the
age of 60 is allowed so long as the parties agree to it in the CBA. It must be voluntarily
consented to by the employee in order to be valid. Retiring at an earlier age will amount
to illegal dismissal if the employee did not consent thereto. An involuntary retirement
amounts to illegal dismissal rendering the employer liable for termination without just
cause. The Employee’s intent is the focal point of analysis; the fairness of the process
governing the retirement decision, payment of stipulated benefits, and the absence of
badges of intimidation or coercion are relevant parameters (Quevedo v Benguet Electric
Cooperative Incorporated, GR no. 168927). The retirement of an employee whose intent
to retire was not clearly established, or whose retirement was involuntary is to be treated
as discharge. Meaning the employer may be liable for illegal dismissal.

Compulsory retirement in the guise of optional retirement is considered a dismissal in

violation of law for failure to follow the legal procedure for termination of employment. It
is merely a scheme to terminate employment without compliance to the due process
requirements of law and without regard to the employee’s security of tenure and is
considered as illegal dismissal which entitles the employee to compensation. The
employee is then entitled to reinstatement, full back-wages, moral damages, exemplary
damages, nominal damages, and attorney’s fees. An illegally dismissed employee who is
approaching or reached the reinstatement age shall not be ordered reinstatement.
Instead he shall be entitled to separation pay, full backwages, and retirement benefits to
the CBA or as provided for in the Labor Code.

61
Bautista, Angelique

Comparison in the cases of Lantion v NLRC (1990) and Gregorio Araneta

University Foundation v NLRC (1987) with regard to retirement/ resignation
relative to retrenchment

In the cases of Lantion v NLRC (1990) and Gregorio Araneta University Foundation v
NLRC (1987), traces its roots to the retrenchment and reorganization program (RRR)
adopted in 1983 by respondent Gregorio Araneta University Foundation. There is a
striking parallelism between the facts and issues in these cases.

On 15 March 1983, Mr. Cesar A. Mijares, then President of the University, addressed a
letter to the Minister of Labor and Employment informing him of the financial predicament
of the University. The letter states that the University can no longer afford to continue the
operations under the present salary rates of the personnel hence, instead if reducing the
salaries which is not legally allowed, the only effective solution is to have all its personnel
resign and pay them their separation pays, or retirement pays, whichever is higher, so
that it could effect a top-to-bottom reorganization and restructuring with the promise to
“rehire them in accordance with new and restructured salary rates ... and without the
benefits not mandated by law ..., subject to the University's actual needs under its
reorganized set-up”.

The Minister of Labor found no serious objection on the proposed organization subject
to the following guidelines: (1) there was to be a separation or retirement of ALL
personnel with corresponding grant of termination pay or retirement benefits, whichever
is higher; (2) top-to-bottom University-wide reorganization subject, however, to the
condition of rehiring of ALL personnel so separated or retired; (3) but with the exception
of those whose present positions will be affected by the proposed reorganizational
changes.

In the 1987 GAUF Case, Complainants were permanent employees and had worked in
the University from eighteen (18) to twenty-five (25) years. On the other hand, the
employees in the 1990 GAUF case are also permanent employees and have rendered
service within a span of from sixteen (16) to thirty-two (32) years. Employees involved in
both cases are retrenched but not reappointed which is the condition with resignation
relative to the retrenchment.

The difference between the two cases lies in that in the First GAUF Case, Complainants
therein did not submit their courtesy resignations, whereas in case of Lantion v NLRC,
the petitioners Clarita Lantion and Fuentes did. Petitioners Filomeno and Clarita Lantion

62
were reappointed but were subsequently terminated because petitioner Filemeno
allegedly resigned and Clarita's term had expired.

Noting these similarities and variances, the NLRC held in the First GAUF Case, that the
dismissal was illegal as their positions were not affected by the reorganization. But in this
case the dismissal was pronounced legal and only the payment of retirement pay under
the "Blue Book" was ordered.

G.R. No. 82028 | January 29, 1990

FILOMENO N. LANTION, CLARITA C. LANTION, and JUANA C. FUENTES,

petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, GREGORIO
ARANETA UNIVERSITY FOUNDATION and OBED JOSE MENESES, respondents.

SECOND DIVISION | MELENCIO-HERRERA, J.:

Facts:

The instant controversy traces its roots to the retrenchment and reorganization program
(RRR) adopted in 1983 by respondent Gregorio Araneta University Foundation. The three
(3) Complainants in this case charged the University with Illegal Dismissal, Non-payment
of separation pay, retirement pay, and gratuity pay, Unfair Labor Practice with Damages,
and Attorney's Fees.

1. Filomeno Lantion, was the Acting Vice President and Executive Officer of the
University at the time of his dismissal. He started as a clerk and has had thirty-two
(32) years and seven (7) months of service. His last monthly salary was P4,247.00.
2. Clarita C. Lantion is his wife who was the Dean of the Institute of Business and
Agricultural Administration and concurrently Head and Professor of the
Department of Business and Finance. She is a holder of a Ph. D in Commerce and
has had twenty-six (26) years of service in the University. Her last monthly salary
was P2,550.00.
3. Juana C. Fuentes, the sister-in-law of petitioner Filomeno Lantion who joined the
University in 1967, her last position being that of Secretary of the Chief Legal
Officer. She is a BSBA holder and has served the University for sixteen (16) years.
Her last monthly salary was P998.00.
On 15 March 1983, Mr. Cesar A. Mijares, then President of the University, addressed a
letter to the Minister of Labor and Employment informing him of the financial predicament
of the University. The letter states that the University can no longer afford to continue the

63
operations under the present salary rates of the personnel hence, instead if reducing the
salaries which is not legally allowed, the only effective solution is to have all its personnel
resign and pay them their separation pays, or retirement pays, whichever is higher, so
that it could effect a top-to-bottom reorganization and restructuring with the promise to
“rehire them in accordance with new and restructured salary rates ... and without the
benefits not mandated by law ..., subject to the University's actual needs under its
reorganized set-up”.

The Minister of Labor found no serious objection on the proposed organization subject to
the following guidelines: (1) there was to be a separation or retirement of ALL personnel
with corresponding grant of termination pay or retirement benefits, whichever is higher;
(2) top-to-bottom University-wide reorganization subject, however, to the condition of
rehiring of ALL personnel so separated or retired; (3) but with the exception of those
whose present positions will be affected by the proposed reorganizational changes. The
Executive Committee of the Board of Trustees of the University issued a Memorandum-
Circular with the said guidelines.

Filomeno and Clarita Lantion and Fuentes, the petitioners were all terminated in their
respective positions. They claimed that they were not affected by the reorganization
program nor were re-hired despite their seniority in service, superior qualifications and
efficiency.

On the other hand, the University contends that Filomeno expressed in clear and
unequivocal terms his conformity to be retired and separated from the service such that
he has no cause for illegal dismissal, much less for reinstatement, Clarita was just in
interim position and was not reappriunted after her appointment expired, thus ceased her
employment with the university and Fuentes tendered her courtesy resignation which was
accepted and that her position was abolished.

Issue: Whether the retrenchment is proper

Ruling:

Yes, the retrenchment was proper but the conditions laid down were not religiously
followed.

Their positions were not affected by the re-organizational changes envisioned in the
retrenchment program. The position of Vice-President continued to exist. As far as
Filomeno and Clarita Lantion are concerned, their temporary appointment to other
positions could not have affected their permanent status pursuant to the ruling in the First

64
GAUF Case. Clarita's position was neither abolished. She was replaced by another
faculty member.

It may be that petitioners Filomeno and Clarita Lantion had expressed their conformity to
their termination, while Fuentes had tendered her courtesy resignation. As is obvious,
however, those steps were but in administrative compliance with the Memorandum
Circular of 14 October 1983 of the University, ante. As a matter of fact, courtesy
resignations could have been dispensed with as all personnel were deemed resigned.
Besides, such compliance had placed them in a better position than the Complainants in
the First GAUF Case considering the proviso in the Memo-Circular of the University that
"those who submit courtesy resignations may be re-appointed while those who would fail
to submit may be retrenched."

65
 G.R. No. 75925-26 October 29, 1987

GREGORIO ARANETA UNIVERSITY FOUNDATION and OBED JOSE MENESES,

petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, PEDRO L. REYES,
ROSARIO D. REYES, BILLY T. VICARIO, CORAZON D. VICARIO, LUIS ALMAZAN
and JULIAN R. MAIMBAN JR., respondents.

THIRD DIVISION | GUTIERREZ, JR., J.:

Facts:

Mr. Cesar A. Mijares, the president of Gregorio Araneta University Foundation, wrote to
the Minister of Labor Blas Ople soliciting his opinion on a proposed retrenchment and
reorganization program made necessary by the University's financial difficulties. Minister
Ople replied that they found "no serious objection to the program" but advised him that "it
should be implemented without prejudice to whatever benefits that might have accrued
to the employees concerned at the effective date of reorganization. The University
implemented its retrenchment program with the issuance of a memorandum-circular.

The private respondents are: 1) Victor Reyes, institute dean and concurrently department
head and a farm administrator who has served the university for 23 years; 2) Rosario
Reyes, wife of Victor Reyes, head of the department of food technology and concurrently
manager for food processing who has served the university as full-time faculty member
for 22 years; 3) Billy T. Vicario, head of the department of soil science, and assistant dean
of the institute of agriculture who has served the university for 19 years; 4) Corazon
Vicario wife of Billy Vicario, dean of the institute of arts and sciences who has served the
university for 25 years; 5) Luis Almazan, head of the department of biology who has
served the university for 28 years and 6) Remigio Perez, full-time associate professor and
department head of Spanish who has served the university for 18 years. The private
respondents did not submit their courtesy resignations but was served notices of
termination.

Issue: Whether the retrenchment is proper

Ruling:

No. The failure of the private respondents to file their courtesy resignations cannot
automatically result in dismissal or inclusion in the retrenchment. Courtesy letters of
resignations were merely administrative requirements that could be dispensed with in the
implementation of the retrenchment program.

66
The guidelines of the retrenchment program as approved by the Minister of Labor
specifically state that under the organizational set up, all the employees of the university
would be considered separated or retired "with corresponding grants of termination pay
or retirement benefits, whichever is higher," and all would be rehired except those whose
present positions wig be affected by the proposed reorganizational changes. all the
employees were, therefore, considered resigned under the reorganizational set up
without any need for the courtesy resignations demanded by the petitioner university in
its memorandum-circular. The resignations or "retirement" of the employees are, of
course, subject to the proviso that their positions have been abolished by the re-
organizational set up envisioned in the retrenchment program. In the case of the private
respondents, their positions were not abolished. Hence, there is no basis for their being
considered retired " or " separated " from the university.

Labor Advisory No.9, Series of 2020, of the Department of Labor and Employment
(DOLE)

The Department of Labor and Employment issued Labor Advisory No. 9 Series of 2020
on March 4, 2020 for the “Guidelines on the Implementation of Flexible Work
Arrangements as Remedial Measure due to the Ongoing Outbreak of Coronavirus
Disease 2019 (COVID-19)”.

The Advisory was issued to assist and guide employers and employees in the
implementation of flexible work arrangements as alternative coping mechanism and
remedial measures to the ongoing outbreak of COVID-19 and its impact to businesses
and the economy. Adopting flexible work arrangements are better alternatives contrary to
outright termination of employees or the total closure of establishments. As DOLE
recognized the desirability and practicability of flexible work arrangement, the employers
must have consult with its employees and take into account the its consequences to the
financial viability of the company.

Flexible work arrangements are alternative arrangements or schedules other than the
traditional or standard workhours, workdays or workweek. These work arrangements
shall be effective and implemented temporarily and subject to the prevailing conditions of
the company.

Labor Advisory No. 9 provided for the following flexible work arrangements which may be
considered, among others:

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1. Reduction of Workhours and/or Workdays where the normal workhours or workdays
per week are reduced.

2. Rotation of Workers where the employees are rotated or alternately provided work
within the week.

3. Forced Leave where the employees are required to go on leave for several days or
weeks utilizing their leave credits, if there any.

Employers and employees are still encouraged to explore other alternative work
arrangements that would mitigate the effect of the loss of income of the employees.
Moreover, the employers and employees shall be primarily responsible for the
administration of the adopted flexible work arrangement. However, in case of difference
in the interpretation, the Advisory provided for the following guidelines:

1. The differences shall be treated as grievance mechanism of the company.

2. If there is no grievance mechanism or if its mechanism is inadequate, the grievance

shall be referred to the Regional Office which has jurisdiction over the workplace for
appropriate conciliation.

3. To facilitate the resolution of grievance, employers are required to keep and maintain,
as part of their records, the documentary requirements proving that the flexible work
arrangement was adopted.

For establishments implementing the flexible work arrangements, the Advisory must be
posted in a conspicuous location in the workplace. In view thereof, employers are required
to notify the adoption of any flexible work arrangements to DOLE through the
Regional/Provincial/Field Office which has jurisdiction over the workplace and shall
monitor and verify the proper implementation of the issuance.

DTI and DOLE Interim Guidelines on Workplace Prevention and Control of COVID-
19.

The Department of Trade and Industry (DTI) and the Department of Labor and
Employment (DOLE), in light of the COVID-19 pandemic, have issued the Interim
Guidelines on Workplace Prevention and Control of COVID-19 pandemic on April 30,
2020.

The Interim Guidelines aimed to assist private institutions which are allowed to operate
during Enhanced Community Quarantine (ECQ) and General Community Quarantine

68
(GCQ) to develop the minimum health protocols and standards to manage the risks of
COVID-19 transmission in the workspaces and are aligned with the objectives of
minimum health standards provided by the Department of Health (DOH). This shall be
applicable to all workplaces, employers and employees in the private sector.

To ensure the workplace safety and health, the standards for a) increasing physical and
mental resilience, b) reducing transmission of COVID-19, c) minimizing contract rate, and
d) reducing the risk of infection of COVID-19 were provided and shall be implemented.

In increasing the physical and mental resilience of their employees, employers must
emphasize to its employees the need to stay healthy by eating nutritious and well-cooked
food, by drinking plenty of fluids, by taking adequate rest/sleep, and by exercising
regularly. Employers are enjoined to provide free medicines and vitamins to its
employees, and refer employees who have mental health concerns to doctors or
professionals.

Standards in reducing transmission of Covid-19 covers not only while inside the
workplace but also prior to the entrance in buildings or workspaces. There is a two-fold
duty between the employers and employees.

First, prior to entry in the building or place,

1. All employers and employees shall:

a. Wear face mask at all times, and remove the same only allowed during
drinking or eating. Employers shall provide the appropriate face masks for
workers. If a cloth mask would be used, it shall be the washable type that
must be worn but additional filter material such as tissue paper inside the
mask must be added.

b. Accomplish daily the health symptoms questionnaire and submit it to the

guard or designated safety officer prior to the entry;

c. Have their temperature checked and recorded in the health symptoms

questionnaire which must be submitted to the guard or the safety officer;

2. Employers or building owners must designate an isolation area to hold employees

whose temperature are over 37.5 Celsius and/or whose response to the
questionnaire needs further

3. Equipment or vehicle entering the hub operational area must go through

disinfection process; and

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 4. Roving officers should instill physical distancing of one meter if there will be a long
queue outside the office or store premises.

Second, inside the workplace:

1. All work areas and frequently handled objects such as door knobs and handles
must be cleaned and disinfected regularly or at least every two hours;

2. All washrooms and toilets must have sufficient clean water and soap since
employees are encouraged to wash their hands and avoid their mouth, eyes and
nose;

3. Sanitizers must be made available in areas where employees pass;

4. Employees shall always practice physical distancing at the minimum of one (1)
meter radius space (side, back, and front) between employees;

5. Eating at communal areas must be discouraged. It is best to eat in individual work

area but all food waste should be disposed properly; and

6. Canteens and kitchens should be cleaned and disinfected regularly.

To minimize contact rate,

1. Alternative work arrangements such as working-hour shifts, work from home,

where feasible and on rotation basis;

2. Prolonged face-to-face interaction between workers and with clients are

discouraged and masks shall be worn at all times and not removed;

3. Meetings needing physical presence shall be kept to a minimum number of

participants and with short duration. Video conferencing shall be utilized for lengthy
discussions among workers;

4. Office tables should be arranged to maintain proper physical distancing;

5. Workstation layout should be designed to allow to unidirectional movement in

aisles, corridors or walkways;

6. Number of people inside an enclosed space and elevators shall be limited;

7. Use of stairs should be encouraged subject to physical distancing requirements;

8. Online system for clients shall be highly encouraged; and

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 9. Roving officers shall ensure physical distancing and observance of minimum
health protocols.

On reducing the risk of infection from COVID-19, the Guidelines distinguished the events
when the worker is suspected of having COVID-19 or is sick but is not suspected of
COVID-19.

In the event that the worker is suspected as having COVID-19, such worker shall
immediately proceed to the designated isolation area and never remove his/her mask.
Clinic personnel attending to the workers should wear appropriate personal protective
equipment (PPEs) and if needed, should require transport of the worker to the nearest
hospital. Company protocols for transport and PCR testing should be in place.
Decontamination of the workplace with appropriate disinfected shall be conducted and
work may only resume after 24 hours. Workers present in the work area with suspected
COVID-19 worker shall go on 14-day home quarantine. If the suspected worker tested
negative, co-workers may be allowed to report back to work.

If the worker is sick or has a fever but is not a suspected COVID-19 patient, he shall be
advised to take prudent measures to limit the spread of the communicable disease such
as staying at home and away from work or crowds, taking adequate rest and plenty of
fluid, practicing personal hygiene to prevent the spread of disease and seeking
appropriate medical care if the fever persists or difficulty of breathing starts or when he
becomes weak.

The Guidelines further laid down the duties of employers and employees. Employers shall
provide the following:

1. Necessary company policies for the prevention and control of COVID-19 taken
from DOH, WHO and reliable sources of information;
2. Resources and materials needed to keep the workers healthy and the workplace
safe (e.g. masks, soap, sanitizer, disinfectant etc.);
3. Designated safety officer to monitor COVID-19 prevention and control measures;
4. Enhanced health insurance provision of workers;
5. If feasible, a shuttle services and/or decent accommodation on near-site location
to lessen travel and people movement;
6. Hiring from the local community is enjoined; and
7. A COVID-19 Hotline and Call Center for employees must be put up to report if
symptomatic, and daily monitoring schemed of suspect employee condition.

On the other hand, workers shall:

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 1. Comply with all workplace measures in place for the prevention and control of
COVID-19 such as frequent hand washing, wearing of masks, observing physical
distancing;
2. Observe proper respiratory etiquette;
3. Cough and sneeeze into tissue or into shirt sleeve if tissue is not available;
4. Dispose used tissues properly; and
5. Disinfect hands immediately through proper washing with soap and water or
alcohol-based sanitizer immediately after a cough or sneeze.

For workplace where workers are evidently at risk of infection such as health-care and
other frontline services, the employer shall comply with DOH Memorandum No. 2020-
0178 or the Interim Guidelines on Health Care Provider Network during Covid-19
Pandemic. Extra precautionary measures which include strict hygiene and use of
personal protective equipment properly worn by workers whiles and work shall be
ensured by the employers as well as its proper disposal after use.

Employers may test workers for COVID-19. Testing kits used and procured shall be the
responsibility of the employer. DOH Protocols shall be followed for the testing and
interpretation of the results. Company policy on COVID-19 testing shall be formulated
and agreed upon by the employers and workers in conformity with the protocols of DOH.

Employers are highly encouraged to allow workers who are older than 60 years old, or,
of any age with co-morbidities or pre-existing illness (hypertension, diabetes, cancer or
with immunocompromised health status, or with high-risk pregnancy) to do work from
home arrangement. This arrangement shall be developed to detail the deliverable from
such employees and there shall be no diminution in wages or benefits.

DTI and DOLE shall extend assistance and technical support to all workplaces, employers
and workers for the compliance of the Guidelines. On the other hand, employers must
provide a monthly reporting of the illness, diseases and injured utilizing the DOLE Work
Accident/ Illness Report Form through the DOLE Regional Office copy furnishing DOH.

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Preglo, Mmimosa Diviena

Entitlement to Social Insurance Benefits and Company retirement benefits

EMPLOYEES’ COMPENSATION PROGRAM

(PD 626)

A. The Employees’ Compensation Program

The Employees’ Compensation Program (ECP) is a government program designed to
provide a compensation package to public and private sector employees or their
dependents in the event of work-related sickness, injury, or death.

B. Coverage
The following are the workers covered under the ECP:
1. Private sector workers who are compulsory members of the Social Security
System (SSS) and sea-based Overseas Filipino Workers (OFWs) Employees
shall be covered starting on the first day of their employment.
2. Government sector employees who are members of the Government service
Insurance System (GSIS), including members of the Armed Forces of the
Philippines, elective government officials who are receiving regular salary and all
casual, emergency, temporary and substitute or contractual employees.
3. Active self-employed members of the SSS.
C. Conditions of Compensability
A sickness, injury, disability or death resulting from an employment accident is
compensable if:
1. The employee is injured at the workplace;
2. The employee is performing official functions; and
3. If the injury is sustained elsewhere, the employee is executing an order for the
employer.

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No compensation will be allowed to an employee or the dependents if the injury, sickness,
disability or death is due to:
1. Drunkenness;
2. Willful intention to injure or kill himself or another; or
3. Notorious negligence.
The conditions for the compensability of COVID-19 are the following:
1. There must be a direct connection between the offending agent or event and
the worker based on epidemiologic criteria and occupational risk (g.,
healthcare workers, screening and contact tracing teams, etc.);
2. The tasks assigned to the worker would require frequent face-to-face and
close proximity interactions with the public or with confirmed cases for
healthcare workers;
3. Transmission occurred in the workplace; or
4. Transmission occurred while commuting to and from work.

D. The Benefits
The following are the benefits under the EC Program:
1. Loss of income benefits – Under the ECP, it is the disability, or the incapacity to
work, which is being compensated and not the illness or the injury. There are
three types of loss of income benefit, namely:

a. Temporary Total Disability (TTD) - For a disability that prevents an

employee from performing his work for a continuous period not exceeding
120 days. The amount of daily income benefit shall be ninety percent
(90%) of the employee’s average daily salary credit as determined by the
Systems.
b. Permanent Total Disability (PTD) - A monthly income benefit granted for
disabilities, such as, but not limited to, complete loss of sight of both eyes,
loss and function loss of both limbs, and brain injury resulting to imbecility
or insanity. The amount of monthly income benefit for PTD shall be
determined by the Systems based on the average monthly salary credit
or average monthly compensation (AMSC/AMC).

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 c. Permanent Partial Disability (PPD) - A monthly income benefit is granted
for disabilities that result in physical loss (amputation) or functional loss of
a body part. The number of monthly pensions is based on the
corresponding body part loss or functional loss, as provided under Article
193 of PD No. 626, as amended, and EC schedule of Compensation.

2. Medical services – It includes reimbursement of the cost of medicines for the

illness or injury, payment to providers of medical care, hospital care, surgical
expenses, and the costs of rehabilitation appliances and supplies. The medical
services are limited to ward services of hospitals duly accredited by the
Department of Health (DOH).

3. Carers’ allowance – A supplemental pension of P1,000/month is provided to

pensioners under the ECP who suffer from work-connected PPD and PTD.

4. Services/KaGabay Program (Katulong at Gabay sa Manggagawang May

Kapansanan) – Persons with work-related disabilities (PWRD) with an approved
EC TTD, PPD or PTD are qualified to avail of the benefits and services under
the Katulong at Gabay sa Manggagawang May Kapansanan, or KaGabay
Program.

5. Death benefit – The beneficiaries of the deceased employee are entitled to an

income benefit if the employee died as a result of a work-related injury or
sickness. They shall receive an income benefit paid at the beginning of the month
of death of the member and will continue for as long as they are entitled thereto.

6. Funeral benefit – An amount of ₽30,000 may be granted for the Private and
Public Sectors upon the death of an employee who died as a result of a work-
related accident or disease.
For workers who contracted COVID-19 may avail of the following benefits:
1. Loss of income benefit;
2. Medical benefit;
3. Death benefit; and
75
 4. Funeral benefit.

E. Notification and Filing of Claims

The employer should be notified of the member's sickness, injury or death within five days
from the occurrence of the contingency. Notice is not necessary if the contingency
occurred during working hours, at the place of work and with the knowledge of the
employer or representative.

Claims for EC benefits are filed at any SSS branch or representative office nearest the
member's residence or place of work.

F. Contribution
Employers pay for the EC contributions of their employees. For a covered employee in
the private sector, his or her employer shall remit to the SSS a monthly contribution in
accordance with the following schedule:
Range of Employers’ Contribution
Compensation
₽900.00 - ₽14,749.00 ₽10.00
₽14,750 - over ₽30.00

When a covered employee dies during employment, or is separated from employment,

his employer’s obligation to pay the monthly contribution arising from that employment
shall cease on the last day of the month of contingency. Likewise, when a covered
employee becomes disabled during employment, his employer’s obligation to pay the
monthly contribution shall be suspended during such months that he is not receiving
salary or wages.

SOCIAL SECURITY BENEFITS

(RA 1161, as amended by RA 11199)

A. Social Security Benefits

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Covered employees are entitled to a package of benefits under the Social Security and
Employees' Compensation (EC) Programs in the event of death, disability, sickness,
maternity and old age. Self-employed and voluntary members also get the same benefits
as covered employees, except those benefits under the EC program.

Basically, the SSS provides for a replacement of income lost on account of the
aforementioned contingencies.

B. Compulsory Coverage
1. Employer (Business or Household Employer);
2. Employee;
3. Self-Employed;
4. Househelper or Kasambahay; and
5. Overseas Filipino Workers (land-based and sea-based, except for Filipino
permanent migrants, including Filipino immigrants, permanent residents, and
naturalized citizens of their host countries, who may be covered on a voluntary
basis).
C. Benefits
If you are regularly paying your contributions, you will be entitled to these social security
benefits:
1. Sickness– a daily cash allowance paid for the number of days a member is
unable to work due to sickness or injury.

2. Maternity– a daily cash allowance granted to a female member in every instance

of pregnancy resulting in childbirth, miscarriage or emergency termination of
pregnancy, regardless of frequency, her civil status, employment status or the
legitimacy of her child.

3. Retirement – a cash benefit granted—either as a monthly pension or a lump sum

amount—to a member who can no longer work due to old age.

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 4. Disability – a cash benefit granted—either as a monthly pension or a lump sum
amount—to a member who becomes permanently disabled, either partially or
totally.

5. Death – a cash benefit granted—either as a monthly pension or a lump sum

amount—to the beneficiaries of a deceased member.

6. Funeral – a cash benefit given to whomever paid for the burial expenses of the
deceased member or pensioner.

7. Unemployment- a cash benefit granted to eligible employees – including house-

helpers and OFWs – who were involuntarily separated from employment.
An employee shall not be qualified to receive the benefit if he/she has been
involuntarily separated from employment due to the following:
1. Serious misconduct;
2. Willful disobedience to lawful orders;
3. Gross and habitual neglect of duties;
4. Fraud or willful breach of trust/loss of confidence;
5. Commission of a crime or offense; or
6. Analogous cases like abandonment, gross inefficiency, disloyalty/ conflict of
interest/ dishonesty.

D. Contribution
Effective January 2021, the following is the new schedule of contributions of employers
(ER) and employees (EE):

AMOUNT OF CONTRIBUTIONS

78
RANGE OF REGULAR SOCIAL MANDATORY PROVIDENT
COMPENSATION SECURITY FUND
ER EE TOTAL ER EE TOTAL
Below 3,250 255.00 135.00 390.00 - - -
3,250 - 3,749.99 297.50 157.50 455.00 - - -
3,750 - 4,249.99 340.00 180.00 520.00 - - -
4,250 - 4,749.99 382.50 202.50 585.00 - - -
4,750 - 5,249.99 425.00 225.00 650.00 - - -
5,250 - 5,749.99 467.50 247.50 715.00 - - -
5,750 - 6,249.99 510.00 270.00 780.00 - - -
6,250 - 6,749.99 552.50 292.50 845.00 - - -
6,750 - 7,249.99 595.00 315.00 910.00 - - -
7,250 - 7,749.99 637.50 337.50 975.00 - - -
7,750 - 8,249.99 680.00 360.00 1,040.00 - - -
8,250 - 8,749.99 722.50 382.50 1,105.00 - - -
8,750 - 9,249.99 765.00 405.00 1,170.00 - - -
9,250 - 9,749.99 807.50 427.50 1,235.00 - - -
9,750 - 10,249.99 850.00 450.00 1,300.00 - - -

AMOUNT OF CONTRIBUTIONS
RANGE OF REGULAR SOCIAL MANDATORY PROVIDENT
COMPENSATION SECURITY FUND
ER EE TOTAL ER EE TOTAL
10,250 - 10,749.99 892.50 472.50 1,365.00 - - -

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10,750 - 11,249.99 935.00 495.00 1,430.00 - - -
11,250 - 11,749.99 977.50 517.50 1,495.00 - - -
11,750 - 12,249.99 1,020.00 540.00 1,560.00 - - -
12,250 - 12,749.99 1,062.50 562.50 1,625.00 - - -
12,750 - 13,249.99 1,105.00 585.00 1,690.00 - - -
13,250 - 13,749.99 1,147.50 607.50 1,755.00 - - -
13,750 - 14,249.99 1,190.00 630.00 1,820.00 - - -
14,250 - 14,749.99 1,232.50 652.50 1,885.00 - - -
14,750 - 15,249.99 1,275.00 675.00 1,950.00 - - -
15,250 - 15,749.99 1,317.50 697.50 2,015.00 - - -
15,750 - 16,249.99 1,360.00 720.00 2,080.00 - - -
16,250 - 16,749.99 1,402.50 742.50 2,145.00 - - -
16,750 - 17,249.99 1,445.00 765.00 2,210.00 - - -
17,250 - 17,749.99 1,487.50 787.50 2,275.00 - - -
17,750 - 18,249.99 1,530.00 810.00 2,340.00 - - -
18,250 - 18,749.99 1,572.50 832.50 2,405.00 - - -
18,750 - 19,249.99 1,615.00 855.00 2,470.00 - - -
19,250 - 19,749.99 1,657.50 877.50 2,535.00 - - -
19,750 - 20,249.99 1,700.00 900.00 2,600.00 - - -
20,250 - 20,749.99 1,700.00 900.00 2,600.00 42.50 22.50 65.00
20,750 - 21,249.99 1,700.00 900.00 2,600.00 85.00 45.00 130.00
21,250 - 21,749.99 1,700.00 900.00 2,600.00 127.50 67.50 195.00
21,750 - 22,249.99 1,700.00 900.00 2,600.00 170.00 90.00 260.00
22,250 - 22,749.99 1,700.00 900.00 2,600.00 212.50 112.50 325.00
22,750 - 23,249.99 1,700.00 900.00 2,600.00 255.00 135.00 390.00
23,250 - 23,749.99 1,700.00 900.00 2,600.00 297.50 157.50 455.00

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 23,750 - 24,249.99 1,700.00 900.00 2,600.00 340.00 180.00 520.00
24,250 - 24,749.99 1,700.00 900.00 2,600.00 382.50 202.50 585.00
24,750 - over 1,700.00 900.00 2,600.00 425.00 225.00 650.00

RETIREMENT PAY
(Article 302)

A. Coverage
Employees shall be retired upon reaching the age of sixty (60) years or more but not
beyond sixty-five (65) years old [and have served the establishment for at least five
(5) years].

This benefit applies to all employees except:

1. Government employees; and
2. Employees of retail, service and agricultural establishments/ operations regularly
employing not more than ten (10) employees.

B. Amount of Retirement Pay

The minimum retirement pay shall be equivalent to one-half (1/2) month salary for every
year of service, a fraction of at least six (6) months being considered as one (1) whole
year.

For the purpose of computing retirement pay, "one-half month salary" shall include all of
the following:
1. Fifteen (15) days salary based on the latest salary rate;
2. Cash equivalent of five (5) days of service incentive leave; and
3. One-twelfth (1/12) or 2.5 daysbb of the thirteenth-month pay.

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Thus, “one-half month salary” is equivalent to 22.5 days (Capitol Wireless, Inc. v.
Honorable Secretary Ma. Nieves R. Confesor, G. R. No. 117174, November 13, 1996).

The COLA shall not be included in the computation of retirement pay.

Illustration:
Minimum Retirement Pay = Daily Ratecc x 22.5 days x number of years in service

Other benefits may be included in the computation of the retirement pay upon agreement
of the employer and the employee or if provided in the Collective Bargaining
Agreement(CBA).

C. Retirement Benefit under a Collective Bargaining Agreement or Applicable

Contract
Any employee may retire or be retired by his or her employer upon reaching the retirement
age established in the collective bargaining agreement (CBA) or other applicable
agreement/contract and shall receive the retirement benefit granted therein; provided,
however, that such retirement benefit shall not be less than the retirement pay required
under RA 7641, and provided further that if such retirement benefit under the agreement
is lesser, the employer shall pay the difference.

Where both the employer and the employee contribute to a retirement fund pursuant to
the applicable agreement, the employer's total contributions and the accrued interest
thereof should not be less than the total retirement benefit to which the employee would
have been entitled had there been no such retirement benefits’ fund. If such total portion
from the employer is lesser, the employer shall pay the deficiency.

D. Retirement Benefit of Workers who are Paid by Results

For covered workers who are paid by results and do not have a fixed monthly salary rate,
the basis for the determination of the salary for fifteen (15) days shall be their average
daily salary (ADS). The ADS is derived by dividing the total salary or earnings for the last
twelve months reckoned from the date of retirement by the number of actual working days

82
in that particular period, provided that the determination of rates of payment by results
are in accordance with the established regulations.

E. Retirement Benefit of Part-time Workers

Part-time workers are also entitled to retirement pay of “one-half month salary” for every
year of service under RA 7641 after satisfying the following conditions precedent for
optional retirement: (a) there is no retirement plan between the employer and the
employee and (b) the employee should have reached the age of sixty (60) years, and
should have rendered at least five (5) years of service with the employer.

Applying the foregoing principle, the components of retirement benefit of part-time

workers may likewise be computed at least in proportion to the salary and related benefits
due them.

F. Retirement Benefit of Underground or Surface Mine Employees under

Republic Act No. 8558, as amended by Republic Act No. 10757dd
The retirement age of underground or surface mine employees has been reduced to a
much lower age. For this purpose, an underground or surface mine employee refers to
any person employed to extract mineral deposits underground or in the surface, or to
work in excavations or workings such as shafts, winzes, tunnels, drifts, crosscuts, raises,
working places whether abandoned or in use beneath or in the earth’s surface for the
purpose of searching for and extracting mineral deposits. Moreover, surface mine workers
shall only include mill-plant workers, electrical, mechanical and tailings pond personnel.

In the absence of a retirement plan or other applicable agreement providing for retirement
benefit of underground mine employees in the establishment, an employee may retire
upon reaching the compulsory retirement age of sixty (60) years or upon optional
retirement at the age of fifty (50) years, provided he/she has served for at least five (5)
years as an underground mine employee or in underground mine of the establishment.

G. Retirement Benefit of Racehorse Jockeys

The compulsory retirement age of professional racehorse jockeys who are duly licensed
by the Philippine Racing Commission (PHILRACOM) is fifty-five (55) years old, provided

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that he/she has served for at least five (5) years as racehorse jockey and has paid
additional premium to the SSS.

H. Other Benefits upon Retirement

The retirement benefits under RA 7641 and RA 8558 are separate and distinct from those
granted by the Social Security System.

Under the law, upon optional or compulsory retirement, the employee is also entitled to
the proportionate thirteenth-month pay for the calendar year and to the cash equivalent
of accrued leave benefits.

I. Coverage from Income Tax of Retirement Pay

Exempted from taxation are the retirement benefits received under RA 7641 (now Article
302 herein) and those received by officials and employees of private firms, whether
individual or corporate, in accordance with a reasonable private benefit plan maintained
by the employer: Provided, That the retiring official or employee has been in the service
of the same employer for at least ten (10) years and is not less than fifty
(50) years of age at the time of his retirement: Provided, further, That the benefits granted
under this subparagraph shall be availed of by an official or employee only once.
For purposes herein, the term 'reasonable private benefit plan' means a pension, gratuity,
stock bonus or profit-sharing plan maintained by an employer for the benefit of some or
all of his officials or employees, wherein contributions are made by such employer for the
officials or employees, or both, for the purpose of distributing to such officials and
employees the earnings and principal of the fund thus accumulated, and wherein it is
provided in said plan that at no time shall any part of the corpus or income of the fund be
used for, or be diverted to, any purpose other than for the exclusive benefit of the said
officials and employees.

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Bacus, Billie Girl

Tax and Legal Ramifications of:

A. Voluntary Resignation

Resignation is defined as the voluntary act of an employee who finds himself in a

situation where he believes that personal reasons cannot be sacrificed in favor of the
exigency of the service so much so that he has no other choice but to dissociate himself
from his employment. According to Article 300 of the Labor Code, the employee must
serve a written notice to his or her employer at least one month in advance and the
employer upon whom no such notice was served may hold the employee liable for
damages. The 30-day prior written notice rule is for the benefit of the employer. The latter
may a) insist on the full observance by the resigning employee of the entire 30 days; or
b) shorten it to such number of days as it may deem appropriate or necessary; or c) waive
it completely and make the resignation effective immediately. The final or last salary
received by the employee from his employer is still subject to taxation since the salary
was “earned” over the course of employment. The resignation must be accepted in writing
to make binding and effective and the resigning employee may withdraw his resignation
anytime before the acceptance is made by the employer. Once accepted, however,
withdrawal thereof can no longer be made by the resigning employee, except with the
consent or agreement of the employer.

B. Involuntary Resignation

Involuntary Resignation is the termination of employment by the employee with just

cause. The following are the instances:
A. Serios insult by the employer or his representative on the honor and person of the
employee;
B. Inhuman and unbearable treatment accorded the employee by the employer or his
representative;
C. Commission of a crime or offense by the employer or his representative against
the person of the employee or any of the immediate members of his family; and
D. Other causes analogous to any of the foregoing.

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An employee is entitled to separation pay equivalent to his/her one-month pay for every
year of service, a fraction of at least six (6) months being considered as one whole year,
if his/her separation from service is due to any of the following:
1. Installation by employer of labor-saving devices;
2. Redundancy, as when the position of the employee has been found to be
excessive or unnecessary in the operation of the enterprise; and
3. Impossible reinstatement of the employee to his or her former position or to a
substantially equivalent position for reasons not attributable to the fault of the employer,
as when the reinstatement ordered by a competent authority cannot be implemented due
to closure or cessation of operations of the establishment/employer, or the position to
which he or she is to be reinstated no longer exists and there is no substantially equivalent
position in the establishment to which he or she can be assigned.u
4. Lack of service assignment of security guard by reason of age.

C. Optional Retirement

The employee may retire as early as 60 years old and there are no distinctions of benefits
for the optional retirement mandatory retirement. The employer and employee may
mutually agree to grant to the employer the sole and exclusive right to retire an employee
at an earlier age or after rendering a certain period of service. This agreement may be
stipulated in a CBA or the employment contract. The employee must consent to the
optional retirement or else it will be considered as illegal dismissal.

D. Compulsory Retirement

Compulsory Retirement happens when the employee reaches the age of 65 and he must
have rendered a minimum of five years of service. Exempted from taxation are the
retirement benefits received under RA 7641 (now Article 302 herein) and those received
by officials and employees of private firms, whether individual or corporate, in accordance
with a reasonable private benefit plan maintained by the employer: Provided, That the
retiring official or employee has been in the service of the same employer for at least ten
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(10) years and is not less than fifty (50) years of age at the time of his retirement: Provided,
further, That the benefits granted under this subparagraph shall be availed of by an official
or employee only once.

For purposes herein, the term 'reasonable private benefit plan' means a pension, gratuity,
stock bonus or profit-sharing plan maintained by an employer for the benefit of some or
all of his officials or employees, wherein contributions are made by such employer for the
officials or employees, or both, for the purpose of distributing to such officials and
employees the earnings and principal of the fund thus accumulated, and wherein it is
provided in said plan that at no time shall any part of the corpus or income of the fund be
used for, or be diverted to, any purpose other than for the exclusive benefit of the said
officials and employees.

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 Group 3

Labor Law Review Reporting

Questions

BACUS
BAUTISTA
LIDASAN
PAMPO
PARAS
PREGLO
SANGALANG
TULDANES

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1) What determines employee-employer relationship?
Employment relationship is determined by law and not by contract.

2) What is the most important test in the four-fold test?

It is the so-called “control test” that is the most important element. Absent the
power to control to the employee with respect to the means and methods of
accomplishing his work, there is no employeremployee relationship between the
parties

3) Who is an employer?
Employer is any person, natural or juridical, domestic or foreign, who carries on it
the Philippines any trade, business, industry, undertaking or activity of any kind
and uses the services of another person who is under his orders as regards the
employment, except the Government and any of its political subdivisions, branches
or instrumentalities, including corporations owned or controlled by the
Government.

4) Who is an employee?
Employee is any person who performs services for an employer in which either or
both mental and physical efforts are used and who receives compensation for such
services, where there is an employer‐employee relationship

5) What is the two-tiered test?

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

6) What is a casual employment?

It is an employment where the Employee is engaged in an activity which is not
usually necessary or desirable in the usual business or trade of the Employer.

7) What is the difference between fixed-term and project employment?.

Both employments are time bound or for a certain period as agreed upon at the
time of engagement, however in project employment, the employee is tasked to
do specific undertaking, which is not present in fixed-term employment.

8) Who is an apprentice?
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 Any worker who is covered by a written apprenticeship agreement with an
individual Employer or any of the entities recognized under the Labor Code.

9) When may learners be employed?

No experienced worker is available, it is necessary to prevent curtailment of
employment opportunities; and Employment does not create unfair competition in
terms of labor costs or impair or lower working standards.

10) Who are considered commission-based employees?

Commission-based employees receive pay based on the revenue they take in for
the business. A commission is a sum of money that is payable to an employee
after they complete a service or a task for a business.

11) Who are piece-rate workers?

Piece-Rate Workers refers to those who are paid a standard amount for every
piece or unit of work produced that is more or less regularly replicated without
regard to the time spent in producing the same.

12) What is the difference between job contracting and labor only contracting?
Job Contracting or Subcontracting: This refers to an arrangement whereby a
principal agrees to put out or farm out to a contractor or subcontractor the
performance or completion of a specific job, work or service within a definite or
predetermined period, regardless of whether such job, work or service is to be
performed or completed within or outside the premises of the principal. “Labor-
Only” Contracting: It is a prohibited act, an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a job, work or
service for a principal.

13) What is trilateral relationship in job contracting?

In legitimate contracting, there exists a trilateral relationship under which there is
a contract for a specific job, work or service between the principal and the
contractor or subcontractor, and a contract of employment between the contractor
or subcontractor and its workers.

14) Who are considered middle managers?

Middle-level managers, or middle managers, are those in the levels below top
managers. Middle managers' job titles include: General manager, Plant manager,
Regional manager, and Divisional manager.

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15) Who are considered first-level managers?
First-level managers are also called first-line managers or supervisors. First-line
managers are responsible for the daily management of line workers—the
employees who actually produce the product or offer the service.

16) What is termination of employment?

Termination of Employment means to sever the employer-employee relationship,
and put an end on an employee’s current work. It can be made by the Employee
through Resignation or by the Employer for just or authorized causes, as provided
in the Labor Code of the Philippines.

17) What is considered as a dismissal based on a just cause and what are the
causes?
A dismissal based on a just cause means that the employee has committed a
wrongful act or omission. The causes are the following:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders
of his employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his
employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his
employer or any immediate member of his family or his duly authorized
representatives; and
(e) Other causes analogous to the foregoing.

18) What are the requisites for serious misconduct?

1. There must be misconduct;
2. The misconduct is of such grave and aggravated character;
3. It must relate to the performance of the employee’s duties;
4. A showing that the employee becomes unfit to continue working for the
employer.

19) What is considered as gross negligence?

Gross negligence has been defined as the want or absence of or failure to exercise
slight care or diligence, or the entire absence of care. It evinces a thoughtless
disregard of consequences without exerting any effort to avoid them. In order to

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 constitute just cause for an employee’s dismissal due to negligence, it must be
both gross and habitual.

20) What are the requisites for fraud or willful breach of trust?
1. There must be an act, omission or concealment;
2. The act, omission or concealment involves a breach of legal duty, trust, or
confidence justly reposed;
3. It must be committed against the employer or his/her representative; and
4. It must be in connection with employee’s work.

21) Who are managerial employees?

Managerial employees - vested with powers or prerogatives to lay down
management policies and to hire, transfer, suspend, lay-off, recall, discharge,
assign or discipline employees or effectively recommend such managerial actions.

22) Who are considered as fiduciary rank and file employees?

Fiduciary Rank and File - those who in the normal and routine exercise of their
functions, regularly handle significant amounts of money or property. Ex. cashiers,
auditors, property custodians.

23) What is a dismissal based on authorized cause and its causes?

A dismissal based on an authorized cause means that there exists a ground which the
law itself allows or authorizes to be invoked to justify the termination of an employee
even if he has not committed any wrongful act or omission, such as installation of
labor-saving devices, redundancy, retrenchment, closure of cessation of business
operations or disease. The causes are the following:

(1) Business-related causes – Referring to the grounds specifically mentioned in

Article 298 [283], to wit:
a) Installation of labor-saving device;
b) Redundancy;
c) Retrenchment;
d) Closure or cessation of business operations NOT due to serious business losses
or financial reverses; and
e) Closure or cessation of business operations due to serious business losses and
financial reverses.
(2) Health-related causes – Referring to disease under Article 299 [284] of the Labor
Code.

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24) What is the definition of installation of labor-saving devices?
This refers to the installation of machinery to effect efficiency and economy in the
employer’s method of production.

25) What is the definition of redundancy?

Redundancy exists when the service capability of the workforce is in excess of
what is reasonably needed to meet the demands of the business enterprise.

26) When is a position considered redundant?

A position is redundant when it is superfluous and superfluity of a position or
positions could be the result of a number of factors such the over hiring of workers,
a decrease in the volume of business or dropping of a particular line or service
previously manufactured or undertaken by the enterprise.

27) What are the requisites for a valid retrenchment to prevent loss?
Requisites
1. The retrenchment is reasonably necessary and likely to prevent business
losses;
2. The losses, if already incurred, are not merely de minimis, but substantial,
serious, actual and real, or if only expected are reasonably imminent as perceived
objectively and in good faith by the employer;
3. The expected or actual losses must be proved by sufficient and convincing
evidence;
4. The retrenchment must be in good faith for the advancement of its interest and
not to
defeat or circumvent the employees’ right to security of tenure; and
5. There must be fair and reasonable criteria in ascertaining who would be
dismissed and would be retained among the employees such as status, efficiency,
seniority, physical fitness, age and financial hardship for certain workers.

28) What is the definition of Abandonment?

It is the deliberate and unjustified refusal of an employee to resume his
employment. It is a form of neglect of duty.

29) What is the definition of courtesy resignation?

Resignation per se means voluntary relinquishment of a position or office. Adding
the word ‘courtesy’ did not change the essence of the resignation.

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30) When is there change of ownership?
A mere change in the equity composition of a corporation is neither just nor an
authorized cause that would legally permit the dismissal of the corporation’s
employees en masse.

31) What is the definition of preventive suspension?

The employer may place the worker concerned under preventive suspension if his
continued employment poses a serious and imminent threat to the life or property
of the employer or of his co-workers.”

32) When is a suspension considered as administrative penalty?

Suspension is considered as an administrative penalty when an employee violates
the company policies or code of conduct such as excessive absences, tardiness
or other similar acts which are prejudicial to the employer. Instead of imposing
outright dismissal, a preventive suspension served as an administrative penalty
may give ample warning to the employees that further violations of the company
policies, code of conduct or other misfeasance may lead their dismissal from their
services.

33) What is the purpose of preventive suspension?

An employee who allegedly committed serious offenses in the workplace, and in
violation of company policies and code of conduct, may be subjected to preventive
suspension pending his or her investigation. Such preventive suspension is to
prevent him from causing harm or injury to the company and to other employees.

34) Is preventive suspension tantamount to constructive dismissal?

When the suspension of an erring employee exceeds the maximum 30-day
preventive suspension, or it is imposed indefinitely, it will be tantamount to
constructive dismissal.

35) What is the definition of constructive dismissal?

Constructive dismissal has often been defined as a "dismissal in disguise" or "an
act amounting to dismissal but made to appear as if it were not." It exists where
there is cessation of work because continued employment is rendered impossible,
unreasonable or unlikely, as an offer involving a demotion in rank and a diminution
in pay.

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36) What is the test of constructive dismissal?
The test of constructive dismissal is whether a reasonable person in the
employee's position would have felt compelled to give up his position under the
circumstances.

37) What is the difference between illegal and constructive dismissal?

Illegal dismissal is readily shown by the act of the employer in openly seeking the
termination of an employee while constructive dismissal, being a dismissal in
disguise, is not readily indicated by any similar act of the employer that would
openly and expressly show its desire and intent to terminate the employment
relationship

38) What is the definition of retirement?

Retirement- the result of a bilateral act of the parties, a voluntary agreement
between the employer and the employee whereby the latter, after reaching a
certain age agrees to sever his or her employment with the former

39) Who are entitled for retirement?

All employees in the private sector, regardless of their position, designation, or
status, and irrespective of the method by which their wages are paid.

40) Who are not covered by retirement benefits?

a. Employees covered by the Civil Service Law;
b. Domestic helpers and persons in the personal service of another, and
c. Employees in retail, service and agricultural establishments or operations
regularly employing not more than ten employees

41) When does R.A. 7641 apply?

RA 7641 only applies in a situation where:
a. there is no collective bargaining agreement or other applicable employment
contract providing for retirement benefits for an employee; or
b. there is a collective bargaining agreement or other applicable employment
contract providing for retirement benefits for an employee, but it is below the
requirements set for by law.

42) What is the age of retirement?

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

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 (60) years or more, but not beyond sixty-five (65) years which is hereby declared
the compulsory retirement age (and have served the establishment for at least 5
years).

43) What is the definition of Optional retirement?

Optional retirement – in the absence of a retirement plan or other applicable
agreement providing for retirement benefits of EEs in an establishment, an EE
may retire upon reaching the age of 60 or more if he has served for at least 5 years
in said establishment.

44) What is the definition of Compulsory retirement?

Compulsory retirement – in the absence of a retirement plan or other applicable
agreement providing for retirement benefits of EEs in an establishment, an EE
shall be retired at the age of 65 years.

45) What is the retirement benefit of workers who are paid by results?
For covered workers who are paid by result and do not have a fixed monthly salary
rate, the basis for the determination of the salary for 15 days shall be their average
daily salary (ADS). The ADS is derived by dividing the total salary or earning for
the last 12months reckoned from the date of retirement by the number of actual
working days in that particular period, provided that the determination of rates of
payment by results are in accordance with established regulations.

46) What are the two kinds of termination under Article 300?
An employee may terminate his employment in either of two ways, to wit:
3. Voluntary resignation- without just just cause as provided in paragraph a; or
4. Involuntary resignation- with just cause as provided in paragraph b thereof.

47) What is the definition of Resignation?

Resignation is defined as the voluntary act of an employee who finds himself in a
situation where he believes that personal reasons cannot be sacrificed in favor of
the exigency of the service so much so that he has no other choice but to dissociate
himself from his employment.

48) What is the definition of involuntary resignation?

Involuntary resignation is the termination initiated by the employee based on the
just causes described and enumerated in paragraph b of Article 300.

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49) What is the difference between resignation and constructive dismissal?
Resignation is voluntary act of an employee who is in a situation where one
believes that personal reasons cannot be sacrificed in favor of the exigency of the
service. It is a formal pronouncement or relinquishment of an office, with the
intention to relinquish accompanied by an act of relinquishment.

On the other hand, Constructive dismissal is involuntary or forced resignation due

to the harsh, hostile, and unfavorable conditions set by the employer. It is
essentially quitting or cessation of work because continued employment is
rendered impossible, unreasonable or unlikely or when there is demotion in rank
or diminution of pay and other benefits. It exists if an act of clear discrimination,
insensibility, or disdain by an employer becomes so unbearable on the part of the
employee that it could foreclose any choice by him except to forego his continued
employment.

50) May a transfer of an employee from one position to another or from one
workplace to another within the same establishment constitute constructive
dismissal?
Generally, it does not amount constructive dismissal. However, it may be
considered constructive dismissal when any or all of the following conditions
concur:

4. When the transfer is unreasonable, inconvenient or prejudicial to the

employee;
5. When the transfer involves a demotion in rank or diminution of salaries,
benefits and other privileges; or
6. When the employer performs a clear act of discrimination, insensibility, or
disdain towards the employee, which forecloses any choice by the latter except
to forego his continued employment.

51) What are some principles on constructive dismissal or involuntary or forced

resignation?
a. Mere allegations of threat or force do not constitute evidence to support a
finding of forced resignation or constructive dismissal.
b. A threat to sue the employee through competent authority, if the claim is
just or legal, is not unjust and will not amount to forced resignation or
constructive dismissal.

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 c. Employee who alleges that he was coerced or intimidated into resigning has
the burden to prove such claim.
d. Giving the employee the choice or option between resignation and
investigation is not illegal.
e. An employee who tendered her voluntary resignation and signed the
quitclaim after receiving all the benefits due her for her separation cannot
claim that she was constructively dismissed.

52) What is an involuntary resignation?

Involuntary resignation amounts to constructive dismissal. In the case of Philippine
Wireless Inc., vs NLRC, the Court defined constructive dismissal as “is 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.

53) What are the different kinds of retirement schemes?

There are different kinds of retirement schemes which includes: (a) compulsory
and contributory in nature, (b) one set up by agreement between the employer and
the employees in the CBA or other agreements between them, and (c) one that is
voluntarily given by the employer, expressly as an announced company policy or
impliedly as in failure to contest the employee’s claim for retirement benefits.

54) What is the definition of flexible work arrangements?

Flexible work arrangements are alternative arrangements or schedules other than
the traditional or standard workhours, workdays or workweek. These work
arrangements shall be effective and implemented temporarily and subject to the
prevailing conditions of the company.

55) When is there reduction of workhours and/or workdays?

Reduction of Workhours and/or Workdays where the normal workhours or
workdays per week are reduced.

56) When is there rotation of workers?

Rotation of Workers where the employees are rotated or alternately provided work
within the week.

57) When is there forced leave by the employees?

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 Forced Leave where the employees are required to go on leave for several days
or weeks utilizing their leave credits, if there any.

58) What is the employee’s compensation program?

The Employees’ Compensation Program (ECP) is a government program
designed to provide a compensation package to public and private sector
employees or their dependents in the event of work-related sickness, injury, or
death.

59) Who are covered under the ECP?

The following are the workers covered under the ECP:
1. Private sector workers who are compulsory members of the Social Security
System (SSS) and sea-based Overseas Filipino Workers (OFWs) Employees
shall be covered starting on the first day of their employment.
2. Government sector employees who are members of the Government service
Insurance System (GSIS), including members of the Armed Forces of the
Philippines, elective government officials who are receiving regular salary and all
casual, emergency, temporary and substitute or contractual employees.
3. Active self-employed members of the SSS.

60) What are the conditions of compensability?

A sickness, injury, disability or death resulting from an employment accident is
compensable if:
1. The employee is injured at the workplace;
2. The employee is performing official functions; and
3. If the injury is sustained elsewhere, the employee is executing an order for the
employer.

61) When is there no compensation to employees?

No compensation will be allowed to an employee or the dependents if the injury,
sickness, disability or death is due to:
4. Drunkenness;
5. Willful intention to injure or kill himself or another; or

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 6. Notorious negligence.

62) What are the conditions for the compensability of COVID-19?

The conditions for the compensability of COVID-19 are the following:
1. There must be a direct connection between the offending agent or event and
the worker based on epidemiologic criteria and occupational risk (g.,
healthcare workers, screening and contact tracing teams, etc.);
2. The tasks assigned to the worker would require frequent face-to-face and
close proximity interactions with the public or with confirmed cases for
healthcare workers;
3. Transmission occurred in the workplace; or
4. Transmission occurred while commuting to and from work.

63) What is considered as loss of income benefits?

Loss of income benefits – Under the ECP, it is the disability, or the incapacity to
work, which is being compensated and not the illness or the injury.

64) What are the three types of loss of income benefits?

• Temporary total disability
• Permanent total disability
• Permanent partial disability

65) What is the definition of temporary total disability?

Temporary Total Disability (TTD) - For a disability that prevents an employee from
performing his work for a continuous period not exceeding 120 days. The amount of
daily income benefit shall be ninety percent (90%) of the employee’s average daily
salary credit as determined by the Systems.

66) What is the definition of permanent total disability?

Permanent Total Disability (PTD) - A monthly income benefit granted for disabilities,
such as, but not limited to, complete loss of sight of both eyes, loss and function loss
of both limbs, and brain injury resulting to imbecility or insanity. The amount of monthly
income benefit for PTD shall be determined by the Systems based on the average
monthly salary credit or average monthly compensation (AMSC/AMC).
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67) What is the definition of permanent partial disability?
Permanent Partial Disability (PPD) - A monthly income benefit is granted for
disabilities that result in physical loss (amputation) or functional loss of a body part.
The number of monthly pensions is based on the corresponding body part loss or
functional loss, as provided under Article 193 of PD No. 626, as amended, and EC
schedule of Compensation.

68) What consists medical services?

Medical services – It includes reimbursement of the cost of medicines for the illness
or injury, payment to providers of medical care, hospital care, surgical expenses, and
the costs of rehabilitation appliances and supplies. The medical services are limited
to ward services of hospitals duly accredited by the Department of Health (DOH).

69) What consists carers’ allowance?

Carers’ allowance – A supplemental pension of P1,000/month is provided to
pensioners under the ECP who suffer from work-connected PPD and PTD.

70) What is the sevices/Kagaby program?

Services/KaGabay Program (Katulong at Gabay sa Manggagawang May
Kapansanan) – Persons with work-related disabilities (PWRD) with an approved EC
TTD, PPD or PTD are qualified to avail of the benefits and services under the Katulong
at Gabay sa Manggagawang May Kapansanan, or KaGabay Program.

71) What consists a death benefit?

Death benefit – The beneficiaries of the deceased employee are entitled to an income
benefit if the employee died as a result of a work-related injury or sickness. They shall
receive an income benefit paid at the beginning of the month of death of the member
and will continue for as long as they are entitled thereto.

72) What consists funeral benefit?

Funeral benefit – An amount of ₽30,000 may be granted for the Private and Public
Sectors upon the death of an employee who died as a result of a work- related
accident or disease.

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73) What is the liability of employer when a covered employee dies during
employment?
When a covered employee dies during employment, or is separated from
employment, his employer’s obligation to pay the monthly contribution arising from
that employment shall cease on the last day of the month of contingency. Likewise,
when a covered employee becomes disabled during employment, his employer’s
obligation to pay the monthly contribution shall be suspended during such months
that he is not receiving salary or wages.
74) What are the benefits under R.A. 1161, as amended by R.A. 11199?
Covered employees are entitled to a package of benefits under the Social Security
and Employees' Compensation (EC) Programs in the event of death, disability,
sickness, maternity and old age. Self-employed and voluntary members also get
the same benefits as covered employees, except those benefits under the EC
program.

If you are regularly paying your contributions, you will be entitled to these social
security benefits:
1. Sickness– a daily cash allowance paid for the number of days a member is
unable to work due to sickness or injury.

2. Maternity– a daily cash allowance granted to a female member in every instance

of pregnancy resulting in childbirth, miscarriage or emergency termination of
pregnancy, regardless of frequency, her civil status, employment status or the
legitimacy of her child.

3. Retirement – a cash benefit granted—either as a monthly pension or a lump sum

amount—to a member who can no longer work due to old age.

4. Disability – a cash benefit granted—either as a monthly pension or a lump sum

amount—to a member who becomes permanently disabled, either partially or
totally.

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 5. Death – a cash benefit granted—either as a monthly pension or a lump sum
amount—to the beneficiaries of a deceased member.

6. Funeral – a cash benefit given to whomever paid for the burial expenses of the
deceased member or pensioner.

Unemployment- a cash benefit granted to eligible employees – including house-

helpers and OFWs – who were involuntarily separated from employment

75) What is the compulsory coverage of SSS?

Compulsory Coverage
a. Employer (Business or Household Employer);
b. Employee;
c. Self-Employed;
d. Househelper or Kasambahay; and
e. Overseas Filipino Workers (land-based and sea-based, except for Filipino
permanent migrants, including Filipino immigrants, permanent residents,
and naturalized citizens of their host countries, who may be covered on a
voluntary basis).

76) When is an employee not qualified for SSS benefits?

An employee shall not be qualified to receive the benefit if he/she has been
involuntarily separated from employment due to the following:
7. Serious misconduct;
8. Willful disobedience to lawful orders;
9. Gross and habitual neglect of duties;
10. Fraud or willful breach of trust/loss of confidence;
11. Commission of a crime or offense; or
12. Analogous cases like abandonment, gross inefficiency, disloyalty/ conflict of
interest/ dishonesty.
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77) What is the amount of retirement pay?
The minimum retirement pay shall be equivalent to one-half (1/2) month salary for
every year of service, a fraction of at least six (6) months being considered as one
(1) whole year.

78) What is the retirement benefit of workers who are paid by results?
For covered workers who are paid by results and do not have a fixed monthly
salary rate, the basis for the determination of the salary for fifteen (15) days shall
be their average daily salary (ADS). The ADS is derived by dividing the total salary
or earnings for the last twelve months reckoned from the date of retirement by the
number of actual working days in that particular period, provided that the
determination of rates of payment by results are in accordance with the established
regulations.

79) What is the retirement benefit of part-time workers?

Part-time workers are also entitled to retirement pay of “one-half month salary” for
every year of service under RA 7641 after satisfying the following conditions
precedent for optional retirement: (a) there is no retirement plan between the
employer and the employee and (b) the employee should have reached the age of
sixty (60) years, and should have rendered at least five (5) years of service with
the employer.

Applying the foregoing principle, the components of retirement benefit of part-time

workers may likewise be computed at least in proportion to the salary and related
benefits due them.

80) What is the definition of habitual absenteeism/tardiness?

It is a form of neglect of duty. Lack of initiative, diligence and discipline to come to
work on time everyday exhibit the employee’s deportment towards work. It is
inimical to the general productivity and business of the employer. This is especially
true when the tardiness and/or absenteeism occur frequently and repeatedly within
an extensive period of time.

81) What is poor performance?

It is tantamount to inefficiency and incompetence in the performance of official
duties. An unsatisfactory rating can be a just cause for dismissal only if it amounts
to gross and habitual neglect of duties. Poor or unsatisfactory performance of an

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 employee does not necessarily mean he is guilty of gross and habitual neglect of
duty.

82) What are past offenses?

Previous offenses may be used as a valid justification for dismissal only if the
infractions are related to the subsequent offense upon which the basis of
termination is decreed.
83) What are habitual infractions?
A series of irregularities when put together may constitute serious misconduct,
under which Art. 297 of the Labor Code is a just cause for dismissal.

84) What is immorality?

DECS Order No. 92 provides that disgraceful or immoral conduct can be used as
a basis for termination of employment.

85) What is the standard of morality?

It is public and secular, not religious. Whether a conduct is considered disgraceful
or immoral should be made in accordance with the prevailing norms of conduct,
which as stated in Leus, refer to those conducts which are proscribed because
they are detrimental to conditions upon which depend the existence of and
progress of human society.

86) What is the definition of totality of infractions?

The totality of infractions or the number of violations committed during the period
of employment shall be considered in determining the penalty to be imposed upon
an erring employee. Fitness for continued employment cannot be
compartmentalized into tight little cubicles of aspects of character, conduct and
ability separate and independent of each other.

87) What is the definition of pregnancy out of wedlock?

When the law speaks of immoral or necessarily, disgraceful conduct, it pertains to
public and secular morality.
Pre-marital sexual relations between two consenting adults, who have no
impediment to marry each other, and consequently, conceiving a child out of
wedlock, gauged from a purely public and secular view of morality does NOT
amount to an immoral conduct.

88) What is considered as conviction/commission of a crime?

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 The charge of drug abuse within the company’s premises and during work hours
constitutes serious misconduct which is a just cause for termination.

89) When is there temporary “off-detail” or “floating status”?

This is the period of time when security guards are in between assignments or
when they are made to wait after being relieved from a previous post until they are
transferred to a new one.

90) What is the definition of procedural?

Procedural: an opportunity to be heard and to defend oneself must be observed
before an employee may be dismissed.

91) What is the definition of substantive due process?

Substantive Due Process - whether the termination was based on the provisions
of the Labor Code or in accordance with jurisprudence. The dismissal must be for
any of the causes provided for in Art. 297-299.

92) What are the requisites for substantive due process?

Two requisites must concur:
(3) the dismissal must be for a just or authorized cause; and
(4) the employee must be afforded an opportunity to be heard and to defend.

93) What is the twin notice requirement/rule?

The employer has the burden of proving that a dismissed worker has been served
two notices:
1. First written notice: specifying the ground(s) for termination and giving the
employee the reasonable opportunity within which to explain his side.
2. Second written notice: indicating that upon due consideration of all
circumstances, grounds have been established to justify his termination.

94) What is the purpose of the twin notice requirement/rule?

To give the employee an opportunity to study the accusation against him, consult
a union official or lawyer, gather data and evidence, and decide on his defenses.

95) What are the contents of first notice?

CONTENTS OF FIRST NOTICE
1. Specific causes or grounds for termination against the employee;

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 2. Directive that the employee is given the opportunity to submit his written
explanation within a “reasonable period” or every kind of assistance that
management must accord to enable him to prepare adequately for his defense.
This should be construed as a period of at least 5 calendar days from receipt of
notice;
3. Detailed narration of the facts and circumstances that will serve as basis for the
charge against the employees. A general description of the charge will not suffice;
[Unilever v. Rivera, GR No. 201701 (2013)]
4. The company rules, if any, violated and/or the grounds under Art. 288 being
charged against the employee.

96) What are the contents of second notice?

CONTENTS OF SECOND NOTICE
1. All circumstances involving the charge against the employee considered;
2. Grounds established to justify the severance of employment.

97) When is there a pre-dismissal?

An employee may be dismissed only if the grounds mentioned in the pre-dismissal
notice were the ones cited for termination of employment.

98) What is the importance of a hearing?

In employee dismissal cases, the essence of due process is simply the opportunity
to be heard, it is the denial of this that constitutes a violation of due process of law.

99) When is the requirement of a hearing complied with?

The requirement of a hearing is complied with as long as there was an opportunity
to be heard, and not necessarily that an actual hearing was conducted.

100) What is the definition of “ample opportunity to be heard?

“Ample opportunity to be heard” means any meaningful opportunity (verbal or
written) given to the employee to:
a. Answer the charges against him and
b. Submit evidence in support of his defense, whether in a hearing, conference or
some other fair, just and reasonable way.

101) When is a formal hearing or conference becomes mandatory?

A formal hearing or conference becomes mandatory when:
a. Requested by the employee in writing,

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 b. Substantial evidentiary disputes exist
c. A company rule or practice requires it, or
d. When similar circumstances warrant.

102) When is a notice not necessary?

Notice is not needed when employee consented to the retrenchment or voluntarily
applied for one.

103) What are the primary rights in an administrative proceeding?

The Court has already set forth what is now known as the “cardinal primary”
requirements of due process in administrative proceedings, to wit:
(1) the right to a hearing which includes the right to present one’s case and submit
evidence in support thereof;
(2) the tribunal must consider the evidence presented;
(3) the decision must have something to support itself;
(4) the evidence must be substantial, and substantial evidence means such
evidence as a reasonable mind might accept as adequate to support a conclusion;
(5) the decision must be based on the evidence presented at the hearing, or at
least contained in the record and disclosed to the parties affected;
(6) the tribunal or body of any of its judges must act on its or his own independent
consideration of the law and facts of the controversy, and not simply accept the
views of a subordinate;
(7) the board or body should, in all controversial questions, render its decisions in
such a manner that the parties to the proceeding can know the various issues
involved, and the reason for the decision rendered.”

104) What is the procedure for absences without leave?

Due process in Absence Without Leave
3. First notice directing the employee to explain why his absences are valid
and with permission
4. Second notice to inform him of the employer’s decision to dismiss him
on the ground of his absences without leave

105) What are the requisites for abandonment?

Requisites:
• The employee must have failed to report for work or must have been absent
without valid or justifiable reason; and

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 • There must have been a clear intention on the part of the employee to sever
the employer-employee relationship manifested by some overt act.

106) What is the due process in abandonment?

Due process in Abandonment:
3. First Notice to apprise the employee of the particular acts or omissions for
which his dismissal is sought;
4. Second Notice to inform him of the employer’s decision to dismiss him on
the ground of abandonment.

Notices in abandonment cases must be sent to employee’s last known address.

107) What is reinstatement?

Reinstatement means restoration to a state or condition from which one had been
removed or separated. The person reinstated assumes the position he had
occupied prior to his dismissal.

108) Are separation pay and reinstatement exclusive remedies?

Yes. The payment of separation pay and reinstatement are exclusive remedies.
The payment of separation pay replaces the legal consequences of reinstatement
to an employee who was illegally dismissed.

109) What is the doctrine of strained relations?

Where the continued relationship between the employer and the employee is no
longer viable due to the strained relations and antagonism between them.

110) What are backwages?

Backwages are:
1. Earnings lost by a worker due to his illegal dismissal;
2. A form of relief that restores the income lost by reason of such unlawful
dismissal;
3. In the nature of a command to the employer to make a public reparation for
illegally dismissing an employee.
a. It is not private compensation or damages;
b. Nor is it a redress of a private right.

111) What are the reliefs of an illegally dismissed employee?

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 An illegally dismissed employee is entitled to (1) either reinstatement, if viable, or
separation pay if reinstatement is no longer viable, and (2) back wages.

112) What is the effect of failure to order back wages?

A “plain error” which may be rectified, even if employee did not bring an appeal
regarding the matter.

113) When is an employee not entitled to back wages?

a. The Court awarded limited back wages where the employee was illegally
dismissed but the employer was found to be in good faith.
b. Delay of the EE in filing the case for illegal dismissal.

114) What is the definition of full back wages?

Full backwages means exactly that, i.e., without deducting from backwages the
earnings derived elsewhere by the concerned employee during the period of his
illegal dismissal.

115) What is the definition of idleness?

Idleness on the part of the employee who would "with folded arms, remain inactive
in the expectation that a windfall would come to him"

116) What is the definition of attrition?

Attrition and protracted delay in satisfying such award on the part of unscrupulous
employers who have seized upon the further proceedings to determine the actual
earnings of the wrongfully dismissed or laid-off employees.

117) What is the no refund doctrine?

An employee cannot be compelled to reimburse the salaries and wages he
received during the pendency of his appeal, notwithstanding the reversal by the
NLRC of the LA's order of reinstatement.

118) What are the requisites for valid redundancy?

Requisites
1. There must be superfluous positions or services of employees;
2. The positions or services are in excess of what is reasonably demanded by the
actual requirements of the enterprise to operate in an efficient and economical
manner;
3. There must be good faith in abolishing redundant positions;

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 4. There must be fair and reasonable criteria in selecting the employees to be
terminated; and
5. There must be adequate proof of redundancy such as but not limited to the new
staffing pattern, feasibility studies/proposal, on the viability of newly created
positions, job description and the approval by the management of the restructuring.

119) What are the two kinds of losses justifying retrenchment?

Two kinds of losses justifying retrenchment
1. Incurred losses - substantial, serious actual and real.
2. Expected losses - reasonably imminent.

120) What are the requisites for a valid closing or cessation of business not
due to serious loss?

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

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