Termination of Employment

Employers may terminate employment based on just causes, authorized causes, or due to a
probationary employee's failure to meet reasonable standards made known at the start of
employment.

Termination by Employer
i. Just Causes
Definition and General Principles:

A just cause dismissal arises when an employee commits a wrongful act or omission.

The act complained of must be related to the performance of the employee's duties and show
them to be unfit to continue working for the employer.

Unsubstantiated suspicions, accusations, and conclusions of employers do not provide legal

justification for dismissing employees. In case of doubt, such cases should be resolved in favor
of labor.

The employer bears the burden of proof to show that the dismissal of the employee is for a just
cause. Failure to do so means the dismissal is not justified, consistent with the constitutional
guarantee of security of tenure.

The existence of a just cause does not automatically result in dismissal. The employer must
decide whether to dismiss, impose a lighter penalty, or even condone the offense, considering
the employee's past offenses.

Specific Just Causes Enumerated in the Labor Code (Article 297 [formerly 282]):

📌 (a) Serious misconduct or willful disobedience

By the employee of the lawful orders of their employer or representative in connection with
their work.

Misconduct is improper or wrong conduct, a transgression of an established rule or duty.

For misconduct to be a just cause, it generally must be serious.

Serious Misconduct:

Definition: Misconduct is defined as improper or wrong conduct, the transgression of

some established and definite rule of action, a forbidden act, a dereliction of duty, which
is willful in character and implies wrongful intent and not mere error in judgment. To be
considered serious, the misconduct must be of such a grave and aggravated character
and not merely trivial or unimportant. However serious, the misconduct must be in
connection with the employee's work to constitute just cause for separation.

Requisites: For misconduct to be a just cause for dismissal, the following requisites must
concur:

1. It must be serious.

Termination of Employment 1
 2. It must relate to the performance of the employee’s duties.

3. It must show that the employee has become unfit to continue working for the
employer.

4. It must have been performed with wrongful intent.

Principles:

Fitness for continued employment cannot be compartmentalized; a series of

irregularities when put together may constitute serious misconduct.

The employer may dismiss an employee if they have reasonable grounds to believe the
employee is responsible for the misconduct and their participation renders them
unworthy of the trust and confidence demanded by their position.

The charge for serious misconduct must not be a mere afterthought.

There must be a valid company rule or regulation violated.

Acts destructive of the morale of co-employees can constitute serious misconduct.

The employer need not suffer damages resulting from serious misconduct committed
against a customer.

Examples of Serious Misconduct:

Sexual harassment. The Safe Spaces Act defines gender-based sexual harassment in
the workplace. It is a valid cause for separation from service, especially when inflicted
by those with moral ascendancy. A managerial employee is held to a higher ethical
standard, and such perversity against a subordinate can be grounds for dismissal due to
lack of trust and confidence.

Fighting within company premises. Assaulting another employee is a just cause for
termination.

Uttering obscene, insulting, or offensive words against a superior. Repeated

utterances can constitute gross misconduct.

Falsification of time records. This can constitute both serious misconduct and fraud.

Gross immorality. Immorality can justify discharge if prejudicial or detrimental to the

employer's interests, depending on the nature of employment.

Pressure and influence on a colleague to change a failing grade and misrepresenting

relationship to a student.

Deceiving a customer for personal gain.

Contracting work in competition with the employer.

Intoxication that interferes with work.

Sleeping while on duty.

Pilferage or theft of company-owned property.

Using employer's property, equipment, and personnel for personal benefit.

Challenging superiors to a fight.

Instigating a spouse to maul a supervisor.

Termination of Employment 2
 In the case of a kasambahay, misconduct includes disobeying lawful orders, gross or
habitual neglect, fraud or willful breach of trust, commission of a crime against the
employer or family, and violation of the employment contract.

A single act of misconduct, if serious, can be a ground for dismissal, even if it's the first
offense. However, the penalty should be proportionate to the offense.

Willful Disobedience or Insubordination:

Definition: Willful disobedience exists when there is a wanton disregard to follow orders of
the employer, characterized by a wrongful perverse mental attitude rendering the
employee's act inconsistent with proper subordination. The employee's disobedience must
relate to substantial matters, not merely trivial or unimportant ones, and must be resorted
to without regard to its consequences.

Requisites: For willful disobedience to constitute just cause for termination, the following
must be present:

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, made known to the employee, and must
pertain to the duties which the employee has been engaged to discharge.

Principles:

Any employee may be dismissed for violation of a reasonable company rule for the
conduct of the employer's business.

Employees may object to, negotiate, and seek redress against rules or orders they deem
unjust or illegal. However, until such rules or orders are declared illegal by competent
authority, employees ignore or disobey them at their peril.

The reasonableness and lawfulness of a rule, order, or instruction depend on the

circumstances.

Disobedience to be willful must be resorted to without regard to its consequences.

The penalty for insubordination or willful disobedience should follow the rule on
reasonable proportionality.

Examples of Willful Disobedience:

Disregarding a superior's order to behave properly in the office.

Refusal to obey a valid transfer order. However, transfer should not result in demotion,
which could be constructive dismissal. Disobedience of an invalid transfer order does
not justify dismissal. The reasonableness of a transfer depends on business needs and
the terms of employment. Failure to report for reassignment in a distant location may not
amount to willful disobedience if the rule is unreasonable.

Failure to answer a memo to explain may constitute willful disobedience. However,

another notice might be required for termination based on this.

Refusal to undergo random drug testing can constitute both serious misconduct and
insubordination.

Termination of Employment 3
 Non-compliance with a suspension order.

Deliberate disregard or disobedience of company rules cannot be countenanced.

📌 (b) Gross and habitual neglect by the employee of their duties.

Definition of Neglect of Duty:

Neglect of duty implies a want or absence of or failure to exercise diligence that an

ordinary prudent man would use in his own affairs.

It can also be understood as a failure to observe prescribed standards of work or to fulfill

reasonable work assignments due to inefficiency. Poor performance is considered
equivalent to inefficiency and incompetence in the performance of official duties.

Requirement for "Gross" and "Habitual":

Significantly, for neglect of duties to constitute a just cause for dismissal, it must generally
be both gross and habitual. Thus, a single or isolated act of negligence does not usually
constitute a just cause for dismissal.

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

Habitual neglect implies a repeated failure to perform one’s duties over a period of time,
depending upon the circumstances.

Exceptions to the "Gross and Habitual" Rule:

The rule requiring both gross and habitual neglect is not absolute. An infraction, even if not
habitual, may warrant dismissal under appropriate circumstances.

An employee who is grossly negligent in the performance of their duty, even if such
negligence is not habitual, may be dismissed especially if the grossly negligent act
resulted in substantial damage to the company. For instance, in one case, employees who
committed gross negligence resulting in missing products amounting to a substantial sum
were found to have been justly dismissed, as their continued tenure was deemed inimical to
the employer's business interest. Another example is a credit investigator who provided a
grossly inflated property appraisal, leading to a significant financial risk for the bank, was
deemed guilty of gross negligence warranting dismissal.

What Constitutes Gross Negligence (Examples):

A bank employee delivering newly approved credit cards to an unfamiliar person without
asking for receipts, causing a substantial financial loss.

A credit investigator's significant error in property valuation due to a lack of diligence in

verification.

While a single act of misassortment may not constitute gross negligence, the circumstances
surrounding the negligence and its consequences are crucial.

Habitual Neglect (Example):

Habitual neglect implies repeated failure to perform one’s duties over a period of time.

Termination of Employment 4
 Relevance to Employer's Interest:

To justify dismissal for neglect of duties, it is not always necessary for the employer to
show actual loss, damage, or prejudice resulting from the employee's conduct. It is
sufficient if the gross and habitual neglect tends to prejudice the employer’s interest, as it
would be unreasonable to require the employer to wait until material injury occurs before
addressing the issue.

Relationship with Unsatisfactory Performance/Inefficiency:

As a general concept, “poor performance” is equivalent to inefficiency and incompetence.

An “unsatisfactory rating” can be a just cause for dismissal only if it amounts to gross and
habitual neglect of duties.

Failure to observe prescribed standards of work or to fulfill reasonable work assignments

due to inefficiency may constitute just cause for dismissal.

Abandonment as a Form of Neglect:

Abandonment of job is considered a form of neglect of duty and is a just cause for
termination. It requires both the failure to report for work without a valid reason and a clear
intention to sever the employer-employee relationship.

Standard of Diligence:

An employee, upon entering into a contract of employment, implicitly undertakes that they
are competent to perform the work and will do so in a careful manner. The expected degree
of skill, care, and diligence is that of ordinary and reasonable skill, care, and diligence.

Burden of Proof:

The burden of proof to show gross and habitual neglect of duties lies with the employer.
Mere allegations of absences or tardiness, for example, are not sufficient.

📌 (c) Fraud or willful breach by the employee of the trust reposed in them by their
employer or duly authorized representative.

Fraud in a general sense comprises anything calculated to deceive, including all acts,
omissions, and concealment involving a breach of legal or equitable duty, trust, or confidences
justly reposed, resulting in damage to another, or by which an undue and unconscientious
advantage is taken of another. Deceit is a species of fraud. Falsification can constitute both
serious misconduct and fraud under the Labor Code.

Willful breach of trust is a breach done intentionally, knowingly, and purposely without
justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly, and
inadvertently. However, loss of trust or confidence can also be based on gross negligence.

Fraud and willful neglect of duties imply bad faith on the part of the employee in failing to
perform their job to the detriment of the employer and the latter’s business.

Requisites of Fraud or Willful Breach of Trust as Just Cause:

The following requisites must be met for fraud or willful breach of trust to be considered a just
cause for termination:

Termination of Employment 5
 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. The act that betrays the employer's trust must be real, meaning founded on
clearly established facts.

3. It must be committed against the employer or their representative. Fraud committed by an

employee against third persons not in connection with their work and which does not in any
way involve their employer is not a ground for dismissal.

4. It must be in connection with the employee’s work, such as would show the employee to
be unfit to continue working for the employer.

5. For willful breach of trust (loss of confidence), the employee concerned must be holding a
position of trust and confidence.

6. The employee's breach of the trust must be willful, i.e., it was done intentionally, knowingly,
and purposely, without justifiable excuse.

Examples of Fraud or Willful Breach of Trust:

Head supervisor initiating and leading a boycott.

Habitual absence of managerial employee.

Failure of cashier to account for the shortage of company funds.

Complicity in the attempt to cover up pilferage of the company’s toll collections.

Stealing company property.

Using double or fictitious requisition slips to withdraw company materials.

Falsification of timecards.

Theft of company property.

Unauthorized use of company vehicle.

Use by a PAL employee of a defective weighing scale to benefit the shipper and defraud the
airline.

Failure to deposit collection.

Unauthorized encashment of personal checks by a teller and cashier.

Position of Trust and Confidence:

Loss of confidence as a just cause for dismissal ideally applies only to cases involving
employees occupying positions of trust and confidence (confidential and managerial
employees) or to those situations where the employee is routinely charged with the care
and custody of the employer’s money or property.

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

A position of trust and confidence is one where a person is entrusted with confidence on
delicate matters, or with the custody, handling, or care and protection of the employer’s
property and/or funds. This includes employees who regularly handle significant amounts
of money or property.

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 Employers are given wider latitude of discretion in terminating the employment of
managerial employees on the ground of lack of trust and confidence. For managerial
employees, the mere existence of a basis for believing that the employee has breached the
trust and confidence of the employer is sufficient for dismissal. However, for rank-and-file
personnel, loss of trust and confidence as a ground for valid dismissal requires proof of
involvement in the alleged events. Mere uncorroborated assertions and accusations by the
employer will not suffice for rank-and-file employees.

Willful Breach and Factual Basis:

The loss of trust and confidence must be based on a willful breach. A breach is willful if it is
done intentionally, knowingly, and purposely without justifiable excuse.

The loss of trust and confidence must be substantial and founded on clearly established
facts sufficient to warrant the employee’s separation from employment. Unsupported by
sufficient proof, loss of confidence is without basis and may not be successfully invoked as
a ground for dismissal. The employer has the burden of establishing the factual basis for the
loss of trust and confidence.

Proof Required:

Proof beyond reasonable doubt of the employee's misconduct is not required to terminate
an employee on the charge of loss of confidence. It is sufficient if there is some basis for
such loss of confidence or that the employer has reasonable ground to believe that the
employee is responsible for the misconduct and that their participation renders them
unworthy of the trust and confidence demanded by their position. However, substantial
evidence is vital, and the burden rests on the employer to establish it.

Restitution:

Restitution by the employee of the funds or property misappropriated does not necessarily
have an absolutory effect and may not negate the basis for loss of trust and confidence.

Work-Relatedness:

The act complained of must be related to the performance of the duties of the employee
such as would show them to be thereby unfit to continue working for the employer.

Loss of Confidence as Afterthought:

Loss of confidence should not be simulated or used as a subterfuge for causes which are
improper, illegal, or unjustified. It must be genuine and not a mere afterthought to justify an
earlier action taken in bad faith. The belated invocation of loss of confidence can suggest it
is a mere afterthought.

Relationship between Fraud and Loss of Trust and Confidence:

Fraud is a specific ground under Article 297(c) of the Labor Code. The commission of fraud
by an employee against the employer will necessarily result in the latter's loss of trust and
confidence in the former. However, the ground of willful breach of the employee's trust and
confidence reposed in them by the employer may not necessarily involve fraud but some
other acts that would similarly result in the loss of such trust and confidence.

Termination of Employment 7
 📌 (d) Commission of a crime or offense by the employee against the person of their
employer or any member of their family or their duly authorized representatives.

Definition: This refers to an act or omission punishable or prohibited by law.

Against Whom: The crime or offense must be committed against the person of the employer,
any immediate member of his/her family, or his/her duly authorized representative.

The employer's immediate family includes the spouse, ascendants, descendants, or

legitimate, natural, or adopted brothers or sisters of the employer or of their relative by
affinity in the same degrees, and those by consanguinity within the fourth civil degree.

Work-Relatedness: Unlike some other just causes like serious misconduct, work-relation is not
necessary for the commission of a crime or offense against the specified individuals to be a
valid ground for termination. It is also not necessary to show that the criminal act renders the
employee unfit to perform their work for the employer.

Conviction Not Required: The conviction of the employee in a criminal case is not
indispensable to warrant their dismissal by the employer. The fact that a criminal complaint
against the employee has been dropped by the city fiscal is not binding and conclusive upon
the labor tribunal. The commission of acts constituting a crime itself is sufficient.

Proof Required: While conviction isn't necessary, the employer still needs to present
substantial evidence to prove that the employee committed the crime or offense.

Analogous Causes: The Labor Code also allows for termination based on "[o]ther causes
analogous to the foregoing" just causes. To be considered analogous to the commission of a
crime or offense (or other just causes), a cause must be due to the voluntary and/or willful act
or omission of the employee.

Examples and Principles from the Sources:

The false attribution of robbery (theft) by an employee against their immediate superior was
considered serious misconduct, warranting dismissal. This highlights that while the
specific just cause is "commission of a crime or offense," acts that constitute crimes can
fall under other categories of just cause like serious misconduct as well.

The employer has the right to impose a heavier penalty than prescribed in company rules if
circumstances warrant it. This principle suggests that the gravity of a crime committed
against the employer or their family could justify dismissal even if company rules have
lesser penalties for other offenses.

📌 (e) Other causes analogous to the foregoing.

For an act to be considered an analogous cause for termination, it must meet the following
criteria:

Similarity to Specified Just Causes: There must be an act or omission that is similar in
nature to the specific just causes enumerated in Article 297 of the Labor Code, such as
serious misconduct, willful disobedience, gross and habitual neglect of duties, fraud or
willful breach of trust, and commission of a crime or offense against the employer or their

Termination of Employment 8
 family/representative. To fall within this ambit, the act or omission must have an element
similar to those found in the specific just causes.

Voluntary and/or Willful Act or Omission: The act or omission must be voluntary and/or
willful on the part of the employee.

Important Considerations:

Company Rules: No act or omission shall be considered as an analogous cause unless it is

expressly specified in the company rules and regulations or policies.

Case-to-Case Basis: The determination of whether a cause for terminating employment is

analogous to any of those enumerated in Article 297 depends on the circumstances of each
case.

Relation to Just Causes: The analogous cause must have an element similar to the
specifically listed just causes under Article 297.

Examples of Analogous Causes:

Violation of company rules and regulations.

Immorality, drunkenness, or fighting inside the premise.

Gross inefficiency.

Illegally diverting the employer’s products.

Failure to heed an order not to join an illegal picket.

Violation of safety rules and code of discipline.

Theft of company property.

Theft of property owned by a co-employee, which is distinguished from theft of employer's

property (serious misconduct).

Failure to attain work quota.

"Attitude problem", which is considered analogous to loss of trust and confidence.

The situation where an employer could not continue the employment of employees because
Petrophil prohibited them from entering its premises due to suspicion of illegally
diverting gasoline.

Incompetence, inefficiency, or ineptitude.

Note on the Implementing Rules and Regulations (IRR):

While the IRR may aim for an express specification of all analogous causes, the law itself does
not mandate this exhaustive written list, as it is practically impossible to predefine all potential
similar incidents.

📌 Loss of Trust and Confidence as a Just Cause:

Loss of Trust and Confidence is a just cause for termination of employment under Article 297
(formerly Article 282) of the Labor Code. It falls under the category of "Fraud or willful breach
by the employee of the trust reposed in him by his employer or duly authorized representative".

Termination of Employment 9
 Definition and Basis:

Loss of confidence arises when the employer has reasonable ground to believe or has
reason to entertain the moral conviction that the employee is responsible for misconduct,
and the nature of their participation renders them unworthy of the trust and confidence
demanded by their position.

It is based on the right of the employer to protect its interests and not be compelled to
continue employing someone guilty of acts inimical to those interests.

A breach of trust is willful if it is done intentionally, knowingly, and purposely without

justifiable excuse.

To Whom Applicable ("Position of Trust"):

Loss of confidence ideally applies to two classes of employees:

Employees occupying positions of trust and confidence (confidential and managerial

employees). This includes those with the power to lay down management policies, hire,
transfer, suspend, lay off, recall, discharge, assign, or discipline employees, or
effectively recommend such actions. A position of trust involves being entrusted with
confidence on delicate matters or with the custody, handling, or care and protection of
the employer's property or funds.

Employees routinely charged with the care and custody of the employer's money or
property.

The rules for termination based on loss of trust differ for managerial/fiduciary employees
and rank-and-file employees. For managerial employees, the mere existence of a basis for
believing that they have breached the employer's trust suffices for dismissal. For rank-and-
file personnel, proof of involvement in the alleged events is required, and mere
uncorroborated assertions are insufficient. However, the alleged misconduct for loss of
trust and confidence can be sufficient to warrant the dismissal of fiduciary rank-and-file
employees as well.

Requisites for Valid Dismissal Based on Loss of Trust and Confidence:

1. The employee concerned must hold a position of trust and confidence.

2. There must be an act that would justify the loss of trust and confidence. This act must be
real, meaning it is founded on clearly established facts.

3. Such loss of trust relates to the employee's performance of duties. The act complained of
must be related to the performance of the employee's duties, showing them unfit to
continue working for the employer.

4. The employee's breach of trust must be willful, meaning it was done intentionally,
knowingly, and purposely, without justifiable excuse.

Guidelines for Applying the Doctrine:

1. Loss of confidence should not be simulated and must have a reasonable basis.

2. It should not be used as a subterfuge for causes that are improper, illegal, or unjustified.

3. It may not be arbitrarily asserted in the face of overwhelming evidence to the contrary.

4. It must be genuine, not a mere afterthought to justify an earlier action taken in bad faith.

Termination of Employment 10
 5. The employee involved must hold a position of trust and confidence.

Proof Required:

Proof beyond reasonable doubt of the employee's misconduct is not required.

It is sufficient if there is some basis for such loss of confidence or if the employer has
reasonable ground to believe that the employee is responsible for the misconduct.

However, the employer still bears the burden of proving that the dismissal was for a just cause.
The basis for dismissal must be clearly and convincingly established. Unsupported loss of
confidence is without basis and cannot be successfully invoked.

Examples and Considerations:

Theft of company property is a valid reason for dismissal due to breach of trust. Even the
return of misappropriated funds does not negate a valid dismissal for breach of trust.

Falsification of time cards by security guards is considered dishonesty and a breach of

trust.

Dishonesty, which involves the disposition to lie, cheat, deceive, or defraud, can lead to
loss of trust.

An employee's attitude problem can be considered analogous to loss of trust and

confidence and can be a valid ground for termination if duly proved by the employer.

Failure to reach sales or production quota is generally not considered a willful breach of
trust justifying dismissal based on loss of confidence, unless it's intentional and unjustified.
However, dismal performance, poor work attitude, gross negligence, and incompetence
of a managerial employee can be grounds for dismissal due to loss of trust and confidence.

The fact that the employer did not suffer losses is irrelevant in termination for loss of trust
and confidence.

Long years of service generally do not negate loss of trust and confidence, although in
some cases, it has been considered in mitigating penalties. However, length of service
should reflect greater loyalty.

The dropping of criminal charges or acquittal in a criminal case arising from the same act
does not affect the validity of dismissal based on loss of trust and confidence. The
standards of proof are different.

Invalid Use of Loss of Confidence:

Loss of confidence should not be used as a shield to dismiss an employee arbitrarily.

It cannot be used to feign what would otherwise be an illegal dismissal.

A belated invocation of loss of confidence can suggest it's a mere afterthought to justify a
baseless dismissal.

"Loss of confidence" based on a "feng shui mismatch" is not a valid ground.

Relationship with Other Concepts:

Serious Misconduct: Dishonesty involved in a breach of trust can also constitute serious
misconduct. Theft, if proven, is analogous to serious misconduct.

Analogous Causes: An employee's attitude problem is an example of a cause analogous to

loss of trust and confidence.

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 Strained Relations: In cases where reinstatement is no longer feasible due to strained
relations between the employer and an employee holding a position of trust and confidence,
separation pay may be awarded instead. However, strained relations should not arise from a
valid and legal act of asserting one's right by the employee. If the antagonism is primarily
caused by the employer's misdeeds, reinstatement should not be denied based on strained
relations.

📌 Procedural Due Process for Just Cause Termination:

This is a two-fold requirement for lawful dismissal, encompassing both substantive (just
cause) and procedural aspects. The absence of proper procedure does not necessarily
invalidate the dismissal if a just cause exists, but it can make the employer liable for nominal
damages.

Here are the specific procedural steps:

1. First Written Notice (Notice to Explain - NTE):

The employer must serve a written notice on the employee.

This notice should specify the particular acts or omissions for which dismissal is
sought.

It must apprise the employee of the charges against them.

The notice should direct the employee to submit a written explanation within a
reasonable period. A reasonable period is considered to be at least five (5) calendar
days from receipt of the notice to allow the employee to study the accusations, consult,
and prepare their explanation.

This first notice is considered the proper charge.

2. Hearing or Ample Opportunity to be Heard:

The employee must be given a hearing or conference or an ample opportunity to be

heard.

This provides the employee with an opportunity to respond to the charge, present
their evidence, or rebut the evidence presented against them.

The employee may be assisted by counsel if they so desire.

The "ample opportunity to be heard" standard under the Labor Code prevails over the
"hearing conference" requirement in the Implementing Rules and Regulations (IRR). A
formal pretermination confrontation is not a sine qua non for compliance. The
opportunity can take various forms of adducing evidence in the employee's defense.

Where the employee denies the charges, a hearing is generally necessary to clarify
doubts.

The opportunity to be heard should be accorded prior to the employee's dismissal to

allow them to adequately prepare their defense. "Fire the employee and let him explain
later" is not in accordance with due process.

3. Second Written Notice (Notice of Decision):

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 After the hearing or opportunity to be heard, the employer must serve a written notice
of termination on the employee.

This notice should indicate that upon due consideration of all the circumstances,
grounds have been established to justify the employee's termination.

It should clearly state all the reasons for dismissal.

Important Considerations:

Burden of Proof: The burden of proving that the termination was for a just cause and
complied with procedural due process rests on the employer. Failure to discharge this
burden means the dismissal is illegal.

Substantial Compliance: Observance to the letter of company rules on investigation is not

mandatory; it is enough that there is due notice and hearing before a decision to dismiss is
made. However, the core requirements of the two-notice rule and opportunity to be heard
must be met.

Union Security Clause: Even with a union security clause in a Collective Bargaining
Agreement (CBA), the company should still conduct its own inquiry and give the employee a
chance to explain their side before termination based on union expulsion. The union's
action does not automatically override the employee's right to due process from the
employer.

Probationary Employees: Procedural due process is required for terminating probationary

employees based on just or authorized causes. For termination due to failure to meet
reasonable standards made known at the start of employment, only a written notice within a
reasonable time from the effective date of termination is sufficient.

Abandonment: While abandonment is a just cause, the procedural due process differs. It
involves a first notice asking the employee to explain their absence and a second notice
informing them of the decision to dismiss based on abandonment. A hearing is not typically
required in abandonment cases.

Nominal Damages: If a dismissal is for a just cause but without proper observance of
procedural due process, the termination is considered legal, but the employer may be liable
for nominal damages to the employee. The amount of these damages can vary.

📌 Consequences of Termination with Just Cause:

If an employer terminates an employee for a just cause as defined in Article 297 of the Labor
Code, and observes the required procedural due process, the termination is considered legal
and valid.

Generally, an employee dismissed for a just cause is not entitled to separation pay. The law
typically does not require the payment of separation pay when the termination is due to the
employee's fault.

However, there is an exception. Separation pay or financial assistance may be allowed as a

measure of social justice or on grounds of equity even in cases of legally dismissed
employees for just cause, especially if the cause is not serious misconduct or does not reflect

Termination of Employment 13
 on the employee's moral character and the employee has rendered a considerable period of
service. This is a matter of the court's discretion.

If the dismissal is based on a just cause but the employer fails to comply with the procedural
due process requirements (which include two written notices and an opportunity to be heard),
the dismissal is still considered legal, but the employer may be held liable for nominal
damages for the violation of the employee's right to due process. The purpose of these
damages is not to penalize the employer but to vindicate the employee's right. The amount of
nominal damages can vary depending on the circumstances of each case.

In cases of termination for just cause, even if procedural due process is not fully observed, the
employee is generally not entitled to reinstatement or backwages because there is a valid
reason for the dismissal.

An employee dismissed for a just cause may not be entitled to retirement benefits,
particularly if the cause involves a willful breach of trust. However, this might depend on the
specific terms of the retirement plan and jurisprudence on vested rights.

The burden of proving that the termination was for a just cause rests on the employer. Failure
to do so would mean the dismissal is not justified.

Any decision taken by the employer to terminate an employee is without prejudice to the
employee's right to contest the validity or legality of their dismissal by filing a complaint with
the regional branch of the NLRC.

The principle of totality of infractions may be considered when determining the penalty for an
erring employee.

It is important to note that while a just cause is a substantive requirement for a lawful dismissal,
adherence to procedural due process is equally important. Failure to observe the proper
procedure can lead to liability for the employer, even if the termination itself was based on a
valid cause.

Important Considerations:

The determination of whether there is just cause is a factual issue that must be supported by
substantial evidence.

The employer's decision to dismiss must be made without grave abuse of discretion, bearing in
mind justice and fair play.

The policy of the state is to assure the right of workers to "security of tenure," making
dismissals under just cause a significant exception that requires careful consideration and
adherence to due process.

ii. Authorized Causes

Authorized causes for termination of employment are grounds recognized by law that permit an
employer to terminate an employee's employment even if the employee has not committed any
wrongful act or omission. Unlike just causes, which imply some fault on the part of the employee,
authorized causes are typically initiated by the employer's exercise of management prerogative or
due to economic or health-related reasons. In terminations based on authorized causes under
Articles 298 and 299 of the Labor Code, the employer has a statutory liability to pay separation
pay as mandated by law.
Here are the specific authorized causes:

Termination of Employment 14
 Business-related causes under Article 298 of the Labor Code:

📌 1. Installation of labor-saving devices.

The installation of labor-saving devices is recognized as a valid authorized cause for the
termination of employment by the employer. This is a management prerogative that allows
an employer to replace manpower with machinery to achieve greater efficiency and
economy in production. Courts generally will not interfere with the exercise of this
prerogative unless there is an abuse of discretion, arbitrariness, or maliciousness on the part
of management.

Requisites for a Valid Automation/Installation of Labor-Saving Devices:

There must be an introduction of machinery, equipment, or other devices. This could

also be referred to as "automation" or "robotics". Modernization programs through the
introduction of high-speed machines are considered valid.

The introduction must be done in good faith.

The purpose for such introduction must be valid, such as to save on cost, enhance
efficiency, and other justifiable economic reasons.

There should be no other option available to the employer other than the introduction of
the machinery/device and the resulting termination of affected employees.

There must be fair and reasonable criteria in selecting employees to be terminated.

The installation should not be used as a pretext for easing out laborers on account of
their union activities.

Procedural Due Process:

To legally terminate employees due to the installation of labor-saving devices, the employer
must comply with procedural due process, which includes serving a written notice:

To the employee.

To the appropriate DOLE Regional Office at least thirty (30) days before the effectivity
of the termination, specifying the ground for termination.

Failure to serve this written notice to the employee and the DOLE at least one month before
the intended date of termination does not automatically make the termination illegal so as to
entitle reinstatement and payment of backwages. If the termination is for a valid cause and
is not tainted with bad faith or arbitrariness, it is considered merely defective, and the
employer may be liable for nominal damages.

Separation Pay:

Employees terminated due to the installation of labor-saving devices are entitled to

separation pay. The amount of separation pay is equivalent to at least:

One (1) month pay for every year of service, or

At least one (1) month pay if the service is less than one (1) year, whichever is higher.

Relationship with Redundancy:

Termination of Employment 15
 The installation of labor-saving devices often results in redundancy. When new machinery
makes certain positions unnecessary or in excess of what is reasonably demanded by the
employer, the affected employees' positions become redundant. In such cases, the
requisites for termination due to the installation of labor-saving devices must be met. If a
finding of redundancy is declared, the dismissal is valid, and the employees are entitled to
separation pay only, without backwages.

Management Prerogative:

The decision to install labor-saving devices is a management prerogative aimed at

achieving economy and efficiency in production. Courts will generally not interfere with this
prerogative in the absence of abuse, arbitrariness, or malice.

Notice When Employee Consents:

If an employee voluntarily applies for retrenchment with the employer due to the
installation of labor-saving devices, the required previous notice to the DOLE may not be
necessary, as the employee acknowledged the existence of a valid cause for termination.

📌 2. Redundancy

Redundancy is recognized as a valid authorized cause for the termination of employment

under Article 298 of the Labor Code. It exists when an employee's services are in excess of
what is reasonably demanded by the actual requirements of the enterprise. In simpler
terms, a position is superfluous.

Key Characteristics and Factors of Redundancy:

Not necessarily duplication of work: Redundancy doesn't always mean that multiple
people are doing the exact same job. It can occur even if no other person holds the
same position.

Outcome of various factors: Superfluity can arise due to:

Overhiring of workers.

Decrease in the volume of business.

Dropping of a particular product line or service activity.

Phasing out of a service activity.

Abolition of departments or positions.

Management prerogative: The decision to declare a position redundant is generally

considered a management prerogative aimed at promoting efficiency and economy.
Courts will typically not interfere with this judgment unless there is a showing of violation
of law, arbitrariness, or malice. The employer has no legal obligation to keep more
employees than necessary for the operation of the business.

Requisites for a Valid Redundancy Program:

For a termination based on redundancy to be considered valid, the employer must comply
with the following requisites:

1. There must be superfluous positions or services of employees.

Termination of Employment 16
 2. The positions or services are in excess of what is reasonably demanded by the actual
requirements of the enterprise to operate in an economical and efficient manner.

3. There must be good faith in abolishing the redundant positions. Redundancy should
not be used as a pretext for removing unwanted employees or for anti-union activities.
Hiring new employees while terminating others on the ground of redundancy can negate
the claim of good faith, especially if the new positions have similar job descriptions. The
employer must show that it evaluated the effect of retaining the alleged redundant
positions.

4. There must be fair and reasonable criteria in selecting the employees to be

terminated. These criteria may include:

Less preferred status.

Efficiency rating.

Seniority (often following the "Last In, First Out" or LIFO rule for employees in the
same line of work). However, the nature of work and experience may also be
considered.

Contribution to income.

5. There must be an adequate proof of redundancy. This may include, but is not limited
to,:

New staffing patterns.

Feasibility studies or proposals.

On the viability of newly created positions.

Job descriptions.

Approval by the management of the restructuring. A mere certification that a position

has become redundant or a change in job title is not necessarily sufficient proof. A
comparison of the old and new staffing patterns is more compelling evidence. The
termination report to DOLE is considered self-serving compliance and not sufficient
proof.

6. A written notice served on both the employees and the Department of Labor and
Employment (DOLE) at least one (1) month prior to the separation from work.

7. Payment of separation pay equivalent to at least one (1) month pay or to at least one
(1) month pay for every year of service, whichever is higher. A fraction of at least six
(6) months is considered as one (1) whole year.

Consequences of Termination due to Valid Redundancy:

If the termination due to redundancy is valid, the employee is generally entitled to

separation pay only and not to backwages.

Consequences of Termination due to Invalid Redundancy:

If the employer fails to comply with the requisites for a valid redundancy program, the
dismissal may be considered illegal. In such cases, the employee may be entitled to
reinstatement with full backwages. However, if reinstatement is no longer feasible due to
reasons such as the abolished position, closure of the company, or strained relations
between the employer and employee, the employee may be awarded separation pay in lieu

Termination of Employment 17
 of reinstatement (SPIR), in addition to backwages. This SPIR is different from the separation
pay mandated for a valid termination due to an authorized cause like redundancy.

Redundancy in Relation to Other Authorized Causes:

Installation of Labor-Saving Devices: The installation of labor-saving devices can often

lead to redundancy by making certain positions unnecessary. The requisites for
termination due to the installation of labor-saving devices should also be met. The
separation pay for this cause is the same as for redundancy. Unlike retrenchment, proof
of losses is not required.

Retrenchment: While both redundancy and retrenchment are authorized causes for
termination and can be forms of downsizing, they are distinct concepts. Redundancy
occurs when a position becomes superfluous, even if the business is profitable.
Retrenchment, on the other hand, is resorted to primarily to avoid or minimize business
losses. The separation pay for redundancy is generally higher than for retrenchment,
and proof of actual or imminent losses is a unique requirement for retrenchment.
However, the distinction can sometimes be unclear, particularly in cases of "preventive
retrenchment" where personnel are reduced to prevent future losses, and "decrease in
volume of business" can be a justification for both.

Closure or Cessation of Operation: This is another distinct authorized cause.

Redundancy may arise as a consequence of a business closure if certain positions are
no longer needed. The amount of separation pay in case of closure depends on whether
it is due to serious business losses.

📌 3. Retrenchment to prevent losses.

Retrenchment to prevent losses is a recognized authorized cause for the termination of

employment under Article 298 (formerly Article 283) of the Labor Code. It is defined as the
reduction of personnel usually due to poor financial returns to cut down on costs of
operations in terms of salaries and wages to prevent bankruptcy of the company. It is a
management prerogative, a means to protect and preserve the employer’s viability and
ensure survival.

Definition and Purpose:

Retrenchment is resorted to by an employer primarily to avoid or minimize business

losses.

It is a cost-cutting measure made immediately necessary by business reduction or

reverses.

The purpose of retrenchment is to save a financially ailing business establishment

from eventually collapsing.

It is a drastic recourse with serious consequences for the livelihood of the employee.

"Retrenchment to Prevent Losses":

This phrase means that retrenchment can be undertaken by the employer before the
losses anticipated are actually sustained or realized. The law does not compel the
employer to wait until losses have materialized.

Termination of Employment 18
 Preventive retrenchment is lawful.

Basic Requisites of a Valid Retrenchment:

1. Written notice served on both the employee and the Department of Labor and
Employment (DOLE) at least one (1) month prior to the intended date of retrenchment.

2. Payment of separation pay equivalent to at least 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 is considered one (1) whole year.

3. Good faith in effecting retrenchment. It should not be used as a pretext to remove

unwanted employees.

4. Proof of expected or actual losses. This is the most singular distinctive requisite of
retrenchment, which is not required for the installation of labor-saving devices and
redundancy. Losses may be incurred or expected/future. Proof may be through
financial statements audited by an independent auditor. A mere decline in gross income
may not be considered serious business losses; it should be substantial, sustained, and
real. A "litany of woes" without solid evidence of specific and substantial losses is
insufficient.

5. To show that the employer first instituted cost reduction measures in other areas of
production before undertaking retrenchment as a last resort. Retrenchment should be a
measure of last resort after less drastic means have been tried and found wanting.

6. The employer used fair and reasonable criteria in ascertaining who would be retained
among the employees, such as status, efficiency, seniority, physical fitness, age, and
financial hardship of certain workers. In a retrenchment program, the last one employed
will necessarily be the first one to go (LIFO rule), although there are exceptions.

Standards to Determine Validity of Losses:

1. The losses expected should be substantial and not merely de minimis in extent.
Insubstantial and inconsequential losses would question the bona fide nature of the
retrenchment.

2. The substantial loss apprehended must be reasonably imminent, as perceived

objectively and in good faith by the employer. There should be a certain degree of
urgency.

3. Retrenchment must be reasonably necessary and likely to effectively prevent the

expected losses. The employer should have taken other cost-cutting measures prior to
or parallel with retrenchment.

4. Alleged losses, if already realized, and the expected imminent losses sought to be
forestalled, must be proven by sufficient and convincing evidence, often through
externally audited financial statements.

Retrenchment vs. Redundancy:

Retrenchment involves losses, closures, or cessation of operations due to serious

business or financial losses.

Redundancy results from a superfluous position, an excess of what is reasonably

needed, even if the business has not suffered reverses.

The separation pay for redundancy is generally higher than for retrenchment.

Termination of Employment 19
 Hiring of Replacements and Contracting Out:

Reorganization and retrenchment cannot be used as a device to get rid of existing

personnel and replace them with new ones. Hiring new employees to replace retrenched
ones belies the necessity of the retrenchment to prevent losses.

However, the termination of employees due to redundancy followed by the hiring of an

independent contractor to promote economy and efficiency has been upheld.

Reduction of Workdays:

Employers may reduce the number of regular working days to prevent serious losses,
and may deduct wages accordingly based on the principle of "no work, no pay". This is
seen as a more humane solution than outright termination.

However, unjustified work reduction that significantly reduces income can be considered
constructive dismissal if not supported by evidence of severe financial losses or if
implemented with discriminatory intent. A temporary lay-off due to business downturn
should not exceed six months; after that, the employee should be recalled or
permanently retrenched with proper separation pay.

Good Faith:

Retrenchment must be effected in good faith and not to defeat or circumvent the
employee's right to security of tenure.

Offering employees an option to be transferred to posts of equal rank and pay before
resorting to retrenchment can indicate good faith.

📌 4. Closure or cessation of operation of the establishment or undertaking:

The complete or partial cessation of the operations and/or shutdown of the establishment
of the employer. This action is typically carried out to either prevent financial ruin or to
promote the business interests of the employer.

Reasons for Closure:

Closure can occur when not due to serious business losses or financial reverses, or
when due to serious business losses or financial reverses.

An employer may close its business whether it is suffering from business losses or not.
No law compels anyone to stay in business.

A firm facing serious business decline and loss is entitled to close to avoid further
economic loss. Courts cannot force a firm to operate at a loss.

Closure can also result from external factors such as the operation of the Agrarian
Reform Law (CARP) or the expiration of a lease.

A bona fide sale of a going enterprise can also lead to a closure of the business under
the previous ownership.

Distinction from Retrenchment:

While often used interchangeably and interrelated, closure of business and

retrenchment are two separate and independent authorized causes for termination.

Termination of Employment 20
 Closure aims to prevent further financial drain upon an employer whose business has
already stopped.

Retrenchment is a reduction of personnel usually due to poor financial returns to cut

down on costs and prevent bankruptcy. It is linked with losses.

Unlike retrenchment, closure or cessation of business need not depend on evidence of

actual or imminent reversal of the employer's fortune.

Legal Requirements:

A written notice must be served on both the employees and the Department of Labor
and Employment (DOLE) at least one (1) month before the intended date of closure.

The cessation of business operations must be bona fide in character. The burden of
proving this lies with the employer.

DOLE clearance to terminate is no longer required.

Separation Pay:

In cases of closure or cessation of operations 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 is considered one (1) whole year.

If the closure or cessation of business is due to serious business losses or financial

reverses, no separation pay need be paid at all. This is provided there is sufficient proof
of such losses. Audited financial statements are often necessary to prove losses in a
closure case.

However, some earlier jurisprudence suggested that separation pay was always required
in case of closure. More recent rulings have clarified the exception for closures due to
serious losses.

Even if a company had a practice of giving more generous separation pay in the past, it
is not obligated to continue this if the closure is due to its inability to continue
business due to accumulated losses.

Good Faith and Unfair Labor Practice (ULP):

The decision to close must be made in good faith and not to circumvent labor laws.

Closure may constitute unfair labor practice if it is a ruse to get rid of employees due to
their union activities. For example, if a closure is intended to discourage workers from
organizing or bargaining, the State may intervene.

A closure is not legal if the "closed" department or company reappears under a new
name, especially if done to defeat workers' organizational rights; this may be considered
a "subterfuge".

Partial Closure:

The principle of closure applies to both total and partial closure or cessation of
business operations. Management may choose to close only a branch, department,
plant, or shop. A partial closure due to losses amounts to retrenchment.

Sale of Business:

Termination of Employment 21
 A bona fide sale of a going enterprise is not prohibited. Unless the new owner agrees to
assume the responsibility, they have no legal obligation to continue employing the
seller's employees. The seller is obligated to pay separation pay to their employees.
Whether a sale is considered a "closure" or "cessation" is not always material, as
employees lose their jobs with post-employment benefits unless rehired.

Temporary Shutdown:

A temporary shutdown of a business for a period not exceeding six months due to a
bona fide suspension of operations does not terminate employment. No notice of
termination is required in such cases. However, if a temporary lay-off due to business
downturn exceeds six months, the employee should be recalled or permanently
retrenched with proper separation pay

📌 Health-related causes under Article 299 of the Labor Code:

Disease where the continued employment is prohibited by law or is prejudicial to the

employee's health as well as to the health of co-employees. In such cases, separation pay
equivalent to at least one (1) month salary or to one-half (1/2) month salary for every year of
service, whichever is greater (with a fraction of at least six (6) months considered as one (1)
whole year), must be paid.

Substantive Requisites for Valid Termination Due to Disease:

For a dismissal on the ground of disease to be considered valid, two main substantive requisites
must concur, as highlighted in the sources:

1. The employee must be found to be suffering from any disease. This can include both
contagious and non-contagious diseases such as stroke, heart attack, osteoarthritis, and
eye cataract.

2. The employee's continued employment must be either:

Prohibited by law.

Prejudicial to their health as well as to the health of their co-employees. The continued
employment of a bus driver after suffering several strokes was considered prejudicial to
their health.

Procedural Requisites and the Role of Medical Certification:

1. A certification must be issued by a competent public health authority stating that the
disease is of such a nature or at such a stage that it cannot be cured within a period
of six (6) months even with proper medical treatment. This is a crucial requirement,
and its absence has led courts to rule against the validity of the dismissal.

2. A medical certificate issued by the company's own physician is not considered a

certificate by a "competent public health authority". The employer bears the burden
of procuring this medical certificate, not the employee.

Due Process Requirements:

While earlier jurisprudence might have suggested no hearing requirement for dismissal due to
disease, more recent interpretations and the principle of protecting workers' rights suggest that

Termination of Employment 22
 the twin-notice requirement for just cause termination now also applies to authorized cause
termination due to disease under Article 299. This means:

1. First written notice: Informing the employee of the ground for which dismissal is sought.

2. Ample opportunity to be heard: Giving the employee a chance to explain their side.

3. Second written notice: Apprising the employee of the employer's decision to dismiss after
considering their explanation.

Separation Pay:

An employee whose services are terminated due to disease is entitled to separation pay
equivalent to at least one (1) month salary or to one-half (1/2) month salary for every year of
service, whichever is greater, with a fraction of at least six (6) months being considered as
one whole year. This separation pay is specifically mandated by Article 299.

Termination Initiated by Employer vs. Resignation Due to Illness:

It is important to note that Article 299 contemplates a situation where the employer, not the
employee, initiates the termination of employment on the ground of the latter's disease or
sickness. If the employee resigns due to their illness, Article 299 is not applicable, and their
claim for separation pay may be denied.

Temporary Unfitness for Night Work:

The provisions of DOLE D.O. No. 119-12 allow the application of Article 299 to a worker found
unfit for night work if their transfer to another (daytime) job is not practicable. For a night
worker certified as temporarily unfit for night work for at least six months, the employer's
ultimate recourse, if transfer is not feasible, may be employment termination based on this
authorized cause. Such a worker is also entitled to the same protection against dismissal as
other workers prevented from working for health reasons.

📌 Other authorized causes mentioned in the sources:

Total and permanent disability of employee.

Valid application of union security clause.

Expiration of period in term of employment.

Completion of project in project employment.

Failure in probation.

Relocation of business to a distant place.

Defiance of return-to work-order.

Commission of illegal acts in strike.

Violation of contractual agreement.

Retirement.

Many other causes are lawful and authorized beyond the specific enumeration in Articles 298
and 299.

Distinction between Just Cause and Authorized Cause:

Termination of Employment 23
 A just cause dismissal implies that the employee has committed some violation against the
employer, such as serious misconduct, fraud, or neglect of duties. The employee himself
essentially initiates the dismissal process through their actions. In contrast, an authorized cause
dismissal is initiated by the employer's exercise of management prerogative or due to economic or
health reasons and does not necessarily imply any delinquency or culpability on the part of the
employee.

Due Process Requirements for Termination based on Authorized Causes:

While the procedural due process for just cause termination involves two notices and an
opportunity to be heard, the requirements for authorized causes, particularly under Article 298 , are
slightly different. The employer must still act in good faith, and the termination should be a matter of
last resort. The sources highlight the following procedural aspects:

Two (2) separate written notices must be served on both the affected employees and the
Department of Labor and Employment (DOLE) at least thirty (30) days before the intended
date of termination.

In the case of termination due to disease under Article 299 , the employee should be
afforded the twin requirements of notice and hearing where they have the opportunity to
defend themselves from possible termination.

Consequences of Termination with Authorized Cause:

Separation Pay: Generally, employees terminated due to authorized causes under Articles 298
and 299 are entitled to separation pay. Article 298 mandates separation pay equivalent to one
(1) month pay for every year of service, or at least one (1) month pay if the service is less than
one (1) year. For termination due to disease under Article 299 , the separation pay is at least
one (1) month salary or to one-half (1/2) month salary for every year of service, whichever is
greater.

Nominal Damages: If the termination is for a valid authorized cause but the employer fails to
comply with the procedural due process requirements, the dismissal is still considered legal.
However, the employer may be liable for nominal damages for the violation of the employee's
right to due process. The amount of nominal damages can vary, and several factors are
considered in determining the amount, such as the authorized cause invoked and whether it
was related to losses. The indemnity is considered "stiffer" in the case of authorized cause
termination compared to just cause when procedural due process is not observed because the
employee has not committed any blameworthy act.

Reinstatement and Backwages: Since the termination is based on a valid authorized cause, the
employee is generally not entitled to reinstatement or backwages.

iii. Procedure
Two-Fold Requirement for Lawful Dismissal: Lawful dismissal requires both substantive (valid
cause) and procedural (due process) legality.

Due Process for Just Causes (Twin-Notice Rule): For termination based on just causes, the
employer must comply with the twin-notice requirement:

1. First Written Notice (Pre-Notice or Notice to Explain - NTE): This notice must be served on
the employee, specifying the ground(s) for termination and giving them a reasonable
opportunity to explain their side within a reasonable period (construed as at least five
calendar days from receipt). The notice should apprise the employee of the particular acts

Termination of Employment 24
 or omissions for which dismissal is sought and should contain a detailed narration of the
facts and circumstances serving as the basis for the charge, enabling the employee to
prepare their explanation and defense intelligently. It should also specify any violated
company rules.

2. Hearing or Conference: After the employee submits their explanation, a hearing or

conference should be conducted where the employee is given an opportunity to respond to
the charge, present their evidence, and rebut evidence against them, with the assistance of
counsel if desired. A trial-type hearing is not strictly required. The opportunity to be heard
must be accorded prior to the dismissal. Preventive suspension and investigation do not
replace the two-notice requirement.

3. Second Written Notice (Notice of Termination): After considering all circumstances, if the
employer finds grounds to justify termination, a second written notice must be served on
the employee informing them of the decision to dismiss and the reasons for it. This notice
should indicate that all circumstances have been considered and grounds have been
established to justify termination.

Due Process for Authorized Causes: For termination based on authorized causes, the due
process requirements involve serving a written notice:

1. Written Notice to the Employee: This notice must be served at least thirty (30) days before
the effectivity of the termination, specifying the ground(s) for termination.

2. Written Notice to the DOLE Regional Office: A similar written notice must also be served on
the appropriate DOLE Regional Office at least thirty (30) days before the effectivity of the
termination, specifying the ground(s). Investigation and hearing are not required for
authorized causes as they do not involve a blameworthy act by the employee. However, a
bona fide attempt to comply with the notice requirements is considered. The notice is to
individual employees, not just a group.

Employee's Right to Contest Dismissal: Any decision taken by the employer is without
prejudice to the worker's right to contest the validity or legality of their dismissal by filing a
complaint with the regional branch of the NLRC.

Burden of Proof: The burden of proving that the termination was for a valid or authorized cause
rests on the employer. Failure to discharge this burden means the dismissal is illegal.

Validity of Termination: The validity of termination itself is determined by compliance with the
two-notice rule (for just cause), hearing (opportunity to be heard for just cause), and the
presence of a just or authorized cause.

Consequences of Lack of Due Process: Failure to comply with procedural due process does
not necessarily make the dismissal illegal if a valid cause exists. In such cases, the dismissal is
considered defective or procedurally illegal. The employee remains dismissed, but the employer
may be liable for nominal damages. The amount of nominal damages depends on whether the
termination was for a just cause (e.g., P30,000 per Agabon doctrine) or an authorized cause
(e.g., P50,000 per Jaka doctrine). However, some sources suggest that failure to comply with
requirements taints the dismissal with illegality. If there is no just or authorized cause, the
dismissal is illegal and the employee is generally entitled to reinstatement and backwages.

iv. Consequences of termination

Consequences of Termination by Employer:

Termination of Employment 25
 The legality of a termination by the employer hinges on two requirements: substantive due process
(a valid just or authorized cause) and procedural due process (proper notice and opportunity to be
heard, where applicable).

If the dismissal is for a just cause (Article 297, LC) and with due process: The dismissal is
valid, and the employee is generally not entitled to separation pay. However, some courts may
grant separation pay as financial assistance based on social justice, especially for long-serving
employees.

If the dismissal is for an authorized cause (Articles 298-299, LC) and with due process: The
dismissal is valid, and the employee is generally entitled to separation pay. The amount of
separation pay varies depending on the authorized cause:

Installation of labor-saving devices or redundancy: At least one month's pay or at least

one month's pay for every year of service, whichever is higher.

Retrenchment to prevent losses or closure or cessation of operations not due to serious

business losses: At least one month's pay or at least one-half month's pay for every year
of service, whichever is higher.

Closure or cessation of business due to serious business losses or financial reverses: No

separation pay is required.

Disease: At least one month's salary or one-half month's salary for every year of service,
whichever is greater.

If the dismissal is without just or authorized cause (illegal dismissal): The employee is entitled
to:

Reinstatement to their former position without loss of seniority rights and other privileges.
If reinstatement is not feasible due to strained relations, closure of the establishment, or
other valid reasons, separation pay in lieu of reinstatement may be awarded. This is often
computed from the commencement of employment up to the finality of the decision.

Full backwages, inclusive of allowances and other benefits, computed from the time their
compensation was withheld up to the time of actual reinstatement. Deductions for earnings
during this period are generally not made.

If the dismissal is for a just or authorized cause but without due process (procedurally
illegal dismissal): The dismissal itself is valid, but the employer is liable for nominal
damages for the violation of the employee's right to due process. The amount of nominal
damages depends on the circumstances. The employee remains dismissed but is
compensated for the procedural lapse.

Other potential reliefs:

Indemnity: May be awarded in addition to backwages in some illegal dismissal cases. In

cases of unjust dismissal of a kasambahay, an indemnity equivalent to 15 days' work is
mandated.

Legal interest: May be imposed on unpaid wages, separation pay, backwages, and other
monetary claims awarded to illegally dismissed employees, at the discretion of the courts.

Attorney's fees: May be awarded in cases of illegal dismissal.

Retirement:

Termination of Employment 26
 Retirement is a form of termination. Upon retirement, an employee is entitled to retirement
benefits as provided by law (Article 302, LC, R.A. Nos. 9946 and 8291) or through a retirement
plan or CBA. Dismissing an employee to avoid paying retirement benefits is reprehensible.

Clearance Process:

Employers may require employees to return company properties before their departure. While
generally prohibited from withholding wages, employers may withhold terminal pay and
benefits pending the return of company properties.

It's crucial to remember that the burden of proving the validity and legality of the termination rests
on the employer. Employees have the right to contest the legality of their dismissal by filing a
complaint with the National Labor Relations Commission (NLRC).

Termination of Employment 27