BOOK SIX

POST EMPLOYMENT

Title I
TERMINATION OF EMPLOYMENT

Art. 278. Coverage. The provisions of this Title shall apply to all establishments or
undertakings, whether for profit or not.

Art. 279. Security of tenure. In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by this
Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the time
his compensation was withheld from him up to the time of his actual reinstatement. (As
amended by Section 34, Republic Act No. 6715, March 21, 1989)

Art. 280. Regular and casual employment. The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade of
the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of the
engagement of the employee or where the work or service to be performed is seasonal in
nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding
paragraph: Provided, That any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee with
respect to the activity in which he is employed and his employment shall continue while
such activity exists.

Art. 281. Probationary employment. Probationary employment shall not exceed six (6)
months from the date the employee started working, unless it is covered by an
apprenticeship agreement stipulating a longer period. The services of an employee who has
been engaged on a probationary basis may be terminated for a just cause or when he fails
to qualify as a regular employee in accordance with reasonable standards made known by
the employer to the employee at the time of his engagement. An employee who is allowed
to work after a probationary period shall be considered a regular employee.

Art. 282. Termination by employer. An employer may terminate an employment for any
of the following causes:

Definition
Just causes for dismissal of employee may be defined as those lawful or valid grounds for
termination of employment which arise from causes directly attributable to the fault or
negligence of the erring employee.Just causes are usually serious or grave in nature and
attended by willful or wrongful intent or they reflected adversely on the moral character of
the employees.
As opposed to authorized causes under Article 283 wherein the termination of
employment is dictated by necessity of the business, the dismissal under just causes is
imposed by the employer to the erring employee as a punishment for the latters acts or
omission.

Just Causes Under the Labor Code
Just causes for termination under the Labor Code is found in Article 282 and enumerated
here as follows:
1. Serious misconduct. Serious misconduct is an improper conduct willful in character
and of such grave nature that transgressed some established and definite rule of
action in relation to the employees work.
2. Willful disobedience to lawful orders. The employees are bound to follow
reasonable and lawful orders of the employer which are in connection with their
work. Failure to do so may be a ground for dismissal or other disciplinary action.
3. Gross and habitual neglect of duties. 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.
4. Fraud or willful breach of trust / Loss of confidence. Fraud is any act, omission, or
concealment which involves a breach of legal duty, trust, or confidence justly reposed
and is injurious to another.
5. Commission of a crime or offense. Commission of a crime or offense by the
employee against his employer or any immediate member of his family or his duly
authorized representative, is a just cause for termination of employment.
6. Analogous causes. Other causes analogous to the above grounds may also be a just
cause for termination of employment.

Examples of Analogous Causes
1. Abandonment. Abandonment of job is a form of neglect of duty. There is
abandonment when the employee leave his job or position with a clear and
deliberate intent to discontinue his employment without any intention of returning
back.
2. Gross inefficiency. Gross inefficiency is analogous to and closely related to gross
neglect for both involve acts or omissions on the part of the employee resulting in
damage to the employer or to his business. (See Lim vs. NLRC, G.R. No. 118434, July
26, 1996.)
3. Disloyalty/conflict of interest. Disloyalty exists when one asserts an interest, or
performs acts adverse to ones employer, such as secretly engaging in a business
which renders him a competitor and rival of his employer. It constitutes a breach of
an implied condition of the contract of employment. (See Elizalde International vs.
Court of Appeals, G.R. No. L40553 February 26, 1981.)
4. Dishonesty. Acts of dishonesty deemed to be patently inimical to the employer is
analogous to breach of trust and is a valid cause for termination of employment.

Art. 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.

Art. 284. Disease as ground for termination. An employer may terminate the services of
an employee who has been found to be suffering from any disease and whose continued
employment is prohibited by law or is prejudicial to his health as well as to the health of his
co-employees: Provided, That he is paid 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, a
fraction of at least six (6) months being considered as one (1) whole year.

Art. 285. Termination by employee.
1. An employee may terminate without just cause the employee-employer
relationship by serving a written notice on the employer at least one (1) month
in advance. The employer upon whom no such notice was served may hold the
employee liable for damages.

2. An employee may put an end to the relationship without serving any notice on
the employer for any of the following just causes:

1. Serious insult by the employer or his representative on the honor and person of
the employee;

2. Inhuman and unbearable treatment accorded the employee by the employer or
his representative;

3. Commission of a crime or offense by the employer or his representative against
the person of the employee or any of the immediate members of his family; and

4. Other causes analogous to any of the foregoing.

Art. 286. When employment not deemed terminated. The bona-fide suspension of the
operation of a business or undertaking for a period not exceeding six (6) months, or the
fulfillment by the employee of a military or civic duty shall not terminate employment. In
all such cases, the employer shall reinstate the employee to his former position without
loss of seniority rights if he indicates his desire to resume his work not later than one (1)
month from the resumption of operations of his employer or from his relief from the
military or civic duty.
Title II
RETIREMENT FROM THE SERVICE
Art. 287. Retirement. Any employee may be retired upon reaching the retirement age
established in the collective bargaining agreement or other applicable employment
contract.
In case of retirement, the employee shall be entitled to receive such retirement benefits as
he may have earned under existing laws and any collective bargaining agreement and other
agreements: Provided, however, That an employees retirement benefits under any
collective bargaining and other agreements shall not be less than those provided therein.
In the absence of a retirement plan or agreement providing for retirement benefits of
employees in the establishment, an employee upon reaching the age of sixty (60) years or
more, but not beyond sixty-five (65) years which is hereby declared the compulsory
retirement age, who has served at least five (5) years in the said establishment, may retire
and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary
for every year of service, a fraction of at least six (6) months being considered as one whole
year.
Unless the parties provide for broader inclusions, the term one-half (1/2) month salary
shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash
equivalent of not more than five (5) days of service incentive leaves.
Retail, service and agricultural establishments or operations employing not more than ten
(10) employees or workers are exempted from the coverage of this provision.
Violation of this provision is hereby declared unlawful and subject to the penal provisions
under Article 288 of this Code.

No Separation Pay
An employee who is terminated from employment for a just cause is not entitled to
payment of separation benefits.

Retirement Age
Retirement is one of the modes of termination of employment. By retirement, the
employment is terminated when the employee has reached a certain age, or after he has
completed a certain number of years of service.

Under the Labor Code (Art. 287), an employee may be retired upon reaching the retirement
age established in the collective bargaining agreement (CBA) or other applicable
employment contract. In the absence of such agreement, the employee may retire upon
reaching the age of 60 or more, but not more than 65, provided he has served at least 5
years or more in the same establishment. The age 60 or more, but below 65, is considered
as the voluntary retirement age. Sixty-five is considered as the compulsory retirement age.

A company may have CBA or employment contract setting a retirement age different
(higher or lower) from that fixed by law. For example, the CBA may fix the retirement age
at 50.
The CBA or employment contract may also establish a retirement age based on years of
service of the employee. For example, it may provide that the employee may be retired
after 20 years of service.

The retirement age may also be established based on the combination of the age and tenure
of the employee. For example, the contract may provide that the employee may retire
upon reaching the age of 50, or after 20 years of service, whichever comes earlier.

For underground mining employees, the voluntary retirement age under the Labor Code is
50 years or more, but not beyond 60. The compulsory retirement age is set 60.

It is important to note that the company cannot unilaterally fix the retirement age of
employee. Retirement age may be established only by a valid CBA or employment contract,
or in the absence of both, by the law.

Another thing, the retirement age fixed by law applies only when no CBA or employment
contract setting the retirement age exist. If there is such agreement or contract, the
retirement age fixed by law wont apply.

Retirement Pay
If the establishment has a CBA or employment contract providing for a retirement plan or
benefits to employees, the employee shall be entitled to receive the benefits as provided in
the said CBA or contract. However, such benefits must not be less than that provided under
the Labor Code.

Under the Labor Code, the retirement pay is equivalent to at least one-half month salary for
every year of service, a fraction of at least six months being considered as one whole year.
The term one-half month salary shall mean 15 days plus 1/12 of the 13th month pay and
the cash equivalent of not more than 5 days of service incentive leaves.

Computation for Separation Pay
Separation pay may be computed based on the terms provided in the employment contract,
company policy, or collective bargaining agreement. Company practice may likewise be
used as basis for computation, if such practice has been established for years and has
already ripened into a demandable right.
In the absence of contract or agreement, or when the existing agreement or policy provides
for a lower benefit, separation pay shall be computed based on the provision of the Labor
Code.
The amount of separation pay under the Labor Code depends on the following factors:
1. The employees last salary;
2. The employees length of service;
3. The reason for employees separation from service.


Employees last salary
The employees last salary refers to the salary rate of the employee at the time of his
termination from service. It determines the based to be used in the computation of
separation pay.

When there is a reduction of the employees salary prior to his termination, e.g., the
employee has been demoted resulting to a reduction of salary, such reduced salary rate,
which is his last salary shall be the basis of the computation. But, if the reduction of salary
was made to circumvent the provision of the Labor Code, that is, to avoid payment of
higher separation pay, the salary rate before the reduction shall be used in the computation
of separation pay.

For employees receiving salary below the minimum wage, the separation pay shall be
computed based on the minimum wage in effect at the time of separation from service. In
addition, the employee affected is also entitled to payment of salary differential equivalent
to the difference between the employees actual salary and applicable minimum wage.

Employees length of service
Employees length of service refers to the duration of time that the employee has been
under the employ of the same employer or company. It is computed beginning from the
time of his engagement up to the date of his termination. A fraction of at least 6 months
shall be considered as one whole year.
However, only the employees last continuous years of service should be considered in the
computation.

The reason for the employees separation from service
The reason for the employees separation from service is an important factor in the
computation of separation pay. The amount of separation pay may vary depending on the
specific ground relied upon for the termination.

An employee terminated based on installation of labor-saving devices or redundancy is
entitled to at least one-month salary or to at least one-month salary for every year of
service, whichever is higher. (See Article 283, Labor Code)

For termination based on retrenchment to prevent losses and closure of business, the
employee affected is entitled to at least one month salary or 1/2 month salary for every
year of service, whichever is higher. (Ibid.)

An employee terminated for health reasons (disease) under Article 284 should be paid
separation pay equivalent to at least one-month salary or to at least one-month salary for
every year of service, whichever is higher.
In case of illegal termination, separation pay in lieu of reinstatement has been consistently
computed at one month salary for every year of service.

At least one month or 1/2 month for every year of service?
The phrase at least one month salary or 1/2 month salary for every year of service,
whichever is higher, can be quite confusing. See these comments: Comment 1, Comment 2.
The phrase though is not really complicated. It simply means that the employee is entitled
whichever is higher of the employees:

1. one month salary; or
2. 1/2 month salary for every year of service.

Example: If the retrenched employees salary is P8,000, and he has been working for 3
years, he is entitled to separation pay equivalent to whichever is higher of his:

1. one month salary = P8,000; or
2. 1/2 month salary for every year of service = (1/2) x P8,000 x 3 years = P12,000.

In the above example, the employee is entitled to P12,000, the higher amount.
Following the same rule, if the length of service is only one year, his separation would be
whichever is higher of the following:

1. one month salary = P8,000; or
2. 1/2 month salary for every year of service = (1/2) x P8,000 x 1 year = P4,000.

Here, separation pay is P8,000 or one month salary, the higher amount. Actually, we will
arrive at the same result even if the length of service is only 10 months or 7 1/2 months,
etc., as long as it is 6 months or more. This is because a fraction of at least 6-months is
considered as 1 whole year.

Now, what if the employee has served for less than 6 months, how much separation pay
will he get? Lets see.

1. one month salary = P8,000; or
2. 1/2 month salary for every year of service = (1/2) x P8,000 x 0 year = 0.

So, its still P8,000 or one month salary.

Minimum Separation Pay
Take a quick look at the examples given above. You will notice that the minimum separation
pay that may be given to an employee is one month salary. This is actually consistent with
the phrase at least one month salary, which simply means that the separation must not be
less than the employees one month salary.