LAW ON TERMINATION

(Title I, Book VI)

A.

HISTORY

The earliest law on termination was Article 302 of the Code of

Commerce, which provided for the payment of a so-called mesada. The
law provided that in cases in which the contract of employment does
not have a fixed period, any of the parties may terminate it, advising the
other party thereof one (1) month in advance. But with the effectivity of
the New Civil Code on August 30, 1950, Article 302 was repealed along
with other provisions of said Code on Agency.
Later, Congress of the Philippines enacted Republic Act No.
1052, otherwise known as the Termination Pay Law which took effect
on June 12, 1954. This was amended by Republic Act No. 1787 which
took effect on June 21, 1957. It was enacted for the purpose of giving
the employer an opportunity to secure a replacement and the employee
a similar opportunity to find another employment (Abe vs. Foster
Wheeler Corp., G.R. No. L-14785; L-14923, November 29, 1960). The
procedure is also to give aid (termination pay) to the laborer who,
suddenly deprived of his livelihood through dismissal without sufficient
notice, would have no means of supporting himself and his family until
he has found another job (Malate Taxicab and Garage vs. CIR, 99 Phil.
41).
The present law on termination requires that an employer can
terminate the services of an employee only for valid cause and just
causes which must be supported by substantial evidence (Pili vs. NLRC,
217 SCRA 338).
B.

COVERAGE and PURPOSE

The law on termination under the Labor Code applies to all

establishments or undertakings whether for profit or not. The purpose of
the law is to extend the same right and benefits enjoyed by employees
in profit establishments to employees in non-profits establishments. The
law is also designed to protect the employee against arbitrary,
oppressive and unceremonious dismissal or deprivation of his job
(Manggagawa ng Komunikasyon ng Pilipinas vs. NLRC, 194 SCRA 573).
B.

CONCEPT OF TERMINATION

Termination is a comprehensive term used to describe dismissal

or lay-off or both. Dismissal is the discharge of an employee, a

Page 2
termination of employment in private or public capacity at the instance
of the employer. A discharge, on the other hand, takes place when a
clear intention is manifested by the employer to dispense with the
services of the employee. But there must be some declaration that the
services will no longer be accepted (Morabe, Law on Termination, p. 3;
Foz, NLRC Reports I).
Lay-off
is a termination initiated by the
employer, but without prejudice to reinstatement or recall of a worker
who has been temporarily separated. [Examples of cause for laying-of
are: 1) breakdown of machinery; b) shutdown for repairs; c) business
reverses; d) lack of work or raw material and others.]
Another type of termination or separation, is quit (resignation),
that is, one initiated by the employee motivated by his own reasons such
as obtaining a better job, dissatisfaction with the terms and conditions of
employment.
Termination of employment, is not a mere cessation or severance
of contractual relationship, but an economic phenomenon affecting
members of the family, and thus under the broad concept of social
justice, the dismissal of employee is adequately protected by the laws of
the State (Alhambra Industries, Inc., vs. NLRC, 56 SCAD 664, G.R. No.
106771, 18 November 1994).
C.

SECURITY OF TENURE
ARTICLE 279. Security of Tenure. - In case of
regular
employment,
the
employer
shall
not
terminate the services of an employee except for a
just cause (see Article 282, LCP) or when authorized by
this Title (see Articles 283 and 284, LCP). [As amended by
Section 34, RA 6715, 21 March 1989]

The term tenure means permanent or regular status granted a

worker usually after a probationary or trial period or after a prescribed
period or length of services. Security of tenure is thus the right of a
worker to be secured or to continue in employment until the same is
terminated by virtue of a valid or just cause or on grounds authorized by
law.
It is also intended to shield workers from unwarranted and
unconsented demotion and transfer. Considering that demotion or
transfer is, like dismissal, also a punitive action, the employee being
demoted or transferred should as in cases of dismissals, be given a
chance to contest the same (Jarcia Machine Shop and Auto Supply vs.
NLRC, G.R. No. 118045, 02 January 1997).

Page 3
a. Constitutional Basis.
The constitutional basis of this provision states that the State shall
guarantee the right of all workers to security of tenure found in Section
3, Article XIII [Social Justice and Human Rights], 1987 Constitution.
The policy of the State is to ensure the rights of workers to security
of tenure. The guarantee is an act of social justice. (Ranice, et al., vs.
NLRC, et al., G.R. No. 68147, June 30, 1988).
Such constitutional rights should not be denied on mere
speculation of any similar unclear or nebulous basis. (Hernandez vs.
NLRC, et al., G.R. No. 84302, August 10, 1989; Tolentino vs. NLRC, et
al., G.R. No. 75380, July 31, 1987).
b. Security of Tenure does not exclusively
apply to regular employment only.
For while the rules on security of tenure are generally applicable to
regular employment, they equally applies to non-regular employment,
such as
1. Probationary employee - Article 281 of the Labor Code,
provides that the services of an employee who has been
engaged on a probationary basis may be terminated for
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.
Consequently, probationary employees
enjoy security of tenure during the period of probationary
employment.
2. Handicapped workers - Article 80 in relation to Art 280
of the Labor Code and Republic Act 7277 provides that
handicapped workers shall enjoy the same terms and
conditions of employment and the same compensation and
privileges,
benefits, incentives, or allowances as a
qualified able-bodied person or any other regular
employees. Hence, handicapped worker enjoys security of
tenure during the period of employment agreement.
(Maritess Bernardo, et al., vs. NLRC and FEBTC, G.R. No.
122917, July 19, 1999)
c. Security of tenure of managerial and confidential
employee
- they also enjoy security of tenure and may not be

Page 4
terminated without just cause although there are causes valid for
terminating managerial employees other than those applicable for rankand-file employees. (For instance, elective company officials may lose
their jobs as president, executive vice-president, or vie-president, etc.
because the stockholders or the board of directors for one reason or
another, did not re-elect or re-appoint them).
General managers,
department managers, cashiers, etc., whose powers are central to the
effective operation of the company may be terminated for lack of
confidence or breach of trust (Policy Instructions No. 8; cited in Brent
School, Inc. vs. Zamora, et al., G.R. No. 48494, 5 February 1990).
The fact that one is a managerial employee does not by itself
exclude him from protection of the constitutional guarantee of security
of tenure. (Maglutac vs. NLRC, et al., G.R. No. 78345, 21, September
1990; Cruz vs. Medina, G.R. No. 73053, 15 September 1989).
d. Security of tenure in the construction industry - Project
employees who have become regular shall enjoy security of tenure as
provided under in Section 3.1 of Department Order No. 19, s. 1993.
e. Security of tenure of househelpers - Articles 149 and 150
provides for indemnity for unjust termination (wages already earned plus
15 days salary) and requirement of service termination notice (at least 5
days before intended termination), otherwise, the termination is illegal.
e. Security of tenure of teachers - No teacher may leave the
service without the consent of the school head. No teacher shall be
suspended or separated from the service during the pendency of his
contract or appointment except for cause and after due process. A
teacher shall enjoy security of tenure after rendering service for at least
three consecutive (3) school years, which is equivalent to the
probationary period (Mt. Carmel College vs. NLRC, G.R. No. 117514,
10.4.96).
f. Security of tenure of apprentices - Either party to an
apprentice agreement may terminate the same after the probationary
period only for a valid cause as provided in Section 25, Rule VI, Book II of
the Rules Implementing the Labor Code. (see Articles 60 and 61 of the
Labor Code)

D.

DUE PROCESS TO INSURE SECURITY OF TENURE

No worker shall be dismissed except for a just or authorized cause

as provided in the Labor Code or by law and after due process. (Art.
279, Labor Code; Section 1, Rule XIV, Book V and Section 2, Rule 1, Book
VIi of the Rules Implementing the Labor Code; Century Textile Mills,

Page 5
Inc., et al., vs. NLRC, et al., G.R. No. 77859, 25 May 1988; Ofshore
Industries, Inc. vs. NLRC, et al., G.R. No. 83108, 29 August 1989).
The right to due process of law is a constitutionally-guaranteed
right. It is a basic constitutional tenet that no person shall be
deprived of life, liberty, or property without due process of law,
nor shall any person be denied the equal protection of the
laws. (Section 1, Article III, Bill of Rights, 1987 Constitution).
But what is meant by due process of law? No exact definition
has been given to the expression, the reason being that the idea
expressed therein is applicable under so many diverse conditions as to
make any attempt at precise decision impossible. But, for our purpose,
we can adopt and paraphrase Daniel Websters famous definition of due
process, as a procedure which hears before it condemns, which
proceeds upon inquiry, and renders judgment only after trial.
The right to labor is a constitutional as well as a statutory right.
The right of a person to his labor is deemed to be property within the
meaning of constitutional guarantees. That is his means of livelihood. He
cannot be deprived of his labor or work without due process of law.
(Ofshore Industries, Inc. vs. NLRC, et al., G.R. No. 83108, 29 August
1989).
The prerogative of management to dismiss or lay-off an
employee must be done without abuse of discretion, for what is at stake
is not only his position but also his means of livelihood. (Remerco
Garments Manufacturing, Inc. vs. Minister of Labor, et al., 135 SCRA
167).

D.a. ASPECTS OF DUE PROCESS

The procedure for terminating an employee is found in Article 277
[b] of the Labor Code. This procedure protects not only rank-and-file
employees but also the managerial employees. Both have the right to
security of tenure as provided in the Constitution. (Villarama vs. NLRC
and Golden Donuts, Inc. G.R. No. 106341, 02 September 1994).
1. Two-fold due process requirement:
a. Substantive aspect; and
b. Procedural aspect (Balayan Colleges vs. NLRC, et al., G.R.
Nos.
101070 and 101289, 14 March
1996).

Page 6
1.a. The just and lawful and authorized causes under Articles 282,
283 and 284, constitute the substantive aspect of due process (China
City Restaurant Corp. vs. NLRC, 217 SCRA 441). In other words, the
dismissal must be for a valid or authorized cause as provided by law
(San Miguel Corp. vs. NLRC, G.R. No. 78277, 12 May 1989). The
substantive aspect refers to the legality or illegality of the act
of dismissal.
1.b The rudimentary requirements of due process which consists
of notice and hearing, must also be observed before an
employee may be dismissed (Shoemart, Inc. vs. NLRC, G.R. No. 74229,
11 August 1989; Falguera vs. Linsangan, 66 SCAD 659, G. R. No.
114848, 14 December 1995). The procedural aspect refers to the
legality or illegality of the manner of dismissal.

D.b

STANDARDS OF DUE PROCESS; MANDATORY

NOTICE REQUIREMENTS

D.b.A. For termination of employees based on just causes

as defined in Article 282 of the Code, due process requires that the
employer must furnish the worker sought to be dismissed with two (2)
written notices before termination of his employment, namely:
a. First notice in writing which informs the employee and
specifying the ground or grounds for termination and giving to said
employee reasonable opportunity within which to explain his side;
b. A hearing or conference during which the employee
concerned, with the assistance of counsel if the employee so desires, is
given opportunity to respond to the charge, present his evidence or
rebut the evidence presented against him; and
c. Second written notice which informs the employee the
managements decision to terminate his employment services and
indicating that upon due consideration of all the circumstances, grounds
have been established to justify his termination.
Note 1.

INSTANCES WHERE HEARING IS NOT REQUIRED.

a. Termination due to authorized causes under Article 283,
such as installation of labor-saving devices, redundancy,
retrenchment or closure of business to prevent losses
(Wiltshire File Company vs. NLRC et al., G.R. No.82249, 7
February 1991) ;

Page 7
b. Termination due to incurable disease under Article 284;
c. Termination after six (6) months of bona-fide suspension
of business operations (International Hardware, Inc. vs.
NLRC, et al., G.R. No. 80770, 10 August 1989);
d. Termination due to expiration of fixed-period employment
(Pantranco North Express, Inc., vs. NLRC et al., G.R. No.
106654, 16 December 1994; Brent School, Inc. vs.
Zamora, et al., G.R. No.48494, 05 February 1990).
e. Termination effected by employee under Article 285;
f. Termination of casual employment (Capule, et al., vs.
NLRC, et al., G.R. No. 90653, 12 November 1990);
g. Termination due to completion of a project in project
employment (Section 2.1 of DO #19, s. 1993), but the
employer should submit the required termination report
to the nearest DOLE office as mandated under Policy
Instruction No. 20;
h. Termination due to expiration period of probationary
employment (Manila Hotel Corp. vs. NLRC et al., G.R. No.
53453, 22 January 1986; AM Oreta & Co., vs. NLRC et al.,
G.R. No. 74004, 10 August 1989);
i. Termination due to lapse of season in case of seasonal
employment;
j. Termination due to expiration of tenure (Hilada vs.
Leogardo, et al., G..R. No 65863, 11 June 1986) ;
k. Termination due to abandonment, as long as the notice
requirement is complied with; and
l. Termination due to closure or stoppage of work by
government authorities.
Note 2. PREVENTIVE SUSPENSION.
During the pendency of the investigation, the employer
may place the employee under preventive suspension if his
continued employment poses a serious and imminent threat to
life and property of the employer or of his co-employee (Section
3, Rule XIV, Book V, Rules and Regulations Implementing the
Labor Code). However, to suspend an employee for absences

Page 8
or tardiness, there being no serious threat to the life and
property of the employer or of his co-employee, is not proper
(Global, Inc. vs. Atienza, 143 SCRA 069).
Under the Labor Code, the maximum period of suspension
that could be lawfully imposed is thirty (30) days. However,
the same can be extended provided the employer pays the
suspended employee his wages and other benefits. (Section 3,
Rule XIV, Book V, Rules and Regulations Implementing the Labor
Code; Benguet Electric Cooperative, Inc. vs. NLRC, G.R. No.
89070, 18 May 1992).
The act of the employer in asking the employee to go
on leave without pay (or so-called forced leave) to
pave the way for the investigation of the charges
against him, is tantamount to preventive suspension (JRS
Business Corp. vs. NLRC, et al., G.R. No. 10889, 17 July 1995).
D.b.B For termination of employees based on authorized
causes defined in Article 283 and 284 of the Labor Code, the
requirements of due process shall be deemed complied with upon
service of a written notice to the employee and the appropriate DOLE
Regional Office at least thirty (30) days before the effectivity of the
termination, specifying the ground or grounds for the termination plus
the payment of separation pay equivalent of one (1) month pay or onehalf (1/2) month pay for every year of service, a fraction of at least six
(6) months being considered as one (1) whole year.
Note 1.

The mere posting of notice to terminate ones employment

on the employees bulletin board is not sufficient compliance
with the statutory requirement (Shoppers Gain Supermart vs.
NLRC, 72 SCAD 379, G. R. No. 110731, 26 July 1996).
The payment of one (1) months salary in lieu of notice is
not valid (Guerrero vs. NLRC, 73 SCAD 579, G.R. No. 119842,
30 August 1996). The payment of thirty (30) days salary is not
a substitute for the required prior written 30-day notice (Ruben
Serrano vs. NLRC and Isetann Department Store, G.R. No.
117040, 17 January 2000).

E.

JUST CAUSES

AND

AUTHORIZED CAUSES.

E.a JUST CAUSES refers to those instances enumerated under

Article 282 [Termination by employer] of the Labor Code:

Page 9
a) Serious misconduct;
b) Willful disobedience to lawful orders of the employer or
his representative in connection with his work;
c) Gross and habitual neglect of duty;
d) Fraud or willful breach of trust;
e) Commission of a crime against the person of the
employer, his representative or any immediate member
of his family; and
f) Analogous causes.
1. Serious misconduct - is the improper or wrongful conduct. It is the
transgression of some definite or established rule of action, a dereliction
of duty, and implies wrongful intent and not mere error in judgment. The
misconduct, however, serious, must, nevertheless, be in connection with
the employees work to constitute just cause for his dismissal (RCPI vs.
NLRC, and Villafuerte vs. NLRC, 71 SCAD 654, G.R. No. 114777, 5 July
1996).
Examples:

(a) Absence without leave and willful breach of trust

(Palagpag vs. NLRC, 218 SCRA 510);
(b) Destroying the properties of the company, assaulting
the Companys House Office while under the influence
of liquor, within the company premises during office
hours (Club Filipino, Inc. vs Sebastian, G.R. No. 85490,
23 July 1992);
(c) Fighting within companys premises and challenging
a superior to a fight (Dy Pao vs. Katipunan, 71 Phil.
285; Lusteveco vs. CIR, 15 SCRA 660; Flores vs. NLRC,
70 SCAD 598, G.R. No. 109362, 15 May 1996).

2. Willful disobedience is the refusal to do an act or obey a

reasonable and lawful order of the employer or his representative and
sufficiently known to the employee and in connection with the duties
which the employee has engaged to discharge (BLTB Co., vs. CA, 71
SCRA 470; Family Planning Org. of the Philippines, Inc. vs. NLRC G.R. No.
75907, 23 March 1992).
Examples:

(a) The unauthorized use of company vehicle (Family

Planning Org. of the Philippines, Inc. vs. NLRC G.R. No.
75907, 23 March 1992);
(b) Refusal to obey the lawful order of transfer, it being a
company policy & practice (Castillo vs. CIR, 39 SCRA
76).

Page 10
3. Gross and habitual neglect of duty Gross neglect means
an absence of that diligence that an ordinarily prudent man would use in
his own affairs. The neglect of duties must not only be gross but also be
habitual. Gross negligence connotes want of care in the performance of
ones duties. Habitual neglect implies repeated failure to perform ones
duties for a period of time (JBG and Associates, Inc. vs NLRC, 69 SCAD
211, G.R. No. 109390, 7 March 1996).
Examples:

(a)
Habitual absenteeism without leave (San Miguel
Brewery, 27 SCRA 71);
(b) Sleeping on the job (Ormoc sugar Co. vs. Osco
Workers Fraternity Labor Union, G.R. No. L-15826, 23
January 1961).

4. Fraud or willful breach of trust - Fraud has been defined

as an act, omission, or concealment which involves a breach of legal
duty, trust, or confidence justly reposed and is injurious to another. To
constitute a just cause for terminating the employees services, the
fraud must be committed against the employer or representative and in
connection with the employees work. Thus, the fraud committed by an
employee against a third person not in connection with his work which
does not in any way involve his employer is not a ground for the
dismissal of the employee (Phil. Education Co. vs. Union of Phil.
Education Employees G.R. No. L-13778, 29 April 1960).
Examples: a). Supervisor initiating and leading the boycott (Top Form
Mfg., co., Inc. vs. NLRC, G.R. No. 65706, 11 December
1992).
b). Failure of cashier to account for the shortage of company
funds, (San Miguel Corp. vs. NLRC, G.R. No. 88268, 2
June 1992).
c). Attempt to cover-up the pilferage of the companys
collections (CDCP Tollways Operation Employees and
Workers Union vs. NLRC, G.R. Nos. 76818-19, 3 July
1992).
d). Stealing company property and caught in flagrante
delicto (ZCWD vs. Bartolome, 140 SCRA 432).
Note:

Positions of trust and confidence:

Page 11
1. Bookeeper
or
accounting
clerk
(Kwikway
Engineering Works vs. NLRC, G.R. No. 85014, 22
March 1991).
2. Puchaser (Ocean Terminal Services, Inc. vs. NLRC,
G.R. No. 85446, 17 May 1991).
3. Accountant (Inter Capitol Mktg. Corp., vs. NLRC,
G.R. No. 90745, 10 October 1991).
4. Cashier (Garcia vs. NLRC, 71 SCAD 513 G.R. No.
119527, 3 July 1996).
5. Salesman (Filipro vs. NLRC, 145 SCRA 123).
6. Bank Teller (Galsim vs. PNB, 29 SCRA 293).
7. Ship Captain (Inter-Orient Maritime Enterprises vs.
NLRC, 54 SCAD 338, G.R. No. 115286, 11 August
1994).
8. Managerial employees (Marina Port Services, Inc.
vs. NLRC, G.R. No. 80962, 28 January 1991).
5. Commission of a crime by the employee - under the law
commission of a crime by the employee refers to an offense against the
person of his employer or any immediate member of his family or his
duly authorized representative. And thus, the conviction of a crime
involving moral turpitude is not analogous thereto as the element of
relation to his work or to his employer is lacking. (JISSCOR Independent
Union vs. Hon. Ruben Torres, 221 SCRA 699).
Sexual harassment, now specifically punished under Republic Act
No. 7877 (Anti-Sexual Harassment Act of 1995), is an example of a crime
or offense which may be committed by an employer against his
employee (Villarama vs. NLRC, 55 SCAD 180 Golden Donuts, G.R. No.
106341, 2 September 1994). [see p. 22 on Article 285, Labor Code]
6. Analogous causes - one is analogous to another if it is
susceptible of comparison with the latter, either in general as in some
specific detail or has close relationship with the latter (Lim vs. NLRC, 72
SCAD 642, G.R. No. 118434, 26 July 1996).
To be considered analogous to the just causes, a cause must be
due to voluntary and/or willful act or omission of the employee (Nadura
vs. Benguet consolidated, Inc., G.R. No. L-17780, 24 August 1962).
Examples: a). Violation of company rules and regulations, such as the
no-smoking or no-sleeping rule or the liquor ban rule
(Castillo vs. CIR, 39 SCRA 76, Northern Motors vs. NLU,
102 Phil. 958; PAL vs. NLRC, 124 SCRA 583).

Page 12
b.)

Theft of company property such as involvement in the

loss or theft of company cargoes (Seal Land Service
Inc. vs. NLRC, G.R. 68212, 24 May 1985).

c). Immorality, drunkenness or fighting inside company

premises may constitute analogous causes (Qua vs.
Hon. Jacobo Clave, G.R. No. 49549; 30 August 1990).
d). Sexual harassment (Villarama vs. NLRC, 55 SCAD 180,
G.R. No. 106341 2 September 1994).
e) Gross inefficiency (Lim vs. NLRC, 72 SCAD 642, G.R. No.
118434, 26 July 1996).

E.a.1.

OTHER CAUSES RECOGNIZED UNDER OTHER

PROVISIONS OF THE LABOR CODE

1. Union officers who knowingly participate in an illegal strike are

deemed to have lost their employment (Article 264 [a], Labor
Code)
2. Any employee, union officer or mere member, who knowingly
participates in the commission of illegal acts during a strike
(irrespective of whether the strike is legal or illegal), is also
deemed to have lost his employment status. (ibid)
3. Strikers who violate orders, prohibitions and/or injunctions as
are issued by the Secretary of Labor and Employment or the
National Labor Relations Commission, may be
imposed
immediate disciplinary action, including dismissal or loss of
employment status. (Article 263 [g], Labor Code).

4. Dismissal from employment may also be justified for violation of

the union security clause stipulated or constituted in the
Collective Bargaining Agreement (CBA) pursuant to Article 248
[e] of the Labor Code. The contracting union can demand from
the employer the dismissal of an employee who commits a
breach of union security arrangement, such as failure to join the
union or to maintain his membership in good standing. The
contracting union can also demand for the dismissal of a
member who commits an act of disloyalty to the union, such as
when the member organizes a rival union. (Lirag Textile Mills vs.
Blanco, 109 SCRA 87; Malayang Samahan ng Manggagawa sa
M. Greenfield [MSMG-UWP] et al., vs. Hon Cresencio J. Ramos,
et al., G.R. No. 113907, 28 February 2000).

Page 13

E.b AUTHORIZED CAUSES refers to those instances

enumerated under Article 283 [Closure of establishment and reduction
of personnel] and Article 284 [Disease as a ground for termination] of
the Labor Code.
Article 283 enumerates the following instances, to wit:
1. Installation of labor-saving devices, such as replacement
of employees by machineries (automation);
2. Redundancy, as when the position of the employee has
been found to be surplusage or unnecessary in the
operation of the enterprise;
3. Retrenchment to prevent losses, i.e., reduction of
personnel affected by management to prevent losses;
Closure or cessation of operation of a business not due to
serious or financial reverses.
Article 284 provides that an employer may terminate the services
of an employee who is suffering from a disease not curable within a
period of six months despite appropriate medical treatment and his
employment is prejudicial to his health or to the health of his coemployees.
The following requisites must be complied with before termination
of employment due to disease may be justified:
1. The employee is suffering from a disease;
2. His continued employment is either:
a. prohibited by law; or
b. prejudicial to his health; or
c. prejudicial to the health of his co-employees;
3. There is a certification by a competent public health authority
that the disease is of such nature or at such stage that it cannot
be cured within a period of six (6) months even with proper
medical treatment;
4. Notice of termination based on this ground should have served
to the employee;
5. Separation pay shall be paid to him in the amount equivalent to
at least one (1) month salary or to one-half (1/2) month salary

Page 14
for every year of service, whichever is greater, a fraction of at
least six (6) months being considered as one (1) whole year.
(Section 8, Rule I, Book VI, Rules Implementing the Labor Code)
Notes:
1. The companys own physician or the so-called company doctor,
engaged by the employer as his employee or hired on a
retainer fee basis, to whom sick workers are referred to for
consultation or treatment, is not the competent public health
authority referred to in the law. (Cebu Royal Plant [San Miguel
Corporation] vs. Hon. Deputy Minister of Labor, et al., G.R. No.
58639, August 12, 1987, 153 SCRA 38).
2. The termination of employment due to PTB sickness was
declared not justified in the absence of medical certificate
issued by a competent public health authority that the disease
is of such nature or at such stage that it cannot be cured within
a period of six (6) months even with proper treatment. (General
Textile, Inc., et al., vs. NLRC, et al., G.R. No. 112969, 4 April
1995).

F.

TYPES OF TERMINATION.
F.1

TERMINATION WITHOUT JUST CAUSE

EVEN IF WITH DUE PROCESS

Employees who are illegally dismissed or dismissed without valid

or just or authorized cause are entitled to reinstatement without loss of
seniority rights and other privileges and to their full backwages, inclusive
of allowances and other benefits or their monetary equivalent, computed
form the time compensation was withheld up to the time of their actual
reinstatement. (Osmalik Bustamante vs. NLRC and Evergreen Farms,
G.R. 111651, 28 November 1996, 265 SCRA 061; Aurelio vs. NLRC,
221 SCRA 432).
Mercury Drug rule (Mercury Drug Co., Inc. vs. CIR, 56 SCRA 694)
which limited the award of backwages of illegally dismissed workers to
three (3) years without deductions and qualifications has been
abandoned by the Bustamante Ruling.
F.2

TERMINATION WITHOUT JUST CAUSE

AND WITHOUT DUE PROCESS.

Page 15
Where the dismissal of an employee is not for just and valid cause
and he was not informed of the charges beforehand nor was he given the
opportunity to refute them, such dismissal is illegal. The employee is
entitled to reinstatement plus backwages. If reinstatement is no longer
feasible, separation pay is warranted (Artemio Labor et al., vs. NLRC, et
al., G.R. No. 110388, 14 September 1995; JBG and Associates vs. NLRC
et al., G.R. No. 109390, 7 March 1996).
The Bustamante ruling is equally applicable in this case.
F.3

TERMINATION
CAUSE.

FOR FALSE OR

NON-EXISTENT

Termination without cause and termination for false or

non-existent cause are two different things.
In termination without cause, it is the intention of the
employer to dismiss his employee for cause whatsoever.
In termination for false or non-existent cause, the employer
does not intent to dismiss the employee but for a specific cause which
turns out to be false or non-existent. Example is when the employee is
detained by the military for alleged subversive act which later was
dismissed for lack of evidence. (Magtoto vs. NLRC, et al., G.R. No.
62370, 18 November 1985; Pepito vs. Secretary of Labor, et al., 96
SCRA 454); and when two employees were arrested and detained
pursuant to a Presidential Commitment Order (PCO), and criminally
charged but later release for failure to prove the charges against them.
Consequently, their dismissal for false or non-existent cause was
declared illegal, and hence, reinstatement is in order. (Pedroso, et al.,
vs. Hon. Ricardo, et al., G.R. No. 70361, 30 January 1985).
Notes:
1.

Circumstances that bar reinstatement:

a) Abandonment of right or laches. - An employee entitled to
reinstatement may waive such right by his failure to report for
work when he had the opportunity to do so. Thus, one who has
left for overseas without availing of the same is deemed to
have abandoned or effectively waived his right to
reinstatement. The employee should have availed of it within
the four (4) years prescription period for reinstatement. (East
Asiatic, Co., vs. CIR , 40 SCRA 521).

Page 16
b) Physical incapacity of employee. - If during the pendency
of a case for reinstatement the illegally dismissed employee
became physically incapacitated, reinstatement will not
prosper. The Supreme Court ruled that in fairness to the
employer, he should not be compelled to reinstate an employee
who is no longer physically fit for work (Mercury Drug Co., Inc.
vs. CIR, 56 SCRA 694; Solis vs. NLRC, 75 SCAD 629, G.R. No.
116 175, 28 October 1996). If reinstatement is no longer
feasible, the proper remedy under the circumstances is to pay
the employee a separation pay.
c) Employee accepts retirement pay. Retirement pay has the
characteristics of separation pay. Thus, an employee who
accepts his retirement pay loses his right to reinstatement.
(Dencias
Kitchenette Workers Union, et al. vs. Dencia
Kitchenette, et al., Case No. 1665-ULP, 25 February 1950;
Escareal vs. NLRC, G.R. No. 99359, 2 September 1992; Mai
Phil. Inc. vs NLRC, 151 SCRA 196).
d) When employment relationship becomes so strained. When
the employer can no longer trust the employee and vice versa,
or there were respective imputations of bad faith to each other,
and that all hopes of reconciliation are nil after reinstatement, it
would be more beneficial to accord employee backwages and
separation pay. (Kunting vs.
NLRC, 46 SCAD 95, G.R.
No.101427, 8 November 1993; Hilario vs. NLRC, 67 SCAD 432,
G.R. No. 119583, 29 January 1996).
e) Closure or cessation of business operation. - An employer,
who, because of business reverses, has ceased operation
cannot be compelled to reinstate an employee. (Pizza Inn vs
NLRC, G. R. No. 74531, 28 June 1988).
Also, reinstatement
could
not be enforced if the employer has ceased operations because
of an act of the State. (Sta. Cecilia Sawmills vs. CIR, 11 SCRA
46; Herald Delivery Carrier vs. Herald Publications, 55 SCRA
723)
f) Transfer of business to an innocent buyer or transferee. Reinstatement could not be enforced to an innocent transferee.
Unless expressly assumed, labor contracts being in personam,
should not affect a transferee acting good faith. Since
reinstatement cannot be availed, the transferee in mala fide is
required to pay dismissed employee a (reasonable) months
wages to tide them over while looking for suitable employment.
(Fernando vs. Angat Labor Union, 5 SCRA 248).

Page 17
The principle enunciated in the above case applies only
when the transferee is an entirely new corporation with a
different or distinct personality from the integrating firms and
not where the transferee was found to be merely an alter ego of
the different merging firms. (Filipinas Port Services, Inc., vs.
NLRC, G.R. No. 972177, 16 August 1991).
g) Economic reverses. - Reinstatement is not feasible in order
to give employment to a greater number of persons that what
is reasonably demanded by the actual requirements of the
business. (Columbian vs. TALE, 6 SCRA 425).
h) Abolition of position. If the position previously occupied by
the employee no longer exists at the time of reinstatement and
no substantially equivalent position is available, reinstatement
should not be ordered because that would in effect compel the
employer to do the impossible. (Arrastre Security vs. Sec. Ople,
127 SCRA 580; Philippine Engineering vs. CIR, 42 SCRA 89;
Dangan vs NLRC, 127 SCRA 706; Industrial Timber corp. vs.
NLRC, 68 SCAD 379, G.R. No. 112069, 14 February 1996).
i) Prescription. - Since there was injury to the right of workers
in an illegal dismissal, the cause of action prescribes in four (4)
years. Therefore, it follows that an action for reinstatement also
prescribes in four (4) years pursuant to Article 1146 of the New
Civil Code. (Callantes vs. Carnation, 145 SCRA 268).

j) Conviction of a crime. An employees conviction for theft is

a supervening cause that rendered unjust and inequitable the
NLRC decision mandating reinstatement with backwages.
(Sampaguita Garments Corp. vs. NLRC, 52 SCAD 354, G.R.
No. 102406, 16 June 1994).
k) Not conducive to industrial harmony. An illegally dismissed
managerial employee on probationary status cannot be
reinstated for it would not be conducive to industrial harmony.
(Lopez vs. NLRC, 67 SCAD 48, G.R. No. 102874, 22 January
1996).
2. EXCEPTIONS to the general rule where separation pay
is granted in lieu of reinstatement, to wit:
(1) that reinstatement can no longer be effected in view of the
long passage of time (22 years of litigation) or because of the
nature of the situation;

Page 18
(2) that it would be inimical to the employers interest;
(3) that reinstatement may no longer be feasible, and that it will
not serve the prudent purpose as when supervening facts
have transpired which make execution unjust and inequitable
(such as abolition of position and no substantially equivalent
position);
(5) that that it would served the best interests of the parties
involved;
(6) that the company would be prejudiced by the workers
continued employment; and
(7) that there is a resultant strained relations or irretrievable
estrangement between the employer and the employee,
where the employee concerned occupies a position of trust
and confidence, and it is likely that if reinstated, an
atmosphere of antipathy and antagonism may be generated
as to adversely affect the efficiency and productivity of the
employee (Manipon, Jr., vs. NLRC, 57 SCAD 707, G.R. No.
105338, 24 December 1994).
F.4

TERMINATION WITH JUST CAUSE BUT

WITHOUT DUE PROCESS (no notice and hearing)

The Supreme Court in the landmark case of Ruben Serrano vs.

NLRC and Isetann Department Store, G.R. No. 117040, 27 January 2000,
held that dismissal of an employee for a valid or just cause but without
notice, is ineffectual, the employer is liable for payment of backwages
from the time the employee was terminated until the Court
finds that the dismissal is for a just or authorized cause.
The
170 SCRA
process is
P1,000.00

previous Wenphil Doctrine (Wenphil Corporation vs. NLRC,

069 [1989]), wherein an employer who failed to observe due
merely required to pay indemnity ranging from the amount of
to P10,000.00, has been modified or abandoned.

F.5.

TERMINATION WITHOUT AUTHORIZED CAUSE

(Same pronouncement as in # F.1 and # F.2)

F.6

TERMINATION WITH AUTHORIZED CAUSE BUT

WITHOUT DUE PROCESS (without 30-day written notice)

Page 19
The termination is not void but only inefectual and the employee
is entitled to separation pay plus backwages. (see Ruben Serrano vs.
NLRC and Isetann Department Store, G.R. No. 117040, 27 January
2000).

F.7

TERMINATION WITH AUTHORIZED CAUSE AND

WITH DUE PROCESS (with 30-day written notice)

Authorized cause dismissal is a form of terminating employeremployee relationship with a liability on the part of the employer to pay
separation pay as mandated by law. Hence, the dismissal is valid.
The law grants the employer the right and prerogative to
terminate his employees even without the fault of the latter, if, in his
judgment, he feels that reduction of personnel or closure of his business
establishment is the most prudent thing to do. This authority
extended by law proceeds from the recognition of the dominical and
proprietary rights of the employer to freely manage his business in
accordance with his judgment. The principle in this jurisdiction is, the
protection extended by the Constitution and the law to labor does not
mean the oppression or self-destruction of capital. The grounds cited in
Articles 283 and 284 are technically called the authorized causes for
termination of employment. They are:
1.
2.
3.
4.
5.

Installation of labor savings device;

Redundancy;
Retrenchment;
Closure or cessation of business not due to business losses;
Incurable disease (Art. 284, Labor Code).

For termination due to authorized cause to be valid, the

employer must comply with the following requirements, to wit:
1. Service of written notice to the employee and the nearest
DOLE Office at least thirty (30) days before the effectivity of
the termination, specifying the ground or grounds for the
termination; and
2. Payment of separation pay equivalent of one (1) month pay
or one-half (1/2) month pay for every year of service, a fraction
of at least six (6) months being considered as one (1) year.
a. Separation Pay equivalent to one-half (1/2) month
pay for every year of service if the separation from service is
due to any of the following causes:

Page 20
1. Retrenchment to prevent losses, i.e., reduction
personnel affected by management to prevent losses;

of

2. Closure or cessation of business operation not due to

serious losses or financial reverses [If the closure is
due to serious business losses, the employer is not
liable to pay separation pay (Statement Investment
House, Inc. vs. CA, et al., G.R. No. 89767, 14 February
1992; Victor Mendoza vs. NLRC, G.R. No. 11079, 27
September 1993; Mindanao Terminal and Brokerage
Service, Inc., vs. Hon. Min. of Labor and Employment, G.R.
No. 75374, 14 November 1994]; and
3. When the employee is suffering from a disease not
curable within a period of six (6) months and his
continued employment is prejudicial to his health or to
the health of his co-employees.
b. Separation Pay equivalent to one (1) month pay for
every year of service if the separation from service is due to
any of the following causes:
1. Installation of labor-saving device, such as replacement of
employee by machines (automation); and
2. Redundancy, as when the position of the employee has
been found to be surplusage or unnecessary in the
operation of the enterprise.
F.8

TERMINATION BY EMPLOYEE (Article 285)

An employee may terminate without just cause, employment

relationship by serving a written notice upon the employer at least one
(1) month in advance. Failure to serve notice will make him liable for
damages. The notice requirement can be dispensed with if the
employment is terminated for a just cause, such as:
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;
3. Commission of a crime or offense by the employer or his
representative against the person of the employee or any of the
immediate member of his family;

Page 21
4. Filing of a certificate of candidacy in an election; and
5. Other causes analogous to any of the foregoing.
Notes:
1. Serious insult is to treat with insolence, indignity, or
contempt by word or action, to affront wantonly. It implies malice, or
denotes ill will or an intent to injure or to offend, or to wound the
feelings of another.
Examples: 1. An act of the employer in broadcasting to some employees
that employee a is the concubine of a high ranking
government official constitutes serious insult.
2. A Chief Engineer after a leave of absence was
transferred to a lower position (plant mechanic) constitutes
serious insult. His quitting the job in order to preserve his
honor and dignity, amounts to constructive dismissal.
2.
Inhuman and unbearable treatment - the term
treatment as used in the law does not refer to physical violence. Any
conduct which will affect the mind and body or where continuance of it
involves the life or health of the employee. The conduct should be
marked with cruelty, unfeeling, indicating an absence of that kindness
and tenderness that belongs to a human being, or
it produces
reasonable apprehension of physical violence, causes mental distress
and sorrow.
Examples: 1. Employees were not provided with gas masks although the
nature of their work deals with smoke-producing chemicals.
This amounts to inhuman treatment.
2. No comfort room was provided by the employer compelling
the employees to go outside employers business premises
to heed the call of nature constitutes unbearable
treatment.
3. Commission of a crime or offense the employers act of
slapping the employee plus the threat of scratching her face with pair of
scissors constitutes an offense which would justify employees severing
employer-employee relationship. Her quitting of job will thus constitute
constructive dismissal.
Sexual harassment, now specifically punished under Republic Act
No. 7877 (Anti-Sexual Harassment Act of 1995), is an example of a crime
or offense which may be committed by an employer against his
employee (Villarama vs. NLRC, 55 SCAD 180 Golden Donuts, G.R. No.
106341, 2 September 1994).

Page 22
4.
Another form of a lawful dismissal initiated by the
employee himself is upon filing of a certificate of candidacy.
The filing of certificate of candidacy of an employee of a GOCC
constitutes a lawful cause for terminating employment relationship.
Thus, Section 66 of the Omnibus Election Code declares employees of
GOCC as ipso facto resigned from office upon the filing of their
certificate of candidacy. (PNO-EDC vs. NLRC, 43 SCAD 1028, G.R. No.
100947, 31 May 1993).
The employee is not entitled to separation pay and this type of
resignation is exempted from the notice requirement of the law.
5. Analogous causes the following constitute analogous
causes, such as, (a) undue delay in the payment of employees salaries
or wages; (b) violation of employment terms and conditions of
employment; and unsanitary or unhygienic working conditions.
Notes:
1. Forced resignation (constructive dismissal)
When the employee was compelled to resign because continued
employment become impossible, unreasonable or unlikely, his quitting
the job amounts to constructive discharge or illegal dismissal. (Phil.
Japan Active Carbon Corp. vs. NLRC, G.R. No. 83239 8 March 1989;
Press Co. vs NLRC, 118 F. and 488).
2. The following acts constitute constructive discharge:

(a) Where the security guards made attempts to secure

loans on their security bond deposits with the company,
indicating that they desperately needed money to meet
their respective families needs, but the company
insisted that they must first turn in their resignations
before their loans be released, under the premises, the
security guards were merely forced by circumstances to
submit their resignation, and could not be deemed to
have voluntarily resigned from their jobs, but rather
were illegally dismissed. (Peoples Security, Inc. vs.
NLRC, 44 SCAD 528, G.R. No. 96451, 8 September
1993).

(b) Where the employee resigned because he has been

compelled by a reasonable and well-grounded fear of
imminent and grave evil upon his person or property, or

Page 23
upon the person or property of his spouse, descendants
or ascendants. (Callanta vs. NLRC, 44 SCAD 143, G.R.
No. 105083, 20 August 1993).

(c) Where an employee was forced to resign instead of

approving her application for an indefinite leave of
absence due to illness. (Reyes vs. NLRC, G.R. No. 78997,
31 August 1989).

(d) When the floating status of the employee lasts for

more than six (6) months. (Agro Commercial Security
Services Agency, Inc. vs. NLRC, G.R. Nos. 82823-24, 31
July 1989).

(e) When the bona fide suspension of the operation of a

business or undertaking exceeds six (6) months. (Intl.
Hardware, Inc. vs. NLRC, G.R. No. 80770, 10 August
1989).

(f) When the employee was transferred to a position for

which he is not qualified. (Foz, NLRC Reports I, 16-19).

(g) When the employer refuses to accept returning

employee after exhausting his leave of absence. (Ibid).

(h) When the employee was indefinitely suspended. (Ibid).

(i) When the employee was indefinitely laid-off. (Ibid).
(j) Where the employer refuses to accept back an employee
on the ground that his position was already filled-up and
there was a low volume of work. (ibid).

(k) Where after the termination of the inventory, laid-off

employee was not allowed to continue in his
employment. (Sta. Mesa Slipways and Engineering Co.,
Inc. vs. CIR, G.R. No. L-4521, 18 August 1952).

SUMMARY: TYPES OF TERMINATION

OR

EFFECT

REMEDY

Page 24
LI
ABILITIES
1. TERMINATION WITHOUT JUST CAUSE
wages;
EVEN IF WITH DUE PROCESS
Reinstatement; or

Dismissal is

- Full back

illegal

- Separation pay
(if
rein
statement is not
feas
ible or possible)
(see Bustamante vs. NLRC,
265 SCRA 061)
(see Agabon Doctrine)
2. TERMINATION WITHOUT JUST CAUSE
rulingAND WITHOUT DUE PROCESS
3. TERMINATION FOR FALSE OR
NON-EXISTENT CAUSE
4. TERMINATION WITH JUST CAUSE
wages from
BUT WITHOUT DUE PROCESS
dismissal
(no notice and hearing)
Court finds

- same -

- see JAKA

- same -

- same -

Dismissal is
ineffectual

- Back

the time of
until the
that the

dismissal
was for a
just cause.
(Ruben Serrano vs. NLRC and
Isetann Dept. Store
G.R. No. 117040, 27 January
2000)
5. TERMINATION WITHOUT
as
AUTHORIZED CAUSE
in # 1 6. TERMINATION WITH AUTHORIZED
wages from
CAUSE BUT WITHOUT DUE PROCESS
dismissal

- same as

- same
in # 1 -

Dismissal is
ineffectual

- Back

the time of

Page 25
(without 30-day notice)
Court finds

until the
that the

dismissal was
for
authorized cause;
Separation Pay
(Ruben Serrano vs. NLRC and
Isetann Dept. Store
G.R. No. 117040, 27 January
2000)
7. TERMINATION WITH AUTHORIZED
Separation pay
CAUSE AND WITH DUE PROCESS
(with 30-day notice)

Termination is
valid / legal

8. TERMINATION BY EMPLOYEE:
- WITHOUT JUST CAUSE
Employee liable for
- WITH JUST CAUSE
liable-damages

Termination
is valid
- same -

damages
- Not

**employee not entitled to separation

pay, except
- IF constructively dismissed
Termination is
- same as #
1deemed illegal
G.

SUSPENSION OF EFFECTS OF TERMINATION.

One of the extraordinary powers granted to the Secretary of Labor

and Employment is his power to suspend the effects of termination
effected by an employer, even pending resolution of the legality or
illegality of such termination in an appropriate proceeding.
The power was introduced into the Labor Code under Article 277[b]
with the amendatory provisions of Section 13, BP 130. Subsequently, the
grant of such power was further affirmed by the amendatory provisions
of Section 33, RA 6715.
The invocation of such power may be made upon a prima facie
finding by the appropriate official of the DOLE before whom the dispute
is pending that:
a) the termination may cause serious labor dispute; or

Page 26
b) the termination is in implementation of a mass lay-off. (Article
277 [b], Labor Code, as amended by Section 33, RA 6715;
Section 9,
Rule XIV, Book V, Rule Implementing the Labor Code).
Consequently, even if a case questioning the validity of the
termination is not yet filed before the Arbitration Branch of the NLRC or
even during its pendency, in case one has already been filed, the
Secretary of Labor and Employment may still suspend the effects of
termination if any or both grounds exist to justify the suspension.
An order of reinstatement pending resolution of the case may be
issued by the Secretary of Labor and Employment. (No. 12, Briefing
Paper on RA 6715).
**DISTINCTION BETWEEN POWER TO SUSPEND AND POWER TO
ASSUME OR CERTIFY LABOR DISPUTE:
POWER TO SUSPEND
TERMINATION
1. Granted under Article 277[b];

POWER TO ASSUME / CERTIFY

LABOR DISPUTE
Exercised under Article 263[g];

2. Involves issue of termination

of employment which may
cause a
serious
labor
dispute or is in implementation of a mass lay-off;

Applicable to all labor disputes,

irrespective of the grounds therefor
causing or likely to cause a strikes
or lockouts in industries indispensable to the national interest;

3. Serious labor dispute as

contemplated does not
involve a strike or lockout;

Labor dispute will cause or likely to

to cause a strike or lockout;

4. Exercised in cases of termination of employment where

the lawful grounds exist,
irrespective of the nature of
the business of the employer;

May only be exercised in industries

indispensable to national interest;

5. Remedy is reinstatement
pending resolution of the
case.

Automatic return to work of the

strikers or locked out employees
and the enjoining of the strike or
lockout, pending the resolution of
the issues raised in the notice of
strike or notice of lockout.

Page 27
H.

CERTIFICATE OF EMPLOYMENT.

A terminated employee regardless of the cause of termination is

entitled for a certificate of employment. Section 6, Rule XXIII of the
Omnibus Rules Implementing the Labor Code, as amended, provides:
Section 6. Certificate of employment. A
dismissed or terminated employee shall be entitled
to receive, or request, a certificate of employment
from the employer specifying the dates of his
employment and termination of his employment and
the type of work on which he is employed. (DO #
10, s. 1997)
Prepared and condensed by:
References:
Atty. Exequiel M.
Dayot III
- Azucena, Labor Code, Vol. II, 1996 Ed.
MedArbiter
- Poquiz, Labor Relations Law, 1999 Ed.
- Chan, Law on Labor Relations and Termination, 1996 Ed.