Termination of Employment in the Philippines

Termination of employment is one of the trickiest decisions that a business owner, HR Manager, or manager has to make in running a company.

The Philippine labor laws, particularly the Labor Code of the Philippines, have technical rules governing the termination with hefty penalty for those who are found to have illegally dismissed an employee. The illegal dismissal can be the result of lack of technical knowledge of the law on termination or sheer bad faith on the part of the person doing it.

In either case, it is a painful business experience to be dealing with the backwages and damages involved in a judgment of illegal dismissal.

Essentially, to dismiss an employee in the Philippines, the employer has to ensure that there is just or authorized cause for the dismissal or termination. Just cause is when the employee is at fault. The Labor Code enumerates what constitutes a just cause under Article 297.

These are:

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

While the authorized cause refers to incidents not due to the fault of the employee. The reason for termination here is the effect or situation of the business. There could be declining sales, losses, excess of manpower, lack of order, etc.

Authorized causes are found in Article 298 of the Labor Code. They are as follows:

1. Installation of labor-saving devices;
2. Redundancy;
3. Retrenchment to prevent losses; and
4. Closure or cessation of operation of the establishment.

The just cause and the authorized cause are also considered as one of the two aspects of due process. They belong to the substantive aspect. The other one is the procedural aspect.

The procedural aspect is the “how” part of employee termination. The law also provides this. The procedure for just cause and authorized cause is different.

For just cause, there should be Notice to Explain (NTE) or any form of notice informing the employee of the offense, charge, violation, etc. The next is the holding of administrative hearing or conference if so requested in writing by the employee or if provided in the company Code of Conduct or policy. The final part of the procedural aspect is the notice of dismissal.

For authorized cause, there should be notice to DOLE and to the employee within the period prescribed.

Learn more about valid termination of employment in the Philippines by watching the discussion of Atty. Elvin B. Villanueva here:  https://lvsonlineacademy.com/courses/how-to-validly-terminate-employee-in-the-philippines/