Baguio City – Last Wednesday, while enjoying a mug of brewed coffee in one of the popular cafe’s along Session Road, a businessman friend joined me and we talked about the old days, family and careers then he asked me about a problem he has been encountering about terminating an employee.

My friend shared his experience and thoughts regarding this topic on termination. In his own words, he said the notion of employees taken advantaged or abused by employers has been in the mindset of the most generations due to the sensationalized news. You’ve never heard any employers/companies in the news being showcased that asks for justice in the public eye just because it doesn’t sell.

Being an employer, he believes that he has not lacked in any aspect to his employees since they are provided with SSS, PAGIBIG, PHILHEALTH, 13th month pay and Service Incentive Leaves; and of course remits their contributions & loans, and income tax returns. He even educates them on how to compute premium pay and how their SSS and HDMF could help them in the future.

I told my friend, termination, while often unpleasant, is simply a necessary part of the employment relationship. Fortunately for employers and employees alike, employment is generally considered at will, which means that either the employee or the employer may terminate an employment relationship at any time and for any reason—any legal reason, that is. Then he asked me if resigned employees entitled to separation pay?

Well, separation pay is given to employees in instances covered by Articles 298 and 299 (formerly Articles 283 and 284) of the Labor Code of the Philippines. An employee’s entitlement to separation pay depends on the reason or ground for the termination of his or her services. An employee may be terminated for just cause (i.e., gross and habitual neglect of duty, fraud, or commission of a crime), and other similar causes as enumerated under Article 297 (formerly Article 282) of the Labor Code and, generally, may not be entitled to separation pay. On the other hand, where the termination is for authorized causes, separation pay is due.

Employers can only terminate their relationship with an employee if there is “just” or “authorized” cause, as defined under the law, has been established, after undergoing due process. Thus, terminating an employee is taken very seriously and can be a complex process, especially since, when in doubt, the Labor Code of the Philippines is construed in favor of employees.

There are two types of employment termination, “termination by employer” and “voluntary resignation” or termination by employee. Employers can dismiss an employee based on just and authorized causes. Just causes are based on acts attributable to an employee’s own wrongful actions or negligence while authorized causes refer to lawful grounds for termination which do not arise from fault or negligence of the employee.

Voluntary resignation is defined as a voluntary act committed by employees who knowingly dissociate themselves from their employment for personal reasons. It does not cover instances where employees are forced to resign with the use of threats, intimidation, coercion, manipulation, or where dismissal is imposed as a penalty for an offense. Forced or coerced resignation is illegal and considered “constructive” dismissal – a dismissal in disguise.

An employee is entitled to receive a separation pay equivalent to one half (1/2) month pay for every year of service, a fraction of at least six (6) months being considered as one (1) whole year, if his/her separation from the service is due to any of the following authorized causes: retrenchment to prevent losses (i.e., reduction of personnel effected by management to prevent losses); closure or cessation of operation of an establishment not due to serious losses or financial reverses; and when the employee is suffering from a disease not curable within a period of six (6) months and his/her continued employment is prejudicial to his/her health or to the health of his/her co-employees.

On the other hand, an employee is entitled to separation pay equivalent to his /her one month pay for every year of service, a fraction of at least six (6) months being considered as one whole year, if his/her separation from service is due to any of the following: installation by employer of labor-saving devices; redundancy, as when the position of the employee has been found to be excessive or unnecessary in the operation of the enterprise; and impossible reinstatement of the employee to his or her former position or to a substantially equivalent position for reasons not attributable to the fault of the employer, as when the reinstatement ordered by a competent authority cannot be implemented due to closure or cessation of operations of the establishment/employer, or the position to which he or she is to be reinstated no longer exists and there is no substantially equivalent position in the establishment to which he or she can be assigned.

On the issue of his employee who resigned voluntarily, for the information of both employees and employers, the act of resignation is considered a voluntary mode of severance of an employee-employer relationship to which the Supreme Court ruled that: “Resignation is defined as the voluntary act of an employee who finds himself in a situation where he believes that personal reasons cannot be sacrificed in favor of the exigency of the service and he has no other choice but to disassociate himself from his employment.” Considering this, it is important to note that the Labor Code of the Philippines does not contain a provision granting separation pay to voluntarily resigning employees.

There are, however, certain occasions when an employee who voluntarily resigns is entitled to a separation pay such as when grant of separation pay to resigning employees has been an established business practice by the employer or when a written agreement to such effect has been made between the employer and employee.

Due process in the context of employment termination is the right of an employee to be notified of the reason for his or her dismissal and, in case of just causes, to be provided the opportunity to defend himself or herself. The due process is different for both authorized and just causes. Just cause involves a two-notice rule while authorized cause requires a 30-day notice. If due process is not accorded to the employee before termination of the employment or the termination itself is declared illegal, the employee is entitled to receive reinstatement and full back wages (Art. 279, Labor Code). If reinstatement is no longer possible where the dismissal was unjust, separation pay may be granted.

END/Patrick T Rillorta