TERMINATION BY EMPLOYER

I. Foundational Principles

1. Constitutional and Statutory Foundation of Security of Tenure:
   The 1987 Philippine Constitution enshrines the policy of affording full protection to labor and promotes the security of tenure of workers. This is operationalized through the Labor Code of the Philippines (Presidential Decree No. 442, as amended), which provides that employees cannot be dismissed from employment except for just or authorized causes, and only after observance of due process. Security of tenure means that an employee who has attained regular status cannot be terminated at will or without proper grounds and procedure.

2. General Legal Basis:
   Primary statutory authority for termination by the employer is found in Book VI, Title I of the Labor Code, specifically Articles 297, 298, 299 (formerly Articles 282, 283, and 284), and related jurisprudence. Implementing rules and regulations, Department of Labor and Employment (DOLE) issuances such as Department Order No. 147-15, as well as Supreme Court decisions, provide further interpretation and guidance.

II. Categories of Causes for Termination

Under Philippine labor law, the grounds for lawful termination by the employer are classified into two broad categories: (1) Just Causes, and (2) Authorized Causes.

1. Just Causes (Article 297, formerly Article 282):
   Just causes refer to grounds arising from the fault, misconduct, or negligence of the employee. These include:
   a. Serious Misconduct or Willful Disobedience:

   • Serious misconduct is an improper behavior that is of grave and aggravated character, directly related to the performance of duties, and shows the employee’s intent to violate lawful workplace rules.
   • Willful disobedience entails a deliberate and intentional refusal to follow a lawful and reasonable employer order related to the employee’s work.

   b. Gross and Habitual Neglect of Duties:

   • Neglect of duties must be both gross (serious in degree) and habitual (repeated or persistent). A single act of negligence may not suffice unless extremely grave.
   • This includes consistent failure to comply with assigned tasks or persistent inefficiency, so long as the conduct is not attributable to mere error in judgment or isolated lapses.

   c. Fraud or Willful Breach of Trust:

   • Fraud involves deceitful conduct that results in damage to the employer’s interests.
   • Willful breach of trust applies typically to employees holding positions of trust and confidence, such as cashiers, treasurers, or managerial employees, who commit acts indicating lack of honesty or integrity.

   d. Commission of a Crime Against the Employer or His/Her Representatives or Immediate Family:

   • This includes theft, qualified theft, estafa, or other acts against the property or person of the employer or his/her immediate family members that demonstrate the employee’s moral unfitness and disrupt the employment relationship.

   e. Analogous Causes:

   • Conduct not specifically enumerated but bearing similar gravitas and character as the foregoing just causes.
   • The analogous cause must be of the same nature as the enumerated causes and must similarly render continuation of employment untenable.

2. Authorized Causes (Articles 298 and 299, formerly Articles 283 and 284):
   Authorized causes are not related to the employee’s wrongdoing, but rather arise from legitimate business or health-related reasons. Although lawful, these causes entitle the employee to separation pay and compliance with procedural requirements.

   a. Installation of Labor-Saving Devices:

   • Introduction of machinery, technology, or methods that reduce the need for workforce.
   • The employer must show good faith and that the chosen device genuinely results in redundancy of certain positions.

   b. Redundancy:

   • The position becomes superfluous due to changes in the business, reorganization, or other operational requirements.
   • Employer must prove redundancy through criteria such as a newly adopted business scheme, decreased volume of work, or overlap in job functions.

   c. Retrenchment to Prevent Losses:

   • Termination is resorted to due to serious financial losses or imminent financial distress.
   • The employer must show actual or imminent substantial losses and that retrenchment is a last resort.
   • It must be done in good faith and by applying a fair and reasonable selection criteria.

   d. Closure or Cessation of Business Operations:

   • If the employer is shutting down operations completely or partially, termination of employees may occur.
   • The closure should not be used as a subterfuge to eliminate undesirable employees.
   • Good faith is required, and if closure is due to business losses, the employer may be exempt from paying separation pay (except in cases where the cessation is not due to losses, in which case separation pay is mandatory).

   e. Disease (Article 299, formerly 284):

   • If an employee is found to be suffering from a disease that is incurable within six months, and whose continued employment is detrimental to their health or that of their co-employees, the employer may validly terminate the employee.
   • A certification from a competent public health authority is required to justify termination on this ground.
   • The employee is entitled to separation pay equivalent to at least one month salary or half-month salary per year of service, whichever is greater.

III. Procedural Due Process Requirements

1. For Just Causes:
   a. The Two-Notice Rule:

   • First Notice (Notice to Explain/Show Cause): The employer must issue a written notice to the employee stating clearly and specifically the acts or omissions upon which termination is sought. The employee must be given a reasonable opportunity to respond in writing—generally at least five (5) calendar days from receipt of the notice.
   • Hearing or Conference: The employer should conduct a hearing or conference, if requested or warranted, giving the employee a chance to present evidence, explain their side, and refute charges.
   • Second Notice (Notice of Decision): After evaluation of the explanation and evidence, the employer must issue a written notice informing the employee of the decision to terminate (if justified) and explaining the reasons for such decision.

   b. Substantial and Procedural Compliance:

   • Failure to strictly comply with procedural requirements, while not automatically rendering the dismissal illegal if the cause is proven, can lead to an award of nominal damages.
   • Employers must exercise fairness and good faith in conducting proceedings.

2. For Authorized Causes:
   a. Notice to the Employee and DOLE:

   • At least thirty (30) days prior to the effectivity of the termination, the employer must give a written notice both to the affected employees and the DOLE Regional Office.
   • The notice must state the specific authorized cause invoked.

   b. Separation Pay:

   • Separation pay must be paid in accordance with the prescribed amounts:
     • For installation of labor-saving devices or redundancy: at least one (1) month pay or one (1) month pay per year of service, whichever is higher.
     • For retrenchment or closure not due to serious losses: at least one-half (1/2) month pay per year of service.
     • For disease-based termination: at least one (1) month pay or one-half (1/2) month pay per year of service, whichever is greater.

   c. Good Faith and Fair Selection:

   • The employer’s decision to resort to authorized causes must be made in good faith and must not be a mere subterfuge to circumvent labor rights.
   • If retrenchment or redundancy is necessary, a fair and reasonable criteria for selecting which employees to terminate must be applied (such as efficiency, seniority, or other objective standards).

IV. Remedies for Illegal Dismissal

1. Definition and Consequences of Illegal Dismissal:
   Illegal dismissal occurs when an employee is terminated without a just or authorized cause, or when due process is not observed. If termination is found to be illegal, the employer faces possible remedies in favor of the employee, including:
   a. Reinstatement without loss of seniority rights – The employee shall be returned to the position they occupied prior to dismissal, or its equivalent.
   b. Full Backwages – The employee is entitled to backwages computed from the time of dismissal until finality of the decision ordering reinstatement.
   c. Separation Pay in Lieu of Reinstatement – If reinstatement is no longer feasible (e.g., strained relations), the employee may be awarded separation pay equivalent to at least one (1) month salary per year of service in lieu of reinstatement.
   d. Damages and Attorney’s Fees – Moral and exemplary damages may be awarded if the dismissal was done in bad faith or oppressively. Attorney’s fees may be granted if the employee was compelled to litigate to protect their rights.

2. Nominal Damages for Procedural Flaw:
   Even if the termination is for a just or authorized cause, failure to observe procedural due process (e.g., not giving the required notices) may result in the awarding of nominal damages, typically in amounts determined by jurisprudence. Philippine Supreme Court decisions have set common nominal damage awards in the range of P30,000 for just cause procedural violations and P50,000 for authorized cause procedural violations, though these amounts can vary over time depending on evolving jurisprudence.

V. Special Considerations and Recent Developments

1. Managerial Employees and Trust and Confidence Doctrine:
   Managerial employees are held to a higher standard of trust and confidence. Termination for breach of trust may be upheld if the loss of confidence is based on clearly established facts and not on mere suspicions or conjectures.

2. Fixed-Term Employment Contracts and Project-Based Employees:
   While these arrangements are allowed under certain conditions, termination issues are more nuanced. For fixed-term employees, termination prior to the expiration of the term without just cause can be seen as illegal dismissal. For project employees, termination upon project completion is generally valid, but termination prior to completion must be for a valid cause.

3. Contracting, Subcontracting, and Security of Tenure Issues:
   Workers engaged through legitimate job contracting arrangements have security of tenure with the contractor. However, illegal labor-only contracting can result in direct employment relationships between principal and workers. Termination in these scenarios must still comply with the strict standards laid out by law.

4. Bona Fide Occupational Qualification (BFOQ) Exceptions and Anti-Discrimination Laws:
   While not explicitly enumerated as causes for termination, anti-discrimination laws prevent termination based on race, gender, religion, or other protected characteristics. Employers must ensure that their decision to dismiss is not tainted by discrimination. The Anti-Age Discrimination in Employment Act (Republic Act No. 10911), for instance, prohibits termination solely on account of an employee’s age.

5. COVID-19 and Other Emergency Measures:
   Economic disruptions and health crises have prompted employers to resort to authorized causes (e.g., retrenchment or closure due to financial difficulties). Employers must still meet the strict good faith requirements and pay proper separation pay where applicable. DOLE guidelines and Labor Advisories issued during crisis situations supplement legal requirements and ensure humane considerations.

VI. Enforcement and Dispute Resolution

1. Filing of Complaints:
   Employees who believe they were illegally dismissed may file a complaint for illegal dismissal with the Labor Arbiter of the National Labor Relations Commission (NLRC). The NLRC’s decisions may be appealed to the Commission proper, and ultimately, to the Court of Appeals and the Supreme Court.

2. Burden of Proof:
   In illegal dismissal cases, the employer bears the burden of proving that the termination was for a lawful cause and that due process was observed. Absent such proof, the dismissal is presumed illegal.

3. Labor Arbiters and NLRC Procedure:
   Proceedings before the Labor Arbiters are summary in nature. The rules of evidence are not strictly applied, and the emphasis is on speedy and inexpensive disposition of cases. However, parties are expected to substantiate their claims or defenses through substantial evidence.

4. DOLE and Preventive Suspension:
   Employers may place employees on preventive suspension (not exceeding thirty (30) days) pending investigation of allegations of serious misconduct to prevent harm to persons or property. However, preventive suspension is not a penalty in itself and must be followed by a resolution of the case. Failure to resolve it within the suspension period requires reinstatement or payment of wages due for the period beyond the suspension term.

VII. Conclusion

Termination by an employer under Philippine labor law is heavily regulated to protect employees’ constitutional right to security of tenure. Employers must strictly adhere to substantive and procedural requirements: (1) ensuring that a just or authorized cause exists; (2) providing written notices and opportunities for the employee to be heard in just cause cases; (3) notifying the DOLE and paying separation pay, if required, in authorized cause cases; and (4) exercising good faith, fairness, and reasonableness in all steps of the termination process. Failure to comply with these requirements can render a dismissal invalid and expose the employer to significant legal and financial liabilities. Philippine jurisprudence continually refines these standards, ensuring that the delicate balance between management prerogatives and employee rights is maintained.