Disclaimer: The following discussion is provided for general informational purposes only and does not constitute legal advice. For specific cases and concerns, it is always advisable to consult a qualified Philippine labor lawyer or the Department of Labor and Employment (DOLE).

Overview

In the Philippines, when an employee is separated from employment—whether through resignation, termination for just cause, or other means—the employer is obliged to release the final pay due to that employee. “Final pay” generally includes:

Unpaid wages (for work rendered up to the last day of employment)
Pro-rated 13th month pay
Cash conversion of unused leave credits (if company policy or CBA allows)
Other benefits due under company policy, contract, or collective bargaining agreement

A common question that arises is whether an employee who was dismissed for cause (particularly for allegations of fraud, dishonesty, or similar offenses) can still receive their final pay. In most instances, yes, they remain entitled to their final pay. However, there are important legal nuances involved in fraud allegations, offsets for damages, and the specific circumstances of the termination.

Below is a detailed discussion of all key considerations under Philippine labor laws, rules, and regulations.

1. The Legal Basis for Final Pay

1.1. The Labor Code and Related Issuances

Labor Code of the Philippines
While the Labor Code does not explicitly list every type of “final pay,” it firmly establishes the right of employees to receive wages for work rendered. The principle holds that wages that have been earned cannot simply be withheld indefinitely.
DOLE Labor Advisory No. 06-20 (Series of 2020)
This advisory provides guidelines on the payment of final pay and states that employers shall release final pay within thirty (30) days from the date of separation or upon completion of the clearance process, unless there is a more favorable company policy or a mutually agreed-upon date.

1.2. Concept of Just Wages

Under Philippine law, wages already earned are considered almost inviolate; they cannot be withheld arbitrarily. Even if the dismissal is for “just cause” (e.g., fraud, serious misconduct, or willful disobedience), the employer still owes the employee salaries for the days or hours worked prior to separation, plus any other legally mandated or contractually guaranteed benefits.

2. Dismissal for Fraud or Dishonesty: Effect on Final Pay

2.1. Grounds for Termination vs. Entitlement to Final Pay

Just Causes Under the Labor Code
Article 297 [formerly Article 282] of the Labor Code enumerates “just causes” for termination, including serious misconduct, willful disobedience, gross and habitual neglect, fraud or breach of trust, and commission of a crime against the employer or his family.
Separation Pay vs. Final Pay
In dismissals for just cause, the employee typically loses entitlement to separation pay (unless otherwise stated in a company policy or a collective bargaining agreement). However, the right to receive final pay (unpaid wages, pro-rated 13th month, unused leave credits, etc.) remains intact.

2.2. Offsetting Damages

If the employer has a valid and liquidated claim for damages against the employee (e.g., proven financial loss directly attributable to the employee’s fraud), the employer may set off or deduct the amount of such loss from the final pay, but only under the following conditions:

The claim is admitted by the employee – The employee consents to the deduction.
The claim is resolved or liquidated – The employer has either a court judgment, arbitral award, or a clear and undisputed basis for the exact amount of damages.
Due process is observed – The employer must respect the employee’s right to due process; unilateral, arbitrary deductions without following proper procedures or establishing the amount owed can be challenged as illegal withholding of wages.

Where the employer merely suspects fraud and no due process or conclusive finding has been made (i.e., the amount of damage is uncertain or unproven), withholding the entirety of the final pay can expose the employer to legal liability for non-payment of wages.

3. Procedural Due Process in Fraud Cases

3.1. Administrative Investigation

Before dismissing an employee for fraud or dishonesty, the employer is required to conduct an administrative investigation that observes procedural due process:

Notice to Explain (NTE) – The employee is informed of the specific charges and given the opportunity to respond in writing.
Administrative Hearing – The employee is given an opportunity to further explain or defend against the allegations, sometimes in a face-to-face hearing.
Notice of Decision – The employer issues a written decision stating the reasons for dismissal or penalty imposed.

Even with a valid dismissal for fraud, the employer may not automatically refuse to pay final wages for days already worked.

3.2. Criminal Complaint vs. Administrative Dismissal

A separate issue arises if the employer files a criminal complaint for fraud or estafa against the employee. However, pending litigation does not, by itself, extinguish the employee’s right to receive final pay for wages and benefits already earned.

If the employer wishes to recover amounts allegedly defrauded, the proper recourse is to:

Pursue criminal or civil action for restitution of damages;
Secure a court order or final judgment establishing the exact amount owed by the employee;
Request a set-off from final pay or garnish any amounts due (subject to legal limitations).

4. Timelines and Procedures for Releasing Final Pay

4.1. Standard 30-Day Rule

Under DOLE Labor Advisory No. 06-20 (Series of 2020), final pay should be released within thirty (30) days from the date of final separation from service or completion of the clearance process, whichever is earlier, unless a more favorable arrangement exists.

4.2. Clearance Process

Employers often require outgoing employees to undergo a clearance process to account for company property (e.g., laptops, uniforms, tools, credit cards, etc.). Completion of clearance is typically required before final pay is released. Still, clearance cannot be used unreasonably to delay release of final pay indefinitely.

4.3. Contesting Delays or Non-Payment

If an employer refuses or fails to pay final wages:

The aggrieved employee may file a complaint with the National Labor Relations Commission (NLRC) or DOLE for underpayment/non-payment of wages.
The employer may defend by alleging lawful cause for withholding (e.g., employee’s admitted debts or a final judgment on damages), but absent clear, established liability, indefinite non-payment is typically disfavored.

5. Practical Considerations

Company Policies or CBA Provisions
Some companies or collective bargaining agreements may provide for partial or full separation pay even in cases of just cause, or may provide additional benefits on top of those mandated by law. Always check the specific policy or CBA in question.
Documentation
Employers should maintain thorough records of any alleged fraud and the administrative proceedings that led to the dismissal. Clear documentation is crucial if an offset against the final pay is contemplated.
Legal Counsel
If the fraud allegation is substantial, it is wise for both the employer and employee to seek legal counsel. This ensures that parties observe due process and correctly handle the computation and release/withholding of final pay.
Potential Risk of Illegal Dismissal Claims
An employee who believes they were unjustly accused or wrongfully terminated for alleged fraud may file an illegal dismissal case. This could lead to an award of back wages and reinstatement (or separation pay in lieu of reinstatement) if the dismissal is found to be without valid cause or done without due process.

6. Key Takeaways

Right to Earned Wages
Regardless of the cause of dismissal, employees retain the right to be paid for all services rendered and any benefits accrued up to the last day of employment.
Separation Pay vs. Final Pay
Dismissal for serious misconduct or fraud generally disqualifies an employee from separation pay. However, it does not disqualify them from receiving final pay (including last salaries, pro-rated 13th month pay, or accrued leave conversions).
Fraud Allegations Alone Do Not Forfeit Final Pay
An employer may not unilaterally forfeit final pay on the basis of mere allegations. A proven and liquidated claim (or a clear admission by the employee) is necessary to justify any deduction from final pay.
Timely Release
The standard rule is to release final pay within 30 days from separation or clearance, unless otherwise provided by company policy or a more favorable agreement.
Legal Recourse
If the employer withholds final pay without proper basis, the employee may file a labor complaint with DOLE or the NLRC for non-payment of wages or other monetary claims.

Conclusion

In Philippine labor law, employees retain their right to final pay—comprising unpaid wages, pro-rated 13th month pay, and any accrued benefits—regardless of whether they are dismissed for just cause, including fraud. Allegations of fraud do not automatically entitle an employer to withhold an employee’s final pay. If there is a legitimate and clearly determined monetary claim against the employee, the employer can offset that proven amount, but such withholding or deduction must be supported by due process, a conclusive finding, or an admission of liability.

Bottom Line: A dismissed employee—even one facing serious allegations—does not lose the wages already earned. Employers should release the employee’s final pay within the mandated period (generally 30 days), subject only to legitimate deductions that are allowed by law, properly documented, and properly communicated. Failure to comply can result in liability for unpaid wages and potential damages under the Labor Code.

Important Note: Always consult a legal professional or the DOLE for tailored advice, especially in cases involving serious allegations of fraud and potential offsets of final pay.