Below is a comprehensive discussion on employee entitlements after termination due to illness (disease) under Philippine law. The information covers the legal bases, conditions for a valid termination based on illness, separation pay, final pay, statutory benefits, and other relevant considerations. This overview will help both employers and employees understand their rights and obligations when employment is terminated due to medical reasons.

1. Legal Basis: Disease as an Authorized Cause for Termination

Under the Labor Code of the Philippines, termination of employment due to disease (often referred to as “illness” in lay terms) is covered by the provision commonly cited as Article 299 (previously Article 284) of the Labor Code. It is classified as an authorized cause, in contrast to “just causes” (e.g., serious misconduct).

What Does Article 299 Provide?

“An employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his [or her] health as well as to the health of his [or her] co-employees:
Provided, That he [or she] is paid separation pay equivalent to at least one (1) month salary or to one-half (1/2) month salary for every year of service, whichever is greater, and a certification by a competent public health authority that the disease is of such nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical treatment.”

In simpler terms, an employer has the lawful option to terminate an employee if:

The employee is suffering from a disease that either:
- Is prohibited by law for continued employment, or
- Is prejudicial to the health of the employee or co-workers.
A competent public health authority (e.g., a government hospital, public health officer, or licensed government physician) certifies:
- The disease cannot be cured within six (6) months, even with proper medical treatment.
Separation pay is provided to the employee in accordance with the legal formula.

2. Requirements and Procedure for Valid Termination

To ensure the validity of the termination and to avoid claims of illegal dismissal, employers must follow certain procedures:

Medical Certification
- The law explicitly requires certification from a competent public health authority. While a private physician’s medical assessment may still be useful, it is strongly recommended that the employer obtain (or at least validate) a formal medical certificate from a government or public health facility stating that the employee’s condition is either:
  - Incurable within six months, or
  - Threatening to the health of co-workers if the employee continues to work.
Reasonable Accommodation (when possible)
- Before proceeding with termination, the employer is encouraged (though not always explicitly required by law) to consider whether the employee’s condition can be reasonably accommodated. This could mean reassigning tasks or modifying duties if it does not cause undue hardship to the company and if it helps in the employee’s recovery or continued safe employment.
Notice Requirements
- As with other types of authorized causes, the employer is generally expected to give notice of termination to the employee and to the Department of Labor and Employment (DOLE) at least 30 days before the intended date of termination.
- The 30-day notice may be waived if circumstances demand immediate termination for health and safety reasons, but there should still be a formal notice to the DOLE.
Separation Pay
- See Section 3 below for more details on the computation and entitlement to separation pay.

If any of these procedural requirements are overlooked—especially the certification from a public health authority—termination could be deemed illegal, exposing the employer to potential liabilities like reinstatement, full back wages, and damages.

3. Separation Pay Computation and Payment

Since termination for disease is classified as an authorized cause, the employee is entitled to separation pay. The law sets two (2) possible computation formulas, and the employee is entitled to the greater amount:

One (1) month salary, or
One-half (1/2) month salary for every year of service (a fraction of at least six months is considered one full year of service).

The Labor Code uses the phrase “whichever is greater,” meaning you:

Compute the one-month lump sum.
Compute the half-month salary times the total years of service (rounding up if the employee has worked at least six months in the last year).
Compare the two amounts.
The employee gets the higher amount as separation pay.

Example Calculation:

Suppose an employee has worked for 5 years and 7 months at a monthly salary of PHP 20,000.
- One-month salary = PHP 20,000
- Half-month salary (PHP 10,000) × 6 years (because 5 years and 7 months rounds up to 6) = PHP 60,000
- The “greater” amount is PHP 60,000. Thus, the employee would receive PHP 60,000 as separation pay.

4. Other Forms of Final Pay

Upon termination, the employee is entitled to final pay (often called “back pay” or “last pay”) in accordance with law and any existing company policy or collective bargaining agreement (CBA). Final pay typically includes:

Unpaid Salaries and Wages
- Any salary due for the last pay period worked, including any overtime pay, holiday pay, or night differential that has not been paid out yet.
Pro-Rated 13th Month Pay
- Under Presidential Decree No. 851, employees are entitled to a 13th month pay. If termination occurs before the end of the year, the employee is still entitled to a pro-rated amount based on actual months worked within the calendar year.
Cash Conversion of Unused Leave Credits
- Many companies have a leave policy (vacation or sick leave). If an employee has unused, convertible leave credits, these should be monetized and given upon final pay, subject to any specific company policy.
Other Company Benefits or Provisions
- Some CBAs or company-specific policies may provide additional separation benefits or gratuity packages. Employers and employees should review internal handbooks, policy manuals, or the CBA (if applicable).

5. Government-Mandated Benefits and Social Security

Even after employment is terminated due to illness, employees may have access to certain government benefits:

Social Security System (SSS) Sickness and Disability Benefits
- If the illness renders the employee temporarily unable to work, SSS provides a Sickness Benefit (for a maximum of 120 days in a year) subject to eligibility conditions (enough monthly contributions, proper notification, etc.).
- If the illness results in partial or total permanent disability, the employee may apply for SSS Disability Benefits (lump sum or pension).
PhilHealth Coverage
- Employees with PhilHealth contributions can avail of hospitalization or medical procedure benefits to offset healthcare costs.
- Termination of employment does not immediately discontinue PhilHealth coverage, but continued contributions or voluntary contributions may be needed to maintain eligibility.
Employee Compensation (EC) Program
- If the disease or illness is work-related, employees may claim benefits under the Employees’ Compensation Commission (ECC) scheme. This is particularly relevant if the work environment or the nature of the job contributed to the illness.

6. Disability vs. Dismissal Due to Illness

In some cases, an illness might disable an employee from performing the essential functions of their job. If this is recognized as a permanent disability, the employee can explore options with SSS disability pension. However, the employer’s right to terminate still hinges on the certification (that the illness is beyond cure within six months and poses harm or is prohibited by law). Sometimes, employees may be retired on disability grounds if the company retirement plan or the law allows it (especially in cases where the employee’s age and service meet early retirement or disability retirement thresholds).

7. Due Process and Avoiding Illegal Dismissal

Even though Article 299 provides a ground for termination, the employer must observe:

Substantive Due Process
- Demonstrate that the illness justifies termination (i.e., certification from a competent public health authority; threat to health or incurability).
Procedural Due Process
- Provide notice and an opportunity for the employee to respond or to present a second opinion, if feasible.
- Properly serve written notice to both the employee and the DOLE 30 days prior to termination unless the nature of the illness demands an earlier termination for health/safety reasons.

Failure to meet these requirements can lead to illegal dismissal. If deemed illegally dismissed, the employee would be entitled to reinstatement, payment of full back wages, and other damages the courts might award.

8. Relevant Judicial Decisions

Philippine jurisprudence has frequently affirmed that:

Medical certification from a competent public health authority is essential.
The burden of proof is on the employer to show compliance with legal requirements.
Termination cannot be based on mere speculation; it must be substantiated by medical evidence.

Notable cases in Supreme Court decisions have emphasized that while protecting the health of all employees is crucial, the law intends to ensure an employer does not easily dismiss an ailing worker without due consideration of possible accommodation or recovery within the prescribed period.

9. Practical Guidance for Employers and Employees

For Employers

Obtain credible medical evidence and ensure the medical certificate comes from a government physician or an accredited public health authority.
Keep records of notices, medical certificates, and communications with the employee.
Explore accommodations or reassignment, if reasonable.
Provide written notice of termination and file the same with DOLE.
Calculate and pay separation pay correctly to avoid disputes.

For Employees

Seek a second opinion if you disagree with the company’s chosen physician or if you believe your condition is still curable within six months.
Verify your SSS, PhilHealth, and Employees’ Compensation entitlements.
Collect all final pay components, including unused leave credits and pro-rated 13th month pay.
If you suspect illegal dismissal, you can file a labor complaint with the National Labor Relations Commission (NLRC) or approach DOLE for assistance.

10. Conclusion

Termination due to illness or disease in the Philippines is a legally recognized authorized cause but is subject to strict requirements under the Labor Code. The employee’s health, potential contagion risk, and the inability to cure the illness within six months must be established by a competent public health authority’s certification. Should the employer validly terminate on this ground, the employee is entitled to separation pay (the higher of one-month salary or one-half month salary per year of service), plus other final pay entitlements such as unpaid wages, pro-rated 13th month pay, and monetized unused leave credits.

The law balances the interests of the employer (ensuring workplace health and safety and preventing undue hardship) and the rights of the employee (ensuring due process and financial assistance in the form of separation pay). Employers must carefully follow the correct procedure to avoid illegal dismissal claims. Meanwhile, employees facing termination due to illness should be proactive in asserting their rights to government benefits and statutory entitlements.