Withholding a Certificate of Employment Over Unpaid Accountabilities in the Philippines
All You Need to Know

1. Introduction

The Certificate of Employment (COE) is a document that details an individual’s tenure, position(s), and, in some cases, the nature of the work performed while employed in a particular company. In the Philippines, the COE plays a crucial role in an employee’s job-hunting and career progression, as many prospective employers require it to confirm previous work experience.

However, certain employers have adopted the practice of withholding a COE if an employee leaves the company with alleged unpaid accountabilities (e.g., loans, financial discrepancies, unreturned company property). This practice raises legal and ethical issues, often leading to confusion among employees and employers alike. Below is a comprehensive discussion of the legal framework governing the issuance of a COE, the obligations of employers, and the rights of employees in the Philippine setting.

2. Legal Framework: Laws and Issuances

Labor Code of the Philippines
While the Labor Code does not explicitly define the process or requirements for issuing a Certificate of Employment, general principles on termination and post-employment documents—such as the obligation to provide proof of employment—are implicit in its provisions emphasizing fair labor practices, the promotion of gainful employment, and protection of workers’ rights.
Department of Labor and Employment (DOLE) Advisory
The clearest guidance is found in Labor Advisory No. 06, Series of 2020 (and related issuances) which directs employers to issue a Certificate of Employment within three (3) days from the time of the employee’s request. Notably, the advisory provides:
- A COE shall be issued upon the employee’s request, regardless of the reason for separation.
- The law does not condition the COE’s release on clearance from financial obligations or on other exit-clearance requirements.
DOLE Handbook on Workers’ Statutory Monetary Benefits
Although it mostly addresses final pay, holiday pay, overtime pay, and other monetary benefits, it reiterates that withholding necessary employment documents—including a COE—strictly to force an employee to settle financial obligations is not a lawful or justified practice.
Jurisprudence and Administrative Guidelines
Past rulings by Philippine courts (though focusing more on final pay or clearance processes) have consistently underscored an employer’s duty to timely provide documents an employee needs to pursue other employment. While the Supreme Court has not released a single, landmark decision specifically on “withholding a COE,” it has strongly emphasized employees’ rights to their certificates of employment in various labor cases, as part of upholding fair labor practices under the social justice principle.

3. Nature and Purpose of the Certificate of Employment

Proof of Work Experience
The COE serves as a straightforward record confirming that a person worked for a specific employer within certain dates and under particular roles. Employers require it to confirm a prospective hire’s employment history and competencies.
Neutral Document
Because the COE states only factual information (start date, end date, position(s) held), it is generally not regarded as a reference letter evaluating the employee’s performance or character. It must be neutral and free from biased statements.
Legal Right of the Employee
Employees are entitled to a COE whether they have resigned, been terminated, or retired. Non-issuance or unjustified delays in issuance can be challenged as a labor rights violation, giving rise to complaints at the Department of Labor and Employment.

4. Unpaid Accountabilities: Common Employer Concerns

Employers often have legitimate interests in ensuring that departing employees settle debts or return any company property. Examples include:

Unpaid balance on salary loans
Unreturned equipment (e.g., laptops, mobile phones, uniforms, tools)
Deductions due to unliquidated cash advances
Overpaid salaries or allowances

These concerns are typically addressed through a clearance process, which may involve signing a clearance form, returning company assets, or making arrangements to settle balances. Employers mistakenly presume they have the right to withhold a COE until these accountabilities are cleared.

5. Why Withholding a COE Over Unpaid Accountabilities is Improper

Employee’s Right to Obtain COE
As mentioned, DOLE requires employers to issue the COE within three days from request. The right to obtain a COE is not contingent upon whether or not the employee has fulfilled financial obligations to the employer.
Potential Labor Violation
Withholding a COE purely to compel settlement of debts or return of property may expose the employer to administrative liability. An aggrieved employee could file a complaint with the DOLE or, in certain instances, directly before the National Labor Relations Commission (NLRC) for non-issuance of the COE.
Alternative Legal Remedies for Employers
If employers have legitimate claims against an employee for debts or unreturned property, they may:
- Deduct the amount owed from final pay (subject to legal limits and due process).
- Pursue a civil case for collection of sum of money, if the employee fails to settle.
- File appropriate legal action for breach of contract, conversion, or other civil liabilities.
These legal avenues do not include withholding an employee’s COE. An employer’s claim for accountability is separate and distinct from the obligation to issue a COE.

6. Distinguishing Clearance vs. Certificate of Employment

Clearance
- Confirms the employee has settled all obligations (financial or otherwise) with the company.
- Required typically before final pay is released.
- Can list conditions or pending tasks (e.g., exit interviews, return of property).
Certificate of Employment
- Confirms only the factual employment details: the period of service, position(s), and sometimes wage or salary if requested.
- Must be issued irrespective of clearance status.
- Has no effect on whether the employee still has an outstanding obligation.

7. Employee Remedies and Enforcement

If an employer refuses to issue or unreasonably delays issuing a COE:

Informal Settlement
The employee can send a formal request letter or email to HR or management, reminding them of the DOLE advisory on the COE’s prompt issuance and stating the date of the original request.
Filing a Complaint with DOLE
If the employer still withholds the COE, the employee may lodge a complaint with the nearest DOLE field or regional office. DOLE labor inspectors or conciliators can step in and require compliance.
Filing a Complaint with the National Labor Relations Commission (NLRC)
In a situation where there are broader labor disputes—unpaid wages, unauthorized deductions, or illegal dismissal—an employee can include the withholding of a COE in an NLRC case. The Commission can order the employer to issue the COE and pay any incurred damages if proven.

8. Practical Tips for Employers

Separate COE Issuance from Account Settlement
Issue the COE promptly upon request. Coordinate settlement of any outstanding obligations via a separate procedure (e.g., letter of demand, final pay deduction, or negotiated payment plan).
Set Clear Policies
Have a written policy on COE issuance that states:
- Timeline for providing the COE (within three days of request).
- Responsible department or personnel.
- Format, information included, and method of delivery.
Maintain Proper Documentation
Keep employment records detailed and updated so that issuing a COE is straightforward and does not require extended verification.
Consult Legal Counsel
For significant accountabilities or complex claims, employers should consult with counsel regarding potential legal actions to recover amounts or property—but not to withhold the COE.

9. Practical Tips for Employees

Send a Written Request
Formally request a COE in writing (email, letter) for record purposes, indicating your last day of work and the positions held, if you want them all reflected.
Keep Follow-Up Records
If your request is ignored or denied, politely follow up, referencing the applicable DOLE advisory. This record will support any complaint you may need to file later.
Know Your Rights
You are entitled to a neutral and factual COE. It should state:
- Exact dates of employment
- Positions held
- Possibly, your last drawn salary (if you request this to be included)
Any negative remarks or any mention that is not factually verifiable (e.g., “employee has unsettled obligations”) should not be included in a COE. If included, you can question the accuracy and ask for the COE to be corrected or reissued.
Seek DOLE Assistance
If all informal measures fail, do not hesitate to visit or contact the DOLE office. Providing them with copies of your written requests, employment contract, payslips, or other relevant documents will help expedite the case.

10. Conclusion

In the Philippines, the right to a Certificate of Employment is a well-established labor standard designed to protect an employee’s ability to secure future employment. Withholding a COE solely because an employee has unpaid accountabilities is not permissible under labor laws and DOLE advisories. Employers who are concerned about recovering financial or property obligations from a former employee must do so by legal means—through civil actions or proper deductions from final pay—rather than impeding the issuance of the COE.

Ultimately, the practice of withholding a COE undermines good faith in employment relationships and may result in legal consequences for the employer. By adhering to clearly defined policies, separating clearance processes from the issuance of a COE, and complying with DOLE regulations, both employers and employees can protect their rights and fulfill their obligations in a fair and lawful manner.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. For specific concerns regarding withholding of COEs, unpaid accountabilities, or related labor disputes, it is best to consult directly with legal professionals or approach the Department of Labor and Employment (DOLE) for official guidance.