Dear Attorney,

I resigned from my previous job four months ago, but I have yet to receive my backpay and Certificate of Employment (COE). Despite repeated follow-ups, my former employer keeps asking me to call next week, but nothing happens. I am urgently in need of my backpay and COE. What can I do in this situation?

Sincerely,
Concerned Former Employee

Insights

In the Philippines, employees who have resigned or have been terminated are legally entitled to receive their backpay and a Certificate of Employment (COE) from their former employer. The failure of the employer to release these entitlements within a reasonable time frame could constitute a violation of labor laws, and affected employees may seek remedies to assert their rights.

1. Understanding Backpay and Final Pay in the Philippines

"Backpay" or "final pay" refers to the total amount of compensation that an employee is entitled to receive from an employer after separation from the company. This includes all outstanding wages, unpaid salaries, prorated 13th-month pay, unused leave credits, and other monetary benefits such as commissions or incentives.

The Department of Labor and Employment (DOLE) recognizes that former employees have a right to their backpay. The final pay should be released within a reasonable period, typically ranging from 30 to 60 days after the employee's resignation or termination, depending on the circumstances. However, delays can occur, leading to disputes like the one described in this situation.

Components of Final Pay:

Unpaid salaries: Wages owed up until the employee’s last working day.
Pro-rated 13th-month pay: This is required by law under Presidential Decree No. 851.
Unused leave credits: If the company has a policy on convertible leave credits, these should be paid out upon separation.
Separation pay (if applicable): This is required if the termination was due to authorized causes like redundancy, retrenchment, or illness.

2. Legal Grounds for Filing a Claim for Unpaid Backpay

Under the Labor Code of the Philippines, an employee who has resigned or been terminated can file a claim for their unpaid wages, including backpay. Article 116 of the Labor Code prohibits employers from withholding wages without valid reasons. If an employer unjustly withholds final pay, the employee has the right to file a complaint with DOLE or pursue a small claims case, if applicable.

Moreover, under Article 297 (Termination by Employer) and Article 300 (Retirement), the law provides specific timelines for payment of backpay. Failure to comply can lead to administrative penalties against the employer.

Filing a Complaint:

DOLE Mediation: The first step for employees in disputes involving backpay is to file a complaint with the nearest DOLE regional office. DOLE provides free conciliation and mediation services where employees and employers can reach an amicable settlement.
Small Claims Court: If DOLE mediation fails, the employee may file a case in small claims court to recover the unpaid amount. Small claims courts expedite the process, and employees do not need to hire a lawyer, as the procedures are simplified.
Labor Arbiters: For more complex cases, especially those involving unfair dismissal or significant sums, the employee may pursue a formal case with the National Labor Relations Commission (NLRC).

3. Entitlement to a Certificate of Employment (COE)

A Certificate of Employment (COE) is an official document issued by the employer that certifies the employment period and the nature of work performed by the employee. According to Labor Advisory No. 06-20, employers are mandated to issue a COE upon the employee’s request within three (3) days from the filing of the request.

The failure of the employer to provide a COE can adversely affect the employee’s ability to seek new employment. This is why it is important to escalate the matter with the employer and, if necessary, seek redress through DOLE.

4. Employer’s Common Excuses for Non-Issuance and Legal Responses

Employers may delay releasing backpay or COEs for various reasons, including pending clearance processes, financial constraints, or disputes over performance. However, such delays are generally not justified unless explicitly stated in the employment contract or company policy. The employee’s right to final pay and a COE is protected by law, and the burden of proof for withholding such entitlements lies with the employer.

Employees can respond to delays by:

Formally requesting the release of backpay and COE in writing, citing applicable labor laws and company policies.
If the employer fails to act within a reasonable period, escalating the matter to DOLE or filing a case.

5. Penalties for Non-Compliance

Employers who fail to comply with their obligations under labor laws face potential administrative fines and sanctions imposed by DOLE. Additionally, employees may claim moral damages if the employer's unjust actions cause mental anguish, serious anxiety, or humiliation. Deliberate and repeated non-compliance may also subject the employer to civil liabilities, including interest on the unpaid amounts.

6. Tips for Employees in Pursuing Backpay and COE

Document Everything: Keep records of your resignation, follow-up emails or letters, and any communications with your former employer regarding your backpay and COE.
File Complaints Promptly: Employees have three years from the time of resignation or termination to file claims for unpaid wages. Delaying the filing of a complaint may weaken the case.
Understand Company Policies: Review the company’s internal policies on clearance procedures and backpay timelines, as these may outline the steps required before final pay is processed.

By understanding their rights and the steps they can take, employees can ensure that they receive their legally entitled backpay and COE. Employers, on the other hand, should be mindful of labor laws and the potential consequences of non-compliance.