Letter to a Lawyer

[From: An Employee Undergoing Resignation Process]

Dear Attorney,

I hope this letter finds you well. I am seeking your expert guidance on a matter concerning my leave entitlement during my resignation period. To provide context, I am currently serving my notice period as stipulated in my employment contract. However, I am unsure whether I am entitled to take leave during this period or if it would affect my resignation process or final pay.

Could you clarify whether an employee can take accrued or scheduled leave (e.g., vacation leave, sick leave) within their resignation period under Philippine labor laws? If there are restrictions, what legal grounds or considerations should I be aware of? Moreover, what are the implications for final pay computation if leave is taken during this period?

Thank you for your assistance.

Sincerely,
A Resigning Employee

Legal Insights: Leave Entitlement During the Resignation Period Under Philippine Law

Introduction

In the Philippines, the question of whether an employee may take leave during their resignation period is a common concern for both employees and employers. This article aims to provide a detailed and comprehensive examination of the topic, encompassing the interplay between labor laws, employment contracts, and practical considerations in the workplace.

1. Governing Laws and General Principles

A. Labor Code of the Philippines

Accrued Leave Benefits as Part of Employment Compensation
While Philippine labor law does not explicitly mandate vacation or sick leave for private-sector employees (unless specified by the employment contract, company policy, or collective bargaining agreement), accrued leave benefits are generally treated as part of an employee’s compensation package. This means:
- Employees may be entitled to use their accrued leave within the resignation period, provided it does not interfere with operational requirements and is consistent with the employer’s policies.
Authorized Causes for Termination (Article 297)
Resignation, as a form of voluntary termination, requires compliance with proper notice requirements under Article 300 of the Labor Code. The law allows employees to resign with at least a 30-day notice unless otherwise agreed. However, it does not expressly restrict the use of leave during this notice period.

B. Constitutional Right to Just and Humane Conditions of Work

The Constitution of the Philippines guarantees just and humane working conditions. This principle implies that an employee's accrued leave benefits are part of their entitlements and should not be unreasonably withheld, even during a resignation period.

C. Civil Code Provisions on Obligations and Contracts

Employment contracts, as private agreements, are governed by general contract law under the Civil Code. Thus, specific provisions on leave usage during the resignation period depend on the terms of the contract and company policy. Employees must adhere to reasonable restrictions outlined in these agreements.

2. Employer Policies and Common Practices

A. Leave Approval and Operational Necessity

Employers typically reserve the right to approve or deny leave requests based on operational needs. During a resignation period, employers may argue that granting leave could disrupt handovers or completion of pending tasks. However, this must be balanced against the employee's right to use accrued benefits.

B. Treatment of Unused Leave Credits

Unused leave credits are often subject to monetization upon resignation, provided this is stipulated in company policy. If the employee is unable or unwilling to use their leave during the notice period, these credits are converted into cash and included in the final pay.

3. Potential Scenarios and Legal Implications

A. Taking Leave Within the Resignation Period

Employer-Approved Leave
If leave is approved during the resignation period, the employee retains the right to compensation for the approved days. However, the employer may require the employee to extend the notice period to ensure a smooth transition.
Unauthorized Absence
If an employee takes leave without prior approval, this could be treated as abandonment of duty or breach of the notice requirement. Employers may impose disciplinary action or deduct corresponding days from the final pay.

B. Monetization of Unused Leave Credits

Unused leave credits are typically monetized as part of the final pay computation. This ensures that the employee is compensated for accrued but unused benefits.

C. Impact on Final Pay and Clearance

Deductions for Unfulfilled Notice Period
If an employee fails to render the complete notice period due to leave or unauthorized absences, the employer may deduct equivalent days’ wages from the final pay. This must be clearly documented and communicated to the employee.
Taxation of Final Pay
Monetized leave credits and other terminal pay components are subject to withholding tax, as required by the Bureau of Internal Revenue (BIR).

4. Key Legal Doctrines and Jurisprudence

A. Employee Rights and Employer Prerogatives

Fair Treatment of Accrued Benefits
Jurisprudence underscores that leave entitlements are part of an employee's earned compensation. Employers must provide a clear and reasonable basis for denying leave during the resignation period.
Management Prerogative
Employers have the prerogative to ensure operational efficiency. However, this must be exercised within the bounds of fairness and reasonableness.

B. Good Faith in Employment Relations

Both parties are expected to act in good faith during the resignation period. Employees must provide proper notice and cooperate with handover tasks, while employers should honor accrued benefits.

5. Practical Considerations and Best Practices

A. For Employees

Submit leave requests well in advance to facilitate approval.
Review your employment contract and company policies to understand your rights.
Ensure that leave taken during the resignation period does not compromise handover responsibilities.

B. For Employers

Establish clear policies on leave usage during resignation.
Communicate expectations to resigning employees to avoid disputes.
Document all decisions related to leave requests and final pay computation.

6. Case Examples

Example 1: Approved Leave During Notice Period

An employee with 15 days of accrued leave submits a resignation letter with 30 days’ notice. The employer approves the use of 10 leave days, requiring the employee to render only 20 working days. The unused 5 leave days are monetized and included in the final pay.

Example 2: Unauthorized Absence

An employee takes leave without approval during the notice period, leaving critical tasks incomplete. The employer deducts the equivalent days from the final pay and issues a warning letter. The case highlights the importance of adhering to company policies.

Conclusion

Leave entitlements during the resignation period are governed by a combination of labor laws, employment contracts, and company policies. While employees generally have the right to use accrued leave, this must align with operational requirements and proper notice procedures. Employers, on the other hand, must ensure that their policies are fair, transparent, and compliant with the law.

By understanding these principles, both employees and employers can navigate the resignation process with clarity and mutual respect. For specific concerns, it is advisable to consult a qualified attorney to address unique circumstances effectively.