Dear Attorney,

I hope this letter finds you well. I am writing to seek your professional opinion and guidance regarding a predicament I am currently facing at my workplace. Recently, I discovered that my performance was not reviewed properly by my manager, which consequently deprived me of a salary increase and a bonus I genuinely believe I should have been entitled to. When I requested clarification, my manager was unable to provide a coherent explanation. This situation leads me to suspect that the employer’s real intention might be to compel me to resign during my lock-in period rather than granting me any monetary benefits or considering my rights as an employee.

I would appreciate your advice on the possible legal remedies and next steps I should consider under Philippine law. Additionally, if there are any relevant precedents or statutes that could guide me in determining whether I may be experiencing constructive dismissal, I would be most grateful if you could share them with me. I intend to protect my rights and ensure fairness in the workplace while also upholding my professional obligations.

Thank you very much for your time and expertise.

Respectfully yours,

A Concerned Employee

LEGAL ARTICLE: UNEXPLAINED WITHHOLDING OF SALARY INCREASE AND BONUS, POTENTIAL CONSTRUCTIVE DISMISSAL, AND REMEDIES UNDER PHILIPPINE LAW

In the Philippine labor landscape, the relationship between employer and employee is governed primarily by the Labor Code of the Philippines (Presidential Decree No. 442, as amended), along with relevant jurisprudence from the Supreme Court. Understanding your rights with respect to salary increases, bonus entitlements, and allegations of unfair treatment or constructive dismissal is crucial in determining how to move forward when encountering potential injustices in your employment.

This article comprehensively discusses the legal implications and context of your concern: (1) performance evaluations and the possible withholding of salary increases or bonuses; (2) the scope of management prerogative in granting or denying such benefits; (3) constructive dismissal; (4) lock-in periods or employment bonds; and (5) administrative and judicial remedies available to aggrieved employees under Philippine law.

1. Performance Evaluations and Their Legal Basis

Under Philippine law, performance evaluations are typically an internal company procedure. Philippine jurisprudence acknowledges the right of employers to set reasonable standards for employee performance. Indeed, the Supreme Court has long held that employers have the management prerogative to assess how efficiently workers are performing their tasks. This prerogative, however, must not be abused.

While there is no explicit statutory provision mandating annual performance reviews, an employer who conducts such reviews should ensure that they are (a) fair and transparent, (b) aligned with the company’s legitimate business interests, and (c) consistently applied to all employees. A flawed or biased performance evaluation, particularly if it leads to the denial of rightful compensation or career advancement, may expose the employer to claims of labor standards violations or unfair labor practices if other statutory rights are implicated.

2. Salary Increases: Right or Privilege?

Generally, Philippine law does not mandate employers to grant annual salary increases. The Labor Code sets only the minimum wage requirements through wage orders issued by Regional Tripartite Wages and Productivity Boards. An employee’s entitlement to a salary increase above minimum wage usually arises from:

Existing employment contracts,
Company policies or handbooks, or
Collective bargaining agreements (if applicable).

If an employer and an employee have an agreement—written or otherwise—that includes a provision for merit-based raises contingent on performance evaluations, the employer must administer such evaluations in good faith. Denying an increase without a valid or clearly explained reason might not automatically be unlawful, but it could constitute a breach of contract if the employer had expressly committed to awarding such increases under certain conditions. If there is a strong factual basis that the employer regularly provides performance-based raises and that the evaluation was intentionally skewed or omitted, there may be grounds to claim that management acted contrary to its own policy or practice, potentially running afoul of the principle of non-diminution of benefits if the salary increase has evolved into a company practice or policy over time.

3. Bonuses: Management Prerogative vs. Company Practice

Unlike wages, bonuses are generally considered discretionary unless stipulated by contract or company policies. Article 96 of the Labor Code distinguishes between “wages” and other forms of compensation, but it does not explicitly regulate bonuses. Philippine Supreme Court rulings clarify that a bonus is a gratuity, the granting of which lies primarily within management prerogative. However, if the employer has demonstrated a consistent and deliberate pattern of awarding bonuses to employees, the bonus may be deemed part of the employees’ regular compensation, thus transforming it into an enforceable obligation.

To ascertain your rights, check whether:

Your contract includes a clause on bonuses contingent upon certain performance measures,
Your company has an established policy or precedent of distributing bonuses,
Any past practice within the organization suggests bonuses are no longer purely discretionary but form part of your expected compensation.

A sudden and unjustified denial of bonuses without proper notice or valid explanation could constitute an act of bad faith on the part of management, especially if other employees similarly situated were granted bonuses.

4. Constructive Dismissal: Definition and Indicators

The concept of constructive dismissal arises when an employee’s working conditions become so intolerable or unreasonable that the employee feels compelled to resign. Under Philippine labor jurisprudence, constructive dismissal is generally present when there is a demotion in rank or a diminution in pay or benefits, or when there is clear discrimination or harassment that makes continued employment unbearable.

Key indicators include:

Arbitrary withholding of salary, benefits, or work entitlements,
Imposition of unreasonable disciplinary measures or severe changes in work responsibilities,
Harassment and discriminatory practices meant to coerce resignation.

In your situation, if the employer’s real motive is to force you out by withholding salary increases or bonuses that were previously promised, or by making your work environment intolerable, it could be argued as constructive dismissal. Any sign that the employer has orchestrated the arrangement (for instance, not providing a coherent explanation for the denial of entitlements) may be used to demonstrate that they intended to circumvent your security of tenure or your right to just compensation.

5. Lock-In Periods or Employment Bonds

Some Filipino employers implement lock-in periods, often referred to as employment bonds, to ensure that the employee remains in service for a certain duration, especially if the company has provided specialized training or financed certifications. Such lock-in clauses, in themselves, are not per se illegal, provided they are reasonable and do not amount to involuntary servitude. The Supreme Court has tolerated these arrangements if:

The employee has consented to the terms voluntarily,
The bond does not create a scenario of forced labor,
The duration is fair and proportionate to the employer’s training cost or benefit to the employee.

However, where the lock-in period is used to unfairly restrain the employee’s movement, or if the employer deploys tactics such as withholding rightful compensation to coerce resignation, this may provide sufficient grounds to question the legality or fairness of the lock-in arrangement. The principle of equity in labor law does not permit arrangements that effectively punish employees by denying wages or benefits due to them.

6. Right to Security of Tenure and Due Process

Article XIII, Section 3 of the 1987 Philippine Constitution protects workers’ rights to security of tenure. Correspondingly, the Labor Code sets forth provisions requiring just or authorized causes for termination and due process to be observed prior to dismissing an employee. Even in cases of discipline or performance-based actions, an employer must follow a clear process, which includes:

A written notice specifying the ground for disciplinary action,
An opportunity for the employee to explain and present evidence,
A final notice indicating the company’s decision.

If the failure to grant a salary increase or bonus is part of a broader scheme aimed at effectively terminating an employee without going through lawful procedures, it can be indicative of an illegal dismissal plan. Employees in such a predicament can claim constructive dismissal if the underlying objective is to make them resign. Should the employee decide to fight back, they can file a complaint with the National Labor Relations Commission (NLRC) or invoke the Single Entry Approach (SENA) at the Department of Labor and Employment (DOLE).

7. Potential Legal Actions and Remedies

7.1 Filing a Grievance or Requesting Mediation

Philippine labor law encourages amicable settlements before pursuing formal litigation. You can consider approaching your company’s human resources department, or the appropriate grievance machinery if you are part of a union, to request a re-evaluation of your performance and a proper explanation for the withheld benefits. If no resolution is reached, you may escalate your complaint through the Single Entry Approach (SENA). Under SENA, parties appear before a conciliator-mediator from the DOLE or the National Conciliation and Mediation Board (NCMB) to explore settlement options within 30 days.

7.2 Filing a Complaint for Illegal Dismissal or Constructive Dismissal

If you believe the withholding of salary increases or bonuses is intentionally done to force your resignation, consider filing a complaint for constructive dismissal before the Labor Arbiter of the NLRC. If the employer cannot justify its actions, and the evidence shows you were effectively coerced to resign, you may be entitled to:

Reinstatement (if feasible) without loss of seniority rights,
Full back wages and other benefits from the time of dismissal up to actual reinstatement,
Damages (moral and, in certain cases, exemplary), if bad faith can be proven.

7.3 Other Monetary Claims

Where an employer fails to pay amounts due under the contract or established company practice (e.g., a bonus that has become part of regular compensation), an aggrieved employee may file a money claim alongside the constructive dismissal case. Damages might also be awarded if the employer’s acts are found to be oppressive or in bad faith.

8. Evidence and Documentation

To strengthen any potential claim, gather evidence showing:

A history of performance evaluations,
Employment or company policy documents referencing salary reviews or bonuses,
Email or written correspondence that reflects management’s refusal to explain the denial of benefits,
Any pattern or record indicating similarly situated employees are being treated more favorably.

Documentation is vital in substantiating claims of unfair labor practice or constructive dismissal. Philippine labor tribunals often rely on written proof, witness testimonies, or undisputed factual circumstances when deciding if an employer’s actions equate to illegal or unjust conduct.

9. Defenses Available to Employers

Employers may defend themselves by citing:

Management prerogative to set or modify performance standards,
Legitimate business reasons for withholding or delaying salary increases or bonuses (e.g., economic difficulties, subpar employee performance),
Absence of any agreement or established practice obligating them to provide said benefits.

If the employer successfully demonstrates that it had a valid basis to withhold the increase or bonus, and provided a fair and transparent performance evaluation process, the NLRC or the courts might rule in the employer’s favor. Hence, employees should be prepared to counter these arguments with solid evidence of either arbitrariness, bad faith, or a breach of established practice and policy.

10. Practical Considerations Before Filing a Case

While filing a labor complaint is a constitutional right, it may lead to an adversarial process. Weigh the following before initiating formal legal action:

The chance of an amicable resolution through internal dispute channels or mediation,
Your readiness to prove constructive dismissal (which requires a higher burden of proof than ordinary claims),
The time and resources you must invest in pursuing litigation.

Engage in open communication, if possible, to obtain a firm explanation from management. Sometimes, misunderstandings or administrative oversights can be resolved informally. If the employer remains unresponsive or continues to withhold benefits without valid grounds, proceeding with the legal avenues described above becomes more justifiable.

11. Philippine Supreme Court Jurisprudence on Withholding of Benefits

Case law reflects that the Supreme Court generally respects the freedom of employers to exercise management prerogative, but this discretion must not override an employee’s rights. For instance, in rulings on non-diminution of benefits, the Court consistently warns that once a benefit has ripened into a company practice, it may not be unilaterally withdrawn. Similarly, if a pattern of bonuses or allowances is proven, an employer’s sudden discontinuation, without a valid business cause or notice, may be struck down as invalid. The Court has also consistently frowned upon deceitful practices that amount to constructive dismissal, underscoring that a disguised attempt to force an employee to resign violates the fundamental tenet of security of tenure.

12. Assessment of Damages

Aside from possible reinstatement and back wages, Philippine law may entitle an aggrieved employee to moral and exemplary damages if the employer’s conduct is found to be in evident bad faith or deliberately malevolent. Moral damages may be awarded if the employee suffers mental anguish, sleepless nights, social humiliation, or other forms of emotional distress. Exemplary damages, on the other hand, aim to punish the employer for gravely oppressive or unscrupulous actions and to serve as a deterrent against similar misconduct.

Employees seeking damages should note that the standard of proof to establish bad faith or malice is relatively high, often requiring clear and convincing evidence.

13. Non-Diminution of Benefits Principle

Under the principle of non-diminution of benefits, an employer is prohibited from unilaterally reducing or discontinuing benefits that have become part of an employee’s compensation. While it is true that there is no absolute right to a bonus, repeated granting of a bonus over a significant period can elevate it to a regular benefit. If your employer has historically provided yearly bonuses or has a codified bonus scheme in the employee handbook, abrupt denial without adequate reason or explanation may be considered a violation of this principle, unless the employer justifies it with legitimate financial losses or other legally sufficient grounds.

14. Policy Revisions and Notice Requirements

If a company decides to revise its policies on salary increases or bonuses, it is prudent and fair to provide employees with prior notice. This is rooted in the general principle of due process and fairness. A lack of notice regarding changes to compensation schemes may be interpreted as an underhanded tactic or bad faith, especially if it disproportionately affects a particular employee or group of employees.

In labor disputes involving the denial of wage-related benefits, the employer’s compliance with notice and hearing requirements is critical. Employers that fail to provide a clear explanation for a compensation policy change might face the presumption that they are unfairly attempting to circumvent established rights or legitimate employee expectations.

15. Procedural Steps in Filing a Labor Complaint

Should you decide to file a formal complaint, you can follow these steps:

Consultation and Documentation: Secure documentary evidence of your performance evaluations, correspondences, and any applicable employment policies.
Filing with the DOLE or NLRC: Depending on the nature of your complaint, file a request for assistance through SENA at DOLE or directly file a case for constructive dismissal and/or unpaid benefits with the NLRC.
Mandatory Conferences: The Labor Arbiter or Conciliator-Mediator will schedule conferences. Attend these diligently and present your evidence.
Submission of Position Papers: Both parties will typically be required to submit position papers and affidavits supporting their claims.
Decision and Appeals: If the Labor Arbiter issues a decision, aggrieved parties may appeal to the National Labor Relations Commission En Banc, and subsequently to the Court of Appeals, if necessary.

Patience is required, as labor cases can be protracted. Nevertheless, the Philippine legal system is designed to protect employees from unjust practices, reflecting the social justice mandate enshrined in the Constitution.

16. Constructive Dismissal vs. Voluntary Resignation

You must carefully distinguish between an intentional scheme by the employer to force your departure and a decision to resign due to dissatisfaction. Voluntary resignation is an employee’s unilateral act, usually with prior notice given to the employer. By contrast, constructive dismissal compels an employee to leave because continuing employment is no longer viable or safe. The distinction is crucial in establishing liability, because in constructive dismissal cases, an employee would be deemed illegally terminated and entitled to reinstatement, back wages, and possible damages, whereas a resigning employee typically forfeits such claims unless the resignation can be proven to have been forced.

17. Burden of Proof and Importance of Legal Counsel

In labor cases, the employer often bears the burden of proving that the dismissal was for a valid cause and followed due process. However, in constructive dismissal claims, the employee must initially establish by substantial evidence that the employer’s acts or policies were tantamount to forced resignation. Thorough preparation, including gathering pertinent documents and seeking professional advice, significantly increases the likelihood of a favorable outcome.

It is highly advisable to consult a lawyer or a competent labor relations specialist before taking any drastic step. An experienced legal advisor can help formulate strategies, guide you through the complexities of labor litigation, and increase your likelihood of success.

18. Conclusion

In summary, an employer’s failure to properly review your performance and its consequent withholding of a salary increase or bonus may not automatically translate to illegal or unjust practices under Philippine law. However, if such withholding is demonstrably arbitrary, lacks transparency, contravenes established company policies or practices, and is orchestrated to coerce you into resigning, you may have a viable claim for constructive dismissal or illegal withholding of benefits.

Philippine labor law and jurisprudence recognize the balance between legitimate management prerogative and protection of employees’ rights. When that balance is disrupted by potential abuse or bad faith, the law offers remedies that safeguard your security of tenure and your right to fair compensation. Should you find yourself in a position where management tactics appear deliberately aimed at forcing your resignation, remember to document all relevant incidents, seek clarification through official channels, and explore mediation or arbitration if necessary. Ultimately, filing a formal complaint with the NLRC or through other legal avenues may be warranted if your legitimate concerns remain unaddressed.

Above all, consult with a skilled lawyer or labor rights advocate to evaluate the strength of your case and to help you navigate the procedural aspects of the Philippine labor dispute resolution system. Staying informed of your rights not only empowers you to act but also ensures that justice and fairness prevail in your employment relationship.