SyCip Salazar Hernandez & Gatmaitan

1

GENERAL PRINCIPLES

Forums For Adjudicating Employment Disputes

Labour disputes may arise between the employer and the employee, between the employer and the union, and among the unions themselves.

The National Labour Relations Commission (NLRC) is the principal government agency with jurisdiction over disputes between employers and employees, including termination of employment. The NLRC has regional arbitration branches where Labour Arbiters hear and decide cases at the first instance. A Labour Arbiter’s decision may be appealed to the NLRC. Decisions of the NLRC division are unappealable; however, they may be ultimately reviewed by the country’s Court of Appeals and the Supreme Court in certain cases on the ground of grave abuse of discretion amounting to lack or excess of jurisdiction.

The Regional Directors of the Department of Labour and Employment (DOLE) may hear small claims when the employee does not seek for reinstatement. They also decide on cases involving compliance of employers with general labour standards, occupational safety and health standards, and rules on job contracting.

Med-arbiters of the DOLE hear representation cases to determine which union shall represent the employees in collective bargaining and negotiations. Intra-union disputes and cancellation of union registration fall under the jurisdiction of the DOLE’s Bureau of Labour Relations.

Bargaining deadlocks needing preventive mediation are filed with the National Conciliation and Mediation Board (NCMB).

Administration of collective bargaining agreements between the union and the management of companies and disputes arising from their interpretation and implementation are to be settled through the grievance machinery of the establishment, and then the Voluntary Arbitrator for unresolved grievances.

Labour disputes may be submitted to voluntary arbitration by agreement of the parties, as a preferred mode of settling disputes in the Philippine Constitution.


The Main Sources Of Employment Law

The Philippine Constitution guarantees the rights of workers and protects their interests. The Labour Code consolidates the laws on labour standards and labour relations, which include: (a) the minimum requirements for wages and other monetary and welfare benefits, hours of work, and health and safety standards; (b) the definition of an employment relationship; (c) the grounds and procedure for terminating employment; and (d) the rules on self-organization and collective bargaining with employers.

There are also special laws and social legislations that deal with retirement and social security, women and children’s rights in the workforce, and sexual harassment in the workplace.


National Law And Employees Working For Foreign Companies

Labour laws apply indiscriminately to both foreign and local companies. Foreign companies established in the Philippines must extend to their employees the Philippine statutory minimum standards of employment. However, international organizations and foreign governments may be considered exempt because of their immunities from suit.


National Law And Employees Of National Companies Working In Another Jurisdiction

National labour laws are applicable only within the Philippine territory and therefore will not apply to employees of Filipino companies established and operating in other jurisdictions. However, national laws apply to Filipino overseas contract workers whose employment abroad must be processed and approved by the Philippine Overseas Employment Administration (“POEA”).


Data privacy

The protection afforded to data privacy applies to the processing of all types of personal information and to any natural and juridical person involved in personal information processing. The processing of personal information shall be allowed, subject to compliance with the requirements of the Philippine Data Privacy Act and other laws allowing disclosure of information to the public and adherence to the principles of transparency, legitimate purpose, and proportionality.

2

HIRING THE EMPLOYEE

Legal Requirements As To The Form Of Agreement

Unless specifically stated in the employment contract, an employee will be considered a regular employee. It is essential for the contract to clearly express the type of employment. An employee is entitled to security of tenure, which means that the employment relationship can only be terminated on grounds provided by the Labour Code. The extent of an employee’s right to security of tenure depends on the type of employment relationship established.


Mandatory Requirements
  • Trial Period

    • There is no trial period for employees hired under a regular, project, seasonal, or fixed-term employment. An employee may be hired under a probationary employment, during which time, the employer will determine whether the employee qualifies as a regular employee based on reasonable standards made known to the employee at the time of his or her engagement. This probationary period, which serves as a trial period to determine an employee’s fitness for regular employment, is only up to six (6) months from the start of employment. An employee who has been allowed to report to work after the six-month period shall automatically become a regular employee.

  • Hours Of Work

    • The normal working hours per day is eight (8) hours, which include compensable breaks or rest periods of twenty (20) minutes or less, but exclude meal periods that shall not be less than an hour. If the employee works beyond eight (8) hours, the employer is required to pay the employee overtime pay at a rate of 25% of the regular wage for the additional hours worked. Night-shift employees are to be paid an additional 10% of their regular wage for work performed between 10:00 in the evening and 6:00 in the morning. Managerial employees, field personnel, those working in the personal service of another, or those paid by result are exempt from overtime pay and night shift differential pay. An employee may be required to perform overtime work in the following cases: (a) when the country is at war or when any other national or local emergency has been declared by Congress or the Chief Executive; (b) when it is necessary to prevent loss of life or property or in case of imminent danger to public safety due to an actual or impending emergency in the locality caused by serious accidents, fire, flood, typhoon, earthquake, epidemic or other disaster or calamity; (c) when there is urgent work to be performed on machines or equipment in order to avoid serious losses; (d) when the work is necessary to prevent loss to perishable goods; and (e) where the continuation of the work started before the eighth (8th) hour is necessary to prevent serious obstruction or prejudice to the business operations. Night-time work is allowed under certain circumstances. Night workers who have been diagnosed and certified to be unfit for night work due to health reasons should be transferred by the employer, whenever practicable, to similar jobs during the day to which they are fit to work.

  • Special Rules For Part-time Work

    • A part-time employee gets paid for the actual hours he or she worked under the principle of fairness and equity. The Philippines adheres to the principle of “a fair day’s wage for a fair day’s labour”. Part-time employees also enjoy security of tenure; therefore, they may be terminated only on grounds provided for by law. They may also be considered as regular employees, depending on the nature of their work, despite rendering services for less than eight (8) hours.

  • Earnings

    • Employees are entitled to the minimum wage for eight (8) hours of work, as determined by the Regional Tripartite Wages and Productivity Board. The rates are classified by sector (e.g. construction, real estate, health work, plantation, fishing, manufacturing) and by region (e.g. Metro Manila, other provinces). The employer cannot make any deductions to the employee’s wage without the permission and consent of the employee, except for withholding taxes, Social Security System contributions, and other deductions expressly authorized by law (e.g. union dues) or regulations issued by the DOLE.

    Rank-and-file employees who have rendered at least one month of service are entitled to a 13th month pay computed at one-twelfth (1/12) of the basic salary received by the employee within a calendar year. The “basic salary” of an employee for the purpose of computing the 13th month pay includes all payments for services rendered, but does not include allowances and monetary benefits which are not integrated into the regular salary, such as the cash equivalent of unused leave credits, overtime, night differential, and holiday pay.

  • Holidays/Rest Periods

    • Employees are entitled to a rest period of at least twenty-four (24) consecutive hours after six (6) working days. An employee who works on his or her scheduled rest day shall be paid an additional 30% of his or her regular wage for that day’s work.

    Employees are also entitled to holiday pay at double their regular rate if they work on any of the following 12 regular holidays: New Year’s Day, Maundy Thursday, Good Friday, Eidul Fitr, Eidul Adha, Araw ng Kagitingan, Labour Day, Independence Day, National Heroes Day, Bonifacio Day, Christmas Day, and Rizal Day.

    The following nationwide special holidays, Ninoy Aquino Day, All Saint’s Day, Feast Day of the Immaculate Conception of Mary, and New Year’s Eve, are considered as non-working days. Employees who work on special days are entitled to an additional 30% of their regular wage for that day’s work. However, employees are not entitled to any pay if they do not work, unless the pay is granted under a company policy or a collective bargaining agreement.

    Employees may be required to work on rest days and holidays in the following cases: (a) there is an emergency caused by a natural disaster or an imminent danger to public safety; (b) there is urgent work on equipment or installation to avoid serious losses to the business; (c) there is abnormal volume of work due to special circumstances; (d) to prevent loss of perishable goods; or (e) the nature of the work requires continuous operations and the stoppage may result in irreparable injury or losses.

    The law also grants employees who have rendered at least one (1) year of service a yearly service incentive leave of five (5) days with pay.

  • Minimum/Maximum Age

    • The minimum age of employment is eighteen (18) years for hazardous jobs, and fifteen (15) years for non-hazardous jobs. Hazardous jobs are those that pose an imminent danger to the employee’s health or safety.

    Children below fifteen (15) years old may be employed by their parents or guardians for as long as their employment does not interfere with their education. Children are also allowed employment if their participation is essential to public entertainment or information (i.e., cinema, theatre, television, or radio), provided that, their parents or guardian and the DOLE give prior approvals.

    The employment contract and the collective bargaining agreement (CBA) may provide for a retirement age. In the absence of a retirement plan, an employee upon reaching the age of sixty (60) may take optional retirement and receive retirement pay. The compulsory retirement age is sixty-five (65). Retail, service, and agricultural establishments employing not more than ten (10) employees are exempted from providing this benefit.

  • Illness/Disability

    • The Employees Compensation Commission provides employees suffering from work-related injury or disability with an income benefit. However, no compensation is granted when the injury was occasioned by the employee’s intoxication, wilful intention to injure or kill oneself or another, or notorious negligence.

  • Location Of Work/Mobility

    • There is no legal requirement as regards the location of work and the mobility of employees in general.

    However, under the Telecommuting Act, an employer in the private sector may offer a telecommuting program to its employees on a voluntary basis and upon such terms and conditions as they may mutually agree upon.

  • Pension Plans

    • Employers are not required to establish a private retirement plan. In the absence of a retirement plan or a more beneficial stipulation in the employment contract or CBA, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years, who has rendered service for at least five (5) years prior retirement is entitled to retirement pay equivalent to a one-half (1/2) month salary for every year of service. Unless the parties provide for broader inclusions, the term one-half (1/2) month salary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5) days of service incentive leaves.

  • Parental Rights (Pregnancy/ Maternity/ Paternity/ Adoption)

    • Under the 105-day Expanded Maternity Leave Law, all covered female workers in both the government and the private sector, including those in the informal economy, regardless of civil status or legitimacy of the child, shall be granted one hundred five (105) days maternity leave with full pay and an option to extend for an additional thirty (30) days without pay. However, a female worker may be granted an additional fifteen (15) days with full pay in case she qualifies as a solo parent under Republic Act No. 8972 or the Solo Parents Welfare Act of 2000. In cases of miscarriage or emergency termination of pregnancy, sixty (60) days maternity leave with full pay shall be granted.

    A male employee who is legally married has a right to paternity leave, which allows him to go on leave for seven (7) calendar days with pay before, during, or after his spouse gives birth or suffers a miscarriage. However, the leave is only available to the employee for his wife’s first four (4) childbirths or miscarriages.

    An additional parental leave of not more than seven (7) working days is available to an employee who has been issued a Solo Parent I.D. by the city or municipal social welfare and development office. A solo parent is one who is left alone with the responsibility of parenthood or any person who solely provides parental care and support to a child or children.

    The adoptive parent/s of a child who is below seven years of age as of the date the child is placed with the adoptive parent/s through a Pre-Adoptive Placement Authority issued by the Department of Social Welfare and Development is/are entitled to maternity and paternity benefits and other benefits given to biological parents upon the birth of a child.

  • Compulsory Terms

    • National laws on labour standards are deemed to be written into all employment contracts.

  • Non-Compulsory Terms

    • The employer and employee are free to agree on matters not covered by law.


Types Of Agreement

Depending on the type of agreement entered into with the employer, employees in the Philippines are classified as regular, project, seasonal, fixed-term, casual, or probationary.

An employment is regular if an employee performs activities that are usually necessary or desirable in the usual business of the employer. By way of exception to regular employment, there can be: (a) project employment, where the employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of the engagement; (b) seasonal, where the work to be performed is seasonal in nature and the employment is for the duration of the season; (c) fixed-term, where the parties by free choice and dealing with each other on more or less equal terms, specify a fixed duration of employment; and (d) casual employment, which covers employment on a temporary basis or employment for services which are not required in the usual course of business of the enterprise. The employment may also be probationary, where the employee may be terminated for failure to meet the reasonable performance standards made known to the employee at the time of his or her engagement to qualify for regular employment.

Unless specifically stated in the employment agreement, an employee will be considered a regular employee; thus, it is essential to clearly express the type of employment.


Secrecy/Confidentiality

The employment contract may contain a confidentiality agreement or a nondisclosure clause. The country’s penal code also imposes criminal liability on any employee of a manufacturing or industrial establishment who reveals the secrets of the employer’s industry.


Ownership of Inventions/Other Intellectual Property (IP) Rights

The Intellectual Property Code of the Philippines grants copyright to the employer if the work is the result of the employee’s regularly assigned duties, unless there is an agreement to the contrary. Copyright belongs to the employee if the invention is not part of his or her regular duties, even if the employer’s time, facilities, and materials were used.

Similarly, the patent shall belong to the employee, if the inventive activity is not part of his or her regular duties even if the employee uses the time, facilities, and materials of the employer. The patent shall belong to the employer, if the invention is the result of the performance of his or her regularly assigned duties, unless there is an agreement, express or implied, to the contrary.


Pre-Employment Considerations

Philippine Labour Laws regulate recruitment and placement activities under such guidelines, rules, and regulations as may be issued by the DOLE. The private employment sector shall participate in the recruitment and placement of workers, locally and overseas. Recruitment and placement refer to any act of canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring workers, and includes referrals, contract services, promising or advertising for employment, locally or abroad, whether for profit or not.


Hiring Non-Nationals

Non-resident non-nationals may be employed in foreign and local companies. In order that they may secure lawful employment, they must have an Alien Employment Permit (AEP) and a valid work visa. To obtain the AEP, it must be shown that no Filipino is competent, able, and willing to take the employment being offered.


Hiring Specified Categories Of Individuals

An apprentice may be engaged to work in an establishment pursuant to an apprenticeship program approved by the DOLE. There must be a written apprenticeship agreement. An apprenticeship is defined as practical training supplemented by theoretical instruction involving certain occupations and trades approved by the DOLE. It shall not exceed six (6) months.

There are also “learners”. A learner is hired as a trainee in semi-skilled and other industrial occupations that cannot be covered by an apprenticeship agreement. The engagement cannot exceed three (3) months, and there must be a commitment to employ the learner as a regular employee after the lapse of the three-month period or the completion of the learnership.

The wage rate of an apprentice or a learner is 75% of the statutory minimum wage.


Outsourcing And/Or Sub-Contracting/Temporary Agency Work

Existing regulations prohibit labour-only contracting. Labour-only contracting refers to an arrangement where the contractor recruits or places workers to perform work or service for a principal, and either (a) the contractor does not have substantial capital or investment and the contractor’s employees recruited and placed are performing activities which are directly related to the main business operation of the principal; or (b) the principal has the right or ability to control the manner the work is performed. In labour-only contracting, the principal (for whom the work is performed) will be treated as the employer.

Job contracting is permissible. A job contractor has an independent business and undertakes the contracted work on his or her own account, according to his or her own manner and method, and free from the control and direction of the employer in all matters connected with the performance of the work, except as to the results thereof. The contractor must have substantial capital (i.e., a paid-up capital of at PhP 5,000,000.00) or investment in the form of tools and materials necessary to conduct the business. The Service Agreement must ensure compliance with all the rights and benefits for all the employees of the contractor under labour laws. Under existing regulations, the job contractor must register with the DOLE under Department Order No. 174, Series of 2017. The failure of the contractor to register with the DOLE gives rise to the disputable presumption that it is engaged in labour-only contracting.

3

MAINTAINING THE EMPLOYEE RELATIONSHIP

Changes To The Contract

Changes to an employment contract are by agreement between the employer and the employee. Following Philippine contract law, the parties should deal with each other in good faith and should freely agree on changes to the terms and conditions of employment (i.e., without duress or deceit).


Change In Ownership Of The Business

In an asset sale transaction, employees do not automatically transfer to the buyer without the consent of the employees. The employee has to be terminated by the original employer and then hired by the buyer-employer. In a share sale transaction, there is no transfer of employees to speak of.


Social Security Contributions

Social security benefits are sourced from a common fund contributed by both the employers and the employees. The Philippine social security programs consist of the SSS, Philippine Health Insurance Corporation (PhilHealth), and Home Development and Mutual Fund (HDMF).

The SSS is geared towards providing support to SSS members who have lost income due to sickness, disability, pregnancy, old age, or death. An employee, not over the age of sixty (60) and his or her employer, are required to contribute for the employee’s social security benefits in accordance with the SSS schedule. The monthly contribution depends on the employee’s monthly salary.

PhilHealth is designed to provide employees with a means of paying for adequate medical care. Both the employer and employee must contribute to the medical insurance. The monthly contribution also depends on the employee’s monthly salary.

HDMF is a savings system that provides housing loans to employees. The employer and the employee are each required to contribute not less than one hundred pesos (PhP100.00) per month to the employee’s HDMF.


Accidents At Work

For accidents arising out of and in the course of employment, an employee is entitled to an income benefit provided by the Employees Compensation Commission. Compensation will be disallowed if the accident was caused by the employee’s intoxication, wilful intention to injure or kill oneself or another, or notorious negligence.


Discipline And Grievance

Employees may be disciplined for violations of the national labour laws and company policies made known to them at the time of their engagement. Grievance may be heard through the grievance machinery required of all collective bargaining agreements, and if unresolved, through Voluntary Arbitration.


Harassment/Discrimination/Equal pay

The anti-sexual harassment law defines sexual harassment in the workplace as requesting sexual favour as a condition for hiring or continued employment, or in granting favourable terms and conditions of employment. However, the term “request for sexual favour” includes mere sexual advances that result in an intimidating, hostile, and offensive working environment. Sexual harassment in the workplace is unlawful. The penalty for sexual harassment is imprisonment of one (1) to six (6) months and/or a fine of ten thousand pesos (PhP10,000.00) to twenty thousand pesos (PhP20,000.00).

The Safe Spaces Act defines gender based sexual harassment in streets, public spaces, online, workplaces, and educational or training institutions, provides protective measures, and prescribes penalties for violations of the law. The law covers catcalling, gender-based online sexual harassment, and stalking. It provides for broader protection against gender-based harassment, as it also affords protection against acts that use information and communications technology in harassing and intimidating victims.

Discrimination has been defined as the failure to treat all persons equally when no reasonable distinction can be found between those favoured and those not favoured. Accordingly, employees who are not similarly situated may receive different terms and conditions of employment.

Employees are given protection under national law against discrimination on grounds of race, gender, age, belief, or union affiliation. There are also specific provisions for women, single parents, minors, senior citizens, and persons with disabilities, which give them protection from discrimination. For instance, it is unlawful for an employer to require as a condition, or continuation, of employment that a female employee shall not get married.

The principle of “equal pay for equal work” applies.


Compulsory Training Obligations

When national security or economic developments demand, the Philippine President may require compulsory training of apprentices.


Offsetting Earnings

In general, an employee’s earnings may not be offset against any monetary claim. The employer cannot make deductions from the wages of employees unless agreed and consented by the employee concerned or authorized by law or regulations issued by the DOLE (e.g., taxes, SSS contributions, and union dues).


Payments For Maternity And Disability Leave

There is maternity leave available for pregnant women.

Any employee who suffers disability is entitled to an income benefit from the Employees Compensation Commission.


Compulsory Insurance

All employees not over the age of sixty (60) years must be covered by the SSS, PhilHealth, and the HDMF.


Absence For Military Or Public Service Duties

The Philippine Constitution provides that the government may call upon the people to defend the country.

The law that implements the constitutional mandate states that male citizens between the ages of eighteen (18) and twenty-five (25) may be required to undergo military registration and training. Those to undergo compulsory training shall be selected by drawing lots. An employee working in a company with monthly operating volume of not less than PhP300,000.00 and not less than twenty (20) employees shall not be terminated from employment, shall not forfeit his seniority status, and shall continue to receive basic salary during such military training.

The law also allows the Philippine President to call on male citizens between the ages of eighteen (18) and thirty-five (35) to undergo draftee training and service for a period not to exceed twenty-four (24) months. A draftee during the period of active duty service is entitled to receive all the pay and allowances equivalent to that of a member of the regular force of the Armed Forces of the Philippines.

The fulfilment by the employee of a military or civic duty shall not terminate employment. In all such cases, the employer shall reinstate the employee to his former position without loss of seniority rights if he indicates his desire to resume his work not later than one (1) month from his relief from military or civic duty.


Works Councils or Trade Unions

The law protects the right of employees to self-organization. Employees may form or join unions for the purpose of collective bargaining. However, the exercise of the right to self-organization is limited to rank-and-file and supervisory employees.

Managerial and confidential employees may not form, join, or assist unions. Managerial employees are those with power to make policy decisions, such as the hiring, disciplining, and assigning of employees. Confidential employees are those with access to confidential matters or those who assist and act in a confidential capacity to persons who formulate, determine, and effectuate management policies in the field of labour relations.

Supervisory employees are those with power to recommend managerial actions, as distinguished from rank-and-file employees who have no such power. They may not join or assist the unions of rank-and-file employees, but they may form or join a separate union for supervisors.

Together, the employer and the employees may form work councils or a labour management committee to enable the employees to participate in policy and decision-making processes that affect their rights, benefits, and welfare.


Employees’ Right To Strike

A strike can only be conducted when there is a labour dispute between the employer and the employees concerned. A labour dispute is a dispute over the terms and conditions of employment, or the representation of persons in negotiating or changing the terms and conditions of employment.

The Labour Code lists the requirements for a valid strike, which are, as follows: (a) the strike must be based on either an unfair labour practice (ULP) of the employer or a collective bargaining deadlock; (b) a notice of strike must be filed with the NCMB; (c) a notice must be served to the NCMB at least twenty-four (24) hours prior to the conduct of a strike vote by secret ballot; (d) a strike vote must be conducted where a majority of the members of the union must approve it; (e) the strike vote report must be submitted to the NCMB at least seven (7) days before the intended date of the strike; (f) the cooling-off period must be observed before a strike may be conducted, except in the case of union-busting where the said cooling-off period may be disregarded completely, in order to encourage the parties to settle their dispute amicably; and (g) the seven (7) day strike ban to be reckoned from the submission of the strike vote report to the NCMB must be observed.

If the labour dispute involves an industry indispensable to the national interest, the Secretary of Labour and Employment may assume jurisdiction over the dispute such that it may decide the case or refer it to the NLRC for compulsory arbitration. The Secretary’s involvement automatically ends the intended strike or terminates the one being held. If the strike continues in these circumstances, the strike will be considered illegal.


Employees On Strike

The employer may dismiss a union officer who knowingly participates in an illegal strike. A non-officer may only be dismissed for knowingly participating in illegal acts during a strike. As a general rule, employees may be sanctioned for knowingly participating in an illegal strike.


Employers’ Responsibility For Actions Of Their Employees

The employer is deemed vicariously liable for the acts of their employees acting within the scope of their assigned tasks and in the course of their employment.

4

FIRING THE EMPLOYEE

Procedures For Terminating the Agreement

No employee shall be dismissed from employment without following substantive and procedural due process. Substantive due process requires the dismissal to be based on valid grounds provided by law. Procedural due process means that compliance with the procedure required by law for termination of employment. The failure to comply with the requirements of substantive due process shall make the dismissal illegal, while non-compliance with procedural due process shall make the employer liable for nominal damages.

The Labour Code sets out the circumstances under which an employee may be dismissed. These reasons are (a) just causes; (b) authorized causes; (c) termination due to disease; (d) enforcement of a union security clause in a CBA; (e) retirement; and (f) for probationary employees, the inability to meet the employer’s prescribed standards of employment.

The just causes for terminating an employee are: (1) serious misconduct or wilful disobedience of the lawful order of the employer; (2) gross and habitual neglect of duties; (3) fraud or wilful breach by the employee of the employer’s trust; (4) commission of a crime against the employer or any immediate member of his family; and (5) other causes analogous to the foregoing.

The authorized causes for terminating employment are installation of labour-saving devices (i.e., automation), redundancy, retrenchment, or closure of business.

In cases of termination for just causes, procedural due process requires that the employer serves the employee to be dismissed with two (2) written notices before the termination of his or her employment is effected: the first, to inform him or her of the particular acts or omissions for which his or her dismissal is sought; and the second, to inform him or her of the employer’s decision that he or she is being dismissed. The employee should be given a reasonable opportunity of no less than five (5) days to respond and defend himself/herself against the charges stated in the first notice. In addition, the employee is also entitled to an administrative hearing where he may be represented by counsel, if he so desires.

In the case of separation due to authorized causes, procedural due process requires service of a written notice to the employee and to the DOLE, at least thirty (30) days prior to the effective date of termination and the payment of separation benefits mandated by law. Prior approval by the DOLE is not required to implement the termination.


Instant Dismissal

Instant dismissal or dismissal without cause by the employer is not permissible. The employer must comply with both the substantive and procedural due process requirements of the law at all times.


Employee's Resignation

An employee must give the employer a written notice at least one (1) month prior to his or her intended date of resignation. However, an employee may put an end to the relationship without any notice on the employer for any of the following just causes: (1) serious insult by the employer or his representative on the honor and person of the employee; (2) inhuman and unbearable treatment accorded to employee by the employer or his/her representative; (3) commission of a crime or offense by the employer or his representative against the person of the employee or any of the immediate members of his family; and (4) other causes analogous to the foregoing.


Termination On Notice

Only the employee may terminate the employment relationship through mere notice. The employer must comply with the requirements of both substantive and procedural due process at all times.


Termination By Reason Of The Employee's Age

Employees have security of tenure until their compulsory retirement age. Their employment relationship may be terminated only on grounds provided for by law.


Automatic Termination In Cases Of Force Majeure

There is no automatic termination of employees even in cases of force majeure.


Collective Dismissals

Philippine Labour Laws have no statutory definition of collective dismissal. At the very least, specific legal requirements on both substantive and procedural due process for mass dismissal of employees apply when dismissal is caused by economic reasons such as redundancy, retrenchment to prevent losses, or the closing or cessation of operation of the establishment. These are among the authorized causes for termination provided for by the Labour Code of the Philippines.


Termination By Parties’ Agreement

Termination by mutual agreement is analogous to an employee’s voluntary resignation.


Directors Or Other Senior Officers

Directors of a corporation are regularly elected by the stockholders. They hold a term of one (1) year and their removal is governed by the Revised Corporation Code of the Philippines. The removal of senior officers who qualify as corporate officers or those whose positions are created by law, the Articles of Incorporation, or the By-laws of the corporation, is governed by the Revised Corporation Code of the Philippines. The removal from office of other senior officers who are not corporate officers is governed by the Labour Code of the Philippines.


Special Rules For Categories Of Employee

There are special rules for domestic workers. Under Republic Act No. 10361 (Domestic Workers Act), neither the domestic worker nor the employer may terminate the contract before the expiration of the term except for grounds set out in the law. If the length of service is not set out or is implied by the nature of the service, the employer or the house helper may end the engagement by giving notice five (5) days prior to the intended termination date.


Specific Rules For Companies in Financial Difficulties

Employers may temporarily shorten the work week provided that employees voluntarily agree, and there is no diminution in pay. Even without the agreement of the employees, the number of regular working days may be shortened in order to prevent serious losses. Shortening the working week is preferred over the outright termination of services or the closure of the company. Employees may also be put on temporary lay-off for a period not exceeding six (6) months.

Companies in financial difficulties may also terminate employment under the authorized causes provided by law (e.g., retrenchment or closure of a department).


Restricting Future Activities

There is no express law governing restrictive covenants. Stipulations prohibiting an employee from engaging in a similar business in competition with the employer’s business may be included in the employment contract provided that there is a reasonable limitation on the trade, geographical location, and period.


Whistleblower Laws

There is no law which regulates whistleblowing in the workplace.


Special Rules For Garden Leave

“Garden leave” is not provided for as such in the Philippines. It may be similar to placing an employee on leave with pay, but that is not a Philippine law requirement.


Severance Payments

Severance payments are mandatory in cases of termination for authorized causes. There is no severance pay for termination based on just causes or in case of voluntary resignation.


Special Tax Provisions And Severance Payments

Any amount received by the employee or their dependent due to employment termination resulting from death, sickness, or other physical disability, or any cause beyond the employee’s control, is exempt from taxation.


Allowances Payable To Employees After Termination

Other than severance pay for termination due to authorized causes, employers are not required to provide any allowance to employees after termination.


Time Limits For Claims Following Termination

As a general rule, money claims arising from employer-employee relationship must be filed within three (3) years from the time the cause of action accrued; otherwise, they are time-barred. There are cases decided by the Philippine Supreme Court where a prescriptive period of four years based on injury to rights was applied.

5

GENERAL

Specific Matters Which Are Important Or Unique To This Jurisdiction

National law encourages the peaceful settlement of labour disputes. For this reason, mandatory conciliation is a required step prior to any form of labour litigation. Compulsory arbitration is provided in labour disputes involving industries indispensable to the national interest. Moreover, there is a grievance machinery for all collective bargaining agreements.



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Leslie C. Dy
SyCip Salazar Hernandez & Gatmaitan
Philippines


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© 2021, SyCip Salazar Hernandez & Gatmaitan. All rights reserved by SyCip Salazar Hernandez & Gatmaitan  as author and the owner of the copyright in this chapter. SyCip Salazar Hernandez & Gatmaitan  has granted to Multilaw non-exclusive worldwide license to use and include this chapter in this guide and to sublicense Lexis Nexis, a division of RELX Inc. and its affiliates certain rights to use and distribute this Guide.

The information in the How to Hire and Fire Guide provides a general overview at the time of publication and is not intended to be a comprehensive review of all legal developments nor should it be taken as opinion or legal advice on the matters covered. It is for general information purposes only and readers should take legal advice from a Multilaw member firm.

Publication Date: June 2021