Termination Laws in the Philippines

Termination regulations in the Philippines ensure fair and lawful dismissals, safeguarding the rights of employers and employees. Understanding Philippine termination laws helps employers avoid disputes and empowers employees to know their protections.

This article provides an overview of the termination laws in the Philippines, covering its legal protections and practices.

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Termination Based on Employment Types in the Philippines

In the Philippines, employment classification is important for understanding employee rights and obligations, particularly regarding termination. The employment types in the Philippines include:

  • Probationary Employment: Probationary employees are hired for a specific period, typically not exceeding six months, to assess their suitability for regular employment. If the employee fails to meet these standards or if just cause arises, the employer may terminate the probationary contract without the same legal implications as regular employees.
  • Regular Employment: Regular employees are those engaged in activities necessary to the business. As the Labor Code specifies, they cannot be dismissed without just cause or authorized causes and are entitled to benefits upon termination.
  • Casual Employment: Casual employees are hired for tasks that are not part of regular business activities and do not last more than one year. Employees engaged in casual work are subject to termination without cause as long as the employer adheres to labor laws.
  • Seasonal Employment: Seasonal workers are employed during particular times of the year when their services are needed, including the holiday shopping season or agricultural harvests. As soon as the season is over, their employment ends. Since seasonal workers are hired for a fixed period, they are not eligible for claims for separation upon termination.
  • Fixed-Term Employment: Fixed-term employees work for a specific period or until the completion of a particular project. When the period expires, their employment automatically terminates. To guarantee that the employee’s rights are upheld for the duration of their job, they can only be terminated before the expiration of their term for just cause.

Legal Grounds for Termination in the Philippines

Employers must have a valid reason and follow due process when terminating an employee.

Valid Reasons for Termination in the Philippines

Termination in the Philippines is governed by various legal grounds to ensure fair and lawful dismissal, which include:

  • Just Cause: Just cause includes legitimate, legally accepted reasons for ending an employee’s employment contract because of wrongdoings or inability to perform duties as assigned. Examples of just cause include:
    • Serious misconduct: Any serious wrongdoing or activity that violates moral or ethical standards.
    • Willful disobedience: Deliberately rejecting an employer’s valid and reasonable commands.
    • Gross and habitual neglect of duties: A significant decline in performance is observed and vital work tasks are consistently neglected.
    • Fraud or willful breach of trust: Dishonest methods undermine the employer’s trust and confidence.
    • Commission of a crime or offense: Engaging in unlawful activities that cause harm to one’s employer or colleagues.
  • Authorized Causes: Authorized causes are legal grounds for terminating employment that stem from business needs rather than employee misconduct or performance. These grounds protect the employer’s interests while protecting employees by ensuring fair dismissal practices. Examples of authorized causes include:
    • Installation of Labor-Saving Devices: The use of innovative technologies reduces workforce demand.
    • Redundancy: An employee’s position is no longer needed due to organizational changes.
    • Retrenchment: Laying off employees to avoid financial losses and keep the business viable.
    • Closure and Cessation of Operations: Halting company activities for various causes, including economic conditions.
  • Health-Related Termination: Under Article 323 (Disease as Grounds for Termination), employers can fire employees whose medical condition endangers themselves or others, maintaining workplace safety and adherence to health rules. The termination must be based on valid medical findings that prevent continued employment.
  • Termination by Employee: Employees can end their employment if certain situations justify leaving without notice. This provision protects employees from harmful situations and gives them the right to resign if their employer commits serious offenses. Examples of grounds for employee-initiated termination include:
    • Serious insult: When an employer or representative disrespects the employee.
    • Inhumane treatment: Subjects an employee to unbearable working conditions or harassment.
    • Commission of a crime: Any criminal action the employer performs against the employee or their family.

The examples provided illustrate circumstances where immediate resignation is justified due to the severity of the employer’s actions, which may also make the employer liable for damages. Employees can also terminate their contract for personal or valid reasons, but in these cases, they are typically required to provide the necessary notice period.

  • Probationary Employment: Employers assess the employee’s suitability for the role during the probationary period. If the employee fails to meet the established standards, termination is permissible without the same legal implications as regular employees.

Due Process Requirements for Termination in the Philippines

In the Philippines, the due process requirements for termination vary depending on whether the termination is based on just cause or authorized cause.

  • Just Cause Termination: For dismissals due to just cause, the employer must issue a written notice to the employee specifying grounds for termination. This notice allows the employee to respond to the allegations within a reasonable period. After receiving the employee’s explanation, the employer should conduct a hearing or conference to discuss the issues further, allowing the employee to defend themselves. If the employer decides to terminate, a second written notice should be given explaining the reasons for the dismissal.
  • Authorized Cause Termination: When a termination occurs for authorized causes, the employer must provide written notice to the affected employee and the Department of Labor and Employment (DOLE). Depending on the cause of termination, the employee is entitled to separation pay.

Wrongful Termination in the Philippines

Wrongful termination in the Philippines occurs when an employee is dismissed without just or authorized cause or when due process is not followed as the Philippine laws mandate. It can happen in different scenarios:

  • Absence of Just or Authorized Cause: Termination is considered wrongful if the employer fails to establish valid grounds for dismissal.
  • Violation of Due Process Requirements: Even if there is a valid reason for termination, failing to follow proper due process can make the dismissal wrongful. This includes not providing required notices and not allowing the employee to present their side before termination.

Legal Protections During Termination in the Philippines

In the Philippines, a number of laws provide important legal protections for employees throughout the termination process. These laws are intended to protect employees’ rights and ensure fair treatment in the workplace. Key legal protections include:

  • Labor Code of the Philippines (Presidential Decree No. 442): The Labor Code of the Philippines provides the legal basis for employment and termination in the Philippines. It requires that terminations must be based on just or authorized causes and requires due process through the two-notice rules, which ensures that employees are notified of the reasons for their termination and allowed to respond.
  • 105-day Expanded Maternity Leave Law (Republic Act No. 11210): The 105-day Expanded Maternity Leave Law extends maternity leave for female employees and protects them from termination throughout the absence. Employers are forbidden from firing employees who take maternity leave, ensuring job stability during this critical time.
  • Domestic Workers Act or Batas Kasambahay (Republic Act No. 10361): The Domestic Workers Act or Batas Kasambahay protects domestic workers by outlining their rights and benefits and preventing them from unjust termination by ensuring they receive due process before termination.
  • Anti-Age Discrimination in Employment Act (Republic Act No. 10911): The Anti-Age Discrimination in Employment Act forbids job discrimination based on age. It prevents employees from being fired only because of their age, ensuring that all employees are treated fairly in the workplace regardless of their age.
  • Anti-Sexual Harassment Act (Republic Act No. 7877): The Anti-Sexual Harassment Act protects employees from termination due to accusations of sexual harassment. Employees can report harassment without fear of retaliation, promoting a secure and courteous workplace.
  • Occupational Safety and Health Standards (OSHS): Under the OSHS, employees are protected from termination in retaliation for reporting unsafe working conditions.

Terminated Employee Benefits in the Philippines

Terminated employees in the Philippines are entitled to receive benefits under the Labor Code and other relevant laws, which include:

  • Separation Pay: Separation pay or final pay is the monetary compensation provided to employees fired for valid reasons, such as business closures, layoffs, health-related problems, or redundancies. Separation pay the terminated employees may receive may vary as follows:
    • Employees who are fired due to authorized causes (e.g., redundancy, installation of labor-saving devices, or closure of operations) are entitled to separation pay equivalent to the higher of one month’s pay or one month’s pay for every year of service.
    • Employees who are retrenched are entitled to an equivalent of one month’s pay or one-half month’s pay for every year of service, whichever is higher.
    • Employees who are fired due to a disease that prohibits continued employment are entitled to one month or one-half month’s salary for every year of service.
  • Unemployment Benefits: The Philippine Government has a mandated program that provides financial assistance to employees who are involuntarily separated from their jobs. This program aims to support individuals during unemployment by offering monetary benefits based on their Social Security System (SSS) contributions. To qualify for unemployment benefits, employees must:
    • Not be over 60 years old at the time of involuntary separation.
    • Have paid at least 36 monthly contributions to the SSS, including 12 contributions in the 18 months immediately before employment separation.
    • Not have settled unemployment benefit claims within the last three years before involuntary separation.

Employees are eligible for unemployment benefits if they have been involuntarily separated due to authorized causes, natural disasters, or economic downturns. Those separated for just causes, including serious misconduct or gross neglect, are not eligible for unemployment benefits.

Layoffs in the Philippines

Layoffs, also known as retrenchment, are recognized as grounds for termination in the Philippines and are governed by the Labor Code of the Philippines. Employers may implement layoffs in the following situations:

  • Redundancy: When a job is no longer necessary for the day-to-day operations of the business.
  • Preventing Substantial Financial Losses: If an employer can provide a valid reason for the action, they may terminate employees to prevent significant financial losses.
  • Business Shutdown: Justified in cases of partial or full business closure, as long as the employer is not at fault.
  • Installation of Labor-Saving Devices: When workers are not needed as much due to new technology or equipment.

Before a layoff or retrenchment, employers must provide the affected employees and the DOLE with a minimum of thirty days’ written notice. Employees also have the right to separation pay, the amount of which varies based on the cause of termination:

  • Redundancy, retrenchment, preventing substantial financial loss, and installation of labor-saving devices: At least one month’s salary or one month’s salary for every year of service, whichever is greater.
  • Closure due to financial losses (business shutdown): If the employer can show financial losses, there is no need for separation pay.

Resignations in the Philippines

Resignations in the Phillippines can be either voluntary or involuntary:

Voluntary Resignation

Voluntary resignation occurs when an employee leaves the company on their initiative. Philippine employees must follow these requirements for a lawful voluntary resignation:

  • Notice Period: Employees in the Philippines must provide a written notice to the employer at least 30 days before the intended resignation date.
  • Waiver of Notice: The employer may waive the 30-day notice period and allow the employee to resign immediately.
  • Clearance Process: Before releasing the final pay, the employer typically requires the employee to complete a clearance process to settle accountabilities, such as returning company property.

Involuntary Resignation

Involuntary resignation, or constructive dismissal, occurs when an employee is forced to resign due to unbearable working conditions or coercion by the employer. The resignation is considered involuntary if:

  • Presence of a hostile work environment: The employee faces harassment, unfair treatment, or conditions that make it impossible to continue working.
  • Unreasonable changes in terms of employment: The employee might face drastic reductions in salary, demotion without cause, or be forced to transfer to a distant location.

In cases of constructive dismissal, employees may file a complaint with the Department of Labor and Employment (DOLE) or the National Labor Relations Commission (NLRC) for illegal dismissal.

Learn about Labor Laws in the Philippines through our detailed guide.

Important Cautionary Note

This content is provided for informational purposes only. While we make every effort to ensure the accuracy of the information presented, we cannot guarantee that it is free of errors or omissions. Users are advised to independently verify any critical information and should not solely rely on the content provided.