Security of tenure is an advantage any employee has over a full-time entrepreneur, and any entrepreneur who was once an employee knows that losing one’s regular job is the biggest risk in being self-employed. Indeed, it’s hard to give up that regular income that comes every 15 days or so.

This idea is clear in the Labor Code of the Philippines, which provides in strong terms that in all cases of regular employment, the employer cannot terminate the services of an employee except for a just cause or when authorized under the said law. An employee who is dismissed in violation of this law is entitled to reinstatement without loss of seniority rights and other privileges and is also entitled to payment of his full back wages, inclusive of allowances and benefits or their monetary equivalent. This applies even to managerial or higher-ranking employees.

The law considers tenure as somewhat of a guarantee of permanent employment, for which the employee is entitled to a regular pay essential for subsistence. But the law also provides that hiring employees can be made on a probationary basis for a period not exceeding six months from the date the employee starts working, during which time the employer can decide whether the employee is fit for regular employment. Thus, a probationary employee may be terminated if he or she fails to meet the employer’s standards of work performance. The law provides, however, that a probationary employee must be informed clearly of the probationary nature of the employment and the fixed standards required for attaining regular status.

Any employee who is allowed to work after a probationary period is presumed to have attained regular status, and as such is entitled to all the rights of a regular employee. Such employee may then be dismissed only for a just or authorized cause.

The Labor Code specifically lists the following as just causes for termination:

1. Serious misconduct or willful disobedience by the employee of the lawful orders of his or her employer or the employer’s representative in connection with the employee’s work;

2. Gross and habitual neglect by the employee of his or her duties;

3. Fraud or willful breach by the employee of the trust reposed in him or her by the employer or the employer’s duly authorized representative;

4. Commission of a crime or offense by the employee against the person of his or her employer, any immediate member of his or her employer’s family, or his or her employer’s duly authorized representative; and

5. Other causes analogous to the foregoing.

All of the foregoing causes that stem from the employee’s questionable conduct and the circumstances around it are considered just or justifiable grounds for dismissal. It is important to remember, however, that the right of management to terminate an employee based on these grounds is not absolute. That right should be exercised in good faith. Employee rights will prevail if it is shown that the purpose of a dismissal is not legitimate but is simply meant to defeat the employee’s security of tenure. And in all cases, the penalty of termination must be shown to be commensurate to the acts committed.

To ensure that the rights of employees are not trampled upon, the law dictates that the requirements of due process—which are enshrined in no less than the Philippine Constitution itself—must be strictly observed. Legal advocates refer to this as the twin requirements of notice and hearing, which mandate that everyone has the right to be notified of the charges against him or her and to be afforded the opportunity to be heard. This is in recognition of the fact that nobody wants to be accused of something he or she didn’t do. And for this reason, the employee must be given a chance to explain his or her side in a hearing called by management for such purpose. Failure of management to comply with due process renders the termination illegal.

There are two notices that must be sent to an employee before he or she can be dismissed for a just cause:

1. A first notice that informs the employee of the particular acts or omissions for which his dismissal is sought. Such a notice must state the specific charges against the employee. The notice should also mention the date and time of the hearing during which the employee will be given the opportunity to explain his or her side; and

2. A second notice that is sent once the hearing is concluded. This notice informs the employee of management’s evaluation of the hearing and the penalty that will be imposed, if any. It should also state clearly the reasons for the action taken against the employee.

It should be noted that an employee may be terminated not only as a result of his conduct on the job. The law recognizes that there are times when employers are authorized to dismiss employees by reason of any of the following: (1) the installation of laborsaving devices; (2) redundancy; (3) retrenchment to prevent losses; or (4) closure or cessation of operation of an establishment. In such cases, prior to the intended date of termination, a one-month notice must be served to the employees concerned as well as to the Department of Labor and Employment. The DOLE will then evaluate the legitimacy of the reasons cited by the employer.

In cases of dismissal due to the installation of laborsaving devices or redundancy, it is further required that the employee must be given a separation pay equivalent to at least one month pay, or at least one month pay per year of service, whichever is higher. In cases of retrenchment to prevent losses and closure or cessation of business operations not arising from serious business losses or financial reverses, the separation pay is equivalent to one-month pay or at least one-half-month pay per year of service, whichever is higher. In either case, employment for a fraction of six months is considered as one whole year.

Every employer should keep these rules clearly in mind when deciding to dismiss an employee. Rash or impulsive actions should be avoided. To ensure compliance with the law, careful consideration of the employee’s rights should be observed.

Reference:
The Labor Code of the Philippines, Presidential Decree No. 442, as amended.

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