Employee Termination in the Philippines: A Guide for Employers

The Department of Labor and Employment (DOLE) and the Labor Code of the Philippines govern employment practices to ensure that both employers and employees are protected. Terminating an employee is one of the most sensitive areas of labor relations, which is why it is heavily regulated under Philippine law.

If your company is offshoring to the Philippines, you must comply with local labor laws and align your internal policies accordingly. This guide provides a detailed overview of the legal grounds and procedures for employee termination in the Philippines, helping you avoid wrongful dismissal claims.

To legally terminate an employee in the Philippines, employers must follow the correct procedures and have valid reasons as outlined in Articles 282 and 283 of the Labor Code. It’s important to stick to these rules to ensure fairness and stay within the law.

Article 282 permits the termination of employees for specific wrongful acts, provided that the employer can prove the allegations. Below are some of the acts considered as just causes for termination:

1. Serious Misconduct

Serious misconduct refers to intentional improper actions by an employee that directly relate to their duties and undermine their fitness for the role. Examples include:

• Sexual Harassment: Involves inappropriate behavior or pressure for sexual favors, particularly from a higher-ranking employee.
• Substance Use in the Workplace: Includes reporting to work under the influence of alcohol or illegal drugs.
• Theft: Stealing company property or that of a colleague.
• Physical Assault: Engaging in physical violence against co-workers within or outside the company premises.
• Forgery: Unauthorized signing of documents on behalf of another person.
• Inappropriate Remarks: Making offensive or insulting comments, accusations, or using sexual language.
• Pressure and Influence: Exerting undue pressure that causes harm to a colleague.
• Immorality: Conduct that negatively affects the work environment or society.
• Habitual Absences and Tardiness: Regularly missing work or being late, which disrupts operations.

2. Willful Disobedience

Willful disobedience or insubordination occurs when an employee intentionally ignores or refuses to follow your instructions. To take action, you need to show that the task you asked them to do was legal and related to their job responsibilities.

If an employee refuses to explain why they were absent, won't go for a required medical check-up, or doesn't give a valid reason for declining to work overtime, this could be seen as willful disobedience.

3. Gross and Habitual Neglect of Duty

Gross negligence means not caring at all or ignoring the obvious consequences of one's actions. It involves a complete disregard for responsibilities. Habitual neglect, on the other hand, is when someone repeatedly fails to do their job over a period of time. For example, frequently being absent from work without permission is considered habitual neglect.

4. Fraud or Breach of Trust

Engaging in fraudulent activities, such as stealing funds or falsifying expenses, can lead to a loss of trust, which is grounds for dismissal.

5. Commission of a Crime or Offense Against the Employer

Acts of violence, threats, or other criminal activities directed towards the employer, their family, or authorized representatives are valid reasons for termination.

6. Other Similar Causes

The following reasons can also lead to dismissal under just causes:

• Breaking company rules and regulations
• Stealing from a co-worker
• Incompetence, inefficiency, or poor performance
• Not meeting work targets or quotas
• Failing to meet required physical standards, like weight requirements
• Having attitude problems, such as not getting along with co-workers, which creates a tense working environment, disrupts teamwork, and negatively affects the company’s performance

Article 283 covers situations where an employee's termination is based on circumstances beyond their control.

These authorized causes include business-related reasons such as retrenchment and redundancy. Employers are required to give at least one month's notice before termination and provide separation pay.

1. Installation of Labor-Saving Devices

If you introduce machines or technology that replace manual labor, you may need to let go of some employees. However, you must ensure that this change was made formally and fairly, without any intention to harm the employees. The decision on who to dismiss should be based on legitimate business needs.

2. Redundancy

Redundancy happens when an employee’s role is no longer necessary, like when too many people are doing the same job, or the company decides to reduce its workforce. You must show that the job is indeed no longer needed and that your decision was fair. Employees affected by redundancy are entitled to separation pay.

3. Retrenchment to Prevent Losses

Retrenchment means cutting jobs to prevent financial losses or because the company is already losing money. To justify retrenchment, you need to provide evidence of these financial issues. This is another situation where employees should receive separation pay.

4. Closure and Cessation of Business

If you decide to close your business or temporarily stop operations, you can terminate employees. However, you must prove that this decision is based on financial reasons and not just to avoid respecting employee rights.

You should give employees and the Department of Labor and Employment (DOLE) a written notice at least one month before the termination and provide separation pay to those affected.

5. Disease or Illness

You can terminate an employee if they have a disease or illness that makes it impossible for them to continue working or if their condition is a threat to their own or their colleagues' health.

A recognized public health authority must confirm that the condition is incurable within six months, even with treatment. Employees dismissed for health reasons are also entitled to separation pay.

The process for terminating an employee differs depending on whether the termination is for just causes or authorized causes.

Due Process for Just Causes

1. Identify the Just Cause and Gather Evidence

Employers must first identify the valid reason for termination and gather evidence to support the claim.

2. Issue a Notice to Explain

The employee must be given a notice explaining the grounds for dismissal and provided an opportunity to respond within a reasonable time, typically five days.

3. Conduct a Fair Hearing

A hearing should be held to allow the employee to defend themselves and present their side of the story.

4. Issue a Notice of Decision

If the employee is found guilty, a final notice of termination is issued, detailing the reasons for dismissal and the evidence considered.

Due Process for Authorized Causes

1. Identify the Authorized Cause and Gather Evidence

As with just causes, employers must identify the reason for termination and collect supporting documents.

2. Provide a 30-Day Written Notice

Employees must be given written notice at least 30 days before the termination date, specifying the reason for dismissal.

3. Notify the Labor Authorities

A copy of the notice must be submitted to the regional DOLE office.

4. Calculate and Pay Severance

Employers must calculate and disburse the appropriate separation pay, which is often one month’s pay for every year of service.

Failure to follow proper procedures can lead to legal consequences, including:

• Reinstatement of the Employee: The court may order the reinstatement of the employee to their previous position with no loss of seniority.
• Payment of Back Wages: Employers may be required to pay back wages, including all benefits, from the time of dismissal until reinstatement.
• Separation Pay: If reinstatement is not feasible, the court may order the payment of separation pay.
• Damages: Employers may also be liable for damages if the termination was done in bad faith.

Can an Employee Be Terminated Immediately?

Yes, but only for serious offenses such as misconduct, willful disobedience, gross neglect of duty, fraud, or committing a crime against the employer.

How Many Days’ Notice is Required for Termination?

For authorized causes, you must provide a written notice at least 30 days before the termination.

What Are the Consequences of Illegal Termination?

Illegal termination can result in reinstatement, payment of back wages, separation pay, and damages for the employee.

Are Terminated Employees Entitled to Separation Pay?

Yes, employees terminated for authorized causes are entitled to separation pay, typically calculated based on their length of service.

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