Week 11 - Termination of employer (Procedural due process)

Question 1

What is the procedural due process requirement provided by the Labor Code for cases of termination with just causes?

Answer 1

Art. 292 [277] (b). Miscellaneous Provisions. – […] the employer shall furnish the worker whose employment is sought to be terminated a written notice containing a statement of the causes for termination and shall afford the latter ample opportunity to be heard and to defend himself with the assistance of his representative if he so desires in accordance with company rules and regulations promulgated pursuant to guidelines set by the Department of Labor and Employment.

Question 2

What is the procedural due process provided by the Labor Code in cases of termination by just causes?

Answer 2

Art. 292 [277] (b). Miscellaneous Provisions. – (b) […] the employer shall furnish the worker whose employment is sought to be terminated a written notice containing a statement of the causes for termination and shall afford the latter ample opportunity to be heard and to defend himself with the assistance of his representative if he so desires in accordance with company rules and regulations promulgated pursuant to guidelines set by the Department of Labor and Employment.

Question 3

What does “reasonable opportunity” mean under the requirement to given the opportunity to give their written explanation within a reasonable period?

Answer 3

“Reasonable opportunity” under the Omnibus Rules means every kind of assistance that management must accord to the employees to enable them to prepare adequately for their defense. [King of Kings Transport v. Mamac]

Question 4

What should the first written notice contain?

Answer 4

To enable the employees to intelligently prepare their explanation and defenses, the notice should contain a detailed narration of the facts and circumstances that will serve as basis for the charge against the employees. A general description of the charge will not suffice. Lastly, the notice should specifically mention which company rules, if any, are violated and/or which among the grounds under Art. 282 [now Art. 297] is being charged against the employees. [King of Kings Transport v. Mamac].

Question 5

According to the case of King of Kings Transport v. Mamac, what is the procedural requirement for termination based on just causes?

Answer 5

1. The first written notice to be served on the employees should contain the specific causes or grounds for termination against them, and a directive that the employees are given the opportunity to submit their written explanation within a reasonable period.
2. After serving the first notice, the employers should schedule and conduct a hearing or conference wherein the employees will be given the opportunity to: (1) explain and clarify their defenses ; (2) present evidence ; (3) rebut the evidence presented against them;
3. After determining that termination of employment is justified, the employers shall serve the employees a written notice of termination indicating that: (1) all circumstances involving the charge against the employee have been considered, and (2) grounds have been established to justify the severance of their employment. [King of Kings Transport v. Mamac]

Question 6

What is the case the provides the doctrine that when the dismissal is justified but due process was not followed, the employee will be entitled to nominal damages instead of reinstatement?

Answer 6

Agabon v. NLRC.

In King of Kings Transport v. Mamac, the Court stated “The doctrine in Serrano (reinstatement) had already been abandoned in Agabon v. NLRC by ruling that if the dismissal is done without due process, the employer should indemnify the employee with nominal damages.”

Question 7

What is the maximum period for a preventive suspension?

Answer 7

A preventive suspension shall not exceed a maximum period of thirty (30) days, after which period the employee must be reinstated to his former position. If the suspension is otherwise extended, the employee shall be entitled to his salaries and other benefits that may accrue to him during the period of such suspension. [Community Rural Bank of San Isidro v. Paez]

Question 8

What is the rule on the management prerogative to transfer employees?

Answer 8

Management has the prerogative to transfer or assign employees from one office or area of operation to another – provided there is no demotion in rank or diminution of salary, benefits, and other privileges; and the action is not motivated by discrimination, made in bad faith, or effected as a form of punishment or demotion without sufficient cause. [Phil. American Life and Gen. Insurance Co. v. Gramaje].

Question 9

What is the meaning of discrimination?

Answer 9

Discrimination is the unequal treatment of employees, which is proscribed as an unfair labor practice by Art. 248(e) of the Labor Code. It is the failure to treat all persons equally when no reasonable distinction can be found between those favored and those not favored. [Phil. American Life and Gen. Insurance Co. v. Gramaje].

Question 10

What is the definition of bad faith?

Answer 10

Bad faith has been defined as a state of mind affirmatively operating with furtive design or with some motive of self-interest or ill will or for an ulterior purpose. It implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity. [Phil. American Life and Gen. Insurance Co. v. Gramaje].

Question 11

What is the test of determining the validity of the transfer of employees?

Answer 11

The employer must be able to show that the transfer is not unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits. Should the employer fail to overcome this burden of proof, the employee’s transfer shall be tantamount to constructive dismissal, which has been defined as a quitting because continued employment is rendered impossible, unreasonable or unlikely; as an offer involving a demotion in rank and diminution in pay. Likewise constructive dismissal exists when an act of clear discrimination, insensibility or disdain by an employer has become so unbearable to the employee leaving him with no option but to forego with his continued employment. [Phil. American Life and Gen. Insurance Co. v. Gramaje].

Question 12

When does constructive dismissal exist?

Answer 12

Constructive dismissal exists when an act of clear discrimination, insensibility or disdain by an employer has become so unbearable to the employee leaving him with no option but to forego with his continued employment. [Phil. American Life and Gen. Insurance Co. v. Gramaje].

There is constructive dismissal when there is a demotion in rank and/or diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee. [Dusit Hotel Nikko v. NUWHRAIN].

Question 13

What is the doctrine in Remoticado v. Typical Construction Trading Corp. regarding proving the fact of dismissal by substantial evidence?

Answer 13

It is true that in illegal termination cases, the burden is upon the employer to prove that termination of employment was for a just cause. Logic dictates, however, that the complaining employee must first establish by substantial evidence the fact of termination by the employer. If there is no proof of termination by the employer, there is no point in even considering the cause for it. There can be no illegal termination when there was no termination. [Remoticado v. Typical Construction Trading Corp.]

Question 14

May a corporation officer be held liable for the corporation’s labor obligations?

Answer 14

Generally, No. In Symex Security Services, Inc. v. Arcega, the Court held that “as a general rule, an officer may not be held liable for the corporation’s labor obligations unless he acted with evident malice and/or bad faith in dismissing an employee. […] To hold a director or officer personally liable for corporate obligations, two requisites must concur: (1) it must be alleged in the complaint that the director or officer assented to patently unlawful acts of the corporation or was guilty of gross negligence or bad faith; and (2) there must be proof that the officer acted in bad faith.

Question 15

What are the twin remedies awarded to persons who were illegally dismissed?

Answer 15

The Twin Remedies are:

1. Reinstatement
2. Backwages

Question 16

Should an employee be reinstated to the same position at all times?

Answer 16

Not necessarily. Reinstatement presupposes that the previous position from which one had been removed still exists, or that there is an unfilled position more or less of a similar nature as this previously occupied by the employee. [PNOC-EDC v. Abella]

Question 17

What is the legal effect of a compromise between the parties?

Answer 17

Prevailing case law provides that “a compromise once approved by final orders of the court has the force of res judicata between the parties and should not be disturbed except for vices of consent or forgery. Hence, ‘a decision on a compromise agreement is final and executory.’ [PNOC-EDC v. Abella]

Question 18

What is the definition of reinstatement?

Answer 18

Reinstatement is the restoration to a state or condition form which one has been removed or separated. The intent of the law in making a reinstatement order immediately executory is much like a return-to-work order, i.e., to restore the status quo in the workplace in the meantime that the issues raised and the proofs presented by the contending parties have not yet been finally resolved. It is a legal provision which is fair to both labor and management because while execution of the order cannot be stayed by the posting of a bond by the employer, the workers also cannot demand their physical reinstatement if the employer opts to reinstate them only in the payroll. (Composite Enterprises, Inc. v. Caparoso GR No. 159919)

Question 19

What is the legal effect of an order for reinstatement by the Labor Arbiter?

Answer 19

An order for reinstatement by the labor arbiter is immediately executory. Art. 229 of the Labor Code provides that “Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders. […] In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shall immediately be executory, pending appeal.”

Question 20

Must the employer reinstatement the employee physically?

Answer 20

No. Under Art. 229 of the Labor Code, “The employee shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The posting of a bond by the employer shall not stay the execution for reinstatement provided therein.”

Question 21

When is payment of separation pay in lieu of reinstatement allowed?

Answer 21

Payment of separation pay as a substitute for reinstatement is allowed only under exceptional circumstances,viz: (1) when reasons exist which are not attributable to the fault or are beyond the control of the employer (e.g. serious business losses); (2) when the illegally dismissed employee has contracted a disease and his reinstatement will endanger the safety of his co-employees; or (3) where a strained relationship exists between the employer and the dismissed employee. [Composite Enterprises, Inc. v. Caparoso].

Question 22

Doctrine in PHESCHEM Industrial Corp. v. Moldez re: reinstatement as the general rule.

Answer 22

The legal consequence of an illegal dismissal are reinstatement of the employee without loss of seniority rights and other privileges, and payment of his full backwages, inclusive of allowances, and other benefits or their monetary equivalent. Clearly, the law intended reinstatement to be the general rule. It is only when reinstatement is no longer feasible that payment of separation pay is awarded to an illegally dismissed employee. [PHESCHEM Industrial Corp. v. Moldez].

Question 23

May the employer reduce the backwages of the employee when the latter has earned income from another employment during the period of their dismissal?

Answer 23

No. In Retuya v. Dumarpa, the Court held “Illegally dismissed employees were entitled to full back wages that should not be diminished or reduced by the amount they had earned from another employment during the period of their illegal dismissal. While litigating, employees must earn a living. Furthermore, as penalty for their illegal dismissal, their employers must pay them full back wages. his rule has been uniformly applied in subsequent cases.”

Question 24

What is the effect of business closure on the computation of back wages?

Answer 24

Reinstatement is no longer feasible when the company has ceased operations. Absent any showing that its business was deliberately stopped to avoid reinstating the complaining employees, the amount of back wages shall be computed from the time of their illegal termination up to the time of the cessation of the business operations.” [Retuya v. Hon. Dumarpa].

Question 25

Shall an illegally dismissed employee who had reached retirement age at the time of judgment be reinstated?

Answer 25

No. An employee held to be illegally dismissed cannot be reinstated if he had already reached the age of sixty (60) years at the time of his second complaint (pressing for reinstatement) before the Labor Arbiter’s Office. [Espejo v. NLRC]

Question 26

May an employee who was illegally dismissed but has reached retirement age at the time of judgment be granted separation pay?

Answer 26

No. In Espejo v. NLRC, the Court held “Generally, an illegally dismissed employee who cannot be reinstated is granted separation pay and back wages. However considering that petitioner has already reached the statutory retirement age of sixty (60), we agree with NLRC that petitioner is entitled only to backwages. The payment of backwages is a form of relief that restores the income lost by reason of the unlawful dismissal; separation pay, in contrast, is oriented towards the immediate future, the transitional period the dismissed employee must undergo before locating a replacement job.”

Question 27

What is the rule regarding strained relations / antipathy and antagonism?

Answer 27

An illegally dismissed employee is entitled to reinstatement as a matter of right. But when an atmosphere of antipathy and antagonism has already strained the relations between the employer and employee, separation pay is to be awarded as reinstatement can no longer be equitably effected. [Litex Glass and Aluminum Supply v. Sanchez].

Separation pay is proper

Question 28

Does length of time before finality of decision have an effect on reinstatement?

Answer 28

Yes. In Noblado v. Alfonso, the Court held that reinstatement is no longer possible because of the length of time that has passed from the date of the incident to final resolution of the case. […] Thus, in this case, petitioners are entitled to an award of full backwages from the time they were illegally dismissed up to the finality of the decision. Separation pay is also to be paid.

Question 29

What are the exceptions to reinstatement?

Answer 29

The exceptions to reinstatement are:

1. Closure of business;
2. Economic business conditions;
3. Employee’s retirement/overage;
4. Antipathy and Antagonism - Strained relations;
5. Not feasible - length of time

Question 30

Will an offer to reinstate by the employer cure the illegal dismissal?

Answer 30

No. In Ranara v. NLRC, the Court held “the fact that his employer later made an offer to re-employ him did not cure the vice of his earlier arbitrary dismissal. The wrong had been committed and the harm done. […] At any rate, sincere or not, the offer of reinstatement could not correct the earlier illegal dismissal of the petitioner. The [employer] incurred liability under the Labor Code from the moment [employee] was dismissed, and the liability did not abate as a result of [the employer’s] repentance.”

Question 31

May the employer ask for a refund on the salaries he gave to the employee who was held illegally dismissed by the Labor Arbiter but validly dismissed by the NLRC?

Answer 31

No. In Garcia v. PAL, the Court stated that “even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher court. It settles the view that the Labor Arbiter’s order of reinstatement is immediately executory and the employer has to either re-admit them to work under the same terms and conditions prevailing prior to their dismissal, or to reinstate them in the payroll, and that failing to exercise the options in the alternative, employer must pay the employee’s salaries.

Question 32

In what case will the employee be barred from collecting the accrued wages after the labor arbiter’s decisions is reversed by a higher tribunal?

Answer 32

After the labor arbiter’s decision is reversed by a higher tribunal, the employee may be barred from collecting the accrued wages, if it is shown that the delay in enforcing the reinstatement pending appeal was without fault on the part of the employer.

The test is two-fold: (1) there must be actual delay or the fact that the order of reinstatement pending appeal was not executed prior to its reversal; and (2) the delay must not be due to the employer’s unjustified act or omission. If the delay is due to the employer’s unjustified refusal, the employer may still be required to pay the salaries notwithstanding the reversal of the Labor Arbiter’s decision. [Garcia v. PAL]

Question 33

What is the exception to the immediate execution of the Labor Arbiter’s order for reinstatement?

Answer 33

The exception is when there is a restraining order. In College of Immaculate Conception v. NLRC, the Court held “A dismissed employee whose case was favorably decided by the Labor Arbiter is entitled to receive wages pending appeal upon reinstatement, which is immediately executory. Unless there is a restraining order, it is ministerial upon the Labor Arbiter to implement the order of reinstatement and it is mandatory on the employer to comply therewith.”

Question 34

Situation. The LA ruled in favor of the dismissed employee and ordered his reinstatement. However, the employer did not immediately comply with the LA’s directive. On appeal, the NLRC reversed the LA and found that there was no illegal dismissal. Is the employee still entitled to the salaries and allowances pending appeal?

Answer 34

Yes. In Garcia v. PAL and in College of Immaculate Conception v. NLRC, the Court held that the Labor Arbiter’s decision to reinstate an employee is immediately executory. The Supreme Court held that the employee is entitled to salaries and allowances pending appeal.

Question 35

Situation. The LA ruled in favor of the dismissed employee and ordered the latter’s reinstatement. This time, the employer complied by reinstating the employee in the payroll. On appeal, the LA’s ruing was reversed, finding that there was no case of illegal dismissal but merely a temporary sanction, akin to a suspension. Is the employee required to reimburse the employer for the salaries and wages?

Answer 35

No, an the employee is not required to reimburse the employer for such cases. In College of Immaculate Conception v. NLRC, the Court reaffirmed the principle that an employee cannot be compelled to reimburse the salaries and wages he received during the pendency of his appeal, notwithstanding the reversal by the NLRC of the LA’s order of reinstatement.

Question 36

When is reinstatement without backwages applicable?

Answer 36

Reinstatement without backwages is applicable when the Labor Arbiter finds that there was no illegal dismissal but the penalty of dismissal is too harsh a penalty. In Lansangan v. Amkor Tech. Phil. Inc., the Labor Arbiter ordered the reinstatement without backwages of the employees despite a finding of a valid dismissal “as a measure of equitable and compassionate relief” owing maintly to the employees’ unblemished employment records, show of remorse, harshness of the penalty and defective attendance monitoring system of respondent.

Question 37

Does Art. 229 [223] of the Labor Code apply to cases of reinstatement without backwages?

Answer 37

No. Art. 229 [223] of the Labor Code does not apply in such cases because Art. 229 [223] concerns itself with an interim relief, granted to a dismissed or separated employee while the case for illegal dismissal is pending appeal. It does not apply in reinstatement without backwages because such measure is applicable when there is a valid dismissal but the Labor Arbiter, at its discretion, finds that such penalty is too harsh.

Question 38

What are the requisites for reinstatement without backwages?

Answer 38

Reinstatement without backwages may be applied on account of the following:

(a) The fact that the dismissal of the employee would be too harsh of a penalty; and
(b) That the employer was in good faith in terminating the employee. [Integrated Microelectronics, Inc. v. Pionilla]

Question 39

When may the employer’s liability to pay back wages be diminished?

Answer 39

When there is good faith on the employer, and they prove that they are in difficult financial conditions. In La Consolacion College Manila v. Pascua, the Court held that the employee’s dismissal was illegal. While the Court ordered her reinstatement, the Court tempered La Consolacion’s liability to pay backwages because the Court found that there was good faith in the dismissal of the employee. The employee’s dismissal was only a result, not so much of purposeful malevolence, but of a flawed appreciation of circumstances– they erroneously appreciated the requisite of having a fair and reasonable criteria for retrenchment.

Retrenchment requisites: (1) Retrenchment is reasonably necessary to prevent losses; (2) retrenchment is done in good faith and not to circumvent the employee’s right to security of tenure; and (3) there is a fair and reasonable criteria in ascertaining who is to be dismissed.

Question 40

What is the legal effect on the backwages if the complainant employee feels to pray for the award of backwages, and the arbiter finds that he was illegally dismissed?

Answer 40

The award of backwages shall still be due to the employee who was illegally dismissed. In Dela Cruz v. NLRC, the Court stated, “It is evident that the award of back wages resulting from the illegal dismissal of an employee is a substantive right. Thus, the failure to claim back wages in a complaint for illegal dismissal has been held to be a mere procedural lapse which cannot defeat a right granted under substantive law.”

Question 41

May an employee be reinstated if he sought payment for separation pay?

Answer 41

No. In Dela Cruz v. NLRC, the Supreme Court held that “By expressly asking for separation pay, [employee] is deemed to have opted for separation pay in lieu of reinstatement. This is the tenor of the holding in Reformist Union v. NLRC to the effect that separation pay is awarded as an alternative to reinstatement.”

Question 42

What is the legal effect if both parties (employer and employee) are equally at fault?

Answer 42

When both parties are at fault or in pari delicto, they must bear the consequence of their own wrongdoing. [Automative Engine Rebuilders, Inc. v. Progresibong Unyon ng mga Manggagawa sa AER].

Question 43

How is the backwages computed in cases of illegal dismissal?

Answer 43

Backwages are computed from the time the employee’s compensation was withheld to the time of his actual reinstatement. Full backwages shall be pegged at the wage rate at the time of the employee’s dismissal, unqualified by any deductions and increases. The base figure for the computation of backwages should include not only the basic salary but also the regular allowances being received, such as the emergency living allownces and the 13th month pay mandated by law.

However, the amounts does not include the increases or benefits granted to employees during the period of his dismissal because time stood still for him at the precise moment of his termination and move forward only upon his reinstatement. Hence, the respondent should only receive backwages that include the amounts being received by him at the time of his illegal dismissal but not the benefits granted to his co-employees after the dismissal. [UCCI v. Valmores]

Question 44

Generally, the Court looks with disfavor at quitclaims executed by employees for being contrary to public policy. However, when will these quitclaimes be held valid?

Answer 44

Generally, the Court looks with disfavor at quitclaims executed by employees for being contrary to public policy. Where the person making the waiver, however, has done so voluntarily, with a full understanding of its terms and with the payment of credible and reasonable consideration, the Court has no option but to recognize the transaction to be valid and binding. [Poseidon International Maritime Services v. Tamala]

Question 45

Do overseas Filipino workers have the right to security of tenure when they move to a different jurisdiction?

Answer 45

Yes. In Sameer Overseas Placement Agency, Inc. v. Cabiles, the Court held that “Employees are not stripped of t heir security of tenure when they move to work ina different jurisdiction. With respect to the rights of overseas Filipino workers, we follow the principle of lex loci contractus (the law of the place where the contract is made). […] There is no question that the contract of employment in this case was perfected here in the Philippines. Therefore, the Labor Code, its implementing rules and regulations, and other laws affecting labor apply in this case.”

Question 46

When will dismissal due to inefficiency of work be held valid?

Answer 46

In Sameer Overseas Placement Agency, Inc. v. Cabiles, the Court held that “To show that dismissal resulting from inefficiency in work is valid, it must be shown that: () the employer has set standards of conduct and workmanship against which the employee will be judged; (2) the standards of conduct and workmanship must have been communicated to the employee; and (3) the communication was made at a reasonable time prior to the employee’s performance assessment.”

Question 47

What are the pecuniary remedies granted to overseas employees dismissed without just or authorized or valid cause?

Answer 47

In Sameer Overseas Placement Agency, Inc. v. Cabiles:

• Full reimbursement of his placement fee with interest of 12% per annum;
• Salaries for the unexpired portion of his employment contract.

Question 48

When is an employee on “floating status”?

Answer 48

An employee is on “floating status” when occurs upon the dire exigency of the employer’s bona fide suspension of operation of a business or undertaking. In security services, this happens when the security agency’s clients which do not renew their contract are more than those that do and that the new ones that the agency gets. [Pido v. NLRC].

Question 49

When may an employer terminate the employee due to a disease?

Answer 49

Art. 299. [284.] Disease as Ground for Termination. – An employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his co-employees: Provided, That he is paid separation pay equivalent to at least one (1) month salary or to one-half (½) month salary for every year of service, whichever is greater, a fraction of at least six (6) months being considered as one (1) whole year.

Cited in Sy v. CA.

Question 50

What is resignation?

Answer 50

Resignation is the voluntary act of employees who are compelled by personal reasons to dissociate themselves from their employment, done with the intention of relinquishing an office, accompanied by the act of abandonment. [Fonterra Brands Phils., Inc. v. Largado].

Question 51

What constitutes a valid resignation?

Answer 51

To constitute a resignation, it must be unconditional and with the intent to operate as such. There must be an intention to relinquish a portion of the term of office accompanied by an act of relinquishment. [Azcor Manufacturing, Inc. v. NLRC].

“In Bilbao v. Sadi Arabian Airlines, this court defined voluntary resignation as ‘the voluntary act of an employee who is in a situation where one believes that personal reasons cannot be sacrificed in favor of the exigency of the service, and one has no other choice but to dissociate oneself from employment. It is a formal pronouncement or relinquishment of an office, with the intention of relinquishing the office accompanied by the act of relinquishment.’ Thus essential to the act of resignation is voluntariness. It must be the result of an employee’s exercise of his or her own will.” [Saudia v. Rebesencio].

Question 52

What is the test to determine constructive dismissal?

Answer 52

The test of constructive dismissal is whether a reasonable person in the employee’s position would have felt compelled to give up his position under the circumstances. It is an act amounting to dismissal but is made to appear as if it were not. Constructive dismissal is therefore a dismissal in disguise. The law recognizes and resolves this situation in favor of employees in order to protect their rights and interest from the coercive acts of the employer. [Tuason v. Bank of Commerce].