The Department of Labor and Employment (DOLE) and Labor Code regulate employment policies in the Philippines to protect employers and employees. Employee termination is one of the most contentious parts of labor relations, hence why this issue is discussed at length in the Code.
Offshoring to the Philippines means that you and your employees should abide by the labor laws in the country. You need to align your organizational policies with national regulations when drafting internal policies to ensure a seamless flow of legal and formal procedures.
Here is a quick overview of the employee termination policies in the Philippines so you know what to do to avoid wrongful dismissal. You can always speak with your recrutment firm if you have more questions, but here are some the basics on lawful termination.
Legally-Accepted Grounds for Termination
To legally terminate an employee, you should ensure that they undergo proper due process and there is a valid reason behind it under the Labor Code. These reasons are categorized under Just Causes and Authorized Causes.
Wrongful or prohibited acts enumerated below are grounds for termination. You are responsible for filing the case and providing the necessary evidence supporting your claims. These wrongful acts include:
Serious misconduct is when an employee intentionally does improper actions against you or a co-worker. The act must be serious and related to their duties, and you no longer see them fit for your company.
Acts considered serious misconduct include the following:
- Sexual Harassment – includes malicious interactions with a lower-ranking employee or using a high-rank status to pressure someone to do sexual favors
- Substance use in the workplace – includes reporting to work drunk, drinking alcoholic beverages in the workplace resulting in getting drunk, or using illegal drugs in the workplace
- Theft from the company or a colleague
- Physical assault of co-employee inside or outside the company premises
- Forgery – includes the unauthorized signing of documents in place of someone else
- Inappropriate remarks – may come in the form of accusations, insults, use of sexual or offensive language, and challenging to a fight
- Pressure and influence on a co-employee – not all acts of undue pressuring are considered just cause, but they can be if they cause moral and physical damage
- Immorality – doing actions that negatively affect the living conditions of someone or society; since this is a tricky subject of jurisdiction, Labor Law provides legal case studies on the matter that the court has already decided.
- Series of irregularities – includes habitual absences and tardiness, accumulating into an alarming period
Willful disobedience or insubordination is an employee’s intentional disregard or refusal to obey your orders. You must prove that the requested task was lawful and related to the employee’s duties.
An employee’s refusal to explain their absence, undergo a medical examination, or provide reasonable justification to decline your request to render overtime work can be considered an act of willful disobedience.
Gross and habitual neglect of duty
Gross negligence is defined as the deliberate desire to lack care, failure to show care, or the total lack of care while dismissing the apparent consequences of such actions. Meanwhile, habitual neglect refers to “repeated failure to perform one’s duties for a period of time, depending upon the circumstances.” Habitual absenteeism without leave is an example.
Fraud or breach of trust
Acts of fraud like hiding and stealing cash or falsifying expenses can result in an irreparable breach of trust that leaves no choice but to let go of the employee.
Commission of a crime or offense against the employer
This accounts for acts by the employee against you, any of your immediate family members, or your duly authorized representatives. However, the said act must have caused bodily harm to be considered just cause.
Other similar causes
The following grounds for dismissal are also under just causes:
- Violation of company rules and regulations
- Theft of property owned by a co-employee
- Incompetence, inefficiency, or ineptitude
- Failure to attain work quota
- Failure to comply with your weight standards
- Attitude problems, like not getting along with their co-employees, which results in a strained working environment that hampers synergy and brings down the company’s performance.
These causes refer to legally justified reasons beyond wrongful acts and can further be classified as business-related or health-related.
Installation of labor-saving devices
Employing equipment that replaces manual labor is your prerogative that can be grounds for authorized employee dismissal.
You need to ensure that there was a formal introduction of the equipment, that the installation process was done without abuse or malice toward the employee/s, that it is necessary for you to install these devices, and that the decision of whom to dismiss was fair.
Redundancy occurs when an employee’s position or tasks are seen as excessive to what your company demands, such as when multiple employees do the same functions when fewer people can accomplish them or when you decide to downsize your operations.
You must prove that there is an excess in positions or services relative to the company’s economic and operational capacity, that the decision of whom to dismiss was fair and done in good faith, and that you are to give separation pay to those who will be dismissed.
Retrenchment to prevent losses
Retrenchment refers to your company’s need to terminate employment due to downsizing, which can otherwise result in or have already led to financial losses. You must present proof of losses or possible imminent losses to validate retrenchment as grounds for authorized employee dismissal.
Closure and cessation of business
Deciding to close or temporarily stop your business operations is your prerogative. However, you must prove that the reason was rooted in financial circumstances and not dismiss employee rights or agreements.
You need to ensure that you will do the dismissal appropriately through a written notice to the employees and DOLE at least a month before the date of employment termination, and you will give separation pay to affected employees.
Disease or illness
You can terminate an employee on the grounds of a disease or illness, given that the declared medical condition prohibits their employment or is proven detrimental to their or colleagues’ health.
Also, a credible public health authority must declare in a medical certificate that the nature or stage of the condition is incurable within six months, even with appropriate medical treatment. The employee is likewise subject to separation pay.
The Proper Due Process When Terminating an Employee
The due process for termination on just causes and authorized causes are not the same. Here’s how they differ:
Due Process for Just Causes
- Identify the proper justification and gather evidence. You are responsible for collecting proof to support your claims for just dismissal.
- Notify the employee and the labor authorities. You must provide the first notice to the employee, stating your identified ground for dismissal, a detailed narration of facts and proof establishing your grounds, and a directive that the employee can submit a written explanation within five days after receiving the first notice.
- Give the respondent a fair trial. You also need to schedule a hearing to allow employees to defend themselves.
- Notify the respondent of the decision and sanctions. When the employee is found guilty, the official decision containing all the case details will be sent to them.
Due process for authorized causes
- Identify the proper justification and gather evidence. As with just causes, you must identify and establish the ground for dismissal with proof.
- Send the employee a written notice of dismissal at least 30 days before the termination date. The written notice of dismissal stating the grounds must be sent to the employee/s at least 30 days before the termination date.
- Submit a copy of the notice to the labor authorities. A copy of the written notice must be sent to the Regional DOLE office of the company or your location.
- Calculate and disburse the appropriate severance pay. Some authorized causes require you to provide separation pay based on existing policies of calculations to the dismissed employee.
Consequences for Wrongful Termination of an Employee
Ensure that you comply with the legal procedures of dismissal cases. Apart from the heavy costs of litigation like lawyer’s fees, filing fees, and other administrative expenses, your company can suffer harsh penalties due to the court-mandated indemnifications to the employee if you are found guilty of illegal dismissal. These indemnification include:
- Immediate reinstatement to the exact position where they were initially terminated and without any impact on their seniority rights
- Payment of back wages, including salary, allowances, and other benefits of monetary value that they should have received during the time of unjust dismissal until their eventual reinstatement.
- If the court finds that your relationship with your employee has been severely affected and reinstatement is no longer an option, the employee will receive separation pay, computed based on existing policies of calculations
- Cost of damages if the illegal dismissal was done inappropriately
Avoid the Minefield of Employee Termination
As a responsible employer, knowing your host country’s labor rights is in your best interest. Not only does it make a safe and harmonious working environment, but it also helps you avoid getting mired in costly legal trouble.