REVIEW MATERIAL ON TERMINATION

OF EMPLOYMENT AND PRESCRIPTION OF ACTION

(Labor Law Review – 2016 – 2017)

The Proof of Employer – Employee Relationship

It is a basic rule of evidence that each party must prove his affirmative allegation. If he claims a
right granted by law, he must prove his claim by competent evidence, relying on the strength of
his own evidence and not upon the weakness of that of his opponent. The test for determining on
whom the burden of proof lies is found in the result of an inquiry as to which party would be
successful if no evidence of such matters were given. In an illegal dismissal case, the onus
probandi rests on the employer to prove that its dismissal of an employee was for a valid cause.
However, before a case for illegal dismissal can prosper, an employer – employee relationship
must first be established. Thus, in filing a complaint before the LA for illegal dismissal, based on
the premise that he was an employee of respondents, it is incumbent upon petitioner to prove the
employer – employee relationship by substantial evidence. (Jesus G. Reyes vs. Glaucoma
Research Foundation, Inc. et al., G.R. No. 189255, June 17, 2015)

Procedural and Substantive Due Process

The Labor Code requires employers to comply with both procedural and substantive due process
in dismissing employees. Agabon v. National Labor Relations Commission discussed these rules
and enumerated the four possible situations considering these rules:
Dismissals based on just causes contemplate acts or omissions attributable to the employee while
dismissals based on authorized causes involve grounds under the Labor Code that allow the
employer to terminate employees. A termination for an authorized cause requires payment of
separation pay. When the termination of employment is declared illegal, reinstatement and full
back – wages are mandated under Article 279 (now 294). If reinstatement is no longer possible
where the dismissal was unjust, separation pay may be granted.
Procedurally, (1) if the dismissal is based on a just cause under Article 282 (now 297), the
employer must give the employee two written notices and a hearing or opportunity to be heard if
requested by the employee before terminating the employment: a notice specifying the grounds
for which dismissal is sought a hearing or an opportunity to be heard and after hearing or
opportunity to be heard, a notice of the decision to dismiss; and (2) if the dismissal is based on
authorized causes under Articles 283 (now 298) and 284 (now 299), the employer must give the
employee and the Department of Labor and Employment written notices 30 days prior to the
effective date of his separation.
From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just
cause under Article 282 of the Labor Code, for an authorized cause under Article 283, or for
health reasons under Article 284, and due process was observed; (2) the dismissal is without just
or authorized cause but due process was observed; (3) the dismissal is without just or authorized
cause and there was no due process; and (4) the dismissal is for just or authorized cause but due
process was not observed.
In the first situation, the dismissal is undoubtedly valid and the employer will not suffer any
liability.
In the second and third situations where the dismissals are illegal, Article 279 mandates that the
employee is entitled to reinstatement without loss of seniority rights and other privileges and full
back – wages, inclusive of allowances, and other benefits or their monetary equivalent computed
from the time the compensation was not paid up to the time of actual reinstatement.
In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot be
cured, it should not invalidate the dismissal. However, the employer should be held liable for
non-compliance with the procedural requirements of due process.
Agabon focused on the fourth situation when dismissal was for just or authorized cause, but due
process was not observed. Agabon involved a dismissal for just cause, and this court awarded P
30,000.00 as nominal damages for the employer's non-compliance with statutory due process.
Jaka Food Processing Corporation v. Pacot involved a dismissal for authorized cause, and this
court awarded P 50,000.00 as nominal damages for the employer's non-compliance with
statutory due process. The difference in amounts is based on the difference in dismissal ground.
Nevertheless, this court has sound discretion in determining the amount based on the relevant
circumstances. In De Jesus v. Aquino, this court awarded P 50,000.00 as nominal damages albeit
the dismissal was for just cause. (Zenaida Paz v. Northern Tobacco Redrying Co., Inc., G.R. No.
199554, February 18, 2015)

Fact of Dismissal Must First Established by the Employee

Fair evidentiary rule dictates that before employers are burdened to prove that they did not
commit illegal dismissal, it is incumbent upon the employee to first establish by substantial
evidence the fact of his or her dismissal. The Court is not unmindful of the rule in labor cases
that the employer has the burden of proving that the termination was for a valid or authorized
cause. It is likewise incumbent upon the employees, however, that they should first establish by
competent evidence the fact of their dismissal from employment. It is an age-old rule that the one
who alleges a fact has the burden of proving it and the proof should be clear, positive and
convincing. Mere allegation is not evidence. (Dionarto Q. Noblejas v. Italian Maritime Academy
Phils., G.R. No. 207888, June 9, 2014.)

Quantum of Evidence Required

It is true that every person is entitled to be presumed innocent of wrongdoing. The objective of
the presumption has been to lay the burden of proof on the shoulders of the alleger of
wrongdoing. The presumption extends to the petitioner and to every other employee charged
with any wrongdoing that may cause them to be sanctioned, including being dismissed from
employment. But the presumption, which is disputable, by no means excuses the employee
charged with wrongdoing from answering and defending herself once the presumption has been
overcome by a showing to the contrary. The failure of the employee to rebut or disprove the
proof of wrongdoing then establishes the charge against her. This is especially true in a case for
dismissal grounded on loss of confidence or breach of trust, in which the employer may proceed
to dismiss the erring employee once the employer becomes morally convinced that she was
guilty of a breach of trust and confidence. Based on the record, the petitioner did not sufficiently
contradict or rebut the charge of dishonesty. (Rosalie L. Gargoles v. Reylita S. Del Rosario, G.R.
No. 158583, September 10, 2014)

Burden of Proof
The rule is long and well settled that, in illegal dismissal cases like the one at bench, the burden
of proof is upon the employer to show that the employee's termination from service is for a just
and valid cause. The employer's case succeeds or fails on the strength of its evidence and not the
weakness of that adduced by the employee, in keeping with the principle that the scales of justice
should be tilted in favor of the latter in case of doubt in the evidence presented by them. Often
described as more than a mere scintilla, the quantum of proof is substantial evidence which is
understood as such relevant evidence as a reasonable mind might accept as adequate to support a
conclusion, even if other equally reasonable minds might conceivably opine otherwise.
(Hacienda Leddy/Ricardo Gamboas, Jr. v. Paquito Villegas, G.R. No. 179654, September 22,
2014)

Resolved the Doubt in Favor of Labor

It is not a mere jurisprudential principle, but an enshrined provision of law, that all doubts shall
be resolved in favor of labor. Thus, in Article 4 of the Labor Code, as amended, "all doubts in the
implementation and interpretation of the provisions of the Labor Code, including its
implementing rules and regulations, shall be resolved in favor of labor." In Article 1702 of the
New Civil Code, a similar provision states that in case of doubt, all labor legislation and all labor
contracts shall be construed in favor of the safety and decent living for the laborer. Applying
these provisions of law to the circumstances in the case at bar, it is not fair for this Court to allow
an ambiguous policy to prejudice the rights of an employee against illegal dismissal. To hold
otherwise and sustain the stance of petitioner corporation would be to adopt an interpretation that
goes against the very grain of labor protection in this jurisdiction. As correctly stated by the
Labor Arbiter, "when a conflicting interest of labor and capital are weighed on the scales of
social justice, the heavier influence of the latter must be counter – balanced by the sympathy and
compassion the law must accord the underprivileged worker." (Mirant (Philippines) Corporation
and Edgardo A. Bautista v. Joselito A. Caro, G.R. No. 181490, April 23, 2014.)

Compassionate Justice is not Available in Termination of an Employee Grounded

Upon Just and Valid Cause

The issue of whether a validly dismissed employee is entitled to separation pay has been settled
in the 2007 case of Toyota Motor Philippines Corporation Workers Association (TMPCWA) v.
NLRC, where it was further clarified that "in addition to serious misconduct, in dismissals based
on other grounds under Art. 282 like willful disobedience, gross and habitual neglect of duty,
fraud or willful breach of trust, and commission of a crime against the employer or his family,
separation pay should not be conceded to the dismissed employee."
This ruling was reiterated in the case of Central Philippines Bandag Retreaders, Inc. v. Diasnes,
where the Court set aside the award of separation pay to Diasnes in view of the latter's gross and
habitual negligence. To quote:
To reiterate our ruling in Toyota, labor adjudicatory officials and the CA must demur the award
of separation pay based on social justice when an employee's dismissal is based on serious
misconduct or willful disobedience; gross and habitual neglect of duty; fraud or willful breach of
trust; or commission of a crime against the person of the employer or his immediate family —
grounds under Art. 282 of the Labor Code that sanction dismissals of employees. They must be
most judicious and circumspect in awarding separation pay or financial assistance as the
constitutional policy to provide full protection to labor is not meant to be an instrument to
oppress the employers. The commitment of the Court to the cause of labor should not embarrass
us from sustaining the employers when they are right, as here. In fine, we should be more
cautious in awarding financial assistance to the undeserving and those who are unworthy of the
liberality of the law.
Again, in the recent case entitled Moya v. First Solid Rubber Industries, Inc., the Court
disallowed the payment of separation pay to an employee dismissed from work based on one of
the grounds under Article 282 of the Labor Code or willful breach by the employee of the trust
reposed in him by his employer. Therein, the Court held that Moya's act of concealing the truth
from the company is outside of the protective mantle of the principle of social justice.
(Immaculate Conception Academy v. Evelyn Camilon, G.R. No. 188035, July 2, 2014)

Prescription of Action

Settled is the rule that when one is arbitrarily and unjustly deprived of his job or means of
livelihood, the action instituted to contest the legality of one's dismissal from employment
constitutes, in essence, an action predicated upon an injury to the rights of the plaintiff, as
contemplated under Article 1146 of the New Civil Code, which must be brought within four
years. (Onofre V. Montero et al v. Times Transportation Company et al, G.R. No. 190828.
March 16, 2015.)

Serious Misconduct and Willful Disobedience [Article 297 (a)]

Serious Misconduct

Misconduct Defined, Explained:

Misconduct is defined as improper and wrongful conduct. It is the transgression of some

established and definite rule of action, a forbidden act, a dereliction of duty, willful in character,
and implies wrongful intent and not mere error in judgment. Of course, ordinary misconduct
would not justify the termination of the services of an employee. The law is explicit that the
misconduct should be serious. It is settled that in order for misconduct to be serious, it must be of
such grave and aggravated character and not merely trivial or unimportant. As amplified by
jurisprudence, the misconduct must (1) be serious; (2) relate to the performance of the
employee's duties; and (3) show that the employee has become unfit to continue working for the
employer.
Under Article 282 of the Labor Code, the misconduct, to be just cause for termination, must be
serious. This implies that it must be of such grave and aggravated character and not merely
trivial or unimportant. Examples of serious misconduct justifying termination, as held in some of
our decisions, include: sexual harassment (the manager's acts of fondling the hands, massaging
the shoulder and caressing the nape of the secretary); fighting within company premises, uttering
obscene, insulting or offensive words against a superior; misrepresenting that a student is his
nephew and pressuring and intimidating a co-teacher to change a student's failing grade to
passing.
The Court recognizes the right of the employers to discipline its employees for serious violations
of company rules after affording the latter due process and if the evidence warrants. Such right,
however, should be exercised in consonance with sound discretion putting into mind the basic
elements of justice and fair play. (Colegio De San Juan De Letran – Calamba v. Engr. Deborah
P. Tardeo, , G.R. No. 190303, July 9, 2014)

The law and jurisprudence guarantee to every employee security of tenure. This textual and the
ensuing jurisprudential commitment to the cause and welfare of the working class proceed from
the social justice principles of the Constitution that the Court zealously implements out of its
concern for those with less in life. Thus, the Court will not hesitate to strike down as invalid any
employer act that attempts to undermine workers' tenurial security. All these the State undertakes
under Article 279 (now Article 293) of the Labor Code that bar an employer from terminating
the services of an employee, except for just or authorized cause and upon observance of due
process.
In protecting the rights of the workers, the law, however, does not authorize the oppression or
self-destruction of the employer. The constitutional commitment to the policy of social justice
cannot be understood to mean that every labor dispute shall automatically be decided in favor of
labor. The constitutional and legal protection equally recognize the employer's right and
prerogative to manage its operation according to reasonable standards and norms of fair play.
Accordingly, except as limited by special law, an employer is free to regulate, according to his
own judgment and discretion, all aspects of employment, including hiring, work assignments,
working methods, time, place and manner of work, tools to be used, processes to be followed,
supervision of workers, working regulations, transfer of employees, worker supervision, layoff
of workers and the discipline, dismissal and recall of workers. As a general proposition, an
employer has free reign over every aspect of its business, including the dismissal of his
employees as long as the exercise of its management prerogative is done reasonably, in good
faith, and in a manner not otherwise intended to defeat or circumvent the rights of workers.
Misconduct is defined as an improper or wrong conduct. It is a transgression of some established
and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies
wrongful intent and not mere error in judgment. To constitute a valid cause for the dismissal
within the text and meaning of Article 282 of the Labor Code, the employee's misconduct must
be serious, i.e., of such grave and aggravated character and not merely trivial or unimportant.
Additionally, the misconduct must be related to the performance of the employee's duties
showing him to be unfit to continue working for the employer. Further, and equally important
and required, the act or conduct must have been performed with wrongful intent.
Dismissal situations (on the ground of serious misconduct) involving sexual acts, particularly
sexual intercourse committed by employees inside company premises and during work hours, are
not usual violations and are not found in abundance under jurisprudence. Thus, in resolving the
present petition, we are largely guided by the principles we discussed above, as applied to the
totality of the circumstances that surrounded the petitioners' dismissal.
Sexual acts and intimacies between two consenting adults belong, as a principled ideal, to the
realm of purely private relations. Whether aroused by lust or inflamed by sincere affection,
sexual acts should be carried out at such place, time and circumstance that, by the generally
accepted norms of conduct, will not offend public decency nor disturb the generally held or
accepted social morals. Under these parameters, sexual acts between two consenting adults do
not have a place in the work environment.
Indisputably, the respondents engaged in sexual intercourse inside company premises and during
work hours. These circumstances, by themselves, are already punishable misconduct. Added to
these considerations, however, is the implication that the respondents did not only disregard
company rules but flaunted their disregard in a manner that could reflect adversely on the status
of ethics and morality in the company.
Additionally, the respondents engaged in sexual intercourse in an area where co-employees or
other company personnel have ready and available access. The respondents likewise committed
their act at a time when the employees were expected to be and had, in fact, been at their
respective posts, and when they themselves were supposed to be, as all other employees had in
fact been, working. (IMASEN Philippine Manufacturing Corporation v. Ramonchito T. Alcon
and Joann S. Papa, G.R. No. 194884, October 22, 2014)
There is no doubt that the last two elements of misconduct were present in the case of Del
Rosario. The cause of her dismissal related to the performance of her duties as a flight attendant,
and she became unfit to continue working for Northwest. Remaining to be determined is,
therefore, whether the misconduct was serious as to merit Del Rosario's dismissal. In that respect,
the fight between her and Gamboa should be so serious that it entailed the termination of her
employment even if it was her first offense. Northwest insists that what transpired on May 18,
1998 between her and Gamboa was obviously a form of fight that it strictly prohibited, but Del
Rosario disputes this by contending that it was only an animated discussion between her and
Gamboa. She argues that as settled in American jurisprudence fight pertained to combat or battle,
like the hostile encounter or engagement between opposing forces, suggesting primarily the
notion of a brawl or unpremeditated encounter, or of a pugilistic combat; while argument was a
connected discourse based upon reason, or a course of reasoning tending and intended to
establish a position and to induce belief.
In several rulings where the meaning of fight was decisive, the Court has observed that the term
fight was considered to be different from the term argument. (Northwest Airlines, Inc. v. Ma.
Conception M. Del Rosario, G.R. No. 157633, September 10, 2014)
Negligence in keeping school or student records, or tampering with or falsification of the same
can neither be cured nor cossetted by compassion towards the students, because the means does
not justify the end. While respondent's motive for increasing the grades of certain students in the
Clean Records was not known or could have been noble, the fact is, unauthorized and improper
alterations were effected in the official records of petitioner, a clear violation of petitioner's
Elementary Faculty Manual as well as the Private School Manual adhered to by petitioners and
its faculties. Respondent is deemed to have exercised an unreasonable degree of discretion in
failing to provide a concrete basis for increasing the grades of certain students. For this,
respondent should be made to face the consequences of her actions. To tolerate such conduct will,
indeed, undermine the integrity of petitioner's grading system, and its standing as an academic
institution as well. (Colegio De San Juan De Letran v. Isidra Dela Rosa – Meris, G.R. No.
178837, September 1, 2014)
Theft committed by an employee against a person other than his employer, if proven by
substantial evidence, is a cause analogous to serious misconduct. Misconduct is improper or
wrong conduct, it is the transgression of some established and definite rule of action, a forbidden
act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in
judgment. The misconduct to be serious must be of such grave and aggravated character and not
merely trivial or unimportant. Such misconduct, however serious, must, nevertheless, be in
connection with the employee's work to constitute just cause for his separation.
But where there is no showing of a clear, valid and legal cause for termination of employment,
the law considers the case a matter of illegal dismissal. If doubts exist between the evidence
presented by the employer and that of the employee, the scales of justice must be tilted in favor
of the latter. The employer must affirmatively show rationally adequate evidence that the
dismissal was for a justifiable cause. (Hocheng Philippines Corporation v. Antonio M. Ferrales,
G.R. No. 211497, March 18, 2015)

The charge of drug abuse inside the company's premises and during working hours against
petitioner constitutes serious misconduct, which is one of the just causes for termination.
(Eduardo Bughaw, Jr. vs. Treasure Island Industrial Corp., G.R. No. 173151, March 28, 2008;
Belle Corp. vs. Arturo N. Macasusi, G.R. No. 168116, April 22, 2008)

The labor tribunals concluded that the petitioner's pregnancy out of wedlock, per se, is
"disgraceful and immoral" considering that she is employed in a Catholic educational institution.
In arriving at such conclusion, the labor tribunals merely assessed the fact of the petitioner's
pregnancy vis-à-vis the totality of the circumstances surrounding the same.
However, the Court finds no substantial evidence to support the aforementioned conclusion
arrived at by the labor tribunals. The fact of the petitioner's pregnancy out of wedlock, without
more, is not enough to characterize the petitioner's conduct as disgraceful or immoral. There
must be substantial evidence to establish that pre-marital sexual relations and, consequently,
pregnancy out of wedlock, are indeed considered disgraceful or immoral.
In Chua – Qua v. Clave,nthe Court stressed that to constitute immorality, the circumstances of
each particular case must be holistically considered and evaluated in light of the prevailing
norms of conduct and applicable laws. Otherwise stated, it is not the totality of the circumstances
surrounding the conduct per se that determines whether the same is disgraceful or immoral, but
the conduct that is generally accepted by society as respectable or moral. If the conduct does not
conform to what society generally views as respectable or moral, then the conduct is considered
as disgraceful or immoral. Tersely put, substantial evidence must be presented, which would
establish that a particular conduct, viewed in light of the prevailing norms of conduct, is
considered disgraceful or immoral.
Thus, the determination of whether a conduct is disgraceful or immoral involves a two-step
process: first, a consideration of the totality of the circumstances surrounding the conduct; and
second, an assessment of the said circumstances vis-à-vis the prevailing norms of conduct, i.e.,
what the society generally considers moral and respectable.
That the petitioner was employed by a Catholic educational institution per se does not absolutely
determine whether her pregnancy out of wedlock is disgraceful or immoral. There is still a
necessity to determine whether the petitioner's pregnancy out of wedlock is considered
disgraceful or immoral in accordance with the prevailing norms of conduct.
In Estrada, an administrative case against a court interpreter charged with disgraceful and
immoral conduct, the Court stressed that in determining whether a particular conduct can be
considered as disgraceful and immoral, the distinction between public and secular morality on
the one hand, and religious morality, on the other, should be kept in mind. That the distinction
between public and secular morality and religious morality is important because the jurisdiction
of the Court extends only to public and secular morality. The Court further explained that:
The morality referred to in the law is public and necessarily secular, not religious. "Religious
teachings as expressed in public debate may influence the civil public order but public moral
disputes may be resolved only on grounds articulable in secular terms." Otherwise, if
government relies upon religious beliefs in formulating public policies and morals, the resulting
policies and morals would require conformity to what some might regard as religious programs
or agenda. The non-believers would therefore be compelled to conform to a standard of conduct
buttressed by a religious belief, i.e., to a "compelled religion," anathema to religious freedom.
Likewise, if government based its actions upon religious beliefs, it would tacitly approve or
endorse that belief and thereby also tacitly disapprove contrary religious or non-religious views
that would not support the policy. As a result, government will not provide full religious freedom
for all its citizens, or even make it appear that those whose beliefs are disapproved are second-
class citizens. Expansive religious freedom therefore requires that government be neutral in
matters of religion; governmental reliance upon religious justification is inconsistent with this
policy of neutrality.
In other words, government action, including its proscription of immorality as expressed in
criminal law like concubinage, must have a secular purpose. That is, the government proscribes
this conduct because it is "detrimental (or dangerous) to those conditions upon which depend the
existence and progress of human society" and not because the conduct is proscribed by the
beliefs of one religion or the other. Although admittedly, moral judgments based on religion
might have a compelling influence on those engaged in public deliberations over what actions
would be considered a moral disapprobation punishable by law. After all, they might also be
adherents of a religion and thus have religious opinions and moral codes with a compelling
influence on them; the human mind endeavors to regulate the temporal and spiritual institutions
of society in a uniform manner, harmonizing earth with heaven. Succinctly put, a law could be
religious or Kantian or Aquinian or utilitarian in its deepest roots, but it must have an articulable
and discernible secular purpose and justification to pass scrutiny of the religion clauses.
Accordingly, when the law speaks of immoral or, necessarily, disgraceful conduct, it pertains to
public and secular morality; it refers to those conducts which are proscribed because they are
detrimental to conditions upon which depend the existence and progress of human society. Thus,
in Anonymous v. Radam, an administrative case involving a court utility worker likewise
charged with disgraceful and immoral conduct, applying the doctrines laid down in Estrada, the
Court held that:
For a particular conduct to constitute "disgraceful and immoral" behavior under civil service laws, it must
be regulated on account of the concerns of public and secular morality. It cannot be judged based on
personal bias, specifically those colored by particular mores. Nor should it be grounded on "cultural"
values not convincingly demonstrated to have been recognized in the realm of public policy expressed in
the Constitution and the laws. At the same time, the constitutionally guaranteed rights (such as the right to
privacy) should be observed to the extent that they protect behavior that may be frowned upon by the
majority.

Under these tests, two things may be concluded from the fact that an unmarried woman gives
birth out of wedlock:
(1) if the father of the child is himself unmarried, the woman is not ordinarily administratively liable
for disgraceful and immoral conduct. It may be a not-so-ideal situation and may cause complications for
both mother and child but it does not give cause for administrative sanction. There is no law which
penalizes an unmarried mother under those circumstances by reason of her sexual conduct or proscribes
the consensual sexual activity between two unmarried persons. Neither does the situation contravene any
fundamental state policy as expressed in the Constitution, a document that accommodates various belief
systems irrespective of dogmatic origins.

(2) if the father of the child born out of wedlock is himself married to a woman other than the mother,
then there is a cause for administrative sanction against either the father or the mother. In such a case, the
"disgraceful and immoral conduct" consists of having extramarital relations with a married person. The
sanctity of marriage is constitutionally recognized and likewise affirmed by our statutes as a special
contract of permanent union. Accordingly, judicial employees have been sanctioned for their dalliances
with married persons or for their own betrayals of the marital vow of fidelity. (Cheryll Santos Leus v.
St. Scholastica’s College Westgrove et al., G.R. No. 187226, January 28, 2015)
Willful Disobedience

"Willful disobedience by the employee of the lawful orders of his employer or representative in
connection with his work" is one of the just causes to terminate an employee under Article 296 (a)
(formerly Article 282 [a]) of the Labor Code. In order for this ground to be properly invoked as a
just cause for dismissal, the conduct must be willful or intentional, willfulness being
characterized by a wrongful and perverse mental attitude. In Dongon v. Rapid Movers and
Forwarders Co., Inc., "willfulness" was described as "attended by a wrongful and perverse
mental attitude rendering the employee's act inconsistent with proper subordination."
It is well to stress that it is the employer who bears the burden of proving, through substantial
evidence, that the aforesaid just cause — or any other authorized cause for that matter — forms
the basis of the employee's dismissal from work. Failing in which, the dismissal should be
adjudged as illegal. (Joel N. Montallana v. LA Consolacion College Manila et al., G.R. No.
208890, December 8, 2014)
Wilful disobedience of the employer's lawful orders, as a just cause for dismissal of an employee,
envisages the concurrence of at least two requisites: (1) the employee's assailed conduct must
have been wilful, that is, characterized by a wrongful and perverse attitude; and (2) the order
violated must have been reasonable, lawful, made known to the employee and must pertain to the
duties which he had been engaged to discharge. (Juliet G. Apacible vs. Multimed Industries, Inc.,
et al., G.R. No. 178903, May 30, 2011, citing Bascon v. Court of Appeals, G.R. No. 144899,
February 5, 2004)

The concerned employees' refusal to submit themselves to drug test is a just cause for their
dismissal. An employer may terminate an employment on the ground of serious misconduct or
willful disobedience by the employee of the lawful orders of his employer or representative in
connection with his work. Willful disobedience requires the concurrence of two elements: (1) the
employee's assailed conduct must have been willful, that is, characterized by a wrongful and
perverse attitude; and, (2) the order violated must have been reasonable, lawful, made known to
the employee, and must pertain to the duties which he had been engaged to discharge. As to the
first element, that at no point did the dismissed employees deny Kingspoint Express' claim that
they refused to comply with the directive for them to submit to a drug test or, at the very least,
explain their refusal gives rise to the impression that their non-compliance is deliberate. The utter
lack of reason or justification for their insubordination indicates that it was prompted by mere
obstinacy, hence, willful and warranting of dismissal. As to the second element, no belabored
and extensive discussion is necessary to recognize the relevance of the subject order in the
performance of their functions as drivers of Kingspoint Express. As the NLRC correctly pointed
out, drivers are indispensable to Kingspoint Express' primary business of rendering door-to-door
delivery services. It is common knowledge that the use of dangerous drugs has adverse effects on
driving abilities that may render the dismissed employees incapable of performing their duties to
Kingspoint Express and acting against its interests, in addition to the threat they pose to the
public. (KAKAMPI and Its Members, et al. vs. Kingspoint Express and Logistic, et al., G.R. No.
194813, April 25, 2012)

An employer has the right to require the performance of overtime service in any of the situations
contemplated under Article 89 of the Labor Code and an employee's non-compliance is willful
disobedience. Thus:

For willful disobedience to be a valid cause for dismissal, these two elements must concur: (1) the
employee's assailed conduct must have been willful, that is, characterized by a wrongful and perverse
attitude; and (2) the order violated must have been reasonable, lawful, made known to the employee, and
must pertain to the duties which he had been engaged to discharge.

In the present case, there is no question that petitioners' order for respondent to render overtime
service to meet a production deadline complies with the second requisite. Art. 89 of the Labor
Code empowers the employer to legally compel his employees to perform overtime work against
their will to prevent serious loss or damage. (Billy M. Realda vs. New Age Graphics, Inc., et al.,
G.R. No. 192190, April 25, 2012 citing R.B. Michael Press vs. Galit, G.R. No. 153510, February
13, 2008)

Gross and Habitual Neglect [Article 297 (b)]

As we already held, gross inefficiency is closely related to gross neglect because both involve
specific acts of omission resulting in damage to another. Gross neglect of duty or gross
negligence refers to negligence characterized by the want of even slight care, acting or omitting
to act in a situation where there is a duty to act, not inadvertently but willfully and intentionally,
with a conscious indifference to consequences insofar as other persons may be affected. (Dr.
Phylis C. Rio v. Colegio De Sta. Rosa – Makati , G.R. No. 189629, August 6, 2014)
Abandonment constitutes a just cause for dismissal because "the law in protecting the rights of
the laborer authorizes neither oppression nor self-destruction of the employer." The employer
cannot be compelled to maintain an employee who is remiss in fulfilling his duties to the
employer, particularly the fundamental task of reporting to work.
In Agabon v. National Labor Relations Commission, this court discussed the concept of
abandonment:
Abandonment is the deliberate and unjustified refusal of an employee to resume his employment.
It is a form of neglect of duty, hence, a just cause for termination of employment by the
employer. For a valid finding of abandonment, these two factors should be present: (1) the
failure to report for work or absence without valid or justifiable reason; and (2) a clear intention
to sever employer-employee relationship, with the second as the more determinative factor
which is manifested by overt acts from which it may be deduced that the employees has [sic] no
more intention to work. The intent to discontinue the employment must be shown by clear proof
that it was deliberate and unjustified.
The burden to prove whether the employee abandoned his or her work rests on the employer.
Thus, it is incumbent upon petitioner to prove the two (2) elements of abandonment. First,
petitioner must provide evidence that respondent failed to report to work for an unjustifiable
reason. Second, petitioner must prove respondent's overt acts showing a clear intention to sever
his ties with petitioner as his employer.
The first element of abandonment is the failure of the employee to report to work without a valid
and justifiable reason. Petitioner asserts that respondent failed to report for work immediately
after his release from prison. He also failed to abide by company procedure and report to his
immediate superior. According to petitioner, respondent's actions constitute a failure to report to
work without a valid and justifiable reason.
The National Labor Relations Commission and the Court of Appeals found that respondent's
failure to return to work was justified because of his detention and its adverse effects. The Court
of Appeals found that petitioner did not refute the allegation that respondent, while in the
custody of the police, suffered physical violence in the hands of its employees. Thus, the Court
of Appeals gave credence to the report submitted by Inspector Escartin, which stated that
respondent was "so traumatized that he actually asked to remain in the custody of the police
because he feared for his life." The Court of Appeals further found that respondent experienced
intense fear, "manifested by the fact that he left the custody of the police only when his mother
accompanied him."
Thus, the intervening period when respondent failed to report for work, from respondent's prison
release to the time he actually reported for work, was justified. Since there was a justifiable
reason for respondent's absence, the first element of abandonment was not established.
(Protective Maximum Security Agency, Inc. v. Celso E. Fuentes, G.R. No. 169303. February 11,
2015)
To constitute abandonment of work, two elements must concur: "(1) the employee must have
failed to report for work or must have been absent without valid or justifiable reason; and (2)
there must have been a clear intention on the part of the employee to sever the employer-
employee relationship manifested by some overt act." The employee's absence must be
accompanied by overt acts that unerringly point to the employee's clear intention to sever the
employment relationship. And, to successfully invoke abandonment, whether as a ground for
dismissing an employee or as a defense, the employer bears the burden of proving the
employee's unjustified refusal to resume his employment. Mere absence of the employee is not
enough. (Diamond Taxi and/or Bryan Ong v. Felipe Llamas, Jr. G.R. No. 190724, March 12,
2014.)

Habitual neglect implies repeated failure to perform one's duties for a period of time. The
employee’s repeated acts of absences without leave and her frequent tardiness reflect her
indifferent attitude to and lack of motivation in her work. Her repeated and habitual infractions,
committed despite several warnings, constitute gross misconduct. Habitual absenteeism without
leave constitutes gross negligence and is sufficient to justify termination of an employee.

Her repeated negligence is not tolerable; neither should it merit the penalty of suspension only.
The record of an employee is a relevant consideration in determining the penalty that should be
meted out. An employee's past misconduct and present behavior must be taken together in
determining the proper imposable penalty. The totality of infractions or the number of violations
committed during the period of employment shall be considered in determining the penalty to be
imposed upon an erring employee. The offenses committed by him should not be taken singly
and separately but in their totality. Fitness for continued employment cannot be
compartmentalized into tight little cubicles of aspects of character, conduct, and ability separate
and independent of each other. It is the totality, not the compartmentalization, of such company
infractions that she had consistently committed which justified her dismissal. (Challenge Socks
Corp. vs. CA, G.R. No. 165268, November 8, 2005)

The act of the master of a fishing vessel in delegating his duties to another then leaving the
vessel to seek medical emergency treatment cannot be the gross neglect of duty contemplated by
the law to warrant dismissal. And although he had in two previous occasions disembarked from
the vessel despite instruction that he should do so only after certain things have been completed,
these cannot render the neglect habitual since he had already been adequately penalized for the
same. Finally, the master’s service for 24 years makes the penalty of dismissal disproportionate
to the gravity of the offense committed. (Ting vs. CA, G.R. No. 146174, July 12, 2006)

For abandonment to exist, two factors must be present: (1) the failure to report for work or
absence without a valid or justifiable reason; and (2) a clear intention to sever the employer –
employee relationship, with the second element as the more determinative factor being
manifested by some overt acts. Abandonment is a matter of intention and cannot lightly be
inferred or legally presumed from certain equivocal acts. For abandonment to be appreciated,
there must be a "clear, willful, deliberate, and unjustified refusal of the employee to resume
employment." Here, the mere fact that [respondent] asked for separation pay, after she was told
to no longer report for work, does not reflect her intention to leave her job. She is merely
exercising her option under Article 279 of the Labor Code, which entitles her to either
reinstatement and back wages or payment of separation pay. (Tegimenta Chemical Phils., et al.
vs. Mary Anne Oco, G.R. No. 175369, February 27, 2013)

Abandonment is a form of neglect of duty, one of the just causes for an employer to terminate an
employee. It is a hornbook precept that in illegal dismissal cases, the employer bears the burden
of proof. For a valid termination of employment on the ground of abandonment, the employer
must prove, by substantial evidence, the concurrence of the employee's failure to report for work
for no valid reason and his categorical intention to discontinue employment. (Ma. Melissa A.
Galang vs. Julia Malasugui, G.R. No. 174173, March 7, 2012)

In Gustilo v. Wyeth Philippines, Inc., we held that a series of irregularities when put together
may constitute serious misconduct. We also held that gross neglect of duty becomes serious in
character due to frequency of instances. (Arsenio S. Quiambao vs. Manila Electric Company,
G.R. No. 171023, December 18, 2009)

Fraud or willful breach of trust [Article 297 (c)]

It need not be stressed that the nature or extent of the penalty imposed on an erring employee
must be commensurate to the gravity of the offense as weighed against the degree of
responsibility and trust expected of the employee's position. On the other hand, the respondent is
not just charged with a misdeed, but with loss of trust and confidence under Article 282 (c) of the
Labor Code, a cause premised on the fact that the employee holds a position whose functions
may only be performed by someone who enjoys the trust and confidence of management.
Needless to say, such an employee bears a greater burden of trustworthiness than ordinary
workers, and the betrayal of the trust reposed is the essence of the loss of trust and confidence
that is a ground for the employee's dismissal.
There are two classes of corporate positions of trust: on the one hand are the managerial
employees whose primary duty consists of the management of the establishment in which they
are employed or of a department or a subdivision thereof, and other officers or members of the
managerial staff; on the other hand are the fiduciary rank-and-file employees, such as cashiers,
auditors, property custodians, or those who, in the normal exercise of their functions, regularly
handle significant amounts of money or property. These employees, though rank-and-file, are
routinely charged with the care and custody of the employer's money or property, and are thus
classified as occupying positions of trust and confidence.
In order that an employer may invoke loss of trust and confidence in terminating an employee
under Article 282 (c) of the Labor Code, certain requirements must be complied with, namely: (1)
the employee must be holding a position of trust and confidence; and (2) there must be an act
that would justify the loss of trust and confidence. While loss of trust and confidence should be
genuine, it does not require proof beyond reasonable doubt, it being sufficient that there is some
basis to believe that the employee concerned is responsible for the misconduct and that the
nature of the employee's participation therein rendered him unworthy of trust and confidence
demanded by his position.
Furthermore, it must also be stressed that only substantial evidence is required in order to
support a finding that an employer's trust and confidence accorded to its employee had been
breached. (P.J. Lhuillier, Inc. v. Flordeliz Velayo, G.R. No. 198620, November 12, 2014)
Furthermore, it goes without saying that the record of an employee is a relevant consideration in
determining the penalty that should be meted out on him. As correctly argued by petitioner,
fitness for continued employment cannot be compartmentalized into tight little cubicles of
aspects of character, conduct and ability separate and independent of each other. Thus, we cannot
oblige petitioner to disregard altogether Quebral's previous violations when determining the
penalty to be imposed on him for his latest offense as if it was the first time he violated company
rules. Moreover, Quebral has no vested right to petitioner's compassion. Just because petitioner
was compassionate to him numerous times in the past when he violated company rules does not
give him the right to demand the same compassion this time on the ground of social justice. As
this Court ruled, social justice and equity are not magical formulas to erase the unjust acts
committed by the employee against his employer.
This Court, likewise, does not subscribe to respondent's argument that since there is no showing
that the offense had prejudiced the operations of petitioner as there are no records of damage
sustained by the latter he does not deserve to be dismissed from employment. A company has the
right to dismiss its employees as a measure of self-protection. It need not wait for it to suffer
actual damage or loss before it can rightfully dismiss an employee who it has already found to
have been dishonest. The fact that petitioner did not suffer losses from the dishonesty of the
respondent does not excuse the latter from any culpability. Whether he has already settled the
amount he was supposed to pay for parking if not for the validated parking tickets is of no
consequence. The fact remains that he was dishonest in the performance of his duties that is a
valid ground for termination of employment. (St. Luke’s Medical Center v. Daniel Quebral and St.
Luke’s Medical Center Employees’ Association – Alliance of Filipino Workers (SLMCEA – AFW), G.R.
No. 193324, July 23, 2014)

To summarize, the first requisite is that the employee concerned must be one holding a position
of trust and confidence, thus, one who is either: (1) a managerial employee; or (2) a fiduciary
rank-and-file employee, who, in the normal exercise of his or her functions, regularly handles
significant amounts of money or property of the employer. The second requisite is that the loss
of confidence must be based on a willful breach of trust and founded on clearly established facts.
In Lima Land, Inc. v. Cuevas, We discussed the difference between the criteria for determining
the validity of invoking loss of trust and confidence as a ground for terminating a managerial
employee on the one hand and a rank-and-file employee on the other. In the said case, We held
that with respect to rank-and-file personnel, loss of trust and confidence, as ground for valid
dismissal, requires proof of involvement in the alleged events in question, and that mere
uncorroborated assertions and accusations by the employer would not suffice. With respect to a
managerial employee, the mere existence of a basis for believing that such employee has
breached the trust of his employer would suffice for his dismissal. The following excerpts from
Lima Land are instructive:
As firmly entrenched in our jurisprudence, loss of trust and confidence, as a just cause for
termination of employment, is premised on the fact that an employee concerned holds a position
where greater trust is placed by management and from whom greater fidelity to duty is
correspondingly expected. This includes managerial personnel entrusted with confidence on
delicate matters, such as the custody, handling, or care and protection of the employer's property.
The betrayal of this trust is the essence of the offense for which an employee is penalized.
It must be noted, however, that in a plethora of cases, this Court has distinguished the treatment
of managerial employees from that of rank-and-file personnel, insofar as the application of the
doctrine of loss of trust and confidence is concerned. Thus, with respect to rank-and-file
personnel, loss of trust and confidence, as ground for valid dismissal, requires proof of
involvement in the alleged events in question, and that mere uncorroborated assertions and
accusations by the employer will not be sufficient. But as regards a managerial employee, the
mere existence of a basis for believing that such employee has breached the trust of his employer
would suffice for his dismissal. Hence, in the case of managerial employees, proof beyond
reasonable doubt is not required, it being sufficient that there is some basis for such loss of
confidence, such as when the employer has reasonable ground to believe that the employee
concerned is responsible for the purported misconduct, and the nature of his participation therein
renders him unworthy of the trust and confidence demanded of his position.
On the other hand, loss of trust and confidence as a ground of dismissal has never been intended
to afford an occasion for abuse because of its subjective nature. It should not be used as a
subterfuge for causes that are illegal, improper, and unjustified. It must be genuine, not a mere
afterthought intended to justify an earlier action taken in bad faith. Let it not be forgotten that
what is at stake is the means of livelihood, the name, and the reputation of the employee. To
countenance an arbitrary exercise of that prerogative is to negate the employee's constitutional
right to security of tenure. (Wesleyan University Philippines v. Nowella Reyes, G.R. No. 208321,
July 30, 2014)

Loss of confidence applies to situations where the employee is routinely charged with the care
and custody of employer's money or property. "If the employees are cashiers, managers,
supervisors, salesmen or other personnel occupying positions of responsibility, the employer's
loss of trust and confidence in said employees may justify termination of their employment."
(Jesus E. Dycoco, Jr. vs. Equitable PCI Bank, et al., G.R. No. 188271, August 16, 2010)

As provided in Article 282 of the Labor Code and as firmly entrenched in jurisprudence, an
employer has the right to dismiss an employee by reason of willful breach of the trust and
confidence reposed in him. To temper the exercise of such prerogative and to reconcile the same
with the employee's constitutional guarantee of security of tenure, the law imposes the burden of
proof upon the employer to show that the dismissal of the employee is for just cause failing
which would mean that the dismissal is not justified. Proof beyond reasonable doubt is not
necessary but the factual basis for the dismissal must be clearly and convincingly established.
Further, the law mandates that before validity can be accorded to a dismissal premised on loss of
trust and confidence, two requisites must concur, viz.: (1) the employee concerned must be
holding a position of trust; and (2) the loss of trust must be based on willful breach of trust
founded on clearly established facts. (Rolando DS. Torres vs. Rural Bank of San Juan, Inc., et al.,
G.R. No. 184520, March 13, 2013)
Loss of trust and confidence as a ground for dismissal has never been intended to afford an
occasion for abuse because of its subjective nature. It should not be used as a subterfuge for
causes that are illegal, improper and unjustified. It must be genuine, not a mere afterthought
intended to justify an earlier action taken in bad faith. (Rolando DS. Torres vs. Rural Bank of
San Juan, Inc., et al., G.R. No. 184520, March 13, 2013)

We have held that there are two (2) classes of positions of trust — the first class consists of
managerial employees, or those vested with the power to lay down management policies; and the
second class consists of cashiers, auditors, property custodians or those who, in the normal and
routine exercise of their functions, regularly handle significant amounts of money or property.
(Dolores T. Esguerra vs. Valle Verde Country Club, Inc., et al., G.R. No. 173012, June 13, 2012
citing Bristol Myers Squibb (Phils.), Inc. vs. Baban, G.R. No. 167449, December 17, 2008)

The employer's case succeeds or fails on the strength of its evidence and not on the weakness of
the employee's defense. If doubt exists between the evidence presented by the employer and the
employee, the scales of justice must be tilted in favor of the latter. Moreover, the quantum of
proof required in determining the legality of an employee's dismissal is only substantial evidence
or such relevant evidence as a reasonable mind might accept as adequate to support a conclusion,
even if other minds, equally reasonable, might conceivably opine otherwise. Thus, it is
incumbent upon petitioners to prove by substantial evidence that valid grounds exist for
terminating respondent's employment on the ground of loss of trust and confidence. However,
our review of the records of this case reveals that the CA correctly held that petitioners failed to
discharge this burden.

To our mind, the failure to reach the monthly sales quota cannot be considered an intentional and
unjustified act of respondent amounting to a willful breach of trust on his part that would call for
his termination based on loss of confidence. This is simply not the willful breach of trust and
confidence contemplated in Article 282 (c) of the Labor Code. Indeed, the low sales performance
could be attributed to several factors which are beyond respondent's control. To be a valid
ground for an employee's dismissal, loss of trust and confidence must be based on a willful
breach. To repeat, a breach is willful if it is done intentionally, knowingly and purposely, without
justifiable excuse. (Norkis Distributors, Inc., et al. vs. Delfin S. Descallar, G.R. No. 185255,
March 14, 2012)

The employers have a right to impose a penalty of dismissal on employees by reason of loss of
trust and confidence. More so, in the case of supervisors or personnel occupying positions of
responsibility, does loss of trust justify termination. Loss of confidence as a just cause for
termination of employment is premised on the fact that an employee concerned holds a position
of trust and confidence. This situation holds where a person is entrusted with confidence on
delicate matters, such as the custody, handling, or care and protection of the employer's property.
But, in order to constitute a just cause for dismissal, the act complained of must be "work-
related" such as would show the employee concerned to be unfit to continue working for the
employer. (Moya v. First Solid Rubber Industries, Inc., G.R. No. 184011, September 18, 2013,
citing The Coca-Cola Export Corp. v. Gacayan, G.R. No. 149433, June 22, 2011)
The test of "supervisory" or "managerial status" depends on whether a person possesses authority
to act in the interest of his employer and whether such authority is not merely routinary or
clerical in nature, but requires the use of independent judgment. (Clientlogic Phil., Inc., et al. vs.
Benedict Castro, G.R. No. 186070, April 11, 2011)

The doctrine of loss of confidence requires the concurrence of the following: (1) loss of
confidence should not be simulated; (2) it should not be used as a subterfuge for causes which
are improper, illegal, or unjustified; (3) it may not be arbitrarily asserted in the face of
overwhelming evidence to the contrary; (4) it must be genuine, not a mere afterthought to justify
an earlier action taken in bad faith; and (5) the employee involved holds a position of trust and
confidence.

Loss of confidence, as a just cause for termination of employment, is premised on the fact that
the employee concerned holds a position of responsibility, trust and confidence. He must be
invested with confidence on delicate matters, such as the custody, handling, care, and protection
of the employer's property and/or funds. In order to constitute a just cause for dismissal, the act
complained of must be "work-related" such as would show the employee concerned to be unfit to
continue working for the employer. (Rolando P. Ancheta vs. Destiny Financial Plans, Inc., et al.,
G.R. No. 179702, February 16, 2010)

Other Causes Analogous to Article 297 (a), (b) and (c)

An employee who cannot get along with his co-employees is detrimental to the company for he
can upset and strain the working environment. Without the necessary teamwork and synergy, the
organization cannot function well. Thus, management has the prerogative to take the necessary
action to correct the situation and protect its organization. When personal differences between
employees and management affect the work environment, the peace of the company is affected.
Thus, an employee's attitude problem is a valid ground for his termination. It is a situation
analogous to loss of trust and confidence that must be duly proved by the employer. Similarly,
compliance with the twin requirement of notice and hearing must also be proven by the employer.

But the employee's supposed “attitude problem” must be shown by clear and convincing
evidence. The mere mention of negative feedback from the employee's team members is not
sufficient proof of her attitude problem. And her failure to refute the employer's allegation of her
negative attitude does not amount to admission. (Heavylift Manila vs. CA, G.R. No. 154410,
October 20, 2005)

A cause analogous to serious misconduct is a voluntary and/or willful act or omission attesting to
an employee's moral depravity. Theft committed by an employee against a person other than his
employer, if proven by substantial evidence, is a cause analogous to serious misconduct. (John
Hancock Life Insurance Corp., et al. vs. Joanna Cantre Davis, G.R. No. 169549, September 3,
2008)

Failure to observe prescribed standards of work, or to fulfill reasonable work assignments due to
inefficiency may constitute just cause for dismissal. Such inefficiency is understood to mean
failure to attain work goals or work quotas, either by failing to complete the same within the
allotted reasonable period, or by producing unsatisfactory results. As the operator of Graphics,
Inc.'s printer, he is mandated to check whether the colors that would be printed are in accordance
with the client's specifications and for him to do so, he must consult the General Manager and
the color guide used by Graphics, Inc. before making a full run. Unfortunately, he failed to
observe this simple procedure and proceeded to print without making sure that the colors were at
par with the client's demands. This resulted to delays in the delivery of output, client
dissatisfaction, and additional costs on Graphics, Inc.'s part. (Billy M. Realda vs. New Age
Graphics, Inc., et al., G.R. No. 192190, April 25, 2012)

In fine, an employee's failure to meet sales or work quotas falls under the concept of gross
inefficiency, which in turn is analogous to gross neglect of duty that is a just cause for dismissal
under Article 282 of the Code. However, in order for the quota imposed to be considered a valid
productivity standard and thereby validate a dismissal, management's prerogative of fixing the
quota must be exercised in good faith for the advancement of its interest. (Armando Aliling vs.
Jose B. Feliciano, et al., G.R. No. 185829, April 25, 2012)

Article 298 (formerly 283) – Closure of Establishment and Reduction of Personnel

Redundancy and Retrenchment Distinguished

In the case of Eugene S. Arabit et al. v. Jardine Pacific Finance, Inc., G.R. No. 181719,
April 21, 2014, the Supreme Court elucidated the distinction between redundancy and
retrenchment. It states:

The fact that they are found together in just one provision does not necessarily give rise to the
conclusion that the difference between them is immaterial. This Court has already ruled before
that retrenchment and redundancy are two different concepts; they are not synonymous; thus,
they should not be used interchangeably. The clear distinction between these two concepts was
discussed in Andrada, et al., v. NLRC, citing the case of Sebuguero v. NLRC, where this Court
clarified:

Redundancy exists where the services of an employee are in excess of what is reasonably demanded by
the actual requirements of the enterprise. A position is redundant where it is superfluous, and superfluity
of a position or positions may be the outcome of a number of factors, such as over hiring of workers,
decreased volume of business, or dropping of a particular product line or service activity previously
manufactured or undertaken by the enterprise.

Retrenchment, on the other hand, is used interchangeably with the term "lay-off." It is the termination of
employment initiated by the employer through no fault of the employee's and without prejudice to the
latter, resorted to by management during periods of business recession, industrial depression, or
seasonal fluctuations, or during lulls occasioned by lack of orders, shortage of materials, conversion of
the plant for a new production program or the introduction of new methods or more efficient machinery,
or of automation. Simply put, it is an act of the employer of dismissing employees because of losses in the
operation of a business, lack of work, and considerable reduction on the volume of his business, a right
consistently recognized and affirmed by this Court.

Written Notice Requirement

With respect to Article 283 (now Article 298) of the Labor Code, the employer's failure to
comply with the notice requirement does not constitute a denial of due process but a mere failure
to observe a procedure for the termination of employment which makes the termination of
employment merely ineffectual. It is similar to the failure to observe the provisions of Article
1592, in relation to Article 1191 of the Civil Code in rescinding a contract for the sale of
immovable property. Under these provisions, while the power of a party to rescind a contract is
implied in reciprocal obligations, nonetheless, in cases involving the sale of immovable property,
the vendor cannot exercise this power even though the vendee defaults in the payment of the
price, except by bringing an action in court or giving notice of rescission by means of a notarial
demand. Consequently, a notice of rescission given in the letter of an attorney has no legal effect,
and the vendee can make payment even after the due date since no valid notice of rescission has
been given.

Indeed, under the Labor Code, only the absence of a just cause for the termination of
employment can make the dismissal of an employee illegal.

In sum, we hold that if in proceedings for reinstatement under Art. 283, it is shown that the
termination of employment was due to an authorized cause, then the employee concerned should
not be ordered reinstated even though there is failure to comply with the 30 – day notice
requirement. Instead, he must be granted separation pay in accordance with Art. 283. (Ruben
Serrano vs. NLRC, G.R. No. 117040, January 27, 2000)

It is required that to effect such termination of any employee, the employer must serve a written
notice on the workers and the DOLE at least one (1) month before the intended date thereof. The
purpose of such previous notice to DOLE must be to enable it to ascertain the verity of the cause
for termination of employment.

In case of termination due to the installation of labor-saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay
or to at least one (1) month pay for every year of service, which ever is higher. However, in case
of retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for
every year of service, whichever is higher. (International Hardware, Inc. vs. National Labor
Relations Commission, G.R. No. 80770, August 10, 1989)

Redundancy

Expounding on the above requirements of written notice and separation pay, this Court in Asian
Alcohol Corporation v. NLRC pronounced that for a valid implementation of a redundancy
program, the employer must comply with the following requisites: (1) written notice served on
both the employee and the DOLE at least one month prior to the intended date of termination; (2)
payment of separation pay equivalent to at least one month pay or at least one month pay for
every year of service, whichever is higher; (3) good faith in abolishing the redundant position;
and (4) fair and reasonable criteria in ascertaining what positions are to be declared redundant.
(SPI Technologies, Inc. and Lea Villanueva v. Victoria K. Mapua, G.R. No. 191154, April 7,
2014)

The general rule is that the characterization by an employer of an employee's services as no

longer necessary or sustainable is an exercise of business judgment on the part of the employer.
The wisdom or soundness of such characterization or decision is not, as a general rule, subject to
discretionary review on the part of the Labor Arbiter, the NLRC and the CA. Such
characterization may, however, be rejected if the same is found to be in violation of the law or is
arbitrary or malicious. (Lopez Sugar Corp. vs. Leonito Franco, G.R. No. 148195, May 16, 2005)

One of the recognized authorized causes for the termination of employment, redundancy exists
when the service capability of the workforce is in excess of what is reasonably needed to meet
the demands of the business enterprise. A redundant position is one rendered superfluous by any
number of factors, such as overhiring of workers, decreased volume of business, dropping of a
particular product line previously manufactured by the company or phasing out of service
activity priorly undertaken by the business. It has been held that the exercise of business
judgment to characterize an employee's service as no longer necessary or sustainable is not
subject to discretionary review where, as here, it is exercised there is no showing of violation of
the law or arbitrariness or malice on the part of the employer. An employer has no legal
obligation to keep more employees than are necessary for the operation of its business. (Nippon
Housing Phil., Inc., et al. vs. Maiah Angela Leynes, G.R. No. 177816, August 3, 2011)

Redundancy exists when the service capability of the workforce is in excess of what is
reasonably needed to meet the demands of the business enterprise. A position is redundant where
it is superfluous, and superfluity of a position or positions may be the outcome of a number of
factors such as over-hiring of workers, decrease in volume of business, or dropping a particular
product line or service activity previously manufactured or undertaken by the enterprise.
(Francisco Soriano, Jr. vs. National Labor Relations Commission, et al., G.R. No. 165594, April
23, 2007; San Miguel Corp. vs. Caroline C. del Rosario, G.R. Nos. 168194 and 168603,
December 13, 2005)

Retrenchment Defined

Retrenchment is the termination of employment initiated by the employer through no fault of and
without prejudice to the employees. It is resorted to during periods of business recession,
industrial depression, or seasonal fluctuations or during lulls occasioned by lack of orders,
shortage of materials, conversion of the plant for a new production program or the introduction
of new methods or more efficient machinery or of automation. It is an act of the employer of
dismissing employees because of losses in the operation of a business, lack of work, and
considerable reduction on the volume of his business. (Waterfront Cebu City Hotel vs. Ma.
Melanie P. Jimenez, et al., G.R. No. 174214, June 13, 2012)

Requirements for a Valid Retrenchment Explained

Thus, retrenchment has been described as "a measure of last resort when other less drastic means
have been tried and found to be inadequate."
Retrenchment is, therefore, not a tool to be wielded and used nonchalantly. To justify
retrenchment, it "must be due to business losses or reverses which are serious, actual and real."
There are substantive requirements relating to the losses or reverses that must underlie a
retrenchment. That these losses are serious relates to their gravity and that they are actual and
real relates to their veracity and verifiability. Likewise, that a retrenchment is anchored on
serious, actual, and real losses or reverses is to say that the retrenchment is done in good faith
and not merely as a veneer to disguise the illicit termination of employees. Equally significant is
an employer's basis for determining who among its employees shall be retrenched. Apart from
these substantive requirements are the procedural requirements imposed by Article 283(now
Article 298) of the Labor Code.
Thus, this court has outlined the requirements for a valid retrenchment, each of which must be
shown by clear and convincing evidence, as follows:
(1) that the retrenchment is reasonably necessary and likely to prevent business losses which,
if already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only
expected, are reasonably imminent as perceived objectively and in good faith by the employer;
(2) that the employer served written notice both to the employees and to the Department of
Labor and Employment at least one month prior to the intended date of retrenchment;
(3) that the employer pays the retrenched employees separation pay equivalent to one month
pay or at least 1/2 month pay for every year of service, whichever is higher;
(4) that the employer exercises its prerogative to retrench employees in good faith for the
advancement of its interest and not to defeat or circumvent the employees' right to security of
tenure; and
(5) that the employer used fair and reasonable criteria in ascertaining who would be
dismissed and who would be retained among the employees, such as status (i.e., whether they are
temporary, casual, regular or managerial employees), efficiency, seniority, physical fitness, age,
and financial hardship for certain workers. (AM-PHIL Food Concepts, Inc. v. Paolo Jesus T.
Padilla, G.R. No. 188753, October 1, 2014)
Essentially, the prerogative of an employer to retrench its employees must be exercised only as a
last resort, considering that it will lead to the loss of the employees' livelihood. It is justified only
when all other less drastic means have been tried and found insufficient or inadequate. Corollary
thereto, the employer must prove the requirements for a valid retrenchment by clear and
convincing evidence; otherwise, said ground for termination would be susceptible to abuse by
scheming employers who might be merely feigning losses or reverses in their business ventures
in order to ease out employees. These requirements are:
(1) That retrenchment is reasonably necessary and likely to prevent business losses which, if
already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only
expected, are reasonably imminent as perceived objectively and in good faith by the employer;
(2) That the employer served written notice both to the employees and to the Department of
Labor and Employment at least one month prior to the intended date of retrenchment;
(3) That the employer pays the retrenched employees separation pay equivalent to one (1)
month pay or at least one-half (1/2) month pay for every year of service, whichever is higher;
(Purisimo M. Cabaobas et al v. Pepsi – Cola Products Philippines, Inc., G.R. No. 176908,
March 25, 2015)
Where the employees had barely two weeks' notice of the intended retrenchment program, the
one-month notice rule was violated. Such rule is mandatory regardless of whether the
retrenchment is temporary or permanent. (PT&T vs. NLRC, G.R. No. 147002, April 15, 2005)

In a number of cases, the Court has identified the necessary conditions for the company losses to
justify retrenchment: (1) the losses incurred are substantial and not de minimis; (2) the losses are
actual or reasonably imminent; (3) the retrenchment is reasonably necessary and is likely to be
effective in preventing the expected losses; and (4) the alleged losses, if already incurred, or the
expected imminent losses sought to be forestalled, are proven by sufficient and convincing
evidence. (AMA Computer College, Inc. vs. Ely Garcia, et al., G.R. No. 166703, April 14, 2008)

Cessation/Closure of Business

Closure or cessation of business is the complete or partial cessation of the operations and/or shut
– down of the establishment of the employer. It is carried out to either stave off the financial ruin
or promote the business interest of the employer. Closure of business as an authorized cause for
termination of employment is governed by Article 283 (now Article 298) of the Labor Code, as
amended.
If the business closure is due to serious losses or financial reverses, the employer must present
sufficient proof of its actual or imminent losses; it must show proof that the cessation of or
withdrawal from business operations was bona fide in character. A written notice to the DOLE
thirty days before the intended date of closure is also required, the purpose of which is to inform
the employees of the specific date of termination or closure of business operations, and which
must be served upon each and every employee of the company one month before the date of
effectivity to give them sufficient time to make the necessary arrangement.
The ultimate test of the validity of closure or cessation of establishment or undertaking is that it
must be bona fide in character. And the burden of proving such falls upon the employer.
(Essencia Q. Manarpiis v. Texan Philippines, Inc. et al., G.R. No. 197011, January 28, 2015)
The decision to close one's business is a management prerogative that courts cannot interfere
with. Employers can "lawfully close shop at anytime," even for reasons of their own. "Just as no
law forces anyone to go into business, no law can compel anybody to continue in it." In Mac
Adams Metal Engineering Workers Union-Independent v. Mac Adams Metal Engineering, this
court said:
It would indeed be stretching the intent and spirit of the law if [courts] were to unjustly interfere with the
management's prerogative to close or cease its business operations just because the business operation or
undertaking is not suffering from any loss or simply to provide the workers continued employment.
However, despite this management prerogative, employers closing their businesses must pay the
affected workers separation pay equivalent to one-month pay or to at least one-half-month pay
for every year of service, whichever is higher. The reason is that an employee dismissed, even
for an authorized cause, loses his or her means of livelihood.
The only time employers are not compelled to pay separation pay is when they closed their
establishments or undertaking due to serious business losses or financial reverses.
Serious business losses are substantial losses, not de minimis. "Losses" means that the business
must have operated at a loss for a period of time for the employer "to have perceived objectively
and in good faith" that the business' financial standing is unlikely to improve in the future.
The burden of proving serious business losses is with the employer. The employer must show
losses on the basis of financial statements covering a sufficient period of time. The period
covered must be sufficient for the National Labor Relations Commission and this court to
appreciate the nature and vagaries of the business. (G.J.T. Rebuilders Machine Shop et al. v.
Ricardo Ambos et al., G.R. No. 174184, January 28, 2015)
While serious business losses generally exempt the employer from paying separation benefits, it
must be pointed that the exemption only pertains to the obligation of the employer under Article
297 of the Labor Code. This is because of the law's express parameter that mandates payment of
separation benefits "in case of closures or cessation of operations of establishment or undertaking
not due to serious business losses or financial reverses." The policy distinction underlying
Article 297 — that is, the distinction between closures due to serious business losses and those
which are not — was deftly discussed by the Court in the case of Cama v. Joni's Food Services,
Inc., as follows:
The Constitution, while affording full protection to labor, nonetheless, recognizes "the right of enterprises
to reasonable returns on investments, and to expansion and growth." In line with this protection afforded
to business by the fundamental law, Article 283 [(now, Article 297)] of the Labor Code clearly makes a
policy distinction. It is only in instances of "retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to serious business losses or financial
reverses" that employees whose employment has been terminated as a result are entitled to separation
pay. In other words, Article 283 [(now, Article 297)] of the Labor Code does not obligate an employer to
pay separation benefits when the closure is due to serious losses. To require an employer to be generous
when it is no longer in a position to do so, in our view, would be unduly oppressive, unjust, and unfair to
the employer. Ours is a system of laws, and the law in protecting the rights of the workingman, authorizes
neither the oppression nor the self-destruction of the employer.

When the obligation to pay separation benefits, however, is not sourced from law (particularly,
Article 297 of the Labor Code), but from contract, such as an existing collective bargaining
agreement between the employer and its employees, an examination of the latter's provisions
becomes necessary in order to determine the governing parameters for the said obligation. To
reiterate, an employer which closes shop due to serious business losses is exempt from paying
separation benefits under Article 297 of the Labor Code for the reason that the said provision
explicitly requires the same only when the closure is not due to serious business losses;
conversely, the obligation is maintained when the employer's closure is not due to serious
business losses. For a similar exemption to obtain against a contract, such as a CBA, the tenor of
the parties' agreement ought to be similar to the law's tenor. When the parties, however, agree to
deviate therefrom, and unqualifiedly covenant the payment of separation benefits irrespective of
the employer's financial position, then the obligatory force of that contract prevails and its terms
should be carried out to its full effect. Verily, it is fundamental that obligations arising from
contracts have the force of law between the contracting parties and thus should be complied with
in good faith; and parties are bound by the stipulations, clauses, terms and conditions they have
agreed to, the only limitation being that these stipulations, clauses, terms and conditions are not
contrary to law, morals, public order or public policy. Hence, if the terms of a CBA are clear and
there is no doubt as to the intention of the contracting parties, the literal meaning of its
stipulations shall prevail. As enunciated in Honda Phils., Inc. v. Samahan ng Malayang
Manggagawa sa Honda:
A collective bargaining agreement refers to the negotiated contract between a legitimate labor
organization and the employer concerning wages, hours of work and all other terms and conditions of
employment in a bargaining unit. As in all contracts, the parties in a CBA may establish such stipulations,
clauses, terms and conditions as they may deem convenient provided these are not contrary to law,
morals, good customs, public order or public policy. Thus, where the CBA is clear and unambiguous, it
becomes the law between the parties, and compliance therewith is mandated by the express policy of the
law. (Benson Industries Employees Union – ALU – TUCP v. Benson Industries, Inc., G.R. No.
200746, August 6, 2014)
Closure of business is the reversal of fortune of the employer whereby there is a complete
cessation of business operations and/or an actual locking-up of the doors of establishment,
usually due to financial losses. Closure of business, as an authorized cause for termination of
employment, aims to prevent further financial drain upon an employer who cannot pay anymore
his employees since business has already stopped. In such a case, the employer is generally
required to give separation benefits to its employees, unless the closure is due to serious business
losses. As explained in the case of Galaxie Steel Workers Union (GSWU-NAFLU-KMU) v.
NLRC (Galaxie):

The Constitution, while affording full protection to labor, nonetheless, recognizes "the right of enterprises
to reasonable returns on investments, and to expansion and growth." In line with this protection afforded
to business by the fundamental law, Article 297 of the Labor Code clearly makes a policy distinction. It is
only in instances of "retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses" that employees
whose employment has been terminated as a result are entitled to separation pay. In other words, Article
297 of the Labor Code does not obligate an employer to pay separation benefits when the closure is due
to serious losses. To require an employer to be generous when it is no longer in a position to do so, in our
view, would be unduly oppressive, unjust, and unfair to the employer. Ours is a system of laws, and the
law in protecting the rights of the workingman, authorizes neither the oppression nor the self-destruction
of the employer. (SANGWOO PHILIPPINES, INC. and/or SANG IK JANG, JISSO JANG, WISSO JANG,
and NORBERTO TADEO, petitioners, vs. SANGWOO PHILIPPINES, INC. EMPLOYEES UNION -
OLALIA, represented by PORFERIA SALIBONGCOGON, respondents, G.R. No. 173154 December 9,
2013; SANGWOO PHILIPPINES, INC. EMPLOYEES UNION - OLALIA, represented by PORFERIA
SALIBONGCOGON, petitioners, vs. SANGWOO PHILIPPINES, INC. and/or SANG IK JANG, JISSO
JANG, WISSO JANG, and NORBERTO TADEO, respondents, G.R. No. 173229, December 9, 2013)

Involuntary Closure
Where the rubber and banana plantations were taken over by the DAR pursuant to the
government’s CARP, resulting in the severance of the employees’ services due to cessation of
the plantations business operations, it was ruled that the employees were not entitled to
separation pay as the cessation of business came about involuntarily. The closure of business
operations contemplated under Article 283 refers to a voluntary act or decision on the part of the
employer, not one forced upon it, as in this case, by an act of the Law or State to benefit the
workers by making them agrarian lot beneficiaries. (Manaban vs. Sarphil Corp., G.R. No.
150915, April 11, 2005)

The Right of the Employer to Close or Cease its Business

The phrase "closure or cessation not due to serious business losses or financial reverses"
recognizes the right of the employer to close or cease its business operations or undertaking even
in the absence of serious business losses or financial reverses, as long as he pays his employees
their termination pay in the amount corresponding to their length of service. (Pilar Espina, et al.
vs. Court of Appeals, et al., G.R. No. 164582, March 28, 2007)

The phrase "closure or cessation of operations of establishment or undertaking" includes a partial

or total closure or cessation. (Pilar Espina, et al. vs. Court of Appeals, et al., G.R. No. 164582,
March 28, 2007; Capitol Medical Center, Inc., et al. v. Cesar E. Meris, G.R. No. 155098,
September 16, 2005)

The determination to cease operations is a prerogative of management which the State does not
usually interfere with, as no business or undertaking must be required to continue operating
simply because it has to maintain its workers in employment, and such act would be tantamount
to a taking of property without due process of law. (Pilar Espina, et al. vs. Court of Appeals, et
al., G.R. No. 164582, March 28, 2007)

For a dismissal based on the closure of business to be valid, three (3) requirements must be
established. Firstly, the cessation of or withdrawal from business operations must be bona fide in
character. Secondly, there must be payment to the employees of termination pay amounting to at
least one-half (1/2) month pay for each year of service, or one (1) month pay, whichever is
higher. Thirdly, the company must serve a written notice on the employees and on the DOLE at
least one (1) month before the intended termination. (Vivian T. Ramirez, et al. vs. Mar Fishing
Co., Inc., et al., G.R. No. 168208, June 13, 2012)

Looking now at Article 283, this Court holds that the same was drafted by the legislature, taking
the best interest of laborers in mind. It is clear that the causes of the termination of an employee
under Article 283 are due to circumstances beyond their control, such as when management
decides to reduce personnel based on valid grounds, or when the employer decides to cease
operations. Thus, the bias towards labor is very apparent, as the employer is statutorily required
to pay separation pay, the amount of which is also statutorily prescribed. (Solidbank Corp. vs.
NLRC, et al., G.R. No. 165951, March 30, 2010)

Article 299 (formerly 284) – Disease as Ground for Termination

For dismissal under Article 284 (now Article 299) to be valid, two requirements must be
complied with: (1) the employee's disease cannot be cured within six (6) months and his
"continued employment is prohibited by law or prejudicial to his health as well as to the health of
his co-employees"; and (2) certification issued by a competent public health authority that even
with proper medical treatment, the disease cannot be cured within six (6) months. The burden of
proving compliance with these requisites is on the employer. Non – compliance leads to the
conclusion that the dismissal was illegal. (FUJI Television Network v. Arlene Espiritu, G.R. Nos.
204944 – 45, December 3, 2014)
Art. 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 (1/2) 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.

Consistent with this construction, we applied this provision in resolving illegal dismissal cases
due to non-contagious diseases such as stroke, heart attack, osteoarthritis, and eye cataract,
among others. In Baby Bus, Inc. v. Minister of Labor, we upheld the labor arbitration's finding
that Jacinto Mangalino's continued employment — after he suffered several strokes — would be
prejudicial to his health. In Duterte v. Kingswood Trading Co., Inc., we recognized the
applicability of Article 284 of the Labor Code to heart attacks. In that case, we held that the
employer-company's failure to present a certification from a public health authority rendered
Roque Duterte's termination due to a heart attack illegal. We also applied this provision in Sy v.
Court of Appeals to determine whether Jaime Sahot was illegally dismissed due to various
ailments such as presleyopia, hypertensive retinopathy, osteoarthritis, and heart enlargement,
among others. In Manly Express, Inc. v. Payong, Jr., we ruled that the employer-company's non-
presentment of a certification from a public health authority with respect to Romualdo Payong
Jr.'s eye cataract was fatal to its defense.

The third element substantiates the contention that the employee has indeed been suffering from
a disease that: (1) is prejudicial to his health as well as to the health of his co-employees; and (2)
cannot be cured within a period of six months even with proper medical treatment. Without the
medical certificate, there can be no authorized cause for the employee's dismissal. The absence
of this element thus renders the dismissal void and illegal.

Simply stated, this requirement is not merely a procedural requirement, but a substantive one.
The certification from a competent public health authority is precisely the substantial evidence
required by law to prove the existence of the disease itself, its non-curability within a period of
six months even with proper medical treatment, and the prejudice that it would cause to the
health of the sick employee and to those of his co-employees. (MARLO A. DEOFERIO, petitioner,
vs. INTEL TECHNOLOGY PHILIPPINES, INC. and/or MIKE WENTLING, respondents, G.R. No.
202996, June 18, 2014.)

A plain reading of the above – quoted provision (Art. 284, Labor Code) clearly presupposes that
it is the employer who terminates the services of the employee 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. It does not contemplate a situation where it is the
employee who severs his or her employment ties. This is precisely the reason why Section 8, 14
Rule 1, Book VI of the Omnibus Rules Implementing the Labor Code, directs that an employer
shall not terminate the services of the employee unless there is a certification by a competent
public health authority that the disease is of such nature or at such a stage that it cannot be cured
within a period of six (6) months even with proper medical treatment. (Romeo Villaruel vs. Yeo
Han Guan, G.R. No. 169191, June 1, 2011)

The requirement for a medical certificate under Article 284 of the Labor Code cannot be
dispensed with; otherwise, it would sanction the unilateral and arbitrary determination by the
employer of the gravity or extent of the employee's illness and thus defeat the public policy on
the protection of labor. (Triple Eight Integrated Services, Inc. vs. NLRC, G.R. No. 129584,
December 3, 1998)

Article 300 (formerly 285) – Termination by Employee

Resignation Explained

Resignation is the formal relinquishment of an office, the overt act of which is coupled with an
intent to renounce. This intent could be inferred from the acts of the employee before and after
the alleged resignation. (INTEL TECHNOLOGY PHILIPPINES, INC., petitioner, vs. NATIONAL
LABOR RELATIONS COMMISSION AND JEREMIAS CABILES, respondents, G.R. No. 200575,
February 5, 2014.)

Given the indications of voluntary resignation, we rule that there is no constructive dismissal in
this case. There is constructive dismissal when there is cessation of work, because continued
employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion
in rank or a diminution in pay and other benefits. Aptly called a dismissal in disguise or an act
amounting to dismissal but made to appear as if it were not, constructive dismissal may, likewise,
exist if an act of clear discrimination, insensibility, or disdain by an employer becomes so
unbearable on the part of the employee that it could foreclose any choice by him except to forego
his continued employment. There was here no discrimination committed by petitioners. While
respondent did not tender her resignation wholeheartedly, circumstances of her own making did
not give her any other option. With due process, she was found to have committed the grave
offense of leaking test questions. Dismissal from employment was the justified equivalent
penalty. Having realized that, she asked for, and was granted, not just a deferred imposition of,
but also an acceptable cover for the penalty. (CHIANG KAI SHEK COLLEGE and CARMELITA
ESPINO vs. ROSALINDA M. TORRES, G.R. No. 189456, April 2, 2014.)

Constructive Dismissal

Constructive dismissal exists where there is cessation of work because 'continued employment is
rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank or a
diminution in pay' and other benefits. Aptly called a dismissal in disguise or an act amounting to
dismissal but made to appear as if it were not, constructive dismissal may, likewise, exist if an
act of clear discrimination, insensibility, or disdain by an employer becomes so unbearable on
the part of the employee that it could foreclose any choice by him except to forego his continued
employment. In cases of a transfer of an employee, the rule is settled that the employer is
charged with the burden of proving that its conduct and action are for valid and legitimate
grounds such as genuine business necessity and that the transfer is not unreasonable,
inconvenient or prejudicial to the employee. If the employer cannot overcome this burden of
proof, the employee's transfer shall be tantamount to unlawful constructive dismissal. (GIRLY G.
ICO, petitioner, vs. SYSTEMS TECHNOLOGY INSTITUTE, INC., MONICO V. JACOB and
PETER K. FERNANDEZ, respondents, G.R. No. 185100, July 9, 2014)
Time and again, we have upheld that the substantiality of the evidence depends on its
quantitative as well as its qualitative aspects, as in the present case where the affidavits on which
the decision was mainly anchored were corroborated by any other documentary evidence such as
the police blotter.

In Siemens Philippines, Inc. v. Domingo, we have declared that "an employee who is forced to
surrender his position through the employer's unfair or unreasonable acts is deemed to have been
illegally terminated and such termination is deemed to be involuntary." Constructive dismissal
does not always involve forthright dismissal or diminution in rank, compensation, benefit and
privileges. There may be constructive dismissal if an act of clear discrimination, insensibility or
disdain by an employer becomes so unbearable on the part of the employee that it could
foreclose any choice by him except to forego his continued employment.

We ought to remind petitioners regarding the doctrine we laid down in Aguilar v. Burger
Machine Holdings Corporation, to wit —

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. Based on the factual considerations in the
instant case, we hold that the hostile and unreasonable working conditions of petitioner justified the
finding of the Labor Arbiter and the NLRC that petitioner was constructively dismissed. Petitioner's
performance may not have been exceptional as he ranked 14th in the quality food service control survey
for the 1st quarter of 2002. But he was certainly not grossly inefficient as Burger Machine pictured him to
be. In fact, he received several citations and was able to comply with the directive to reduce his shortages
for the month of November 2001. From all indications, there is really no ground to dismiss petitioner for
gross inefficiency. And, as Burger Machine saw it, the only way to get rid of the latter was to
constructively dismiss him.

No employee should be subjected to constant harassment, ridicule and inhumane treatment on

the basis of management prerogative or even for poor performance at work. While we concur
with petitioners that raising one's voice in the workplace as a result of displeasure in the
performance of an employee is not illegal per se, the right to impose disciplinary sanctions upon
an employee for just and valid cause is not without limit. The means does not justify the end;
thus, the same should be in accordance with the norms of due process. (MCMER CORPORATION,
INC., MACARIO D. ROQUE, JR. and CECILIA R. ALVESTIR, petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION and FELICIANO C. LIBUNAO, JR., respondents.)

In Superstar Security Agency, Inc. and/or Col. Andrada v. NLRC, the Court ruled that placing an
employee on temporary "off-detail" is not equivalent to dismissal provided that such temporary
inactivity should continue only for a period of six (6) months. In security agency parlance, being
placed "off-detail" or on "floating status" means "waiting to be posted." In Salvaloza v. NLRC,
the Court further explained the nature of the "floating status," to wit:
Temporary "off-detail" or "floating status" is the period of time when security guards are in
between assignments or when they are made to wait after being relieved from a previous post
until they are transferred to a new one. It takes place when the security agency's clients decide
not to renew their contracts with the agency, resulting in a situation where the available posts
under its existing contracts are less than the number of guards in its roster. It also happens in
instances where contracts for security services stipulate that the client may request the agency for
the replacement of the guards assigned to it even for want of cause, such that the replaced
security guard may be placed on temporary "off-detail" if there are no available posts under the
agency's existing contracts. During such time, the security guard does not receive any salary or
any financial assistance provided by law. It does not constitute a dismissal, as the assignments
primarily depend on the contracts entered into by the security agencies with third parties, so long
as such status does not continue beyond a reasonable time. When such a "floating status" lasts
for more than six (6) months, the employee may be considered to have been constructively
dismissed.
Relative thereto, constructive dismissal exists when an act of clear discrimination, insensibility,
or disdain, on the part of the employer has become so unbearable as to leave an employee with
no choice but to forego continued employment, or when there is cessation of work because
continued employment is rendered impossible, unreasonable, or unlikely, as an offer involving a
demotion in rank and a diminution in pay. (Vicente C. Tatel v. JLFP Investigation Security
Agency et al G.R. No. 206942, February 25, 2015)

Article 301 (formerly 286) – When Employment Not Deemed Terminated

Without necessarily resulting to a termination of employment, an employer may at any rate, bona
fide suspend the operation of its business for a period of not exceeding six months under Article
286 of the Labor Code. While the employer is, on the one hand, duty bound to reinstate his
employees to their former positions without loss of seniority rights if the operation of the
business is resumed within six months, employment is deemed terminated where the suspension
exceeds said period. Not having resumed its operations within six months from the time it
suspended its operations on 27 July 2001, it necessarily follows that petitioner is liable to pay
respondents' separation pay computed at one (1) month pay or at least one-half (1/2) month pay
for every year of service, whichever is higher, as well as the damages and attorney's fees
adjudicated by the Labor Arbiter. Without proof of the serious business losses it allegedly
sustained and/or compliance with the reportorial requirements under Article 283 of the Labor
Code, petitioner cannot expediently plead exemption from said liabilities due to the supposed
financial reverses which led to the eventual closure of its business. It is essentially required that
the alleged losses in business operations must be proven for, otherwise, said ground for
termination would be susceptible to abuse by scheming employers who might be merely feigning
business losses or reverses in their business ventures in order to ease out employees. The
condition of business losses justifying retrenchment is normally shown by audited financial
documents like yearly balance sheets and profit and loss statements as well as annual income tax
returns which were not presented in this case. (Manila Mining Corporation v. Lowito Amor, G.R.
No. 182800, April 20, 2015)
While there is no specific provision in the Labor Code that governs the "floating status" or
temporary "off-detail" of security guards employed by private security agencies, this situation
was considered by this Court in several cases as a form of temporary retrenchment or lay-off.
The concept has been defined as that period of time when security guards are in between
assignments or when they are made to wait after being relieved from a previous post until they
are transferred to a new one. As pointed out by the CA, it takes place when the security agency's
clients decide not to renew their contracts with the agency, resulting in a situation where the
available posts under its existing contracts are less than the number of guards in its roster. It also
happens in instances where contracts for security services stipulate that the client may request
the agency for the replacement of the guards assigned to it, even for want of cause, such that the
replaced security guard may be placed on temporary "off-detail" if there are no available posts
under the agency's existing contracts.
As the circumstance is generally outside the control of the security agency or the employer, the
Court has ruled that when a security guard is placed on a "floating status," he or she does not
receive any salary or financial benefit provided by law. Pido v. National Labor Relations
Commission explains why:
Verily, a floating status requires 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 contracts are more than those that do and the new ones that the agency gets. Also, in
instances when contracts for security services stipulate that the client may request the agency for the
replacement of the guards assigned to it even for want of cause, the replaced security guard may be
placed on temporary "off-detail" if there are no available posts under respondent's existing contracts.

When a security guard is placed on a "floating status," he does not receive any salary or financial benefit
provided by law. Due to the grim economic consequences to the employee, the employer should bear the
burden of proving that there are no posts available to which the employee temporarily out of work can be
assigned."

It must be emphasized, however, that although placing a security guard on "floating status" or a
temporary "off-detail" is considered a temporary retrenchment measure, there is similarly no
provision in the Labor Code that treats of a temporary retrenchment or lay-off. Neither is there
any provision that provides for its requisites or its duration. Nevertheless, since an employee
cannot be laid-off indefinitely, the Court has applied Article 292 (previously Article 286) of the
Labor Code by analogy to set the specific period of temporary lay-off to a maximum of six (6)
months. (EXOCET SECURITY AND ALLIED SERVICES CORPORATION and/or MA. TERESA
MARCELO, petitioner, vs. ARMANDO D. SERRANO, respondent, G.R. No. 198538 September 29, 2014)

Under Article 286 of the Labor Code, the bona fide suspension of the operation of a business or
undertaking for a period not exceeding six months shall not terminate employment.
Consequently, when the bona fide suspension of the operation of a business or undertaking
exceeds six months, then the employment of the employee shall be deemed terminated. By the
same token and applying said rule by analogy, if the employee was forced to remain without
work or assignment for a period exceeding six months, then he is in effect constructively
dismissed. (Fernandito P. De Guzman vs. NLRC, et al., G.R. No. 167701, December 12, 2007)
 Traditionally invoked by security agencies when guards are temporarily sidelined from duty
while waiting to be transferred or assigned to a new post or client, Article 286 of the Labor Code
has been applied to other industries when, as a consequence of the bona fide suspension of the
operation of a business or undertaking, an employer is constrained to put employees on floating
status for a period not exceeding six months.

The rule is settled, however, that "off-detailing" is not equivalent to dismissal, so long as such
status does not continue beyond a reasonable time and that it is only when such a "floating
status" lasts for more than six months that the employee may be considered to have been
constructively dismissed. A complaint for illegal dismissal filed prior to the lapse of said six –
month and/or the actual dismissal of the employee is generally considered as prematurely filed.
(Nippon Housing Phil., Inc., et al. vs. Maiah Angela Leynes, G.R. No. 177816, August 3, 2011)

Article 301 (formerly 287) – Retirement

RA 7641, which was enacted on December 9, 1992, amended Article 287 of the Labor Code,
providing for the rules on retirement pay to qualified private sector employees in the absence of
any retirement plan in the establishment. The said law states that "an employee's retirement
benefits under any collective bargaining agreement (CBA) and other agreements shall not be less
than those provided" under the same — that is, at least one-half (1/2) month salary for every year
of service, a fraction of at least six (6) months being considered as one whole year — and that
"unless the parties provide for broader inclusions, the term one-half (1/2) month salary shall
mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of
not more than five (5) days of service incentive leaves."

The foregoing provision is applicable where (a) there is no CBA or other applicable agreement
providing for retirement benefits to employees, or (b) there is a CBA or other applicable
agreement providing for retirement benefits but it is below the requirement set by law. Verily,
the determining factor in choosing which retirement scheme to apply is still superiority in terms
of benefits provided.

The Court, in the case of Elegir v. Philippine Airlines, Inc., has recently affirmed that "one-half
(1/2) month salary means 22.5 days: 15 days plus 2.5 days representing one-twelfth (1/12) of the
13th month pay and the remaining 5 days for SIL." The Court sees no reason to depart from this
interpretation. (GRACE CHRISTIAN HIGH SCHOOL, represented by its Principal, DR. JAMES
TAN, petitioner, vs. FILIPINAS A. LAVANDERA, respondent. G.R. No. 177845, August 20, 2014)

In Aquino v. National Labor Relations Commission, citing Batangas Laguna Tayabas Bus
Company v. Court of Appeals and University of the East v. Hon. Minister of Labor, the Court
held that an employee is entitled to recover both separation pay and retirement benefits in the
absence of a specific prohibition in the Retirement Plan or CBA. Concomitantly, the Court ruled
that an employee's right to receive separation pay in addition to retirement benefits depends upon
the provisions of the company's Retirement Plan and/or CBA. (GOODYEAR PHILIPPINES, INC.
and REMEGIO M. RAMOS, petitioners, vs. MARINA L. ANGUS, respondent, G.R. No. 185449,
November 12, 2014)

Worthy to stress is that retirement is of a different species from the reliefs awarded to an illegally
dismissed employee. Retirement is a form of reward for an employee's loyalty and service to the
employer, and is intended to help the employee enjoy the remaining years of his life, and to
lessen the burden of worrying about his financial support or upkeep. In contrast, the reliefs
awarded to an illegally dismissed employee are in recognition of the continuing employer-
employee relationship that has been severed by the employer without just or authorized cause, or
without compliance with due process.
The petitioner argues that according to Roquero v. Philippine Airlines, Inc., the employer is
obliged to reinstate and to pay the wages of the dismissed employee during the period of appeal
until its reversal by the higher Court; and that because he was not reinstated either actually or by
payroll, he should be held entitled to the accrued salaries. (CRISANTO F. CASTRO, JR., petitioner,
vs. ATENEO DE NAGA UNIVERSITY, FR. JOEL TABORA, and MR. EDWIN BERNAL, respondents, G.R.
No. 175293, July 23, 2014)

Republic Act No. 7641 which was enacted on December 9, 1992 amended Article 287 of the
Labor Code by providing for retirement pay to qualified private sector employees in the absence
of any retirement plan in the establishment. Even if petitioner as bus conductor was paid on
commission basis then, he falls within the coverage of R.A. 7641 and its implementing rules. As
thus correctly ruled by the Labor Arbiter, petitioner's retirement pay should include the cash
equivalent of the 5-day SIL and 1/12 of the 13th month pay. (Rodolfo J. Serrano vs. Severino
Santos Transit, et al., G.R. No. 187698, August 9, 2010)

Undoubtedly, under this provision, the retirement age is primarily determined by the existing
agreement or employment contract. Absent such an agreement, the retirement age shall be fixed
by law. The above-cited law mandates that the compulsory retirement age is at 65 years, while
the minimum age for optional retirement is set at 60 years. Moreover, Article 287 of the Labor
Code, as amended, applies only to a situation where (1) there is no CBA or other applicable
employment contract providing for retirement benefits for an employee; or (2) there is a
collective bargaining agreement or other applicable employment contract providing for
retirement benefits for an employee, but it is below the requirement set by law. The rationale for
the first situation is to prevent the absurd situation where an employee, deserving to receive
retirement benefits, is denied them through the nefarious scheme of employers to deprive
employees of the benefits due them under existing labor laws. The rationale for the second
situation is to prevent private contracts from derogating from the public law. (Amelia R. Obusan
vs. PNB, G.R. No. 181178, July 26, 2010)

There are three kinds of retirement schemes. The first type is compulsory and contributory in
character. The second type is one set up by agreement between the employer and the employees
in collective bargaining agreements or other agreements between the employees and the
employer. The third type is one that is voluntarily given by the employer, expressly as in an
announced company policy or impliedly as in a failure to contest the employee's claim for
retirement benefits. (GVM Security and Protective Agency vs. NLRC, G.R. No. 102157, July 23,
1993)
Under Article 287 of the Labor Code as amended, the legally mandated age for compulsory
retirement is 65 years, while the set minimum age for optional retirement is 60 years.

In this case, it may be stressed that the CBA does not per se specifically provide for the
compulsory retirement age nor does it provide for an optional retirement plan. It merely provides
that the retirement benefits accorded to an employee shall be in accordance with law. Thus, we
must apply Art. 287 of the Labor Code which provides for two types of retirement: (a)
compulsory and (b) optional. The first takes place at age 65, while the second is primarily
determined by the collective bargaining agreement or other employment contract or employer's
retirement plan. In the absence of any provision on optional retirement in a collective bargaining
agreement, other employment contract, or employer's retirement plan, an employee may
optionally retire upon reaching the age of 60 years or more, but not beyond 65 years, provided he
has served at least five years in the establishment concerned. That prerogative is exclusively
lodged in the employee. (URSUMCO, et al. vs. Agripino Caballeda, et al., G.R. No. 156644, July
28, 2008)

Where the security guard worked with two (2) security agencies which were owned by the same
family and his employment thereat was continuous and uninterrupted, both agencies are liable
for the former's retirement benefits. And in the computation of his retirement benefit, the whole
five (5) days of service incentive leave is included. (Enriquez Security Services vs. Cabotaje,
147993, July 21, 2006; Alberto P. Oxales vs. United Laboratories, Inc., G.R. No. 152991, July
21, 2008)

Article 306 (formerly 291) – Money Claims

All money claims arising from employer-employee relations accruing during the effectivity of
this Code shall be filed within three (3) years from the time the cause of action accrued;
otherwise they shall be forever barred.
All money claims accruing prior to the effectivity of this Code shall be filed with the
appropriate entities established under this Code within one (1) year from the date of effectivity,
and shall be processed or determined in accordance with the implementing rules and
regulations of the Code; otherwise, they shall be forever barred.
Workmen's compensation claims accruing prior to the effectivity of this Code and during the
period from November 1, 1974 up to December 31, 1974, shall be filed with the appropriate
regional offices of the Department of Labor not later than March 31, 1975; otherwise, they
shall forever be barred. The claims shall be processed and adjudicated in accordance with the
law and rules at the time their causes of action accrued.

This four – year prescriptive period applies to claims for back – wages, not the three – year
prescriptive period under Article 291 of the Labor Code. A claim for back – wages, according to
this court, may be a money claim "by reason of its practical effect." Legally, however, an award
of back – wages "is merely one of the reliefs which an illegally dismissed employee prays the
labor arbiter and the NLRC to render in his favor as a consequence of the unlawful act
committed by the employer." Though it results "in the enrichment of the individual illegally
dismissed, the award of back – wages is not in redress of a private right, but, rather, is in the
nature of a command upon the employer to make public reparation for his violation of the Labor
Code."
Actions for damages due to illegal dismissal are likewise actions "upon an injury to the rights of
the plaintiff." Article 1146 of the Civil Code of the Philippines, therefore, governs these actions.
(GEORGE A. ARRIOLA, petitioner, vs. PILIPINO STAR NGAYON, INC. and/or MIGUEL G.
BELMONTE, respondents, G.R. No. 175689, August 13, 2014)

Art. 291 (now Article 306) of the Labor Code applies to money claims in general and provides
for a 3 – year prescriptive period to file them. On the other hand, respondent employees' money
claims in this case had been reduced to a judgment, in the form of a Wage Order, which has
become final and executory. The prescription applicable, therefore, is not the general one that
applies to money claims, but the specific one applying to judgments. Thus, the right to enforce
the judgment, having been exercised within five years, has not yet prescribed.

Stated otherwise, a claimant has three years to press a money claim. Once judgment is rendered
in her favor, she has five years to ask for execution of the judgment, counted from its finality.
This is consistent with the rule on statutory construction that a general provision should yield to
a specific one and with the mandate of social justice that doubts should be resolved in favor of
labor. (J. K. Mercado & Sons Agricultural Enterprises, Inc. vs. Patricia A. Sto. Tomas, et al.,
G.R. No. 158084, August 29, 2008)

The term "money claims" covers all money claims arising from an employer-employee
relation. (Intercontinental Broadcasting Corp. vs. Ireneo Panganiban, G.R. No. 151407,
February 6, 2007)