Termination of Employment

I. Just Causes for Termination

 

Under Article 297 of the Labor Code (formerly Article 282), an employer may terminate an employee based on just causes, which include serious misconduct, willful disobedience, gross and habitual neglect of duties, fraud, or commission of a crime related to the job. These causes relate to an employee’s behavior or actions that directly affect the employer-employee relationship.

 

Leading Case: Agabon v. NLRC (G.R. No. 158693, November 17, 2004)

 

Factual Background: Employees were dismissed for abandonment of work. However, the employer failed to follow procedural due process in dismissing them.

 

Ratio Decidendi: The Supreme Court ruled that while the dismissal was for a just cause, the employer’s failure to observe procedural due process (notice and hearing) entitled the employees to nominal damages. This case clarified that non-compliance with procedural due process does not render a dismissal illegal, but the employer may be liable for damages.

 

II. Authorized Causes for Termination

 

Article 298 and 299 of the Labor Code (formerly Articles 283 and 284) allow employers to terminate employment for business reasons, such as redundancy, retrenchment to prevent losses, closure of business, and disease, provided certain conditions are met (e.g., payment of separation pay).

 

Recent Case: Coca-Cola Femsa v. Macapagal (G.R. No. 227363, February 13, 2019)

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Facts: Coca-Cola retrenched several employees due to a corporate reorganization aimed at cost efficiency.

 

Ratio Decidendi: The Supreme Court upheld the retrenchment, ruling that it was based on a legitimate business necessity. The employer provided the required notices and separation pay, ensuring compliance with the law. The decision reinforced that authorized causes for termination must be based on substantial evidence and proper procedure.

 

III. Procedural Due Process in Termination

 

The law mandates that termination must follow due process, which includes two written notices: a [1] notice to explain (NTE) the grounds for dismissal and a [2] notice of decision after the employee has been given a chance to respond. This is the 2-notice Rule. This is required for both just and authorized causes.

 

Leading Case: King of Kings Transport v. Mamac (G.R. No. 166208, June 29, 2007)

 

Factual Background: Employees were dismissed without being given proper notice or an opportunity to be heard.

 

Ratio Decidendi: The Supreme Court held that the employer failed to comply with the twin requirements of notice and hearing, rendering the dismissal illegal. This case emphasized the procedural aspect of termination, reiterating the importance of due process in protecting employees’ rights.

 

IV. Security of Tenure

 

Article 294 of the Labor Code states that an employee cannot be terminated without just or authorized cause. This security of tenure is a fundamental right of workers, ensuring that they are not dismissed without lawful or justifiable reasons.

 

Recent Case: Rivera v. Solid Development Corp. (G.R. No. 221507, March 15, 2017)

 

Factual Background: An employee was terminated for alleged incompetence, but the company failed to substantiate the claim.

 

Ratio Decidendi: The Supreme Court ruled in favor of the employee, declaring that the dismissal was without basis and in violation of the worker’s right to security of tenure. The decision highlighted that allegations must be proven with clear evidence before terminating an employee.

 

V. Remedies for Illegal Dismissal

 

If an employee is dismissed without just or authorized cause, or if due process is not followed, the termination is considered illegal. Under Article 294, the illegally dismissed employee is entitled to reinstatement without loss of seniority rights and payment of back wages.

 

Leading Case: St. Luke’s Medical Center v. Notario (G.R. No. 227821, June 28, 2017)

 

Factual Background: An employee was dismissed for participating in union activities. The employer claimed it was for economic reasons, but no authorized cause was proven.

 

Ratio Decidendi: The Supreme Court found that the dismissal was illegal, as the employer did not establish valid grounds for termination. The employee was awarded reinstatement and back wages, reaffirming the importance of adhering to lawful procedures and justifications for dismissal.

 

VI. Preventive Suspension

 

Under Section 8, Rule XXIII, Book V of the Omnibus Rules Implementing the Labor Code, an employer may place an employee on preventive suspension if the latter poses a serious and imminent threat to the life or property of the employer or co-workers while an investigation is pending.

 

Recent Case: Global Medical Center v. Padilla (G.R. No. 220903, March 14, 2018)

 

Factual Background: An employee was placed on preventive suspension due to alleged theft of company property.

 

Ratio Decidendi: The Court upheld the preventive suspension, ruling that the employer acted within its rights as the circumstances warranted the temporary removal of the employee pending investigation. The decision stressed that preventive suspension must not exceed 30 days, beyond which the employee must either be reinstated or formally charged.