- Section 5: Due Process of Termination of Employment
- 5.1 Termination of Employment Based on Just Causes
- 💡 Termination Steps Recap
- 5.2 Standards on Just Causes
- 💡 Reasons for Termination
- 5.3 Termination of Employment Based on Authorized Causes
- 5.4 Standards on Authorized Causes
- Section 6: Other Causes of Termination
- Conclusion
Termination of employment can be a complex process, but it's essential to know your rights and the valid reasons for termination.
We’ve labeled each section similar to Rule I-A of the DOLE Rules and Regulations implementing Book IV of the Labor Code of the Philippines for easy referencing.
We'll break down each subpoint and provide relatable case scenarios to make it clear and concise.
Each case scenarios will look like this so it’ll be easier for you to spot them!
The aim of this blog is to help you better understand the Labor Code.
Section 5: Due Process of Termination of Employment
In any termination of employment, it's crucial to follow the standards of due process outlined in Article 299 of the Labor Code. Let's explore each subpoint to understand its significance. To make it relatable, we'll present case scenarios that help illustrate the concepts.
5.1 Termination of Employment Based on Just Causes
Termination based on just causes requires the following:
(a) The first written notice should include:
- Specific causes or grounds for termination, such as repeated violation of company policies.
- A detailed explanation of the facts and circumstances supporting the charges against the employee. A general description won't suffice.
- The employee should be given a reasonable period, usually at least five (5) calendar days, to respond and provide a written explanation. This gives them time to review the accusations, seek advice, gather evidence, and prepare their defense.
Case Scenario: Sarah, an employee, has been consistently late for work without any valid reasons. Her employer provides her with a written notice stating the reasons for termination and gives her five days to explain her side of the story and provide any evidence to support her case.
(b) After serving the first notice, the employer should provide ample opportunity for the employee to be heard and defend themselves, either verbally or in writing. A formal hearing or conference is only mandatory under specific circumstances.
Case Scenario: John, an employee, is accused of insubordination for refusing to follow a reasonable and known order from his supervisor. The employer arranges a meeting where John can present his side of the story, respond to the allegations, and provide evidence to support his defense.
(c) After determining that termination is justified, the employer must serve the employee a written notice of termination. This notice should indicate that all circumstances related to the charge against the employee have been considered, and valid grounds for termination have been established.
Case Scenario: Emma, an employee, repeatedly engages in fraudulent activities related to her work. The employer conducts a thorough investigation, considers all the facts, and provides Emma with a written notice explaining the termination, including the established grounds for her dismissal.
💡 Termination Steps Recap
- Write a detailed explanation of the facts and reasons for termination.
- Give employee at least five (5) calendar days to respond.
- Allow employee to respond and defend themselves either verbally or in writing.
- After determining that the reason is justified write a notice of termination to the employee indicating all the circumstances related to the charge for which valid grounds of termination has been established.
5.2 Standards on Just Causes
An employer may terminate an employee for the following valid grounds:
(a) Serious Misconduct
When an employee engages in severe and aggravated misconduct that directly relates to their job performance and renders them unfit to continue working for the employer.
David, an employee entrusted with handling cash, intentionally steals money from the company's cash register, leading to financial losses and breaching the trust placed in him.
(b) Willful Disobedience or Insubordination
When an employee intentionally disobeys a reasonable and known order, showing a wrongful and defiant attitude towards their duties.
Lisa, an employee, consistently refuses to follow her supervisor's instructions and openly challenges their authority in front of other colleagues.
(c) Gross and Habitual Neglect of Duties
When an employee consistently and severely neglects their duties, displaying a pattern of gross negligence.
Alex, an employee responsible for maintaining equipment, repeatedly fails to perform regular maintenance checks, resulting in machinery breakdowns and production delays.
(d) Fraud or Willful Breach of Trust
When an employee commits an act, omission, or concealment that breaches their legal duty, trust, or confidence, specifically in connection with their work.
Michael, an employee entrusted with handling confidential client information, intentionally leaks sensitive data to a competitor, compromising the company's reputation and violating his obligation to protect confidential information.
(e) Loss of Confidence
When an employee's actions or omissions justify a genuine loss of trust and confidence from the employer, as long as it's not a pretext for improper or illegal reasons.
Sarah, a manager, repeatedly violates company policies, including ethical conduct, by engaging in discriminatory behavior, causing her employer to lose trust in her ability to lead.
(f) Commission of a Crime or Offense
When an employee commits an act or omission punishable by law against their employer, a family member, or a duly authorized representative.
Mark, an employee, physically assaults his supervisor, leading to criminal charges and breaching the employer-employee relationship.
(g) Analogous Causes
When an act or omission is similar to the specified just causes and is voluntary and willful on the part of the employee, as explicitly specified in company rules and regulations or policies.
Anna, an employee, consistently engages in behavior that disrupts the workplace environment, despite multiple warnings and counseling sessions.
💡 Reasons for Termination
- Serious Misconduct
- Willful Disobedience or Insubordination
- Gross and Habitual Neglect of Duties
- Fraud or Willful Breach of Trust
- Loss of Confidence
- Commission of a Crime or Offense
- Analogous Causes
5.3 Termination of Employment Based on Authorized Causes
Termination based on authorized causes requires compliance with Articles 298 and 299 of the Labor Code. It involves serving a written notice to the employee and the appropriate Regional Office of the Department of Labor and Employment (DOLE) at least thirty days before the termination's effectivity, specifying the ground or grounds for termination.
XYZ Company, due to financial difficulties and the need to restructure, decides to downsize its workforce. They provide written notices to the affected employees and the Regional Office of DOLE at least thirty days in advance, citing financial hardship as the authorized cause for termination.
5.4 Standards on Authorized Causes
An employer may terminate an employee for the following valid grounds:
(a) Installation of Labor-saving Devices
When introducing machinery, equipment, or other devices in good faith to save costs, enhance efficiency, or achieve justifiable economic reasons, leading to the termination of affected employees.
ABC Factory adopts automated machines to streamline production processes and reduce costs, resulting in the termination of a few employees whose roles are replaced by the new technology.
(b) Redundancy
When there are excessive positions or services beyond what is reasonably demanded by the enterprise, leading to the abolition of redundant positions.
Company XYZ restructures its operations, leading to the elimination of duplicated roles and positions that are no longer necessary, resulting in the termination of a few employees.
(c) Retrenchment or Downsizing
When an employer needs to reduce its workforce to prevent substantial and imminent business losses.
Due to a significant decline in sales and revenue, Company ABC decides to downsize its workforce to sustain its operations, resulting in the termination of several employees.
(d) Closure or Cessation of Operation
When a company decides, in good faith, to close down or cease its operations entirely.
XYZ Store, after careful consideration, decides to permanently close its doors due to economic challenges and a decline in customer demand, leading to the termination of all employees.
(e) Disease
When an employee's continued employment is prohibited by law, detrimental to their health and the health of coworkers, and certified as incurable by a competent public health
authority.
Laura, an employee diagnosed with a highly contagious and incurable disease, is unable to continue working due to the health risks it poses to herself and others.
Section 6: Other Causes of Termination
Aside from the aforementioned sections, employers may also terminate employees based on reasonable and lawful grounds specified in their company policies.
Company ABC's policies strictly prohibit substance abuse. John, an employee who tests positive for drug use, is subject to termination as outlined in the company's policies.
Conclusion
Understanding your rights and the valid reasons for termination is essential for both employees and employers. By breaking down each section and providing relatable case scenarios, we aimed to make the process easier to understand.
Remember, knowing your rights empowers you to protect yourself and make informed decisions. Employers must follow due process, while employees should be aware of the grounds that can lead to termination.
By maintaining fairness and respecting labor laws, a harmonious work environment can be achieved.
Want to know how to compute the 13 month pay of your employees? Read how on this blog post:
Related Links: