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A Critical Analysis of the Law andDoctrines on Dismissal of Employees

Atty. VICENTE LEOGARDO, JR.Director General, ECOPNov. 12, 2015

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Dismissal of Employees and Termination of Employment Distinguished

1. Dismissal of employees refers to the unilateral action of the employer to terminate the employment of the employee for cause in accordance with law (Articles 282, 283 and 284)It is an exercise of management prerogative

2. Termination of employment is a broader term which includes not only dismissal for cause but all other

causes based on contract (project, seasonal, casual, fixed period), resignation, retirement, death and termination by the employee

Fundamental Principles on Dismissal of Employees

Our Constitution, statutes and jurisprudence uniformly guarantee to every employee or worker tenurial security. What this means is that an employer shall not dismiss an employee except for just or authorized cause and only after due process is observed. Thus, for an employee’s dismissal to be valid, the employer must meet these basic requirements of: (1) just or authorized cause (which constitutes the substantive aspect of a valid dismissal); and (2) observance of due process (the procedural aspect).(Baguio Central University vs. Ignacio Gallente, G. R. No. 188267, Dec. 2, 2013).

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Fundamental Principles . . . cont’d.1. The Constitution referred to by the Supreme Court is

the 1978 Constitution, Sec. 3, Art. XIII thereof, whichprescribes that workers are entitled to security of tenure.

2. On the other hand the statutes particularly refer to Art. 279 as well as the other provisions in Title I, Book VI of the Labor Code, Termination of Employment,:ART. 279. Security of Tenure. – In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

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Fundamental Principles . . . cont’d.3. While the Labor Code (1974) antedated the 1978

Constitution, the right to security of tenure was also assured in the 1973 Constitution (Sec. 9, Article II)

4. In other words, security of tenure has been a constitutional right since 1973

5. The jurisprudence referred to in the “Fundamental Principles on Dismissal of Employees” is the prevailing doctrine on dismissal established in the en banc decision of the Supreme Court in Agabon and Agabon vs. NLRC, et al., (G. R. No. 158693, Nov. 17, 2004)

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The Prevailing Doctrine on Dismissal1. The doctrine lays down two basic requirements for

dismissal: a) A valid cause, which constitutes the substantive

aspect (legality of dismissal), andb) The observance of due process (manner of dis-

missal), which constitutes the procedural aspect. 2. Due process as a manner of dismissal refers to

statutory due process under the Labor Code3. Before 2004 observance of constitutional due process

was required for a valid dismissal:“No person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied the equal protection of the laws.” (Sec. 1, Article III, Bill of Rights)

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The Prevailing Doctrine on Dismissal (cont’d)3. The failure of the employer to observe due process in

the dismissal of a worker no longer renders the dismissal invalid.

4. But for such failure, the employer must pay an indemnity to the worker

5. If the dismissal is based on a just cause under Art. 282 the sanction to be imposed should be temperedbecause the dismissal process was initiated by an act imputable to the employee

6. If the dismissal is based on an authorized cause under Art. 283, the sanction should be stiffer becausethe dismissal process was initiated by the exercise of management prerogative (Jaka Food Processing Corp. vs. Pacot, G.R. No. 151378, March 28, 2005, 454 SCRA 119)

The Prevailing Doctrine on Dismissal (cont’d)7. The nominal damages awarded to the employee for a

dismissal based on a just cause but without the noticerequirement was fixed at P30,000.00 (Agabon and Agabon vs NLRC, et al., G.R. No. 158693, Nov. 17, 2004, 442 SCRA 573)

8. If the dismissal was based on an authorized cause without the required notice, the amount fixed was P50,000.00 (Celebes Japan Foods Corporation, G.R. No. 175855, Oct. 2, 2009, citing Jaka Food Processing Corp. supra)

3/2/2011 8ECOP-VRL

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The Law and Doctrine on Termination: Ante the Labor Code

1. The law governing termination previous to the LaborCode was the Termination Pay Law (R. A. No. 1052 as amended) which in effect provided:a) For employment without a definite period, the employer

may terminate the employment any time for just cause; or without just cause, by serving written notice to the employee at least 1 month in advance or 1/2 month for every year of service of the employee, whichever is llonger

b) The employee who was not served such notice in case of termination without just cause shall be entitled to compensation from the date of termination in an amount equivalent to his wages corresponding to the required period of notice.

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The Law and Doctrine on Termination: Ante the Labor Code (cont’d)

2. The Termination Pay Law was significant, because in its application, the Supreme Court established the following precedent on the dismissal of employees:a) Failure to give advance notice to the employee was

deemed as an infringement of his constitutional right to due process of law and equal protection of the laws (Art. IV, Sec. 1(1), 1973 Constitution):

b) Since the right of an employee to his labor is in itself aproperty, his summary and arbitrary dismissal amounted to deprivation of his property without due process.“(Batangas Laguna Tayabas Bus Co. vs. Court of Appeals (G.R. No. L-38482 June 18, 1976)

3. Thus, the dismissal without advance notice was illegal

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The Law and Doctrine on Dismissal Up to 1989 (cont’d)

4. This precedential doctrine prevailed even after the effectivity of the Labor until year 1989

5. The impact of this doctrine whose application was carried over under of Labor Code had graver consequences for employers

6. Under Art. 279, in case of regular employment, aworker dismissed without just cause is deemed illegal and the worker shall be reinstated with full back wages and benefits

7. The doctrine extended the illegality of dismissal even if there was valid cause but the employer failed to observe due process in dismissing the miscreant worker

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1989: Doctrine on Dismissal Reexamined1. In 1989, the Supreme Court in an en banc decision

held that the policy that dismissal of an employee was illegal if effected without due process even if there was valid cause, should be reexamined (Wenphil Corp. vs. NLRC & Mallare, (en banc, G.R. No. 80587, Feb. 08, 1989).

2. It ruled that If just cause was established, It was arbitrary and unfair to the employer to order reinstatement with back wages

3. It would demoralize the rank and file if the un-deserving if not undesirable remained in the service

4. But infraction of the due process requirement subjects the employer to sanction in the form of an indemnity award to the employee

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1989: Doctrine on Dismissal Reexamined (cont’d)5. Award of indemnity depends upon the facts of each

case and the gravity of the omission committed bythe employer.

7. Up to 2004 , the fines imposed for violations of the notice requirement had varied from case to case fromP1,000.00, P2,000.00, P5,000.00 to P10,000.00.

8. Nevertheless the Court maintained the doctrine that failure to give an employee the benefit of a hearing before he was dismissed constituted an infringement of his constitutional right to due process of law.

9. The foregoing doctrine became known as the Wenphilor Belated Due Process Rule.

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2000: Wenphil Modified and Reversed1. In 2000, the Supreme Court in an en banc decision

reversed its previous ruling that violation of the notice requirement by the employer before it dismissed anemployee was a denial of constitutional due process (Ruben Serrano vs. NLRC & Isetann Department Store, en banc (G. R. No. 117040, 27 Jan 2000):a) The due process clause of the Constitution is a limitation

on governmental powers. It does not apply to the exercise of private power, such as the termination of employment by the employer under the Labor Code

b) "The reason is simple: Only the State has authority to take the life, liberty, or property of the individual.”

3. The remedy is to order payment of full back wages to the employee from the time of his dismissal until final judgment that the dismissal was for a just cause.

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2000: Doctrines Modified and Reversed (cont’d)4. But, otherwise, his dismissal must be upheld and he

should not be reinstated. This is because his dismissal is ineffectual.

5. For the same reason, if an employee is laid off for any of the causes in Arts. 283-284, but the employer did

not give him and the DOLE a 30-day written notice of termination in advance, then the termination of his employment should be considered ineffectual

6. However, the termination of his employment should not be considered void but he should simply be paid separation pay as provided in Art. 283 in addition to back wages.

7. The employer must be sanctioned for failure to observe the requirements of due process (Sebuguero v. NLRC, 248 SCRA)

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Implications of Serrano doctrine on Dismissal Without Notice

1. Imposes fiction of continued employer-employeerelationship even after the employer had dismissed the employee

2. Grants the following benefits to dismissed worker until date of finality of decision:a) Back wages for employees dismissed for just

causeb) Back wages plus separation pay for employees

dismissed for authorized causesc) Back wages plus separation pay for employees

dismissed on account of closures due to serious business losses or financial reverses

3. If award is reversed on appeal, what happens to benefits already received by the employee?

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2004: Serrano Doctrine Abandoned1. In 2004, the Supreme Court in an en banc decision

abandoned the Serrano doctrine and reinstated the Wenphil doctrine but imposed stiffer sanctions on the employer in the form of nominal damages (Agabon, et al. vs. NLRC, et al. (G.R. No. 158693, Nov. 17, 2004)

2. Thus, an employee found legally dismissed, is entitled to nominal damages of P50,000.00 if his dismissal lacked proper notice in violation of his right to statutory due process

3. The Serrano ruling did not consider the full meaning of Art. 279: that termination is illegal only if it is not for any of the just or authorized causes provided by law, and that payment of back wages and other benefits, including reinstatement is justified only if theemployee was unjustly dismissed.

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2004: Serrano Doctrine Abandoned (cont’d)4. Abagon differentiated statutory due process from

constitutional due process:a) Due process under the Labor Code has 2 aspects:

1) substantive, i.e., the valid and authorized causes ofemployment termination

2) procedural, i.e., the manner of dismissal, whose requirements are found in the Implementing Rules ofthe Labor Code, Book VI, Rule I, Sec. 2, as amended by D. O. Nos. 9 and 10

5. Thus, statutory due process under the Labor Code and Implementing Rules protects employees from being unjustly terminated without just cause after notice and hearing

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2004: Serrano Doctrine Abandoned (cont’d)6. On the other hand, constitutional due process protects

the individual from the government and assures him of his rights in criminal, civil or administrative proceedings

7. From the foregoing doctrine the Supreme Court summarized four possible situations that may be derived in the dismissal of employees: a) The dismissal is for a just cause under Art. 282 of the

Labor Code, for an authorized cause under Art. 283, or for health reasons under Art. 284, and due process was observed;

b)) The dismissal is without just or authorized cause but due process was observed;

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2004: Serrano Doctrine Abandoned (cont’d)c) The dismissal is without just or authorized cause and

there was no due process; and d) The dismissal is for just or authorized cause but due

process was not observed.

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Implications of the Four Situations1. In the 1st situation (just or authorized cause, with due

process) the dismissal is undoubtedly valid and the employer will not suffer any liability.

2. In the 2nd and 3rd situations where the dismissals are illegal, Art. 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.

3. In the 4th situation (just or authorized cause but due process was not observed), the dismissal should be upheld.

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Implications of the Four Situations (cont’d)4. 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.

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Epilogue1. Summing up, due process under the Labor Code, like

Constitutional due process, has two aspects: a) substantive, i.e., the valid and authorized causes of

employment termination under the Labor Code; andb) procedural, i.e., the manner of dismissal.

2. Procedural due process requirements for dismissal are found in the Implementing Rules of the Labor Code, as amended Department Order No. 147-15, Series of 2015

3. Breaches of these due process requirements violate the Labor Code. Therefore statutory due processshould be differentiated from failure to comply with constitutional due process.

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Epilogue (cont’d)4. The constitutional policy to provide full protection to

labor is not meant to be a sword to oppressemployers.

5. The employer should not be compelled to continue employing a person who is admittedly guilty of misfeasance or malfeasance and whose continued employment is patently inimical to the employer.

6. The law protecting the rights of the worker authorizes neither oppression nor self-destruction of the employer.

7. An employee who is clearly guilty of conduct violative of Article 282 should not be protected by the Social Justice Clause of the Constitution.

8. Social justice, as the term suggests, should be used only to correct an injustice.

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