Notice and Severance

Notice Requirement

Under the Labor Code, employers are required to give a written contract termination notice explaining the causes for termination of employment. Labour Code further requires the employer to give worker an ample opportunity to be heard and to defend himself with the assistance of a representative.

In the Philippines, the employee has "the right to security of tenure". This means that an employee can only be dismissed for a just cause or an authorized cause and after the observance of the procedure laid down by the law.

Just causes are blameworthy acts on the part of the employee such as serious misconduct, willful disobedience, gross and habitual neglect of duties, fraud or willful breach of trust, commission of a crime and other analogous causes.

Authorized causes are of two types: economic reasons and disease. Economic reasons cover "installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking, while disease cover situations where an "employee 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 and a competent public health authority has certified that the disease is incurable within a period of six months even with proper medical treatment.

All other reasons for terminating the employment of the employee are unlawful and include but are not limited to dismissal based on sexual discrimination; dismissal after the contravention of a stipulation in the labour contract that a women cannot to marry during her employment; where the employer dismisses a woman employee on account of her pregnancy; where the employer engages in practice deemed as unfair labour practices (dismissal based on trade union activity); the dismissal of employees who have contracted AIDS or who are disabled.

There is no notice period prior to a dismissal for a just cause. The employer is only required to give a 30-day notice to the employee in the event of termination for business reasons or disease related reasons. Authorized dismissals also require a 30-day notice to the Department of Labour and Employment (DOLE).

Workers can also terminate an employment contract by serving a 30-day notice. A worker is allowed to terminate employment relationship without serving any notice in the following cases:

       i.          Serious insult by the employer or his representative on the honor and person of the employee;

      ii.          Inhuman and unbearable treatment accorded the employee by the employer or his representative;

    iii.          Commission of a crime or offense by the employer or his representative against the person of the employee or any of the immediate members of his family; and

    iv.          Other causes analogous to any of the foregoing.

Lastly, the law does not provide for compensation in lieu of notice.

Source: §13 of the Constitution of the Philippines; §135-137, 279, 297-300 of the Labour Code, as amended; DOLE D.O. 147-15; §35 of the Philippine AIDS Prevention and Control Act of 1998 (No. 8504); §32 of the Republic Act No. 7277, 1992

Severance Pay

Where the employment has been terminated for a just cause, no severance pay is awarded to the employee. However, where the employee is dismissed for an authorized cause (economic reasons or disease), the worker is granted severance pay.

Workers are entitled to receive a separation pay of at least half month for every year of service. A fraction of at least 6 months is considered one year. The above referred separation pay is due if the contract was terminated on the following grounds:

a)     Retrenchment, i.e., reduction of personnel to prevent losses;

b)     Closure or cessation of operations of an establishment (not due serious losses or financial reverses);

c)     Where an employee is suffering from a disease not curable within 6 months and his continued employment is prejudicial to his or his co-workers’ health

In any of the above cases, separation pay cannot be less than one-month pay.

Workers are entitled to receive a separation pay equivalent to one month pay for every year of service. A fraction of at least 6 months is considered one year. The above referred separation pay is due if the contract was terminated on the following grounds:

a)     Installation of labour saving devices by the employer;

b)     Redundancy, where the position of employee is found to be excessive or unnecessary in the operation of the enterprise;

c)     Where reinstatement (as ordered by the competent authority) of worker to a former position is not possible due to closure or cessation of enterprise operations or obsolescence of worker’s position or lack of any other equivalent position to which worker can be assigned  

Source: §298 and 299 of the Labour Code, as amended; DOLE D.O. 147-15