Knowing the Legal Effects of a Finding of Illegal Dismissal

Dismissal due to gross and habitual neglect of duty

Private employers are not prohibited from terminating the employment contract of their employees, however, it must be done in accordance with the law. Under the Labor Code, termination or dismissal of employees requires the observance of two (2) fold due process requisites (Joselito Guianan Chan, Bar Reviewer on Labor Law, 2017), these are:

1. Substantive Due Process, which means that the dismissal must be for any of the (a) just causes provided under Article 297 (282) of the Labor Code or the company rules and regulations promulgated by the employer; or (b) authorized causes under Articles 298 (283) and 299 (284) thereof; and

• Procedural Due Process, which means that the employee must be accorded due process, the elements of which are notice and the opportunity to be heard and to defend himself.

Substantive Aspect

Just Causes for Dismissal

Under Article 297 (282), an employer may terminate an employment for any of the following causes:

• Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;
• Gross and habitual neglect by the employee of his duties;
• Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;
• Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representatives; and
• Other causes analogous to the foregoing.

Authorized Causes for Dismissal
(Joselito Guianan Chan, Bar Reviewer on Labor Law, 2017)

Under the Labor Code, particularly, authorized causes are classified into two (2) classes, namely:

• Business-related causes indicated under Article 298 (283) of the Labor Code, to wit:
  • Installation of labor-saving device;
  • Redundancy;
  • Retrenchment;
  • Closure or cessation of business operations not due to serious business losses or financial reverses; and
  • Closure or cessation of business operations due to serious business losses and financial reverses;

• Health-related causes, which refers to disease covered by Article 299 (284) of the Labor Code.

Procedural Aspect

This is an aspect or rule deeply embedded in our jurisprudence. Procedural Due Process requires that in order to constitute a valid dismissal, two requisites must concur: (a) the dismissal must be for any of the causes expressed in Art. 297 (282) of the Labor Code; and (b) the employee must be accorded due process, basic of which is the opportunity to be heard and to defend himself. Simply put, the twin requirements of due process, substantive and procedural, must be complied with before a dismissal can be considered valid. ||| 

The law requires that an employee sought to be dismissed must be served two written notices before termination of his employment. The first notice is to apprise the employee of the particular acts or omissions by reason of which his dismissal has been decided upon; and the second notice is to inform the employee of the employer’s decision to dismiss him. Failure to comply with the requirement of two notices makes the dismissal illegal. The procedure is mandatory. Non-observance thereof renders the dismissal of an employee illegal and void. (Loadstar Shipping Co. v. Mesano, G.R. No. 138956, [August 7, 2003], 455 PHIL 936-943)

In determining cases of Illegal Dismissal, there are seven (7) possible standard situations (Joselito Guianan Chan, Bar Reviewer on Labor Law, 2017) where both rules on substantive and procedural due process are relevant, these are:

1. The dismissal was for a just or authorized cause, and procedural due process was duly observed, the termination is legal ||| (Philippine Airlines, Inc. v. National Labor Relations Commission, G.R. No. 115785, [August 4, 2000], 392 PHIL 50-57);
2. The dismissal was without a just or authorized cause but due process was observed, the termination is illegal ||| (ACD Investigation Security Agency, Inc. v. Daquera, G.R. No. 147473, [March 30, 2004]);
3. The dismissal was without a just or authorized cause and due process was not observed, the termination is illegal. It is fundamental that an employer is liable for illegal dismissal when it terminates the services of the employee without just or authorized cause and without due process of law (Lambert Pawnbrokers and Jewelry Corporation v. Binamira, G.R. No. 170464, [July 12, 2010], 639 PHIL 1-16).
4. The dismissal was for a just or authorized cause but due process was not observed, the termination is legal ||| (Agabon v. National Labor Relations Commission, G.R. No. 158693, [November 17, 2004], 485 PHIL 248-367);
5. The dismissal was for a non-existent cause, the termination is illegal||| (Standard Electric Manufacturing Corp. v. Standard Electric Employees Union, G.R. No. 166111, [August 25, 2005], 505 PHIL 418-430);
6. The dismissal was not supported by any evidence of termination, the dismissal is neither legal nor illegal as there is no dismissal to speak of (Ledesma, Jr. v. National Labor Relations Commission, G.R. No. 174585, [October 19, 2007], 562 PHIL 939-953).
7. The dismissal was brought about by the implementation of a law, the termination is legal (St. Mary’s Academy of Dipolog City v. Palacio, G.R. No. 164913, [September 8, 2010], 644 PHIL 532-551).

The legality of a dismissal may be questioned before the Labor Arbiter of a Regional Arbitration Branch of the National Labor Relations Commission (NLRC), through a complaint for illegal dismissal. In establishments with a collective bargaining agreement (CBA), the dismissal may be questioned through the grievance machinery established under the CBA. If the complaint is not resolved at this level, it may be submitted to voluntary arbitration (Read here).

Reliefs for Illegal Dismissal

The normal consequences of respondents’ illegal dismissal, then, are reinstatement without loss of seniority rights, and payment of backwages computed from the time compensation was withheld up to the date of actual reinstatement. Where reinstatement is no longer viable as an option, separation pay equivalent to one (1) month salary for every year of service should be awarded as an alternative. The payment of separation pay is in addition to payment of backwages (ICT Marketing Services, Inc. v. Sales, G.R. No. 202090, [September 9, 2015]).

Other Reliefs

            In cases of termination for just causes, the violation of the employee’s right to statutory due process by the employer warrants the payment of indemnity in the form of nominal damages amounting to P30,000.00. The amount of such damages is addressed to the sound discretion of the court, taking into account the relevant circumstances.  The court believe this form of damages would serve to deter employers from future violations of the statutory due process rights of employees. At the very least, it provides a vindication or recognition of this fundamental right granted to the latter under the Labor Code and its Implementing Rules (Agabon v. National Labor Relations Commission, G.R. No. 158693, [November 17, 2004], 485 PHIL 248-367).

The clear-cut distinction between a dismissal for just cause under Article 297 (282) and a dismissal for authorized cause under Article 298 (283) is further reinforced by the fact that in the first, payment of separation pay, as a rule, is not required, while in the second, the law requires payment of separation pay.

For these reasons, there ought to be a difference in treatment when the ground for dismissal is one of the just causes under Article 297 (282), and when based on one of the authorized causes under Article 298 (283).

|||         It is, therefore, established that there was ground for employee’s dismissal, i.e., retrenchment, which is one of the authorized causes enumerated under Article 298 (283) of the Labor Code. Considering the factual circumstances in the instant case and the above ratiocination, the Court deem it proper to fix the indemnity at P50,000.00. | (Jaka Food Processing Corp. v. Pacot, G.R. No. 151378, [March 28, 2005], 494 PHIL 114-125)

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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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