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Legal Dismissal - Jurisprudence

According to Article 282 of the Labor Code, an employer can terminate an employee for just causes, which
could be any of the following:

1. Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work;
2. Gross and habitual neglect by the employee of his duties;
3. Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representatives;
4. 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
5. Other similar causes.

- Ordinarily, dismissal under this provision does not need the payment of separation pay.
However, where the cause of the dismissal does not pertain to the employee’s moral character
or gross misconduct, social justice requires employers to pay separation pay or financial
assistance to the employee. [See Cesario Azucena, Jr., The Labor Code with Comments
and Cases, p.901 (2013)].

1. Serious Misconduct
1. Misconduct – a transgression of some established and definite rule of action, a forbidden act, a
dereliction of duty, willful in character which implies wrongful intent and not mere error in judgment. [
Ha Yuan Restaurant vs. NLRC, G.R. No. 147719, January 27, 2006].

Requisites - 1. Misconduct must be serious;

2. The misconduct must relate to the employee’s performance of duty;

3. .It must show that the employee has become unfit to continue working for the
employer. [Roquero vs. PAL, G.R. No. 152329, April 22, 2003; Coca-Cola Bottlers, Phils.,
Inc., vs. Kapisana ng Malayang Manggagawa sa Coca-Cola-FFW, G.R. No. 148205,
February 28, 2005].

Examples -

1. Utterance of obscene, insulting or offensive words against a superior. [Asian Design and Mfg. Corp.,
vs. Deputy Minister of Labor, G.R. No. 70552, May 12, 1986].
2. Immorality, generally, does not justify discharge of an employee unless such conduct is prejudicial or
in some way detrimental to the employer’s interest. [Santos, Jr. vs. NLRC, G.R. No. 115795, March 6,
1998].

3. A teacher falling in love with her student is not immoral. However, two teachers having extra-marital
relationship together is immoral. [See Chua-Qua vs. Clave, G.R. No. L-49549, August 30, 1990 vis-à-vis
Santos, Jr. vs. NLRC, G.R. No. 115795, March 6, 1998].

4. Sexual harassment. [Villarama vs. NLRC, G.R. No. 106341, September 2, 1994].

5. Theft of company property is just cause for termination but not theft of property not-owned by the
company. [See NLMK-OLALIA-KMU vs. Keihin Phil. Corp., G.R. No. 171115, August 9, 2010 vis-à-vis
Villamor Golf Club vs. Pehid, G.R. No. 166152, October 4, 2005].

1.a Willful Disobedience


Requisites

1. The orders, regulations, or instructions of the employer or representative must be reasonable


and lawful;
2. Sufficiently made known to the employee; and
3. In connection with the duties which the employee has been engaged to discharge. [Ace
Promotion and Marketing Corp. vs. Ursabia, G.R. No. 171703, September 22, 2006;
- Genuino Ice Company, Inc. vs. Magpantay, G.R. No. 147790, June 27, 2006

1. Lack of knowledge of company rules is a valid defense against dismissal. However, employees are
expected to know fundamental and universal rules such as the prohibition from driving recklessly and
obedience to traffic rules. A driver, therefore, cannot set up as defense failure by the employer to notify
rules on driving standards and traffic regulations. [Sampaguita Auto Transport Corp. vs. NLRC, G.R. No.
197384, January 30, 2013].

2. Employee’s disobedience of transfer order is a ground for dismissal because this is a valid exercise of
management prerogative. However, a transfer is invalid where the transfer amounts to unfair labor
practice or perpetrated in bad faith. [Abbott Laboratoris vs. NLRC, G.R. No. 76959, October 12, 1987
vis-à-vis Yuco Chemical Industries vs. Ministry of Labor, G.R. No. 75656, May 28, 1990; Escobin vs.
NLRC, G.R. No. 118159, April 15, 1998].

3. When a transfer is coupled with or is in the nature of a promotion, it is unenforceable when the
employee rejects the promotion and s/he is not guilty of disobedience. [Dosch vs. NLRC, G.R. No.
51182, July 5, 1983].
2. Gross and Habitual Neglect of Duties
1. Gross negligence – want or absence of or failure to exercise slight care or diligence, or the entire
absence of care. It evinces a thoughtless disregard of consequences without exerting any effort to avoid
them. [National Bookstore vs. CA, G.R. No. 146741, February 27, 2002; Citibank vs. Gatchalian, G.R.
No. 111222, January 18, 1995]

Requisites

1. There must be gross negligence which is the absence of that diligence required of an ordinary prudent
man [Chavez vs. NLRC, G.R. No. 146530, January 17, 2005]; and

2. Habituality, which implies repeated failure to perform one’s duties for a period of time, depending
on the circumstances [Fuentes vs. NRC, G.R. No. 75955, October 28, 1988].

Examples:

2. (a) Abandonment – a clear and deliberate intent to discontinue one’s employment


without any intention of returning back [Flores v. Funeraria Nuestro, G.R. No. 66890, April 15, 1988].

Requisites-

(a) failure to report for work or absence without valid or justifiable reason, and

(b) a clear intention to sever the employee-employer relationship. [Labor vs. NLRC, G.R. No. 110388,
September 14, 1995].

2. As a rule, the immediate filing of a illegal dismissal complaint negates abandonment except when
there is no genuine complaint such as when it is used as a leverage against the employer. [Arc-Men
Food Industries Corp., v. NLRC, G.R. No. 113721, May 7, 1997].

2.(b) Tardiness and Absenteeism

- generally, a form of neglect of duty. [Sajonas vs. NLRC, G.R. No. 49286, March 15, 1990]. Thus,
the unjustified absences by a union president for a number of months is a valid cause for dismissal.
[Cando vs. NLRC, G.R. No. 91344, September 14, 1990].
3. Fraud or Dishonesty
1. Fraud – to constitute just cause for termination, the fraud must be:

(a) committed against the employer or his representative,

(b) in connection with the employee’ work, and

(c) willful or with wrongful intent. [Section 4343.01(3), Department of Labor Manual].

2. Dishonesty – is the disposition to lie, cheat, deceive, or defraud; untrustworthiness; lack of integrity;
lack of honesty, probity or integrity in principle; lack of fairness and straightforwardness; disposition to
defraud, deceive or betray. [NPC vs. Olandesca, G.R. No. 171434, April 23, 2010].

Examples

1. Falsification of time cards. [SMC vs. NLRC, G.R. No. 82467, June 29, 1989].
2. . Theft of company property. [Firestone Tire and Rubber Company vs. Lariosa, G.R. No. 70479,
February 27, 1987].

3.(b) Loss of Confidence


Requisites

1. Loss of confidence must not be simulated;

2. It should not be used as a subterfuge for causes which are improper, illegal, or unjustified;

3. It may not be arbitrarily asserted in the face of overwhelming evidence to the contrary;

4. It must be genuine, not mere afterthought to justify earlier action taken in bad faith; and

5. The employee involved holds a position of trust and confidence. [The Coca-Cola Export Corp. v.
Gacayan, G.R. No. 149433, December 15, 2010]

Position of trust and confidence – a position where on is entrusted with the confidence on delicate
matters, or with the custody, or care and protection of the employer’s property. [Lepanto Consolidated
Mining Co., vs. CA, G.R. No. L-15171, April 29, 1961].
4. Commission of a Crime or Offense
1. Immediate family members – limited to spouse, ascendants, descendants, or legitimate, natural or
adopted brothers or sisters or relatives by affinity in the same degrees, and those by consanguinity
within the 4th civil degree. [Article 11 (2), Revised Penal Code].

2. Conviction or Prosecution not required – the fact that the criminal complaint was dropped by the city
fiscal is not binding an conclusive upon the labor tribunal. [Starlite Plastic Industrial Corp., vs. NLRC,
G.R. No. 78491, March 16, 1989].

5. Analogous Cases
Theft committed by an employee against a person other than his employer, if proven by substantial
evidence, is a cause analogous to serious misconduct. [Cosmos Bottling Corp. vs. Fermin, G.R. No.
193676 and G.R. No. 194303, June 20, 2012]

A cause analogous to serious misconduct is a voluntary and/or willful act or omission attesting to an
employee's moral depravity. [John Hancock Life Insurance Corp. vs. Davis, G.R. No. 169549, September
3, 2008]

One who asserts an interest, or performs acts adverse or disloyal to one's employer commits a breach of
an implied condition of the contract of employment which may warrant discharge, as, for example,
where one secretly engages in a business which renders him a competitor and rival of his employer.
Where an employee engages in a business which necessarily renders him a competitor and rival of his
employer, no matter how much or how little time and attention he may devote to it, he is deemed to
have an interest which conflicts with his duty to his employer, and for this cause may be dismissed. In
the absence of a specific provision, the employee must be deemed to have been rightfully discharged
where it appears that his activities tended to injure or endanger the business of his employer. [Elizalde
International (Philippines) Inc. vs. Court of Appeals and Galan, G.R. No. L-40553, February 26, 1981]

Gross inefficiency falls within the purview of “other causes analogous to the foregoing,” and constitutes,
therefore, just cause to terminate an employee under Article 282 of the Labor Code. One is analogous to
another if it is susceptible of comparison with the latter either in general or in some specific detail; or
has a close relationship with the latter. “Gross inefficiency” is closely related to “gross neglect,” for both
involve specific acts of omission on the part of the employee resulting in damage to the employer or to
his business. [International School Manila vs. International School Alliance of Educators (ISAE), G.R.
No. 167286, February 5, 2014]
AUTHORIZED CAUSE FOR DISMISSAL

Art. 297 (283). Closure of establishment and reduction of personnel. The employer may also
terminate the employment of any employee due to the installation of labor-saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by
serving a written notice on the workers and the Ministry of Labor and Employment at least one (1)
month before the intended date thereof. In case of termination due to the installation of labor-saving
devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to
at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is
higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations
of establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every
year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1)
whole year.
Art. 298 (284). Disease as ground for termination. An employer may terminate the services of an
employee who 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: Provided,
That he is paid separation pay equivalent to at least one (1) month salary or to one-half (1/2) month
salary for every year of service, whichever is greater, a fraction of at least six (6) months being
considered as one (1) whole year.

Article 297 and 298 provide the authorized causes under the Labor Code. Simply, they are:

1. Installation of labor-saving device;


2. Redundancy;
3. Retrenchment;
4. Closure or cessation of business operations;
5. Disease

The enumeration found above is not an exhaustive list. There are other authorized causes such as
expiration of period in fixed-term employment, completion of a project in project employment, sale
which amounts to closure of business, defiance of return to work order, failure to meet standards by
probationary employee, and the application of union security clause, among others. [Cesario
Azucena, Jr., The Labor Code with Comments and Cases, p. 828, (2013)].

1. Installation of labor-saving device (Automation)

It is recognized that a manufacturer may introduce machineries or robots for the automation of
production in order to be more efficient and economical. This is valid provided that it is done in good
faith and not as a means to remove union members. [Edge Apparel vs. NLRC, G.R. No. 121314,
February 12, 1998].
2. Redundancy (Downsizing)
Redundancy exists where the services of an employer are in excess of what is reasonably
demandable by the actual requirements of the enterprise. The position is superfluous that may be
due to over hiring, decrease in output, or drop in market demand for a product line. [Dusit Hotel
Nikko v. NUWHRAIN – Dusit Hotel Nikko Chapter, G.R. No. 160391, Aug. 9, 2005; Wiltshire File
Co., Inc. v. NLRC, G.R. No. 882249, February 7, 1991].
Requisites for redundancy:

1. That there must be good faith in abolishing the redundant positions;


2. That there is no other option available to the employer except to terminate redundant employees;
3. That there be written notice served on both the affected employees and the Department of Labor
and Employment at least one (1) month prior to the intended date of termination;
4. That Separation pay is paid to the affected employees in such amount equivalent to at least his
one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher,
a fraction of at least six (6) months shall be considered as one (1) whole year. In case the CBA or
company policy provides for a higher separation pay, the same must be followed instead of the
one provided in Article 297.
5. That there be a fair and reasonable criteria in ascertaining what positions are to be declared
redundant and accordingly abolished [Lopez Sugar Corporation v. Franco, G.R. No. 148195,
May 16, 2005].

Notes:

 The creation of a related position to that which was abolished does not invalidate the redundancy
program as long as such was done in good faith and not to maliciously terminate the employees.
[Santos v. CA, G.R. No. 141947, July 5, 2001]. However, the hiring of new employees while firing
old ones is redundancy in bad faith. General Miling Corporation v. V.L. Viajar, G.R. No. 181738,
January 30, 2013].
 Replacing a regular employee with an independent contractor is valid exercise of management
prerogative. [Serrano v. NLRC, G.R. No. 117040, January 27, 2000].
 In termination due to redundancy, the management action is presumed to be done in good faith.
[Culili v. Eastern Telecommunications Phil., G.R. No. 165381, February 9, 2011].

3. Retrenchment
Retrenchment is the termination of employment initiated by the employer through no fault of the
employees and without prejudice to the latter, resorted by management during periods of business
recession, industrial depression, or seasonal fluctuations; or during lulls occasioned by lack of work or
orders, shortage of materials; or considerable reduction in the volume of the employer’s business,
conversion of the plant for a new production program or the introduction of new methods or more
efficient machinery, or of automation. [Anabe v. Asian Construction, G.R. No.183233, December
23, 2009].
Requisites:

1. That the retrenchment is reasonably necessary and duly proved and likely to prevent business
losses which, if already incurred, are not merely de minimis but substantial, serious, actual and
real or, if only expected, are reasonably imminent as perceived objectively and in good faith by
the employer;
2. That the employer serves a written notice both to the affected employees and to the Department
of Labor and Employment at least one (1) month prior to the intended date of retrenchment;
3. That the employer pays the retrenched employees separation pay equivalent to one (1) month
pay or at least one half (1⁄2) month pay for every year of service, whichever is higher;
4. That the employer exercises its prerogative to retrench employees in good faith for the
advancement of its interest and not to defeat or circumvent the employees’ right to security of
tenure; and
5. That the employer uses fair and reasonable criteria in ascertaining who would be dismissed and
who would be retained among the employees, such as status (i.e., whether they are temporary,
casual, regular or managerial employees), efficiency, seniority, physical fitness, age, and financial
hardship for certain workers. [FASAP v. Philippine Airlines,Inc., [G.R. No. 178083, July 22,
2008; Shimizu Phils. Contractors, Inc. v. Callanta, G.R. No. 165923, September 29, 2010;
Lambert Pawn brokers and Jewelry Corp. v. Binamira, G.R. No. 170464, July 12, 2010].

Criteria of layoff
There is no one standard criteria but such must be fair and reasonable. Factors such as seniority,
efficiency rating and employment status may be used. [Asiaworld Publishing House v. Ople, G.R.
No. 56398, July 23, 1987].
Standards of retrenchment
The employer must proved:

1. that the loss expected should be substantial and not merely de minimis in extent;
2. that the substantial loss must be reasonably imminent;
3. that the retrenchment is reasonably necessary and likely to effectively prevent the expected
losses; and
4. that the alleged losses if already realized, and the expected imminent losses sought to be
forestalled must be proven by sufficient and convincing evidence. [Lopez Sugar Corp., v.
Federation of Free Workers, G.R. Nos. 75700-01, August 30, 1990].
4. Closure or Cessation of Business Operations
Closure or cessation of business may be complete or partial. It is carried out to either stave off the
financial ruin or promote the business interest of the employer. [Eastridge Golf Club, Inc. v.
Eastridge Golf Club, Inc. Labor Union–Super, G.R. No. 166760, August 22,2008; Espina v. CA,
G.R. No. 164582, March 28, 2007].

Requisites
The following are the requisites for a valid closure or cessation of business operations:

1. The decision to close or cease operations should be made in good faith;


2. The purpose should not be to circumvent the provisions of Title I (Termination of Employment) of
Book Six (Post Employment) of the Labor Code;
3. There is no other option available to the employer except to close or cease its business operations;
4. The notice requirement under Article 283 should be complied with by serving a copy thereof to the
affected employees and to the Department of Labor and Employment at least one (1) month prior
to the effectivity of the termination. This requisite applies irrespective of whether or not the closure
or cessation of operations is due to serious business losses or financial reverses; and
5. When the closure or cessation of business operations is not due to serious business losses or
financial reverses, the affected employees should be paid a separation pay equivalent to one (1)
month pay or at least one half (1⁄2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1) whole year [Catatista v. NLRC, G.R.
No. 102422, August 3,1995].

Notes:

1. The employer has the right to close business even without experiencing losses. [Catatista v.
NLRC, G.R. No. 102422, August 3, 1995].
2. Closure, however, may be deemed an unfair labor practice. [Carmelcraft Corporation v. NLRC,
G.R. Nos. 900634-35, June 6 1990].
3. Audited financial statements is only necessary when closure is due to losses. [Danzas
Intercontinental v. Daguman, G.R. No. 54368, April 15, 2005].
4. Closure must be invoked at the time of termination and not merely as an after thought. [San Miguel
Corp., v. Aballa, G.R. No. 149011, June 28, 2005].
5. Disease

Requisites:

1. The employee is suffering from a disease;


2. His continued employment is either:
1. prohibited by law; or
2. prejudicial to his health; or
3. prejudicial to the health of his co employees;
3. There is a certification by a competent public health authority that the disease is of such nature or
at such stage that it cannot be cured within a period of six (6) months even with proper medical
treatment;
4. Notice of termination based on this ground should be served both to the employee and the
Department of Labor and Employment at least one (1) month prior to the effectivity of the
termination;374 and
5. Separation pay should be paid to the employee in an amount equivalent to at least one (1) month
salary or to one half (1⁄2) month salary for every year of service, whichever is greater, a fraction
of at least six (6) months being considered as one (1) whole year. [Section 8, Rule I, Book VI,
Rules Implementing the Labor Code].

Notes:

1. The certification must come from a competent public health authority. Hence, a medical certificate
issued by the company physician is not applicable. [Cebu Royal Plant v. Deputy Minister of
labor, G.R. No. 58639, August 12, 1987].
2. If the disease or ailment can be cured within the period of six (6) months with proper medical
treatment, the employer should not terminate the employee but merely ask him to take a leave of
absence. The employer should reinstate him to his former position immediately upon the
restoration of his normal health. [Sevillana v. I.T. (International) Corp, G.R. No. 99047, April 16,
2001].
3. The provision is not applicable when the employee dies. [Gomez v. Central Vegetable Oil, G.R.
No. L-22702, July 28, 1969].
4. Medical certificate is indespensble and best evidence of illness. [Duterte v. Kingswood, G.R. No.
160325, October 4, 2007].