16.2.1.
1 Security of Employment
Employment security is about the protection of workers against fluctuations in earned income as a result of job loss. Job loss
may occur during economic downturns, as part of restructuring, or be related to other various reasons for dismissals. One of
the forms of protection that is afforded to workers against, or upon, dismissal, is provided by employment protection
legislation (EPL). The growth over the past several decades of nonstandard work -- temporary contracts, temporary agency and
dispatched work, dependent self-employment, marginal part-time work – in many parts of the world, have heightened
workers’ concerns over employment security.
Employment protection legislation—the set of laws governing the initiation of open-ended and temporary contracts, as well as
the termination of contractual relationships, both individually or collectively—has been at the center of debates on
labor market reforms. Nevertheless, the very existence of legal provisions often does not tell much about how strict
regulations are in a given country, nor the degree of protection afforded to workers, which will also depend on complementary
policies such as income support for the unemployed. A well-functioning EPL - which balances the need to provide fair
treatment as well as income security to workers and allow firms’ to adjust employment (hours or jobs) based on fluctuations in
aggregate demand - is an important determinant of an economy’s resilience to economic shocks. Together with
unemployment benefit systems, employment protection legislation forms a basis for an overall worker security. In times of
economic downturns, employment security may also be afforded by other means, such as work-sharing.
16.2.1.2 Classification of Employment as to Tenure
In the Philippines, the following are the recognized types of employment:
(1) regular; (2) casual; (3) project; (4) seasonal; (5) fixed-term; and (6) probationary.
Regular and Casual Employment
Pursuant to Article 280 of the Labor Code of the Philippines (“Labor Code”), the primary standard that determines
regular employment is the reasonable connection between the particular activity performed by the employee and the usual
business or trade of the employer; the emphasis is on the necessity or desirability of the employee’s activity. Thus, when the
employee performs activities considered necessary and desirable to the overall business scheme of the employer, the law
regards the employee as regular.
In addition, the Labor Code also considers as regular employment a casual arrangement when the casual employee’s
engagement has lasted for at least one year, regardless of the engagement’s continuity. The controlling test in this
arrangement is the length of time during which the employee is engaged. (See Universal Robina v. Acibo, G.R. No. 186439, 15
January 2014)
Project Employment
Project employment contemplates an arrangement whereby “the employment has been fixed for a specific project or
undertaking whose completion or termination has been determined at the time of the engagement of the employee.”
(Article 280, Labor Code of the Philippines)
Since the employee’s services are coterminous with the project, the services of the project employees are legally and
automatically terminated upon the end or completion of the project.
Seasonal Employment
Seasonal employment applies “where the work or service to be performed is seasonal in nature and the employment
is for the duration of the season.” (Article 280, Labor Code of the Philippines)
Season employees may also be considered regular employees, thus: “[f]arm workers generally fall under the definition
of seasonal employees. We have consistently held that seasonal employees may be considered as regular employees. Regular
seasonal employees are those called to work from time to time. The nature of their relationship with the employer is such that
during the off-season, they are temporarily laid off; but reemployed during the summer season or when their services may be
needed. They are in regular employment because of the nature of their job,and not because of the length of time they have
worked.” (Gapayao v. Fulo, et al., G.R. No. 193493, 13 June 2013)
Fixed-Term Employment
Fixed-term employment is valid when: (a) the fixed period of employment was knowingly and voluntarily agreed upon
by the employer and employee without any force, duress, or improper pressure being brought to bear upon the employee and
absent any other circumstances vitiating his consent; or (b) it satisfactorily appears that the employer and the employee dealt
with each other on more or less equal terms with no moral dominance exercised by the former or the latter. (See Caparoso, et
al. v. Court of Appeals, G.R. No. 155505, 15 February 2007)
Probationary Employment
Probationary employment exists when the employee, upon his engagement is made to undergo a trial period where
the employee determines his fitness to qualify for regular employment, based on reasonable standards made known to him
at the time of engagement. The employer shall make known to the employee the standards under which he will qualify as a
regular employee at the time of his engagement. Where no standards are made known to the employee at that time, he shall
be deemed a regular employee. (See Section 6(d), Implementing Rules of Book VI, Rule VII-A of the Labor Code)
Generally, probationary employment shall not exceed six (6) months from the date the employee started working.
(See Article 281, Labor Code)
16.2.1.3 Termination by Employer and Employee
Termination of Employment
1. What is the right to security of tenure?
The right to security of tenure means that a regular employee shall remain employed unless his or her services are
terminated for just or authorized cause and after observance of procedural due process.
2. May an employer dismiss an employee? What are the grounds?
Yes. An employer may dismiss an employee on the following just causes:
a) serious misconduct;
b) willful disobedience;
c) gross and habitual neglect of duty;
d) fraud or breach of trust;
e) commission of a crime or offense against the employer, his family or representative;
f) other similar causes.
3. Are there other grounds for terminating an employment? What are they?
Yes. The other grounds are authorized causes:
a) installation of labor-saving devices;
b) redundancy;
c) retrenchment to prevent losses;
d) closure and cessation of business; and
e) disease / illness.
4. Before terminating the services of an employee, what procedure should the employer observe?
An employer shall observe procedural due process before terminating one’s employment.
5. What are the components of procedural due process?
A. In a termination for just cause, due process involves the two-notice rule:
a) A notice of intent to dismiss specifying the ground for termination, and giving said employee reasonable
opportunity within which to explain his or her side;
b) A hearing or conference where the employee is given opportunity to respond to the charge, present
evidence or rebut the evidence presented against him or her;
c) A notice of dismissal indicating that upon due consideration of all the circumstances, grounds have been
established to justify termination.
B. In a termination for an authorized cause, due process means a written notice of dismissal to the employee specifying
the grounds at least 30 days before the date of termination. A copy of the notice shall also be furnished the Regional
Office of the Department of Labor and Employment (DOLE) where the employer is located.
6. What is the sanction if the employer failed to observe procedural due process in cases of legal and authorized
termination?
In cases of termination for just causes, the employee is entitled to payment of indemnity or nominal damages in a sum
of not more than 30,000 pesos (Agabon vs. NLRC, 442 SCRA 573); in case of termination for authorized causes, 50,000 pesos
(Jaka Food Processing vs. Darwin Pacot, 454 SCRA 119).
7. May an employee question the legality of his or her dismissal?
Yes. 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.
8. In cases of illegal dismissal, who has the duty of proving that the dismissal is valid?
The employer.
9. Suppose the employer denies dismissing the employee, who has the duty to prove that the dismissal is without valid
cause?
The employee must elaborate, support or substantiate his or her complaint that he or she was dismissed without valid
cause (Ledesma, Jr. vs. NLRC, 537 SCRA 358, October 19, 2007).
10. On what grounds may an employee question his or her dismissal?
An employee may question his or her dismissal based on substantive or procedural grounds.
The substantive aspect pertains to the absence of a just or authorized cause supporting the dismissal.
The procedural aspect refers to the failure of the employer to give the employee the opportunity to explain his or her
side.
11. What are the rights afforded to an unjustly dismissed employee?
An employee who is dismissed without just cause is entitled to any or all of the following:
a) reinstatement without loss of seniority rights;
b) in lieu of reinstatement, an employee may be given separation pay of one month pay for every year of service
(Golden Ace Builders, et. al vs. Jose Talde, May 5, 2010, GR No. 187200);
c) full backwages, inclusive of allowances and other benefits or their monetary equivalent from the time compensation
was withheld up to the time of reinstatement;
d) damages if the dismissal was done in bad faith (Aurora Land Project Corp. vs NLRC, 266 SCRA 48).
12. What is reinstatement?
Reinstatement means restoration of the employee to the position from which he or she has been unjustly removed.
Reinstatement without loss of seniority rights means that the employee, upon reinstatement, should be treated in
matter involving seniority and continuity of employment as though he or she had not been dismissed from work.
When a Labor Arbiter rules for an illegal dismissal, reinstatement is immediately executory even pending appeal by the
employer (Article 223 of the Labor Code, as amended).
13. In what forms may reinstatement pending appeal be effected?
Reinstatement pending appeal may be actual or by payroll, at the option of the employer.
14. What is meant by full backwages?
Full backwages refer to all compensations, including allowances and other benefits with monetary equivalent that
should have been earned by the employee but was not collected by him or her because of unjust dismissal. It includes all the
amounts he or she could have earned starting from the date of dismissal up to the time of reinstatement.
15. What is separation pay?
In termination for authorized causes, separation pay is the amount given to an employee terminated due to
installation of labor-saving devices, redundancy, retrenchment, closure or cessation of business or incurable disease.
Separation pay may also be granted to an illegally dismissed employee in lieu of reinstatement.
16. How much is the separation pay?
In cases of installation of labor-saving devices or redundancy, the employee is entitled to receive the equivalent of one
month pay or one month for every year of service, whichever is higher.
In cases of retrenchment, closure or cessation of business or incurable disease, the employee is entitled to receive the
equivalent of one month pay or one-half month pay for every year of service, whichever is higher.
In case of separation pay in lieu of reinstatement, the employee is entitled to receive the equivalent of one month pay
for every year of service.
17. Is proof of financial losses necessary to justify retrenchment?
Yes. Proof of actual or imminent financial losses that are substantive in character must be proven by the employer to
justify retrenchment (Lopez Sugar Central vs. NLRC, 189 SCRA 179).
18. Are there other conditions before an employee may be dismissed on the ground of redundancy?
Yes. It must be shown that there is:
a) Good faith in abolishing redundant position; and
b) Fair and reasonable criteria in selecting employees to be dismissed, such as but not limited to less preferred status
(e.g. temporary employee), efficiency and seniority (Asian Alcohol Corp. vs. NLRC, 305 SCRA 416);
c) A one-month prior notice is given to the employee and DOLE Regional Office as prescribed by law.
19. May the services of an employee be terminated due to disease?
Yes. The employer may terminate employment on ground of disease only upon the issuance of 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 months even with proper medical treatment.
20. What is constructive dismissal?
Constructive dismissal refers to an involuntary resignation resorted to when continued employment becomes
impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer becomes unbearable to an employee or an unwarranted transfer or
demotion of a employee, or other unjustified action prejudicial to the employee. The employer has to prove that such
managerial actions do not constitute constructive dismissal (Blue Dairy Corp. vs. NLRC, 314 SCRA 401)
21. May an employee be placed on floating status?
Yes, provided it is permitted under circumstances for a period of not more than six (6) months. Beyond this period,
floating status becomes constructive dismissal which entitles the employee to separation pay (Phil. Industrial Security Agency
Corp. vs. Virgilio Dapiton and NLRC, 320 SCRA 124)
22. When an employee resigned voluntarily, is he or she entitled to separation pay?
No. An employee is not entitled to separation pay when he or she resigns voluntarily, unless it is a company practice or
provided in the CBA (Hanford Philippines Inc. vs. Shirley Joseph, 454 SCRA 786, March 31, 2005).
23. Are quitclaims valid?
Yes, provided that these are voluntarily signed and the consideration is reasonable and is not against the law or public
policy. (More Maritime Agencies vs. NLRC, 307 SCRA 189)
Quitclaims entered into by union officers and some members do not bind those who did not sign it (Liana’s
Supermarket vs. NLRC, 257 SCRA 186).
16.2.1.4 Retirement
Retirement age in the Philippines is between 60 and 65. The government and most private companies allow optional
retirement at 60 and mandatory retirement at 65.
Companies should develop policies so that both employees and managers know the expectations and so that all
employees are treated fairly and equitably. Retirement policies represent one section of a company's overall human resources
policy and should be part of the employee handbook. Establishing retirement policies requires some initial planning but saves
time and headaches over the longer term. Fair retirement policies also can aid in recruitment of top talent.
In the absence of a retirement plan or agreement providing for retirement benefits of employees, an employee upon
reaching the age of sixty (60) years (optional) or more, but not beyond sixty-five (65) years (mandatory), who has served at
least five (5) years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half
(1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one (1) whole year.
Under the Labor Code of the Philippines, unless the parties provide for broader inclusions, the term one half (1/2)
month salary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more
than five (5) days of service incentive leaves.
Thus, the minimum retirement pay is one-half (1/2) month salary for every year of service, a fraction of six (6) months
being considered as one (1) whole year. “1/2 month salary” shall include all of the following:
1. 15 days salary based on the latest salary rate
2. Cash equivalent of 5 days service incentive leave
3. 1/12 of the thirteenth month pay (1/12 x 365/12 = 2.53)
