Labor Relations in the Philippines
I. Employment Terminations
There are (2) two types of employment termination in the Philippines: termination by the employer and voluntary resignation or termination by the employee. Termination of employment in the Philippines can be a complex process for employers since the Labor Code is construed in favor of employees.
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Termination by Employer
An employer can terminate an employee based on a just or authorized cause. A just cause is based on acts attributable to an employee’s own wrongful actions or negligence while an authorized cause refers to lawful grounds for termination which do not arise from fault or negligence of the employee.
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An employee can be terminated for the following just causes:
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Serious misconduct or willful disobedience of the lawful orders of the employer;
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Gross and habitual neglect of work duties;
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Fraud or willful breach of the trust given by the employer;
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Execution of a crime or offense against the employer, his/her family or representative; or
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Other related causes.
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Similarly, an employee can also be terminated for authorized causes, such as the following:
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Installation of labor-saving devices;
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Redundancy;
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Retrenchment (reduction of costs) to prevent losses;
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Closure of business or operations; or
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Disease/illness (that is of such a nature and at such a stage that it can no longer be cured within a period of six [6] months even with medical attention).
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Voluntary Resignation
An employee may file a voluntary resignation without just cause or with just cause.
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The just causes for filing a resignation are as follows:
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Serious insult to the honor and person of the employee;
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Inhuman and unbearable treatment given by the employer;
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Crime committed against the employee or his/her family; or
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Other related causes.
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If the resignation is without just cause, the employee must give a one (1) month advance written notice for resignation (referred to as a resignation letter) to the employer to enable them to look for a replacement and prevent work delay. Failure to file a resignation letter can make the employee incur liability for damages.
II. Illegal Dismissal
Employees can file a complaint for illegal dismissal before the National Labor Relations Commission (NLRC) if the cause for their termination does not fall under the conditions stipulated by the Labor Code.
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The most common type of illegal dismissal in the Philippines is constructive dismissal, a dismissal in disguise where an employee is forced to resign with the use of threats, intimidation, coercion, manipulation or penalty for an offense.
In cases of illegal dismissal, the employer has the duty of proving the dismissal is valid. Employees are allowed to question their dismissal from work based on two grounds:
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Substantive – absence of a just or authorized cause supporting the dismissal
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Procedural – failure of the employer to give the employee the opportunity to explain their side
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If an employer fails to observe procedural due process in cases of legal and authorized termination, they are required to pay the employee indemnity or nominal damages in a sum of not more than 30,000 pesos (for just causes) and not more than 50,000 pesos (for authorized causes).
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Employees who are unjustly dismissed are entitled to any or all of the following:
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reinstatement without loss of seniority rights
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separation pay equivalent to one (1) month salary for every year of service if reinstatement cannot be provided
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full backwages, inclusive of allowances and other benefits of their monetary equivalent from the time compensation was withheld up to the time of reinstatement
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payment of damages and/or attorney’s fees (if the dismissal was done in bad faith)
II. Labor Unions and Strikes
Right to Organize Labor Unions
The Philippine Constitution provides employees in rank-and-file and supervisory positions the right to organize, join, and assist labor unions for the main purpose of establishing a Collective Bargaining Agreement (CBA) with their employer. Managerial employees, on the other hand, are not entitled to demand a CBA but are given the option to form associations for mutual aid and protection in the workplace.
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The CBA must be executed upon request of the employer or the bargaining representative of the employees and contain the agreed terms of conditions of employment with respect to wages, hours of work, and other related matters which must not be below the minimum standards stipulated by law. The CBA must also include proposals for resolving grievances.
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Labor Strikes and Lockouts
Rank-and-file and supervisory employees are also given the right to organize and participate in labor strikes or lockouts, provided they were organized for a valid purpose and conducted through means allowed by law.
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Employees who participate in lawful strikes cannot be terminated by their employer since the law does not consider them to have abandoned their work but are merely exercising their right to organize to protect their rights as employees and/or obtain better work conditions.
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But if the strike was unlawful and conducted for purposes not recognized by law, employees who participated in the commission of illegal acts during the strike may be terminated.​