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).

[ G.R. No. 218282, September 09, 2020 ]

REDENTOR Y. AGUSTIN, PETITIONER, VS. ALPHALAND CORPORATION, ET

AL., RESPONDENTS.

DECISION

Ruling of the Court

The petition is meritorious.

In the case of St. Michael's Institute v. Santos,41 a group of teachers with regular
employment status were dismissed for joining a public rally and disrupting classes.42 The LA
found and declared that there was just cause for the dismissal since they were guilty of
dereliction of duty and insubordination.43 On appeal, the NLRC reversed the ruling of the
LA and held that the teachers had been illegally dismissed. However, the NLRC in its
Decision did not award backwages. The employer in St. Michael's Institute filed a Petition
for Certiorari. The CA sustained the decision of the NLRC and in addition, awarded
backwages to the teachers who were illegally dismissed.44 Undaunted, the employer filed a
Petition for Review on Certiorari before this Court. In the said petition, the employer averred
that when the CA awarded backwages in favor of the employees, it "unwittingly reversed a
time-honored doctrine that a party who has not appealed cannot obtain from the appellate
court any affirmative relief other than the ones granted in the appealed decision."45 To this
issue, this Court ruled that the award of backwages is merely a legal consequence of the
finding that the employees were illegally dismissed by the employer. In unequivocal terms,
this Court explained in the said case that: "the [Court] is imbued with sufficient authority and
discretion to review matters, not otherwise assigned as errors on appeal, if it finds that their
consideration is necessary in arriving at a complete and just resolution of the case or to serve
the interests or to avoid dispensing piecemeal justice."46
The case of Alphaland and Agustin presents Us with a similar factual milieu. In the same
vein as St. Michael's Institute, the case at bar involves a regular employee who was declared
illegally dismissed yet was not properly awarded backwages from the time of illegal
dismissal until reinstatement.

Based on two grounds, this Court holds that Agustin was a regular employee of Alphaland.

First, The LA, NLRC, and later on the CA uniformly found that Agustin was hired from the
management's standpoint as a probationary employee but was not informed of the reasonable
standards by which his probationary employment was to be assessed. The standards set are
too general and failed to specify with clarity what is expected of Agustin as an Executive
Chef.47 Consequently, the lower courts found that Agustin's dismissal was illegal. This
finding warrants the application of the following self-explanatory provisions:

Article 296 of the Labor Code

Article 296. 281 Probationary Employment. – Probationary employment shall not exceed six

(6) months from the date the employee started working, unless it is covered by an
apprenticeship agreement stipulating a longer period. The services of an employee who has
been engaged on a probationary basis may be terminated for a just cause or when he fails to
qualify as a regular employee in accordance with reasonable standards made known by the
employer to the employee at the time of his engagement. An employee who is allowed to
work after a probationary period shall be considered a regular employee.

Section 6 (d) of the Implementing Rules of Book VI, Rule I of the Labor Code

Section 6. Probationary Employment. – There is probationary employment where the

employee, upon his engagement, is made to undergo a trial period during which the employer
determines his fitness to qualify for regular employment based on reasonable standards made
known to him at the time of engagement.

Probationary employment shall be governed by the following rules:

xxxx

(d) In all cases of probationary employment, 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. (Emphasis supplied).

Considering the foregoing, the probationary period set in the contract of employment dated
July 6, 2011 is therefore purposeless. In no case was Agustin hired on a probationary status
by Alphaland. As of July 6, 2011, Agustin became part of Alphaland Corporation as a regular
employee of the company without a fixed term of employment.

Second, Agustin served as a consultant prior to being hired as an Executive Chef allegedly on
a probationary status. The Consultancy Engagement Offer48 provides that Agustin served as
a consultant from June 6, 2011 until July 5, 2011, with a salary of P50,000.00. Narrated in the
Memorandum49 submitted by Alphaland, Agustin as a consultant, was responsible for setting
up the kitchen, choosing the equipment, laying out the job description for each kitchen staff,
and the preparation of menus for all cuisines that the Club will offer. Following the
completion of Agustin's tasks as the Club's consultant, Alphaland proceeded to search for an
Executive Chef to head the Club's restaurants. Since the opening of the Club was fast
approaching, Alphaland hired Agustin as the Executive Chef for all the Club's restaurants.
Alphaland claims that since it still had to assess and determine whether Agustin's skills as
Executive Chef are at par with what the Club requires, it hired Agustin as a probationary
employee.50

We find this circumstance contrary to the ordinary course of business. Mainly, consultants
are hired to provide their expert advice and opinion on what needs to be done. Records show
that Agustin has been in the culinary industry for almost 19 years already, won several
contests, and has served well-known establishments in the Philippines and abroad.51 When
Alphaland hired Agustin as Consultant, without doubt, it was fully aware of his qualifications
and skills to set up the "kitchen" at the Balesin Island Club. This Court cannot agree that
Agustin was hired as Executive Chef on probationary basis since the tasks for which Agustin
was engaged as a Consultant were the very same tasks he had to do as an Executive Chef. In
both engagements, Agustin was tasked to take over the kitchen planning.

Dismissal of regular employees by the employer requires the observance of the two-fold due
process, namely: (1) substantive due process; and (2) procedural due process. Alphaland
failed to observe both substantive and procedural due process in dismissing Agustin from
employment.

Substantive due process means that the dismissal must be for any of the: (1) just causes
provided under Article 297 of the Labor Code or the company rules and regulations
promulgated by the employer; or (2) authorized causes under Article 298 and 299 thereof.
None of these causes exist in the case at bar.

The attendant circumstances in the instant case show that the issue of Agustin's alleged
failure to meet the standards set by Alphaland as a ground for terminating employment was
not proven with substantial evidence. The NLRC correctly observed that "the record is bereft
of any persuasive showing that such dissatisfaction is real and in good faith, not feigned.
How the assessment was made, who made it, and the result of such assessment are not
known. It is only on appeal that Alphaland submitted the affidavits of Mario A. Oreta and
Conrad Nicholson M. Celdran who assessed and evaluated the performance of [Agustin].
[Alphaland] offered no explanation why such affidavits were presented only on appeal. What
comes clear is that the execution of these affidavits – more than one year from [Agustin's]
termination – is just an afterthought x x x."52

Neither does the purported unsatisfactory performance of Agustin as Executive Chef fall
under any of the just causes provided in Article 297 of the Labor Code, such as gross and
habitual neglect or serious misconduct and similar offenses. For misconduct or improper
behavior to be a just cause for dismissal, there must be a valid company rule or regulation
violated. As found by the labor tribunals and by the CA, the standards set by Alphaland are
too general to apprise the employee of what he is expected to do or accomplish. Expecting
Agustin "to render the highest quality of professional service and to always pursue the
interest of the company"53 falls short of the required reasonable standards to be provided by
the employer in order to serve as guidelines for the employee for purposes of evaluating his
performance. Moreover, even if the standards for an Executive Chef need not be spelled out,
Agustin has not acted in a manner contrary to basic knowledge and common sense.
Procedural due process means that the employee must be accorded due process required
under Article 292(b) of the Labor Code, the elements of which are the twin-notice rule and
the employee's opportunity to be heard and to defend himself.54 In the case of Agustin's
dismissal, neither of these elements was satisfied.

Agustin's dismissal, through a Notice of Termination55 dated November 2, 2011, took effect

upon notice.Ꮮαwρhi ৷ Alphaland does not deny the fact that only one Notice of Termination
was sent to Agustin. Without presenting any evidence, Alphaland also failed to discharge its
burden of proving that it afforded Agustin the opportunity to be heard and to explain himself.

Pursuant to Article 294 of the Labor Code, an illegally dismissed employee is entitled to the
following reliefs: (1) reinstatement without loss of seniority rights and other privileges; (2)
full backwages, inclusive of allowances; and (3) other benefits or their monetary equivalent.

Notably, the lower courts awarded backwages merely for the unexpired portion of Agustin's
probationary employment. The fact that Agustin did not appeal the Decision of the LA does
not bar this Court from awarding additional backwages, i.e., backwages from the time of his
illegal dismissal until reinstatement as a regular employee. Following the ruling in St.
Michael's Institute, the grant of such additional backwages is "necessary in arriving at a
complete and just resolution of the case"56 and is a relief granted by substantive law which
cannot be defeated by mere procedural lapses. This award is merely a logical consequence of
the finding that Agustin was a regular employee who has been illegally dismissed by
Alphaland.

Agustin is thus entitled to backwages reckoned from the time he was illegally dismissed on
November 4, 2011, with a P122,500.00 monthly salary, until his reinstatement. However, this
Court finds that the award of separation pay in lieu of reinstatement will be in the best
interest of both parties. This Court recognizes the fact that a continued relationship between
Agustin and Alphaland is no longer viable due to the strained relations57 and antagonism
definitely brought about by the long lapse or passage of time that Agustin was out of
Alphaland's employment from the date of his dismissal until the final resolution of this
case.58

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated September 26,
2014 and the Resolution dated April 20, 2015 of the Court of Appeals in CA-G.R. SP No.
130198 are hereby AFFIRMED with MODIFICATION in that Alphaland Corporation
is ORDERED to pay petitioner Redentor Y. Agustin the following:

(a) Backwages from the date he was illegally dismissed on November 4, 2011 until
the finality of this Decision; and

(b) Separation pay computed from July 6, 2011 until the finality of this Decision, at
the rate of one (1) month salary for every year of service.

The amount of P245,000.00 previously received by petitioner Redentor Y. Agustin by virtue

of the Decision of the Labor Arbiter must be deducted from the foregoing awards.

Further, Alphaland Corporation is ORDERED to pay petitioner Redentor Y. Agustin legal

interest of six percent (6%) per annum of the foregoing monetary awards computed from the
finality of this Decision until full satisfaction.59
The Labor Arbiter is hereby ORDERED to make another recomputation according to the
above directives.

SO ORDERED.