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Concluding An Employment for an Authorized Cause: Legal Process and Separation Pay

Christian Andrew Labitoria Gallardo[1] and Atty Juan Miguel de Leon[2]

"You're fired" said Mr. Krabs. “What?” retorted SpongeBob

“Well, you see, I’ve been doing some calculating. You know, crunch in the old numbers, and it turns out that I’ll save a whole nickel if I cut your salary… completely?” said Mr. Krabs while working on his calculator.

“What if I work for free??” said SpongeBob in a panicked manner. “Well, I looked into that. Apparently, it is “illegal” and I will lose my “license” said Mr. Krabs sarcastically.

Although there may be a ground for an authorized cause of termination under the Labor Code, the law nonetheless prescribes some procedure for effecting it, which includes, in some cases, the payment of separation pay to affected employees. In the part three of the article dealing with just causes of termination, we have discussed the so-called “two-notice” rule for dismissing an erring employee. The essence of which is to afford the employee with due process through giving him an opportunity to present his side, and possibly his pieces of evidence, for the consideration of the employer in making his decision.

Obviously, the “two-notice rule” does not apply in this case since no fault is being attributed to an employee for terminating him due to an authorized cause. It must be remembered that in authorized causes for termination, the employee is being terminated due to business necessity, and not due to any of his misconduct or negligence. Hence, a single notice would suffice to terminate an employee due to an authorized cause.

However, such notice must be sent to two parties. First, it must be sent the employee to be terminated in order to adequately inform him of the cause and the effective date of termination. Since no fault is being attributed to the employee in the first place, no hearing or conference to give an opportunity to explain is required. Nonetheless, it is suggested that a personal discussion be conducted with the concerned employee in order to fully explain to him the external circumstances necessitating the course of action of the part of the management, and to fully answer his questions, if any. Secondly, notice must be sent as well to the DOLE Regional Office, at least one month before the intended date of termination, specifying the grounds thereof and the undertaking to pay the separation pay mandated by the law. Failure to comply with any of these notices shall result in the liability to pay nominal damages amounting to Fifty Thousand Pesos (Php 50,000.00) to the aggrieved party.[3]

To conclude, it must be remembered that there are common grounds among all the authorized causes of termination discussed in the previous articles. First, the employer must be motivated by good faith in effecting it. Meaning, it should not be used as a mere excuse to let go of problem employees. Second, it should be a matter of last resort, which means that the employer is left with no other choice but to implement such cost-cutting measures lest he face irreversible cost cutting measures. Third, as discussed above, two separate notices must be served on both the affected employee and the DOLE regional office at least one month prior to the intended termination date. Lastly, and what has not been discussed yet, is the payment of separation pay.

The amount of separation pay depends on the monthly pay of the employee and the specific authorized cause for his termination. If an employee has been terminated for installation of labor saving device or redundancy, the employee must be given one month pay for every year of service to the employer, or if the service did not reach a year, an equivalent of one month pay. On the other hand, if the employee has been terminated due to retrenchment or closure of business not due to serious business losses, the employee must be given half of the monthly pay for every year of service to the employer, or if the service did not reach 1 year, an equivalent of one month pay. In both cases however, the "rounding up" commonly used in elementary math apply, meaning that a fraction of six months shall be deemed 1 year for purposes of computing the separation pay. Lastly, and unfortunately, in case of closure of business due to serious business losses, no separation pay shall be awarded. It must be noted however that the separation pay discussed in this article is the bare minimum provided by law, and nothing precludes a generous employer from giving more if stated in the Collective Bargaining Agreement or a Company Policy, or simply, from the goodness of his heart and deep pocket.

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[1]Christian Andrew Labitoria Gallardo is a recent graduate of the Ateneo School of Law with a Juris Doctor degree, and is currently an associate of the Sangalan and Gaerlan, Business Lawyers, a law firm specializing in labor, corporate and business law. You may reach him through a phone call or message (09157042132) or via email ( [2]Atty. Juan Miguel E. De Leon is a graduate of the Far Eastern University - Institute of Law. A member of the Tau Kappa Phi fraternity of FEU-Law and the Knights of Rizal, a civic and patriotic organization duly established under Republic Act No. 646. He is currently a Senior Associate Lawyer of of the Sangalang and Gaerlan, Business Lawyers, a law firm specializing in labor, corporate and business law. You may reach him at [3] Jaka Food Processing v Pakol, G.R. No. 151378 (2006).


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