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Firing an Employee: Legally Acceptable Causes (Part 1)

Christian Andrew Labitoria Gallardo[1] and Atty Renato Magbalon III[2]

They say what separates a true watch enthusiast from those merely having a budget for collecting fancy watches is their consideration in choosing the timepiece to buy. While those who only wanted to “show-off” their “fine taste in culture” selects their piece based on the watch brand, and probably giving a little consideration as well on the color of the dial and style of the mark (consider those who do not even know that the logo of older Tudor masterpieces is an elegant Rose), a true watch enthusiast considers not only the exterior details but also the internal movement of a timepiece. The movement is the exquisite internal mechanism of a watch that keeps time itself. It is so delicate that a displacement of a single gear or wheel therein can cause the whole watch to stop working.

Photo of Omega Moon watch movement from:

New Atlas

Similarly, in an organization, a single problem employee may cause the inefficiency of the whole team or unit. While minor offenses may call for a compassionate response, or a need for a more thorough or in-depth coaching, serious offenses which mark the lack of concern, or even disdain, of the employee to the organization may call for termination, especially when it negatively affects the organization.

Just Causes for Termination

Obviously, not all offenses or inefficiencies warrant immediate termination. Recognizing that employment is more than just a mere contractual relationship but a property right which affects the quality of life of the family of the employee concerned[3], the law provides for specific causes which may be deemed as reasonable enough to authorize termination. These are: (I) serious misconduct, (II) willful disobedience or insubordination, (III) gross and habitual neglect of duties, (IV) fraud or wilful breach of trust, (V) loss of confidence, (VI) commission of a crime or offense, and (VII) analogous causes. Outside these causes, a termination may be deemed unwarranted and illegal, warranting the employee to claim damages and other monetary benefits from the employer. As will be shown in the later installment of this article, an illegal termination may be a costly mistake. Hence, it is important to know the different just causes of termination one by one.

Serious Misconduct

A misconduct means a willful violation of an established rule in the organization.[4] In order for it to become a just cause for termination, it must relate to the performance of the work of the employee, and it must be severe enough as to render him unfit for working.[5] Note that it must be serious in character. Hence, an isolated case of being tardy, or even being absent on a crucial time, might not be enough to warrant a termination due to serious misconduct.[6] Perhaps an example of this is when, in a bit of an irony and with no pun intended, a clock engineer in a cuckoo clock manufacturing company falsifies his time records to make it appear that he rendered overtime work beyond the 5 PM cuckoo call, when in fact he did not.[7] The Court also ruled in prior cases that theft of property owned by a co-employee[8], as distinguished from a company property, is considered as serious misconduct. Defaming a superior[9], drug abuse in the workplace[10], instigating a fight in the workplace[11], using company property for personal business[12] and immoral conduct, when prejudicial to the company[13], shall likewise constitute a serious misconduct for justifying termination.

Fraud or Willful Breach of Trust

Fraud means the breach of confidence duly reposed upon a person.[14] The fraud in this case however must report to the work of the employee concerned.[15] An example is when the property custodian tasked for making an inventory of the number of rubies available for attaching to the watches smuggled a part of it in order to put it as a gemstone in his ring.[16] It must be stressed that lack of damage is not necessary in fraud cases, and the fact that the act of stealing is timely discovered even before the employee was able to take it out of the premises will not negate fraud. Likewise, restitution of the stolen property will not excuse the employee from termination.[17]

Loss of Confidence

Loss of confidence is the effect of fraud committed by a person occupying a position of trust. Under existing jurisprudence, and as confirmed by a Labor Advisory of the DOLE, there are two classes of position of trust. One consists of managerial employees or those with the power to create management policies over the establishment or department being entrusted, and the other consists of employees regularly handling significant amount of money or property such as cashiers and property custodians. Outside these two classes, no matter how fancy the job title may sound, it is not considered as a position of trust which can be readily dismissed due to loss of confidence.[18] In case of termination of an employee occupying a position of trust, while the employer still has the burden of proof in justifying the termination due to loss of confidence, the Court recognizes the mere existence of a basis for breaching the reposed trust as sufficient for dismissing the employee.[19] However, there must still be a reasonable basis for justifying loss of trust. A mismatch in Feng Shui is not a valid ground to lose trust and confidence.[20] Believe it or not, there is a case involving that. How unlucky.

Photo from: Feng Shui Tricks

So far, we have examined three of the legally justifiable causes for terminating an employee. In the second installment of this article, we shall discuss the other just causes for termination, as well as the inclusions in the “final pay”. Stay tuned and join our public facebook group for free legal discussions.

Cover Photo from:

[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] Renato P. Magbalon III, young, dynamic, and a problem-solver lawyer from the University of Santo Tomas Faculty of Civil Law, currently an associate lawyer and business law coach at Sangalang & Gaerlan, Business Lawyers. You may reach him at [3] Convoy Marketing Corporation and/or Arnold Laab v Oliver Albia, G.R. No. 194969 (2015). [4] § 4 (o), DO 147-15. [5] § 5.2 (a), DO 147-15. [6] Labor et al v NLRC, G.R. No. 110388 (1995). [7] Felix v Enertech Systems Industries Inc [8] John Hancock Life Insurance Corp v Davis, G.R. 169549 (2008). [9] Torreda v Toshiba Information Equipment Philippines, G.R. No. 165960 (2007). [10] Bughaur Jr. v Treasure Island Industrial Corp, G.R. No. 173151 (2008). [11] Garcia v NLRC, G.R. No. 116568 (1999). [12] Zenco Sales v NLRC, G.R. No. 111110 (1994). [13] Santos Jr. v NLRC, G.R. No. 115795 (1998). [14] § 4 (i), DO 147-15. [15] § 5.2 (d) DO 147-15 [16] Zamboanga Water District v Bartolome, 140 SCRA 432. [17] Gonzales v NLRC and Coca-Cola Products Phils Inc, G.R. No. 131653 (2001). [18] § 4 (n), DO 147-15. [19] Alcantara v Philippine Commercial and Industrial Bank, G.R. No. 151349 (2010). [20] Wensha Spa Center v Yung, G.R. No. 185122 (2010).


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