Employment 2023 Comparisons

No Blue-Collar/White-Collar Worker Classification

Philippine laws do not define or describe blue-collar workers and white-collar workers. It is generally understood, however, that blue-collar workers are those who typically perform manual labour and are paid a daily wage, while white-collar workers are those who perform work in an office or administrative setting and are paid a monthly salary. Nonetheless, regardless of whether an individual is a blue-collar worker or a white-collar worker, as long as they are considered an employee, they shall be generally entitled to such rights and entitlements under the Labor Code, and other labour laws.

Employees With Regular Status and Those Without

An employee’s status may be either regular (or with indefinite term) or non-regular. A probationary employee who hurdles the performance standards set for probation attains regular status and security of tenure, with an indefinite employment term. They may not be dismissed except for a just or an authorised cause. Conversely, the following have definite or prescribed terms:

• a probationary employee – no more than 180 days;
• project employment – the duration of the project or undertaking, as stipulated in the project employment contract;
• casual employee – no more than one year; and
• a fixed-term employee – for the specific term set in the employment contract.

Philippine laws and jurisprudence specifically recognise the following types of employment:

• regular employment;
• casual employment;
• probationary employment;
• project employment;
• seasonal employment; and
• fixed-term employment.

Regular Employment and Casual Employment

Article 295 of the Labor Code provides for two types of employment, depending on the nature of the work the employee has been engaged to perform vis-à-vis the usual trade or business of the employer. On the one hand, an employee who has been engaged to perform activities that are usually necessary or desirable in the usual business or trade of the employer is considered as a regular employee. On the other hand, if the work the employee has been engaged to perform is not usually necessary or desirable in the usual business or trade of the employer, the employee is deemed to be a casual employee. However, a casual employee who has performed their work for at least one year, whether continuous or intermittent, is deemed to have attained regular employment but only with respect to the work they have been engaged to perform.

Probationary Employment

Normally, an employee who is engaged for regular employment is required to first undergo probationary employment: an assessment period to determine whether the said employee is, in fact, fit for regular employment.

To provide probationary employees a fair chance at attaining regular employment, employers are legally mandated to inform their prospective probationary employees of the reasonable standards for regularisation at the time of engagement. Failure of an employer to do so will mean that the employee shall instead be under regular employment from the outset.

Probationary employment may generally not exceed six months or 180 days. In exceptional circumstances, however, this period may be extended by mutual agreement of the parties. Normally, an employee who is allowed to work beyond the period of their probationary employment shall already be considered to have attained regular employment by operation of law.

Project Employment and Seasonal Employment

Based on Article 295 of the Labor Code, an employee is deemed to be under project employment if they are assigned to carry out a specific project or undertaking, the duration or scope of which was specified at the time they were engaged for that project. Conversely, an employee is deemed to be under seasonal employment when they are engaged to perform work that is seasonal in nature and their employment is for the duration of the said season.

Fixed-Term Employment

Fixed-term employment refers to an employment with a definite period. This type of employment is not found in the Labor Code but is recognised by jurisprudence. While the Supreme Court has recognised the validity of fixed-term employment contracts, it has consistently held that this is the exception rather than the general rule.

To be valid, fixed-term employment must meet the following criteria:

• the fixed period of employment was knowingly and voluntarily agreed upon by the employer and the employee without any force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating their consent; and
• 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 on the latter.

Requirements Concerning Employment Contracts

In the Philippines, employment contracts are not ordinarily classified as definite or indefinite. Instead, the type of employment contract follows the type of employment under which the employee is classified (ie, regular, casual, probationary, project, seasonal or fixed-term).

Since employees generally enjoy security of tenure, employment contracts may only be terminated for just or authorised causes under the Labor Code, or, in the case of probationary employment, should the employee fail to meet the reasonable performance standards for their regularisation. The employment contracts for project, seasonal and fixed-term employees, on the other hand, may be terminated upon the completion of the project, the end of the season, or the expiry of the term, as the case may be.

Philippine laws do not require that the employment contract be written, although written agreements are preferred. There are, likewise, no formal requirements for an employment contract to be valid and enforceable. As a matter of fact, the employment status of an employee does not rely solely on the stipulations in a written employment contract, as the grant and enforcement of employee rights are highly favoured. In this regard, Article 295 of the Labor Code provides that an employment shall be deemed to be regular where the employee has been engaged to perform activities that are usually necessary or desirable in the usual business or trade of the employer, subject to the exceptions provided therein, “the provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties”.

Further, the law does not prescribe particular details that must be included in employment contracts. However, the employment contracts covering project, seasonal, probationary or fixed-term employment must contain the necessary details mentioned above. Otherwise, the employee will be deemed a regular employee.

Maximum Working Hours per Day/Week

Article 83 of the Labor Code provides that the normal hours of work of an employee must not exceed eight hours per day. Based on an ordinary working week of six days, an employee is thus understood to have a maximum of 48 hours of work per week. After every six consecutive normal workdays, employees are entitled to a rest period of not less than 24 consecutive hours, in accordance with Article 91 of the Labor Code.

Flexible Work Arrangements

Based on DOLE Advisory No 02-2009 and No 04-2010, the adoption of flexible work arrangements must be anchored on a voluntary agreement between the employer and the employees and may only be temporary in nature.

One such flexible work arrangement is a compressed workweek (CWW). In a CWW, the normal workday is increased to more than eight hours but does not exceed twelve hours, without the corresponding overtime premium. The normal working week is then reduced to less than the usual number of workdays in a week, but the total number of working hours per week shall remain.

Other flexible work arrangements include:

• reduction of workdays;
• rotation of workers;
• forced leave;
• broken time schedule; and
• flexi-holidays schedule.

Part-Time Contracts

There are no specific terms required for part-time contracts, except for the exact hours of work expected to be rendered in a day or during the working week. It must be emphasised, however, that employees who render part-time work are also entitled to the benefits mandated under the law, proportionate to the duration of the services rendered vis-à-vis those granted to regular employees.

Overtime Rules and Regulations

Under Article 87 of the Labor Code, work may be performed beyond eight hours a day, provided that the employee is paid for the overtime work. While employees may not generally be compelled to render overtime work, they may be required to render emergency overtime work under the circumstances provided in Article 89 of the Labor Code, such as when there is urgent work to be performed on machines, installations or equipment in order to avoid serious loss or damage to the employer or when the work is necessary to prevent loss or damage to perishable goods.

The rates of overtime pay vary depending on the day when the overtime work is performed, viz:

• for overtime work on an ordinary working day, the employee shall be entitled to additional compensation equivalent to their regular wage plus at least 25% thereof; and
• for overtime work on a scheduled rest day, a special day and a regular holiday, the employee shall be entitled to an additional compensation equivalent to the employee’s rate for the first eight hours on such rest day, special day or regular holiday plus at least 30% thereof.

The 2023 Handbook on Workers’ Statutory Monetary Benefits, issued by the DOLE, sets forth the rules to be followed for the payment of overtime premiums during a regular holiday, special day, or an employee’s rest day.

Minimum Wage

An employer is mandated to pay an employee a daily wage not less than the prevailing minimum wage rate in the region based on the most recent wage order promulgated by the NWPC. Employers who pay their employees below the minimum wage may be subject to punishment. In the capital Metro Manila region, the latest Wage Order (NCR No 24) prescribes a minimum daily wage of PHP610.00, effective 16 July 2023.

13th-Month Pay

An additional income given to rank-and-file employees who have worked for at least one month during the calendar year, 13th-month pay is equivalent to one 12th of the basic salary within a calendar year. While the employer is required to pay its qualified employees their 13th-month pay not later than 24 December every year, the employer may opt to pay half of the 13th-month pay before the opening of the regular school year and the other half on or before 24 December. Per Labor Advisory No 18, Series of 2021, employers are required to report their compliance to the DOLE no later than 15 January of the following year by filing a 13th-month pay report online via the DOLE Establishment Report System.

Bonuses

Bonuses are generally granted to an employee as an act of generosity on the part of the employer. As a rule, therefore, an employee cannot claim entitlement to their bonuses. However, when a bonus is stipulated in a contract or a collective bargaining agreement (CBA) or is given unconditionally, it shall form part of an employee’s wage and must therefore be given to them as a matter of right.

Government Intervention in Compensation/Increases

Other than setting minimum wages per region, the government allows employers and employees to agree on compensation levels and other terms and conditions of employment. Where there are unions representing the employees in a specified bargaining unit, the government allows these unions to collectively bargain with the employer with respect to wages, hours of work, and all other terms and conditions of employment.

Service Incentive Leave

Under Article 95 of the Labor Code, an employee who has rendered at least one year of service is entitled to a Service Incentive Leave (SIL) of five days with pay, which may be used for vacation and sick leave purposes. The unused SIL is commutable to its money equivalent at the end of the year. Other than the five-day SIL, an employer is not obliged to provide other vacation leaves, whether paid or unpaid, of the same import.

Required Leaves

Maternity leave

Pursuant to Republic Act No 11210, or the Expanded Maternity Leave Law, all female employees are entitled to a maternity leave benefit of 105 days with full pay, with an option to extend for an additional 30 days but without pay, regardless of whether the birth of the child is via caesarean section or natural delivery. Female employees who qualify as a solo parent under Republic Act No 11861, or the Expanded Solo Parents’ Welfare Act, are entitled to an additional maternity benefit of 15 days. However, in the case of a miscarriage or an emergency termination of pregnancy, the maternity leave benefit shall only be 60 days with full pay.

A female employee entitled to maternity leave benefits may allocate up to seven days of the said benefits to the child’s father. In the case of death, absence or incapacity of the father, the allocation may be provided to an alternative caregiver, who may be a relative within the fourth degree of consanguinity or the current partner of the female employee sharing the same household.

Paternity leave

Section 2 of Republic Act No 8187, or the Paternity Leave Act, provides that every married male employee is entitled to a paternity leave benefit of seven working days with full pay for the first four deliveries of his legitimate spouse with whom he is cohabiting.

Parental leave

Section 8 of the Expanded Solo Parents’ Welfare Act grants a special leave benefit of not more than seven working days every year to a solo parent who has rendered at least six months of service.

Leave for female victims of violence

Section 43 of Republic Act No 9262, or the Anti-Violence Against Women and Their Children Act, provides that a female employee who is a victim of the crime of violence against women and their children is entitled to a paid leave benefit of up to ten days per year, which shall be extendable when the need arises, as specified in the protection order.

Leave due to gynaecological surgery

Section 18 of Republic Act No 9710, or the Magna Carta of Women, grants a female employee who has rendered continuous aggregate service of at least six months for the last 12 months a special leave benefit of two months with full pay based on their gross monthly compensation following surgery caused by gynaecological disorders.

Limitations on Confidentiality, Non-disparagement Requirements

In accordance with the principle of autonomy of wills under contract law, there are no limitations as to confidentiality or non-disparagement clauses found in an employment contract. An employer may perpetually prohibit an employee from divulging confidential information that they received in the course of their employment. Similarly, an employer may prohibit an employee from taking any action that may impact its business or reputation. Confidentiality or non-disparagement clauses typically impose penalties for violating the same in the form of liquidated damages, the amount of which may be tempered by the courts if found to be unreasonable in relation to the breach.

Employee Liability

To the employer

An employee’s liability to their employer for loss or damage may be enforced through deposits and wage deductions, albeit at very stringent standards.

Under Article 114 of the Labor Code, an employer may require its employees to make deposits from which deductions shall be made for the reimbursement of loss or damage to tools, materials or equipment supplied by the employer only under the following circumstances:

• when the employer is engaged in such trades, occupations or business where the practice of making deductions or requiring deposits is a recognised one; or
• the deposit is necessary or desirable as determined by the DOLE Secretary in appropriate rules and regulations.

DOLE Department Order No 195, Series of 2018, likewise adds, as an exception, deductions with written authorisation of the employee for payment to the employer or a third person, provided that the employer does not receive any direct or indirect pecuniary benefit from the transaction.

Nonetheless, Article 115 of the Labor Code and DOLE Labor Advisory No 11, Series of 2014 provides that no deduction from the deposits of an employee for the actual amount of the loss or damage shall be made unless the employee has been heard thereon, and their responsibility has been clearly shown. In no case shall the deduction exceed 20% of the employee’s wages in a week.

To third persons

As regards an employee’s liability to third persons, Article 2180 of the Civil Code of the Philippines provides that employers shall be liable for the damages caused by their employees acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry.

Non-compete clauses may be included in Philippine employment contracts, especially if substantial investment in the employees is involved. According to Philippine jurisprudence, while there is no hard and fast rule to determine the validity or enforceability of a non-compete clause, it may be struck down when, based on the circumstances, the restriction is unreasonable so as to unduly restrain trade (ie, time, place, scope of trade), when it is contrary to the public welfare, and when the restriction is greater than is necessary to afford fair and reasonable protection to the party in whose favour it is imposed.

Non-compete clauses may be enforced by filing a civil case with the regular courts of competent jurisdiction within ten years from the time the right of action accrues, as stated in Article 1144 of the Civil Code. The extent of the liability depends on the stipulation in the contract and/or the damages that may be proven arising from the breach. Typically, however, non-compete clauses include the imposition of a penalty in the form of liquidated damages set at a fixed amount. While the employer may stipulate any amount, courts may still temper the same upon judicial review if the amount is found to be unconscionable or iniquitous in light of the circumstances.

Similar to non-compete clauses, non-solicitation clauses, whether with regard to employees or customers, may be enforced by filing a civil case with the regular courts within ten years from the time the right of action accrues. There are no set standards for the validity or enforceability of such clauses, except as to their reasonableness. The Civil Code allows the parties to a contract to agree on such terms as they may deem convenient, provided that they are not contrary to law, morals, good customs, public order or public policy. Further, there are no substantial distinctions as to the enforceability or validity of non-solicitation clauses in reference to customers compared to those for employees.

Republic Act No 10173, otherwise known as the Data Privacy Act, and its Implementing Rules and Regulations generally apply to employment relationships. An employee may be considered as a data subject, whose personal, sensitive personal or privileged information may be processed by their employer in accordance with and under the circumstances provided under Sections 12 and 13 of the Data Privacy Act.

Pursuant to Section 20 of the Data Privacy Act, employers, being personal information controllers of their employees’ personal information, are required to implement reasonable and appropriate organisational, physical and technical measures to protect the personal information in their custody. These measures must be comprehensive enough to protect the personal data from both natural dangers (eg, accidental loss or destruction) and human dangers (eg, unlawful access, fraudulent misuse, unlawful destruction, alteration and contamination).

Article 40 of the Labor Code provides that a non-resident foreign national may only be engaged to perform services in the Philippines under an employment arrangement if there is no person in the country who is competent, able and willing at the time of application to perform the services for which the said foreign worker is desired.

Article 40 of the Labor Code also provides that any foreign national seeking admission to the Philippines for employment purposes and any domestic employer who desires to engage them for employment in the Philippines shall obtain an employment permit from the DOLE. According to DOLE Department Order No 221, Series of 2021, the permit required is otherwise known as the AEP, which is valid for one year, unless the employment contract or other modes of engagement provide otherwise, which in no case shall exceed three years.

Conversely, under Joint Guidelines No 1, Series of 2019, issued by the DOLE, Department of Justice, Bureau of Immigration (BI), and Bureau of Internal Revenue, as amended by BI Operations Order No JHM-2020-003, a foreign national who intends to perform activities or render services in the Philippines outside an employment arrangement must, instead of an AEP, secure a Special Work Permit (SWP) from the BI. An SWP may be secured for an initial period of three months and is renewable for the same period thereafter.

DOLE Department Order No 237, Series of 2022, which amended the Implementing Rules and Regulations of the Telecommuting Act, provides that the terms and conditions of telecommuting shall not be less than minimum labour standards and shall not in any way diminish or impair the terms and conditions of employment contained in any applicable company policy or practice, individual contract or collective bargaining agreement. The Order also clarifies that work performed in an alternative workplace is to be considered as work performed in the regular workplace of the employer, and that all time that an employee is required to be on duty, and/or permitted or suffered to work in the alternative workplace shall be counted as hours worked.

With regard to data privacy, the National Privacy Commission (NPC) issued NPC PHE Bulletin No 14, which provided the guidelines on monitoring of employees under work-from-home arrangement. In the said Bulletin, the NPC states that employers in exercising their legitimate interest may monitor employees on a work-from-home arrangement but should balance it with the rights and freedoms of their employees and adherence to the general data privacy principles. Monitoring employee activities when the employee is using an office-issued computer may be allowed, provided that the processing falls under any of the criteria for lawful processing under the Data Privacy Act.

With regard to occupational safety and health, Department Order No 198, Series of 2018 on the Implementing Rules and Regulations of the Occupational Safety and Health Standards (OSHS) states that covered workplaces subject to the OSHS rules shall refer to establishments, projects, sites and all other places where work is being undertaken in all branches of economic activity. Hence, the OSHS rules apply, not only in the employer’s workplace, but to any place where work is being undertaken, which includes the homes of the employees when they are working from home. Department Order No 202, Series of 2019 on the Implementing Rules and Regulations of the Telecommuting Act also confirms that OSHS rules apply in the implementation of a telecommuting programme.

There is no specific regulation governing sabbatical leave in the Philippines. In terms of pay, whether or not an employee on sabbatical leave will be paid during the said period will depend on the company policies of the employer. An employee who goes on an extended sabbatical leave without approval of the employer may be dismissed due to abandonment of work provided that the employer is able to establish that there is no valid reason for the employee’s absence and that there is clear intention on their part to sever the employer–employee relationship.

With the increase in the number of companies opting to allow remote work or hybrid arrangements, individual offices may have become impractical. With this, companies have opted or may consider it more sensible to move to smaller offices, have their employees work in a common space when physically reporting to the workplace and have a desk-sharing or hot-desking arrangement.

The right to self-organisation guaranteed under the Philippine Constitution covers the right to form, join or assist labour organisations or unions for the purpose of collective bargaining or for dealing with employers concerning terms and conditions of employment. Jurisprudence provides that a union obtains the right to bargain collectively with the employer upon registration and after being recognised as the exclusive bargaining representative of a group of employees, otherwise known as a bargaining unit. Conversely, dealing with the employer concerning terms and conditions of employment is a generic description for interacting with the employer concerning grievances, wages, working hours, and other terms and conditions of employment.

While the right to self-organisation, more often than not, connotes unionism, the said right may likewise pertain to other employee representative bodies. Workers may also form or join workers’ associations as well as labour management councils.

A workers’ association refers to an organisation of workers formed for the mutual aid and protection of its members or for any legitimate purpose other than collective bargaining. The existence of an employer–employee relationship is not mandatory in the formation of a workers’ association. What the law simply requires is that the members of the workers’ association, at the very least, share the same interest.

A labour management council is a body composed of representatives from both the employer and the employees. The employees’ representatives shall be elected by at least a majority of all employees in the establishment. The purpose of a labour management council is to allow employees to participate in policy and decision-making processes of the establishment where they are employed in so far as said processes will directly affect their rights, benefits and welfare.

A CBA refers to the negotiated contract between the exclusive bargaining representative and the employer concerning terms and conditions of employment in a bargaining unit. Similar to ordinary contracts, the parties in a CBA may establish such stipulations, clauses, terms and conditions as they deem convenient, provided that these are not contrary to law, morals, good customs, public order or public policy. A CBA serves as the law between the parties, and they are obliged to comply with its provisions.

Grounds for Termination of Employment

Instead of motivation, a just or authorised cause is necessary to terminate employment. Unlike in other countries that adopt an “at-will employment” arrangement, Philippine labour law reinforces an employee’s right to security of tenure, as guaranteed by the Philippine Constitution. Accordingly, before an employee could be meted the supreme penalty of termination from employment, their employer must ensure the existence of either a just or an authorised cause to justify employment termination. Just causes are causes attributable to the employee’s fault or negligence, while authorised causes are those attributable to a management decision to terminate an employee for business reasons or their affliction with a disease.

Just Causes for Termination

The just causes for termination are provided under Article 297 of the Labor Code:

• serious misconduct or wilful disobedience by the employee of the lawful orders of their employer or representative in connection with their work;
• gross and habitual neglect by the employee of their duties;
• fraud or wilful breach by the employee of the trust reposed in them by their employer or duly authorised representative;
• commission of a crime or offence by the employee against the person of their employer or any immediate member of their family or their duly authorised representative; and
• other causes analogous to the foregoing.

Authorised Causes for Termination

The authorised causes for termination are provided under Articles 298 and 299 of the Labor Code:

• installation of labour-saving devices;
• redundancy;
• retrenchment to prevent losses;
• closure or cessation of operation of the establishment or undertaking; and
• disease.

Procedural Requirements for Termination

The procedural requirements for just causes are different from those for authorised causes, as will be explained in 7.2 Notice Periods. In sum, terminations due to just causes follow the twin-notice rule (involving a notice to explain, an ensuing administrative investigation, and a notice of the employer’s decision). In terminations due to authorised causes, a 30-day advance notice is required to be served on the affected employees and the DOLE. Procedural requirements must be complied with before an employee can be dismissed for just or authorised cause(s). Failure to comply with the procedural requirements will not invalidate the dismissal, if based on sufficient substantive grounds, but will entitle the employee to an award of nominal damages.

Collective Redundancies

In the Philippines, there is no threshold for a redundancy to be considered as a collective redundancy. According to jurisprudence, redundancy generally exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. A position is redundant where it is superfluous, and superfluity of a position may be the outcome of a number of factors, such as over-hiring of workers, decreased volume of business and dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise. Redundancy may also be validly resorted to as a cost-cutting measure and to streamline operations so as to make them more viable, because the employer has no legal obligation to keep on its payroll more employees than are necessary for the operation of its business.

In the event of redundancy, the affected employees are entitled to receive separation pay of at least one month’s pay or one month’s pay per year of service, whichever is higher. Where there are employees similarly situated, the employer must have applied fair and reasonable selection criteria to determine who among the employees are to be made redundant. In addition, they are entitled to an advance notice of at least 30 days prior to the effective date of separation.

Just Causes for Termination

For termination due to just causes, procedural due process consists of the following.

• Show cause notice or notice to explain – the employer must serve a first written notice on the erring employee, which should contain the following:
1. the specific causes or grounds for termination under Article 297 of the Labor Code, and company policies, if any;
2. a detailed narration of the facts and circumstances that will serve as the basis for the charge against the employee (a general description will not suffice); and
3. a directive that the employee is given an opportunity to submit a written explanation within a reasonable period, which has been construed as a period of at least five calendar days from receipt of the notice.
• Ample opportunity to be heard – after serving the first notice, the employer should afford the employee an ample opportunity to be heard and to defend themself with the assistance of their representative if they so desire. “Ample opportunity to be heard” means any meaningful opportunity (verbal or written) given to the employee to answer the charges against them and submit evidence in support of their defence, within a period of at least five calendar days from receipt of the first notice. A formal hearing or conference becomes mandatory only when requested by the employee in writing, when substantial evidentiary disputes exist, when a company rule or practice requires it, or when similar circumstances justify it.
• Notice of termination – finally, if the evidence warrants termination from employment, the employer shall serve on the employee a written notice of termination indicating that:
1. all circumstances involving the charge against the employee have been considered; and
2. the grounds have been established to justify the severance of their employment.

Authorised Causes for Termination

For termination due to authorised causes, notice is a statutory and regulatory requirement. This consists of service of two separate written notices on both the affected employees and the appropriate Regional or Field Office of the DOLE at least 30 days before the termination becomes effective, specifying the ground or grounds for termination.

In the case of termination due to disease, in addition to the service of the separate written notices on the affected employees and the DOLE, there should be 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 six months even with proper medical treatment. It must be noted, however, that the Supreme Court has ruled in several cases that employees who are dismissed due to disease must have also been served the notices required for termination due to just causes as stated above.

Separation Pay

In the case of termination for authorised causes, the affected employees are entitled to separation pay. The separation pay shall be in an amount equivalent to one month’s pay or at least one month’s pay for every year of service, whichever is higher, if the termination is due to the installation of labour-saving devices or redundancy. In cases of retrenchment to prevent losses, closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, and in cases of disease, the separation pay is one month’s pay or at least half a month’s pay for every year of service, whichever is higher. A fraction of at least six months shall be considered as one whole year. Monthly pay consists of the employee’s monthly basic pay plus any guaranteed monthly allowances received by them regularly without any conditions. Separation pay, which forms part of an employee’s final pay, must be paid within 30 days from the date of separation.

The payment of separation pay and the service of one month’s notice are required by the law. Payment in lieu of notice is not allowed, although an employee may be placed on garden leave (with pay) prior to the effective date of separation.

Separation pay is not required for termination due to just causes or resignations, although the two notices mentioned above are indispensable for purposes of complying with procedural due process in case of dismissals for just causes.

External Advice or Clearance

No other external advice or authorisation is required to carry out terminations for just or authorised causes. Similarly, no prior clearance is required from the DOLE before any termination may be effected.

Philippine laws do not allow summary dismissal regardless of the nature or gravity of the just cause. The requirements of procedural due process must always be observed in dismissals for just causes. However, the law allows an employer to place an employee on preventative suspension for a maximum period of 30 days, if the employer finds the employee to be a serious threat to the life or property of the employer or their representatives, or of co-employees. The period of preventative suspension may exceed 30 days pending the resolution of the disciplinary proceedings, although the employee must already be paid their salary during such extension.

The procedural requirements for dismissal due to just causes are discussed in 7.2 Notice Periods.

Should an employee be summarily dismissed – ie, the requirements of procedural due process are not observed – the dismissal per se is not invalid should the same be based on sufficient grounds. However, this may entitle the employee to an award of nominal damages.

Termination Agreements

In the Philippines, termination agreements are permissible but imply a voluntary resignation on the part of the employee. In this regard, while there is nothing to prohibit the employer and employee from agreeing upon the conditions of an employee’s resignation, the employer must ensure that such an agreement may be proved as having been freely and voluntarily entered into by the parties. This is because once an employee questions the validity of such termination agreements before the labour courts, the same may be construed as a forced resignation and, consequently, constructive dismissal. These agreements are typical in cases where an employee is allowed a graceful exit as an alternative to dismissal from employment due to just causes.

Constructive dismissal exists where there is cessation of work because continued employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank or a diminution in pay and other benefits. Constructive dismissal may likewise exist if an act of clear discrimination, insensibility or disdain by an employer becomes so unbearable on the part of the employee that it could foreclose any choice by them except to forgo their continued employment. Once found to have been constructively dismissed, an employee will be adjudged to be entitled to reinstatement, backwages and even moral or exemplary damages.

Releases and Quitclaims

There are no statutory requirements for releases. While law and jurisprudence look with disfavour upon releases and quitclaims by employees who are merely pressured into signing them, a legitimate waiver representing a voluntary settlement of an employee’s claim should be respected by the courts as an agreement between the parties. Jurisprudence provides the following requisites for a valid (release waiver and) quitclaim:

• there was no fraud or deceit on the part of any of the parties;
• the consideration for the quitclaim is credible and reasonable; and
• the contract is not contrary to law, public order, public policy, morals or good customs, or prejudicial to a third person with a right recognised by law.

Protection for Certain Categories of Employees

No particular category of employees is immune from employment termination if, based on the circumstances, their acts warrant the imposition of the supreme penalty of dismissal. To impose upon an employer the retention of an employee when the latter does not deserve continued employment is to violate the employer’s management rights or prerogative. An employer, however, may not dismiss an employee solely on the basis of their gender, age, illness or religion.

Implications for Employee Representatives

Officers of a union that has been certified as the exclusive bargaining representative are not particularly immune from dismissal and/or disciplinary action. However, if found to be unjustified under the circumstances, the dismissal of a union officer may be considered as union-busting. This, in turn, may be considered as an unfair labour practice, which is a ground for the conduct of a strike and even criminal prosecution.

An employee may file a wrongful dismissal claim before the National Labor Relations Commission (NLRC) if their dismissal was not due to either a just or authorised cause, or the dismissal is otherwise contrary to law.

If a wrongful dismissal claim is found to be meritorious, by virtue of Article 294 of the Labor Code, the employee may be awarded with reinstatement without loss of seniority rights and other privileges, or payment of separation pay in lieu thereof, plus full backwages, inclusive of allowances, and other benefits or their monetary equivalent. If the dismissal is carried out in malice or bad faith, the employer may also be held liable for moral or exemplary damages. Attorney’s fees may likewise be awarded constituting 10% of the total judgment award.

Grounds for a Claim of Discrimination

Pursuant to the state’s policy under Article 3 of the Labor Code, all employers are enjoined to prevent discrimination in the workplace on account of sex, race or creed. Providing lesser compensation to a particular employee as against another for work of equal value or favouring one employee over another with respect to promotion, training opportunities, study and scholarship grants solely on account of a difference in sex, race or creed are examples of such acts of discrimination.

The following Labor Code provisions and statutes likewise aim to curb discrimination in the workplace:

• Articles 133–135 of the Labor Code and Republic Act No 9710, or the Magna Carta for Women, on discrimination against women;
• Section 32 of Republic Act No 7277, or the Magna Carta for Disabled Persons, on discrimination against disabled persons;
• Republic Act No 10911, or the Anti-Age Discrimination in Employment Act, on discrimination on account of age;
• DOLE Department Order No 5, Series of 2010, on discrimination against persons afflicted with Hepatitis B;
• Republic Act No 8504 or the Philippine AIDS Prevention and Control Act of 1988, in relation to DO No 102, Series of 2010, on discrimination against persons afflicted with HIV or AIDS;
• DOLE Department Order No 73, Series of 2005, on discrimination against persons afflicted with tuberculosis;
• Section 7 of Republic Act No 11861, or the Expanded Solo Parents Welfare Act, on discrimination against solo parents; and
• Republic Act No 11036, or the Mental Health Act, on discrimination against persons with mental health conditions.

Burden of Proof in Discrimination Cases

There are no laws, rules or regulations that categorically establish the burden of proof in discrimination cases. Thus, the general rule that “the party who alleges a fact has the burden of proving it” should be followed. However, if the discrimination issue is raised in a case for illegal dismissal, it would be incumbent upon the employer to prove by substantial evidence that the dismissal was based on valid grounds, in accordance with Articles 297 and 298 of the Labor Code. Thus, in these cases, the burden of proof is on the employer.

Penalties and Relief in Discrimination Cases

Discrimination against women

Under Article 303 of the Labor Code, employers who are found to have wilfully discriminated against women may be penalised with a fine ranging from PHP1,000 to PHP10,000, or imprisonment for between three months and three years, or both, at the discretion of the court.

Discrimination against disabled persons

Section 46 of the Magna Carta for Disabled Persons, on the other hand, provides that “any person who violates any provision of [the Magna Carta of Disabled Persons] shall suffer the following penalties: for the first violation, a fine of not less than [PHP50,000] but not exceeding [PHP100,000], or imprisonment of not less than six months but not more than two years, or both, at the discretion of the court; and for any subsequent violation, a fine of not less than [PHP100,000] but not exceeding [PHP200,000], or imprisonment of not less than two years but not more than six years, or both, at the discretion of the court”.

Discrimination on account of age

The Anti-Age Discrimination in Employment Act penalises any violation of the said law with a fine of PHP50,000 to PHP500,000, or imprisonment for three months to two years, or both, at the discretion of the court.

Discrimination against persons with mental health conditions

Section 44 of the Mental Health Act provides that any person who discriminates against a person with a mental health condition shall be punished by imprisonment for not less than six months, but not more than two years, or a fine of not less than PHP10,000, but not more than PHP200,000, or both, at the discretion of the court.

Foreign nationals, corporations, trusts, and other entities

Common to the above statutes are provisions stating that any foreign national found guilty may be summarily deported after serving their sentence. Likewise, if the offence is committed by a corporation, trust, firm, partnership, association or any other entity, the penalty is imposed upon the guilty officers of such corporation and/or entity.

Separate action for damages

Apart from the penal statutes, an aggrieved employee may likewise file an action for damages in a separate action before the regular courts.

The Supreme Court of the Philippines issued the Administrative Matter No 20-12-01-SC (Re: Proposed Guidelines on the Conduct of Videoconferencing) dated 9 December 2020, which allowed courts to conduct hearings through videoconferencing as an alternative to in-court proceedings in order to address the limitations on movement and travel of court users due to the COVID-19 pandemic. The said Guidelines, which took effect on 16 January 2021, will remain effective even after the end of the pandemic.

Similarly, the National Labor Relations Commission issued En Banc Resolution No 13-22, which provides that mandatory conciliation, mediation conferences and other hearings may be done, as far as practicable, face-to-face, or by videoconferencing or any other electronic means, or by any combination thereof.

Disputes between employees and their employers involving labour standards benefits (eg, normal hours of work, meal periods, night shift differential, overtime premium pay, weekly rest period, holiday pay and service incentive leave) are cognisable by the DOLE Regional Offices.

On the other hand, the Labor Arbiters of the NLRC shall have original and exclusive jurisdiction to hear and decide the following cases:

• unfair labour practice cases;
• termination disputes;
• cases filed by workers involving wages, rates of pay, hours of work and other terms of employment, if accompanied by a claim for reinstatement;
• claims for actual, moral, exemplary and other forms of damages arising from the employer–employee relationship;
• cases arising from any violation of the duty to collectively bargain; and

• all other claims arising from the employer–employee relationship, except claims for employees compensation, social security, and maternity benefits.

Decisions of the Labor Arbiters may be appealed to the NLRC within ten days from receipt upon the posting of a bond equivalent to the amount of the judgment award in favour of the employee. In the event of a judgment of illegal dismissal, the Labor Code mandates either actual or payroll reinstatement pending appeal. Decisions of the NLRC may, in turn, be reviewed on certiorari proceedings by the Court of Appeals and, eventually, in the proper case by the Supreme Court.

Employment Class-Action Claims

Since a particular employment relationship is treated differently from another despite a common cause of action, each and every employee must be considered as an individual litigant when filing claims, thus negating the possibility of a class-action suit. One employee may have a different set of entitlements and/or accountabilities from another or may have particularities in the case that would aggravate or mitigate the employer’s liability to them, if any. Thus, the disposal of a class-action suit with a blanket and identical relief for all employees of an employer may not be available in labour cases.

Nonetheless, where there are two or more cases or complaints pending before different Labor Arbiters in the same Regional Arbitration Branch involving the same employer and common principal causes of action, or the same parties with different causes of action, the subsequent cases or complaints may be consolidated with the first to avoid unnecessary costs or delay. The consolidated case will then be disposed of by the Labor Arbiter to whom the first case was assigned.

Appearance/Representation Before the Labour Arbiter and the NLRC

Section 6 of Rule III of the 2011 NLRC Rules of Procedure, as amended, provides that a lawyer appearing for a party is presumed to be properly authorised for that purpose.

Conversely, a non-lawyer may appear in any of the proceedings before the Labor Arbiter or the NLRC only under the following conditions:

• they represent themselves as a party to the case;
• they represent a legitimate labour organisation, which is a party to the case;
• they represent a member of a legitimate labour organisation that exists within the employer’s establishment and that is a party to the case;
• they are a duly accredited member of any legal aid office recognised by the Department of Justice or Integrated Bar of the Philippines; or
• they are the owner or president of a corporation or establishment that is a party to the case.

Voluntary arbitration is possible, especially in a unionised setting, pursuant to the provisions of a CBA, which should provide for a grievance machinery and a voluntary arbitration procedure. This is mandated in cases where the dispute involves the interpretation, implementation or enforcement of a CBA.

Under Article 274 of the Labor Code, the parties to the CBA may resort to voluntary arbitration by DOLE-accredited arbitrators of the National Conciliation and Mediation Board (NCMB) if no settlement is achieved through a grievance machinery system provided for in the CBA. These voluntary arbitrators have original and exclusive jurisdiction over cases relating to the interpretation or implementation of CBAs, or the enforcement of an employer’s personnel policies. Under Article 275 of the Labor Code, the parties may vest upon the voluntary arbitrators the jurisdiction to hear and decide all other labour disputes, including unfair labour practices and bargaining deadlocks.

Pre-dispute arbitration agreements are enforceable. These agreements are usually embodied in CBAs, wherein the parties may agree to resort to voluntary arbitration in the event that settlement through the grievance machinery process is futile. These provisions in the CBA may be enforced.

In labour cases, attorney’s fees partake of the nature of an extraordinary award granted to the employee as an indemnity for damages. Philippine jurisprudence provides that attorney’s fees may be recovered in labour cases involving the following:

• unlawful withholding of wages;
• where the defendant’s act or omission has compelled the claimant to litigate, or the claimant incurred expenses to protect their interest;
• in actions for the recovery of wages of household helpers, labourers and skilled workers;
• in actions for indemnity under workmen’s compensation and employer’s liability laws; and
• in cases where the court or tribunal deems it just and equitable that attorney’s fees and expenses of litigation should be recovered.

Based on Article 111 of the Labor Code, the maximum amount of attorney’s fees the employee may recover is set at 10% of the monetary award.