Philippine law does not classify employees by whether they are blue or white-collar workers. However, it is generally understood that blue-collar workers are those engaged in manual labour or skilled trades, typically earning daily wages, such as construction workers and factory employees. In contrast, white-collar workers are typically involved in professional, managerial, or administrative roles, receiving a monthly salary, like office staff and managers.

Instead, Philippine law provides for the following classifications of employees, based on the nature and duration of the work performed:

• regular employees: those who have been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer;
• casual employees: those who perform work that is merely incidental to the principal business of the employer, where such work is for a definite period made known to the employee at the time of engagement;
• project employees: those whose employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of the engagement of the employee;
• seasonal employees: those who work or perform services which are seasonal in nature, and the employment is for the duration of the season;
• fixed-term employees: those hired for a specific period, with employment ending on a predetermined date; and
• probationary employees: those employed on a trial basis, which generally lasts up to six months, to determine their qualification for regular employment.

Types of Employment Contracts

Similar to the classification of employees as provided above, employment contracts are typically structured based on the nature and duration of the work. These contracts may be construed as indefinite (eg, regular employment) or definite (eg, fixed-term employment and project-based employment), though this classification is not generally provided for under Philippine law.

Formal Requirements of Employment Contracts

Philippine law does not mandate that employment contracts be in writing for their validity, nor does it impose specific formal requirements. However, it is highly recommended to have a written contract to provide evidence of the terms and conditions agreed upon by the parties.

Nevertheless, it must be noted that an employee’s status does not depend on the designation or the terms outlined in an employment contract. Instead, an employee’s status is defined by the actual nature of the work performed. As Article 295 of the Philippine Labour Code emphasises, this determination applies regardless of any written or oral agreements to the contrary.

Further, in a recent case entitled Aragones v Alltech Biotechnology Corporation, G.R. No. 251736, 2 April 2025, the Philippine Supreme Court held that an employment relationship begins as soon as the employee has accepted the job offer from an employer. According to the Supreme Court, as a consensual contract, an employment contract is perfected as soon as the employee and the employer have agreed upon the terms and conditions of the employment contract, which is typically manifested by the employee’s acceptance of the job offer. From that moment, an employment relationship is created, even if it has been agreed that the employee would commence actual work on a later date.

Maximum Working Hours

Under Article 83 of the Philippine Labour Code, the standard maximum working hours are eight hours per day, six days a week, totalling 48 hours per week. In addition, Article 91 of the Labour Code entitles the employee to a rest period of not less than 24 consecutive hours after every six consecutive normal workdays.

Flexible Arrangements

Flexible work arrangements are valid, provided that they are documented and mutually agreed upon by the employer and the employee. Prior to implementing any flexible work arrangement, the employer must notify the Department of Labour and Employment (DOLE) through the regional office that has jurisdiction over the workplace, in accordance with the Department of Labour and Employment Advisory No 002-09. The types of flexible work arrangements are as follows:

• compressed workweek: where the workweek is shortened to less than six days, but the total work hours remain at 48 hours per week;
• reduction of workdays: where the number of workdays per week is reduced, which should not exceed six months;
• rotation of workers: where employees are rotated or alternated within the workweek;
• forced leave: where employees are required to go on leave, using their leave credits if available;
• broken-time schedule: where work hours are not continuous but total work hours within the day or week remain unchanged; and
• flexi-holidays schedule: where employees agree to take holidays on other days without reducing existing benefits.

Part-Time Contracts

Despite part-time employment being practised in the Philippines, there is no specific law governing part-time contracts. Thus, part-time employees are entitled to the same statutory benefits as full-time employees, but these benefits are prorated based on the number of hours worked relative to a full-time employee, as applicable.

Overtime Regulations

Pursuant to Article 87 of the Philippine Labour Code, work performed beyond eight hours on regular workdays must be compensated at a premium rate of at least 25%, in addition to the employee’s regular wage. On the other hand, work performed beyond eight hours on a holiday or rest day shall be paid an additional compensation of 30%.

In October 2024, the Philippine Supreme Court held that overtime pay must be paid for as long as the employee is made to wait for work beyond eight hours, reiterating the rule that even “waiting time” is considered part of the employee’s work hours. In the case of Cambila, Jr. et al. v Seabren Security Agency, et al., G.R. No 261716, 21 October 2024, the employer claimed that the employees are not entitled to overtime pay as they were supposedly reporting for only eight hours of work, with the first four hours served in the morning and the remaining four hours later in the evening. However, according to the Supreme Court, the “break” between the shifts of the employees in that case cannot be considered as non-compensable since the employees cannot leave the employer’s premises and use the said “break” for their own personal interests. Thus, the Supreme Court held that the “break” must be construed as “waiting time” for the employees and, thus, part of their work hours. Accordingly, if the employees had been working for more than eight hours (including their “break” or “waiting time”), then they must be paid overtime.

Minimum Wage Requirements

The minimum wage in the Philippines varies by region and is determined by the Regional Tripartite Wages and Productivity Boards (RTWPB). Each region sets its minimum wage rates based on factors such as the cost of living, prevailing wage rates, and the capacity of employers to pay.

13th-Month Pay

Under Presidential Decree No 851, 13th-month pay is mandatory under Philippine law. It is equivalent to one-twelfth of an employee’s total basic salary within a calendar year and must be paid no later than 24 December each year. All rank-and-file employees who have worked for at least one month during the calendar year are entitled to receive the 13th-month pay, regardless of the nature of their employment.

Bonuses

Bonuses, apart from the 13th-month pay, are generally discretionary unless they are stipulated in the employment contract, company policy, or a collective bargaining agreement (CBA). Employers may offer performance-based bonuses, Christmas bonuses, or other forms of incentives, but these are not statutorily required.

Minimal Government Intervention

Beyond establishing regional minimum wage rates, the government generally permits employers and employees to negotiate compensation levels and other employment terms, which are typically embodied in a CBA.

Holiday and Holiday Pay

Under Article 95 of the Philippine Labour Code, regular employees who have rendered at least one year of service are entitled to a Service Incentive Leave (SIL) of five days with pay each year. This leave can be used either for holidays or periods of illness. If an employee does not use the SIL within the year, it is convertible to cash at the end of the year.

Required Leaves (Including Pay)

Maternity leave

Under Republic Act No 11210, known as the “Expanded Maternity Leave Law”, all female employees are entitled to 105 days of maternity leave with full pay. This benefit is provided regardless of the employee’s civil status, employment status, or the legitimacy of the child. An additional 15 days of leave with full pay is granted if the female employee qualifies as a solo parent under Republic Act No 8972, or the “Solo Parents’ Welfare Act of 2000”. In the case of miscarriage or emergency termination of pregnancy, the employee is entitled to 60 days of leave with full pay. If the employee wishes, she can extend her maternity leave by an additional 30 days without pay.

Paternity leave

Republic Act No 8187, or the “Paternity Leave Act of 1996”, provides that all married male employees in the private sector are entitled to paternity leave for the first four deliveries of their legitimate spouse with whom they are cohabiting. The leave period is seven days with full pay, which is meant to allow the husband to support his wife during her recovery and in caring for the newborn child.

Parental leave for solo parents

Solo parents, as defined under Republic Act No. 8972, or the “Solo Parents’ Welfare Act”, are entitled to seven days of parental leave with full pay each year. This leave is granted to enable solo parents to perform parental duties and responsibilities where physical presence is required.

Leave for victims of violence against women and their children

Republic Act No 9262, or the “Anti-Violence Against Women and Their Children Act of 2004”, grants female employees who are victims of violence up to ten days of leave with full pay.

Special leave for women

Under Republic Act No 9710 or the “Magna Carta of Women”, female employees who undergo surgery due to gynaecological disorders are entitled to a special leave benefit of two months with full pay. This benefit applies to those who have rendered at least six months of continuous aggregate service in the 12 months preceding surgery. The special leave is not cumulative and cannot be converted into cash.

These leaves are statutory entitlements in the Philippines and are designed to support employees during significant life events, ensuring they receive the necessary time off with the corresponding pay to address personal and family matters.

Limitations on Confidentiality and Non-Disparagement Clauses

Confidentiality clauses

Consistent with the principle of autonomy of contracts under Article 1306 of the Philippine Civil Code, employers may include confidentiality provisions in employment contracts to protect sensitive business information that employees may encounter during their tenure, provided that they are not contrary to public policy. These clauses can be designed to extend beyond the period of employment, effectively prohibiting the disclosure of proprietary information, including trade secrets, client lists, financial data, and any other information that, if disclosed, could harm the business.

Non-disparagement clauses

Non-disparagement clauses are similarly enforceable and allow employers to prevent employees from making statements or taking actions that could damage the company’s reputation. These clauses are typically broad, covering any conduct that could negatively impact the employer’s business or standing in the community. Although non-disparagement clauses can be enforceable, they must be weighed against the employee’s rights, including the right to freedom of speech and to file genuine complaints or grievances. Penalties for violating these clauses, often imposed as liquidated damages, should be reasonable and may be reviewed by a court if deemed excessive.

Employee Liability and Limitations

According to Articles 114 and 115 of the Philippine Labour Code and DOLE Labor Advisory No 11, series of 2014, employers may require deposits from employees, from which deductions can be made to cover losses or damages to tools, materials, or equipment, provided that the following conditions are observed:

• the employee concerned is clearly shown to be responsible for the loss or damage;
• the employee is given a reasonable opportunity to show reason why deductions should not be made;
• the amount of such deduction is fair and reasonable and shall not exceed the actual loss or damage; and
• the deduction from the employee’s wages does not exceed 20% of the employee’s wages in a week.

In the Philippines, non-compete clauses are generally enforceable, provided that certain conditions are present, as provided for in case law:

• there are limitations in terms of time, place and trade, thereby preventing an undue restriction on the employee’s right to work and earn a livelihood; and
• such limitations must not be greater than is necessary to afford a fair and reasonable protection to the employer.

Philippine law does not explicitly require independent consideration for non-compete clauses because clauses are typically embodied in employment contracts.

However, when restrictive covenants, such as non-compete clauses, are written into mutual separation agreements, a separation package is provided in exchange for certain waivers or agreements, which may include non-compete clauses. Thus, the separation payment acts as consideration for the employee’s compliance with post-employment obligations, including non-compete and non-solicitation clauses, among others.

Similar to non-compete clauses, non-solicitation clauses, which prevent former employees from soliciting the employer’s customers, are also enforceable, provided that they contain reasonable limitations as to time, trade, and place, and that such limitations are not greater than is necessary to afford a fair and reasonable protection to the employer.

Data privacy in the employment sphere is governed primarily by Republic Act No 10173, or the “Data Privacy Act of 2012”.

Under the Act, employees are recognised as data subjects, meaning that their personal, sensitive, and privileged information is subject to protection under the law. This includes information that can directly or indirectly identify an employee, such as their name, contact details, health records, and government-issued identification numbers.

The personal information of the employee may only be processed if any of the criteria under Section 12 of the Act are satisfied, such as when the employee has given their consent, or when the processing of such information is necessary for the legitimate business interests of the employer.

The processing of sensitive personal information (eg, health information and government-issued identifiers like social security numbers) and privileged information (eg, human resources investigations or psychological evaluations) is likewise prohibited when any of the instances under Section 13 of the Act are present.

Moreover, Section 20 requires employers to adopt organisational, physical, and technical measures to protect personal information from risks such as unauthorised access, breaches, or destruction, including the implementation of secure communication channels, proper encryption, and data protection protocols for mobile work settings.

As a matter of national policy and under Article 40 of the Philippine Labour Code, the employment of foreign nationals is restricted when there are competent, able, and willing Filipino workers available to perform the work desired. 

Section 40 of Republic Act No 7916, or the “Special Economic Zone Act”, provides that the employment of foreign nationals hired by Ecozone enterprises in a supervisory, technical or advisory capacity shall not exceed 5% of its workforce without the express authorisation of the Secretary of Labour and Employment.

The employment of foreign workers in nationalised and partially nationalised industries, where foreign equity participation is limited to 40%, is also regulated by the Department of Justice (DOJ).

For the practice of professions, Article XII, Section 14 of the 1987 Philippine Constitution provides that the practice of all professions in the Philippines shall be limited to Filipino citizens, unless specified otherwise by law. Generally, only foreign nationals from countries with reciprocity agreements are eligible to take licensure exams and practice professions, such as engineering and medicine. However, the practice of law remains reserved exclusively for Filipino citizens.

Permits

Under Article 40 of the Philippine Labour Code and the newly issued DOLE Department Order No 248, series of 2025 (“D.O. No 248-25”), employers intending to hire foreign nationals must prove through a Labour Market Test (LMT) that no qualified Filipino is available for the position.

Foreign nationals who intend to work in the Philippines must secure an Alien Employment Permit (AEP) from the DOLE. The AEP is only valid for the position and employer specified in the application. In case of transfer to another position or company, a new application must be submitted. Notably, under the new D.O. No 248-25, an application for an AEP may be filed and processed even while the foreign national intended to be hired is still outside the country, provided that no AEP shall be released unless the foreign national has entered the country with the appropriate pre-arranged employment visa or 9(G) or working visa presented to the DOLE Regional Office. The other requirements and the process for the application of the AEP are found in D.O. No 248-25, DOLE Labour Advisory No 16, series of 2021, and the latest DOLE Citizen’s Charter (1st Edition, 2025). 

Furthermore, foreign workers in certain regulated professions (eg, doctors, engineers) must also secure a Special Temporary Permit (STP) from the Professional Regulation Commission (PRC).

For short-term services, engagements, and specialised projects, foreign nationals intending to work in the Philippines for six months or less must apply for a Special Work Permit (SWP) with the Bureau of Immigration (BI), under BI Order No JHM-2019-008.

Nevertheless, certain foreign nationals are exempt from the AEP requirement, such as diplomatic personnel, refugees, and stateless persons recognised by the DOJ, as well as those holding key positions in corporations without direct involvement in management.

Under the Joint Memorandum Circular No 1, series of 2019, nationalised and partially nationalised industries, where foreign equity participation is limited to a maximum of 40%, are required to apply for an Authority to Employ Alien (AEA) to be issued by the DOJ.

Moreover, enterprises engaged in mining operations are also required to obtain an Authority to Hire Foreign National (AHFN) to be issued by the Department of Environment and Natural Resources (DENR) for the employment of foreign nationals engaged in mining operations.

Visas

Under Section 9(g) of Commonwealth Act No 613, or the “Philippine Immigration Act of 1940”, foreign nationals who are proceeding to the Philippines to engage in any lawful occupation, whether for wages or salary or other forms of compensation, must secure the pre-arranged employment visa or 9G visa, following BI Order No JHM-2021-0004.

For enterprises registered with the Philippine Economic Zone Authority (PEZA), foreign nationals employed in executive positions, as well as those employed in supervisory, technical and advisory positions (including their qualified dependents under 21 years of age) must secure a PEZA visa, in accordance with BI Order No JHM-2021-010.

Tax Identification Number

All applications for work permits and working visas must be supported by a Tax Identification Number (TIN). The procedure and application requirements are outlined in the Bureau of Internal Revenue (BIR) Memorandum Order No 28-2019.

Mobile work, or work from an alternative workplace with the use of telecommunications and/or computer technologies, is governed by Republic Act No 11165, or the “Telecommuting Act”. Under Section 4 of the Act, the employer may offer a telecommuting program to its employees on a voluntary basis, and upon such terms and conditions as they may mutually agree upon.

Section 6 of the Telecommuting Act mandates that employers ensure the protection of data processed and used by telecommuting employees. This requires employers to take appropriate measures, such as implementing secure data storage systems and encryption protocols.

Furthermore, employers are responsible for informing telecommuting employees about relevant data protection laws, particularly Republic Act No 10173 or the “Data Privacy Act of 2012”, which applies in a supplementary capacity.

While the Telecommuting Act does not explicitly address occupational safety and health, Section 4(a) of Republic Act No 11058 or the “Occupational Safety and Health Standards Act”, states that employers are responsible for ensuring that workers are provided with a workplace that is free from hazards that may cause illness, injury, or death. This responsibility applies regardless of whether the employee works on-site or remotely.

Under Section 5 of the Act, telecommuting employees are entitled to the same treatment available to on-site employees, including the same social security benefits, such as Social Security System (SSS), Pag-IBIG, and PhilHealth, as well as the minimum labour standards set by law, such as compensable work hours, minimum number of work hours, overtime, rest days, and entitlement to leave benefits.

Sabbatical leave in the Philippines is generally left to the discretion of the employer and is governed by company policy or CBA. However, employers must ensure that such a policy does not override the minimum statutory leave entitlements, such as SIL under Article 95 of the Philippine Labour Code, or parental leaves, which are separate entitlements.

The concept of “new work” is evolving in the Philippines, particularly with the rise of flexible work arrangements under DOLE Advisory No 002-09, as discussed in 1.3 Working Hours, and telecommuting, as discussed in 5.1 Mobile Work.

Although specific laws and policies have not yet addressed various “new work” arrangements, businesses continue to explore and adopt modern approaches, such as technology integration and desk-sharing. These initiatives demonstrate a broader trend toward flexibility, efficiency, and the optimal use of workplace resources.

Under Section 1, Book V of the Rules to Implement the Philippine Labour Code, as amended by DOLE Department Order No 40-03, series of 2003 (“D.O. No 40-03”), a union is technically defined as a labour organisation in the private sector organised for collective bargaining and for other legitimate purposes. This term is often used interchangeably with “labour organisation”, which refers to any union or association of employees in the private sector which exists in whole or in part for the purpose of collective bargaining, mutual aid, interest, co-operation, protection, or other lawful purposes. Thus, there are two basic purposes of a union or labour organisation, namely:

• for collective bargaining with respect to the terms and conditions of employment; and
• for dealing with the employer.

A legitimate labour organisation refers to any labour organisation in the private sector registered or reported with the DOLE, under the Philippine Labour Code and its Implementing Rules, including a branch or local thereof. Once registered, the union, now being a “legitimate labour organisation” may act as the representative of its members for collective bargaining (without binding non-members of the union) and may be certified as the exclusive representative of all the employees in an appropriate collective bargaining unit for purposes of collective bargaining, pursuant to Article 242 of the Philippine Labour Code.

Role

A legitimate labour union that is duly recognised or certified as the sole and exclusive bargaining representative or agent (SEBA) shall represent all the employees in a bargaining unit in the negotiation process with the employer during the subsistence of the CBA. The relationship between a union and its members can be understood as one of principal and agent, where the union acts as the agent, and the members are the principals. This relationship is fiduciary in nature, meaning that the union, as the agent, must act in the best interests of its members. The union’s role is to represent its members to ensure that they receive fair wages and favourable working conditions.

Institution of the Representative Body

The modes to determine the SEBA depend on whether the establishment is unorganised or organised (ie, one without a certified SEBA, and one with a certified SEBA, respectively), and whether or not there is more than one legitimate labour organisation.

Request for SEBA certification

This mode is used when there is no competing union, and majority support from employees can be confirmed, specifically in unorganised establishments with only one legitimate labour union, the process for which is outlined under Rule VII of the DOLE Department Order No 40-I-15, series of 2015.

Thus, organised establishments and unorganised establishments with more than one legitimate labour organisation will necessarily involve the conduct of a certification election.

Certification election/consent election

Under the Rules, a “certification election” refers to the process of determining through secret ballot the SEBA of the employees in an appropriate bargaining unit for purposes of collective bargaining or negotiations, which is conducted under the control and supervision of the DOLE.

Conversely, a “consent election” likewise involves the same process of determining through secret ballot the SEBA, but is voluntarily agreed upon by the parties, with or without the intervention of the DOLE.

The conduct of certification elections for unorganised establishments is governed by Article 269, whereas organised establishments are governed under Article 268 of the Philippine Labour Code.

A CBA is a contract negotiated between an employer and the duly recognised or certified exclusive bargaining representative of the workers. This agreement covers matters such as wages, working hours, and other employment terms and conditions within the appropriate bargaining unit, and mandatory provisions for grievance and arbitration mechanisms. The CBA is executed by both the employer and SEBA.

Before entering into a collective bargaining negotiation, the following conditions must be met:

• there must be an employer-employee relationship between the employer and the members of the bargaining unit;
• the bargaining agent must have the majority support of the bargaining unit and be lawfully recognised; and
• the proposed agreement must align with legal standards.

The CBA, when finalised, becomes legally binding during its entire duration and must be followed in good faith by both parties. It is important to note that wage negotiations within the CBA are separate and distinct from legally mandated wage increases, provided that any reductions must not fall below the minimum standards.

Once ratified by the majority of the bargaining unit, the CBA becomes binding on all employees. Beneficiaries of the CBA include members of the bargaining unit, non-members who pay agency fees, and any employees hired after the agreement has been enforced. Notably, filing a petition for the cancellation of union registration does not prevent the ongoing CBA negotiation process. Furthermore, CBAs should be interpreted liberally; if the terms of the agreement are clear, the intent of the contracting parties should prevail.

Finally, a valid CBA must include specific mandatory provisions. These include:

• grievance procedure;
• voluntary arbitration;
• no strike-no lockout clause; and
• the establishment of a Labour-Management Council (LMC).

If these provisions are not incorporated, the Bureau of Labour Relations (BLR) may reject the CBA’s registration.

In the Philippines, motivation is required a priori. Article 294 of the Philippine Labour Code provides that the employer may only terminate the employee for “just cause” or “authorised cause”. The procedures for the observance of due process in terminations based on just and authorised Causes differ in terms of notice requirements and periods, as discussed in 7.2 Notice Periods.

Just Causes for Termination

The causes for termination are based on acts attributable to an employee’s own wrongful actions or negligence. Article 297 of the Philippine Labour Code provides the just causes for termination, which are:

• serious misconduct;
• wilful disobedience or insubordination;
• gross and habitual neglect of duties;
• fraud or wilful breach of trust;
• loss of confidence;
• commission of a crime or offence; and
• causes analogous to the foregoing, for as long as such act or omission is voluntary or wilful on the part of the employees.

The specific requisites per ground are enumerated in DOLE Department Order No 147-15, series of 2015 (“D.O.147-15”).

Authorised Causes

Authorised causes refer to lawful grounds for termination which do not arise from the fault or negligence of the employee. Articles 298 and 299 of the Philippine Labour Code enumerate the authorised causes for termination, which are classified into business-related causes and health-related causes.

The business-related causes under Article 298 of the Philippine Labour Code are:

• installation of labour-saving devices;
• redundancy;
• retrenchment; and
• closure or cessation of business operations.

For guidance, the requisites for each ground of business-related causes are outlined in D.O.147-15. In general, these grounds require good faith in effecting the termination, and that termination is a matter of last resort, there being no other option available to the employer after resorting to cost-cutting measures. Fair and reasonable criteria in the selection of employees to be terminated are likewise required for all grounds, except for the closure or cessation of business operations.

Health-related causes, specifically “disease” under Article 299 of the Philippine Labour Code, require the following conditions:

• the employee has been found to be suffering from a disease;
• the continued employment is either:
1. prohibited by law; or
2. prejudicial to the health of the employee or their co-workers; and
• a competent public health authority has issued a medical certificate stating that the disease is of such nature or stage that it cannot be cured within six months, even with proper medical treatment.

Collective Redundancies

Collective terminations may generally be carried out via redundancy, retrenchment, or closure or cessation of business operations.

Under Philippine law, redundancy is specifically designated as a valid ground for employee termination. Redundancy generally refers to the condition when the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise or are superfluous. This ground for termination may be collective, particularly when there is a dismissal of a large number of employees due to business or operational reasons rather than individual performance or conduct, such as the overhiring of workers, decreased volume of business, or the dropping of a particular product line or service activity.

Regardless of the number of employees affected by the redundancy, the following requisites under D.O.147-15 must be complied with for redundancy to be a valid ground for termination:

• there must be superfluous positions or services of employees;
• the positions or services must exceed what is required for the enterprise to operate efficiently;
• the decision to abolish the redundant positions must be made in good faith;
• there must be fair and reasonable criteria for selecting which employees to terminate; and
• there must be adequate proof of redundancy, such as staffing patterns, feasibility studies, or management-approved restructuring plans.

Conversely, retrenchment occurs when a business finds itself in a precarious financial situation and must reduce labour costs to continue operating. Unlike redundancy, retrenchment does not necessarily mean that the position is no longer needed, but rather that the business can no longer afford to maintain its workforce at its current size.

Retrenchment is valid when the following requisites are present:

• the retrenchment must be reasonably necessary and likely to prevent business losses;
• the losses should be substantial, actual, or imminent, and not merely minor or de minimis;
• the expected or actual losses must be supported by sufficient and convincing evidence;
• the retrenchment must be carried out in good faith to advance business interests and not as a means to circumvent employee rights; and
• fair and reasonable criteria must be applied to determine which employees are retained or dismissed, based on factors such as efficiency, seniority, age, and financial hardship.

Lastly, closure or cessation of business, as the name suggests, refers to the complete or partial cessation of the operations and/or shut-down of the establishment of the employer. It requires the following conditions to be permissible:

• the management’s decision to close or cease business operations;
• such decision is made in good faith; and
• there is no other option available to the employer except to close or cease operations.

Notice Requirements and Periods

In cases of termination based on just cause, the employer must observe due process, which involves issuing two written notices.

• The first notice should contain:
1. the specific causes or grounds for termination as provided for under Article 297 of the Philippine Labour 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; and
3. a directive that the employee is given the opportunity to submit a written explanation within a reasonable period, which is construed as at least five calendar days from receipt of notice.
• After this, the employer must ensure the employee has an opportunity to be heard, either verbally or in writing, with counsel if they desire.

A formal hearing is not necessary, except under any of the following circumstances:

• 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.

If the employer determines that dismissal is justified after considering the employee’s explanation, a second notice is issued confirming that all relevant facts have been taken into account and that valid grounds for termination exist.

Both notices must be delivered personally or sent to the employee’s last known address.

Thus, external advice or authorisation for just causes is not required, as the process involves the employer and employee.

Due process for authorised causes shall be deemed complied with upon service of a written notice specifying the ground/s for termination to the employee and the appropriate Regional Office of the Department of Labour and Employment (DOLE) at least 30 days before the termination takes effect. External notification to the DOLE is mandatory. Non-compliance with due process without affording the employee procedural due process will not render the dismissal ineffectual, but will entitle the employee to an indemnity of PHP50,000 in the form of nominal damages.

While disease is deemed an authorised cause for termination, case law has held that due process in termination due to disease is similar to due process for just cause termination.

Specifically, the employer must furnish the employee with two written notices, namely:

• a first notice informing the employee of the grounds for termination and allowing them to respond; and
• a second notice informing the employee of the decision to terminate their employment.

As mentioned in 7.1 Grounds for Termination, the employer must also obtain a certification from a competent public health authority stating that the disease is of such a nature or at such a stage that it cannot be cured within six months, even with proper medical treatment.

Severance/Separation Pay

Separation pay is generally only required for authorised causes, the amounts of which are provided as follows:

• separation pay equivalent to at least one month’s pay or at least one month’s pay for every year of service, whichever is higher:
1. installation of labour-saving devices; or
2. redundancy; and
• separation pay equivalent to one month’s pay or at least half a month’s pay for every year of service:
1. retrenchment;
2. closure or cessation of business operations not due to serious business losses (when closure or cessation of business operations is due to serious business losses or financial reverses, no separation pay is required); or
3. disease.

For purposes of computing separation pay, a fraction of six months’ service is considered as one whole year.

For just causes, no separation pay is required unless specified by company policy or the CBA.

Just Causes for Termination

In the Philippines, summary dismissal or dismissal for serious cause is not defined under the law.

However, it is akin to termination for just cause under the Philippine Labour Code, as discussed in 7.1 Grounds for Termination. Both refer to the dismissal of an employee due to serious offences, such as gross misconduct, wilful disobedience, fraud, or other grave violations of company policies or the law.

As indicated in 7.2 Notice Periods, the employer must adhere to due process, which involves issuing two written notices. The first notice must clearly state the specific reasons for termination and include detailed facts supporting the charge. After this, the employee must be provided with an opportunity to explain their side, either verbally or in writing, and within five days from receipt of the first notice. If, after considering the employee’s explanation, the employer determines that dismissal is justified, a second notice must be issued to confirm the termination.

Failure to follow the proper procedural due process will not invalidate the dismissal; however, the employee will be entitled to receive nominal damages amounting to PHP30,000 as indemnity for the violation of their rights.

Other Forms of Summary Dismissals in the Philippine Labour Code

Employees may be terminated for violating a Union Security Clause under Article 259(c) of the Philippine Labour Code if such a clause is included in the CBA. This grants the SEBA the authority to request an employer to dismiss any employee who fails to comply with the union security agreement, such as by refusing to join the union or failing to maintain membership in good standing, provided that there is sufficient evidence for the violation thereof. This only applies to new employees hired after the signing of the CBA containing the union security clause, unless they are religious objectors. Termination based on Article 259(c) of the Philippine Labour Code shall follow the procedural requirements for just cause.

Article 279(a) of the Philippine Labour Code provides for termination upon the commission of prohibited activities. Union officers who knowingly participate in an illegal strike are deemed to have lost their employment status. In addition, any employee, union officer or ordinary member who knowingly participates in the commission of illegal acts during a strike (irrespective of whether the strike is legal or illegal) is also deemed to have lost their employment status. The due process here does not require a notice and hearing, as the act itself results in automatic loss of employment status.

Under Article 278(g) of the Philippine Labour Code, strikers who violate orders, prohibitions and/or injunctions as are issued by the DOLE Secretary or the National Labour Relations Commission (NLRC) may be subject to immediate disciplinary action, including dismissal.

Lastly, under Article 296 of the Philippine Labour Code, the employment of a probationary employee may be terminated if he/she fails to meet the reasonable standards for regular employment, as long as the employer clearly communicated these standards at the time of hiring.

Termination Agreements

Termination agreements or mutual separation agreements are permissible in the Philippines, provided that the terms are mutually agreed upon by both the employer and employee, without coercion or undue influence. Otherwise, this will be tantamount to constructive dismissal.

As a contractual agreement, the procedural and substantive due process requirements under the Philippine Labour Code are not applicable. However, if the termination agreement is based on authorised causes, such as redundancy or retrenchment, the employee must receive at least the minimum separation pay mandated by law, as outlined in 7.2 Notice Periods.

Releases, Waivers, and Quitclaims

Case law has recognised the validity of the waivers and quitclaims signed by the employees, provided they are credible, reasonable, and voluntarily executed. The Supreme Court has also upheld the validity of quitclaims where the workers voluntarily accepted a reasonable amount or consideration as settlement.

However, a waiver of claims must not include rights or benefits that cannot be legally waived under Philippine law, such as those related to illegal dismissal or non-waivable statutory benefits. Such waiver shall be considered null and void for being contrary to public policy.

Women Employees

Under Article 134 of the Philippine Labour Code, it is unlawful for an employer to require as a condition for or continuation of employment that a woman employee shall not get married. Employers are also prohibited from stipulating that once a woman employee marries, she will be automatically considered resigned or terminated.

Under Article 135, employers also cannot dismiss a woman due to her pregnancy or while she is on maternity leave, or refuse to admit or to discharge a woman back to work after maternity leave for fear that she may become pregnant again.

Article 158 of the Philippine Labour Code and Republic Act No 10151 provide that women nightworkers shall likewise not be dismissed for reasons of pregnancy, childbirth or childcare responsibilities. Women nightworkers shall not lose the benefits regarding their employment status, seniority, and access to promotion which may attach to their regular night work position.

Domestic Workers or Kasambahays

Republic Act No 10361, or the “Kasambahay Act”, protects against the dismissal of domestic workers (eg, general housekeepers, cooks, gardeners, laundry persons), who can be terminated for the following causes:

• misconduct or wilful disobedience;
• gross or habitual neglect;
• fraud or breach of trust;
• crime or offence;
• violation of terms and conditions of employment;
• disease; and
• other analogous causes.

If a kasambahay is dismissed for reasons other than these causes, the employer is required to pay compensation equivalent to 15 days’ worth of work.

Moreover, pregnancy and marriage are explicitly identified as invalid grounds for termination under the law. Employers cannot dismiss a kasambahay merely because they become pregnant or get married. This protection aligns with the broader labour laws that prohibit discrimination based on marital status or pregnancy, ensuring that domestic workers are treated fairly and their personal circumstances are not used as a basis for dismissal.

Persons with Disabilities

Under Section 32 of the Republic Act No 7277, as amended by Republic Act No 9442, or the “Magna Carta for Persons with Disability”, persons with disability (PWDs) cannot be dismissed simply because of their disability, unless the employer can demonstrate that the disability impairs the satisfactory performance of essential job functions, causing prejudice to the business.

Union Members, Officers, and Employee Representatives

Article 259(b) of the Philippine Labour Code prohibits employers from requiring employees to refrain from joining a labour organisation or compelling them to withdraw from one to which they already belong, as a form of unfair labour practice.

Case law has also illustrated the following dismissals to constitute unfair labour practice:

• dismissing union members to secure the union’s defeat in the certification election;
• dismissing union officers in a manner that threatens the union’s existence, regarded as a form of union busting;
• dismissing an employee because of their act of soliciting signatures for the purpose of forming a union; and
• dismissing employees because of their act of engaging in valid and legal concerted union activities.

Employers who commit unfair labour practices are subject to criminal and civil liability in the form of damages, fines and other penalties, following Article 258 of the Philippine Labour Code. Employees who are dismissed due to ULP may be entitled to reinstatement without loss of seniority rights and other privileges, as well as back wages and other benefits.

Wrongful or Illegal Dismissal

Case law provides that there is illegal dismissal when there is no clear, valid and legal cause for termination of employment, specifically when:

• there is no just or authorised cause for termination; or
• when the employee is constructively dismissed.

Constructive dismissal occurs in the following instances:

• when an employee is compelled to resign involuntarily because continued employment has been rendered impossible, unreasonable, or unlikely;
• when there is a demotion in rank and/or a diminution in pay; or
• when an employer demonstrates clear discrimination, insensibility, or disdain, creating an unbearable work environment, effectively leaving the employee no choice but to resign.

Reinstatement Pending Appeal

Complaints for illegal dismissal are filed with the labour arbiter under Article 224 of the Philippine Labour Code. It is important to note that under Article 229 of the Philippine Labour Code, the decision of the labour arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shall immediately be executory, even pending appeal. Thus, no writ of execution is required to enforce the labour arbiter’s decision, and the employer must reinstate the employee even if they plan to contest the decision.

In implementing the labour arbiter’s order for reinstatement, the employer may opt for actual reinstatement, where the employee is physically reinstated to their position and allowed to resume work, or payroll reinstatement, where the employer must continue to pay the employee’s salary during the pendency of the appeal.

Reliefs

As a primary relief, employees who are illegally dismissed are entitled to reinstatement without loss of seniority rights and other privileges under Article 294 of the Philippine Labour Code.

However, if reinstatement is no longer possible due to the strained relations or the impossibility thereof, the employee shall receive separation pay in lieu of reinstatement as a secondary relief.

In both cases, the employee shall also be awarded full back wages, inclusive of allowances, and other benefits or their monetary equivalent from the time their compensation was withheld up to the time of actual reinstatement.

In C.P. Reyes Hospital et al., v Barbosa, G.R. No. 228357, 16 April 2024, the Philippine Supreme Court confirmed that even probationary employees may also be awarded with backwages computed from the time that compensation was withheld up to the finality of the decision, which may go beyond the probationary period of the employee. This abandons the previous rule that probationary employees may only be awarded back wages up to the expiration of their probationary period.

In the recent case of Philippine Airlines v Ahmee, et al., G.R. No. 221065, dated 7 April 2025, the Supreme Court clarified the standards for proving money claims related to employee salaries and benefits. It stated that payrolls and vouchers can serve as acceptable proof of payment only if they clearly show that the employees actually received these benefits. Additionally, when payments are made through electronic wire transfers, such as automatic payroll arrangements with banks, employers are required to provide proof that they instructed their bank to credit their employees’ payroll accounts. According to the Supreme Court, the mere submission of payroll registers and payslips would only constitute proof that the employer has prepared the corresponding payroll, but not as actual proof of payment to its employees.

Additionally, the following reliefs are also granted:

• moral and exemplary damages and attorney’s fees; and
• legal interest on separation pay, back wages, and other monetary awards.

In General

Where the employer fails to treat employees equally despite there being no rational basis for the distinction, such as when they are denied privileges which are granted to others under similar conditions and circumstances, the employee claims damages under Article 32 of the Philippine Civil Code against the employer with the Labour Arbiter. As this forum is merely administrative in nature, only substantial evidence is required, or such an amount of relevant evidence as a reasonable mind might accept as adequate to justify a conclusion.

Age

Republic Act No 1091, or the “Anti-Age Discrimination in Employment Act”, prohibits employers from discriminating based on age in matters of compensation, working conditions, promotions, or training opportunities. Employers also cannot terminate employees solely due to age or enforce early retirement based on age. However, age limitations are permissible provided that they fall under any of the exceptions as provided under Section 6 of the Act, such as when age is a bona fide occupational qualification necessary for the business.

Violations of the Anti-Age Discrimination in Employment Act expose the employer to criminal liability, punishable by a fine ranging from PHP50,000 to PHP500,000, imprisonment of three months to two years, or both penalties, at the discretion of the court. The offended party is entitled to damages arising from the crime under Article 100 of the Revised Penal Code.

As a violation of this Act is criminal in nature, the guilt of the employer must be proven beyond a reasonable doubt, or the evidence must produce a conviction in the mind of a sensible, impartial person.

Moral and exemplary damages may also be sought before the Labour Arbiter under Articles 2217 and 2229 of the Civil Code, respectively, which only require substantial evidence. 

Gender and/or Marital Status

Article 133 of the Philippine Labour Code, as amended by Republic Act No 6725, prohibits employers from discriminating against female employees with respect to the terms and conditions of employment based solely on their sex, including paying female employees less than male employees for work of equal value, and favouring male employees over female employees in matters like promotion, training, or scholarship opportunities.

Violations of this provision are criminal in nature, resulting in a penalty of a fine ranging from PHP1,000 to PHP10,000, or imprisonment of not less than three months and not more than three years, or both, at the discretion of the court, including damages resulting from the criminal offence to be awarded to the offended party. Moral damages and exemplary damages may also be claimed.

On the other hand, discriminatory acts under Republic Act No 9710, or the “Magna Carta of Women”, include the following:

• any gender-based distinction, exclusion, or restriction that impairs or nullifies the recognition, enjoyment, or exercise of human rights and fundamental freedoms on an equal basis with men;
• any act or omission, including by law, policy, or administrative measure, that directly or indirectly excludes or restricts women from accessing opportunities or rights;
• failure to provide mechanisms to offset gender-based disadvantages, resulting in women being denied or restricted in their access to rights, benefits, or privileges; and
• discrimination compounded by or intersecting with other grounds such as ethnicity, age, poverty, or religion.

Pursuant to Section 41 of Republic Act No 9710, private entities or individuals who commit these discriminatory acts are liable for damages to the injured party, without prejudice to other remedies available under the law.

Health Conditions and Disabilities

Under Section 32 of Republic Act No 7277, as amended by Republic Act No 9442, or the “Magna Carta for Persons with Disability”, discrimination against qualified PWDs is prohibited in all aspects of employment, including hiring, promotion, compensation, and termination.

Acts of discrimination include limiting or classifying PWDs in ways that harm their job prospects, using job standards or tests that disproportionately screen them out unless necessary for the position, and applying methods that result in disability-based discrimination. Providing lower compensation to PWDs for the same work, favouring non-disabled employees in promotions or training, reassigning PWDs to roles they cannot perform due to their disability, or dismissing PWDs without first offering reasonable accommodations are also discriminatory acts. Additionally, PWDs cannot be excluded from labour union membership or subjected to ineffective employment tests that do not accurately measure their abilities.

For the first violation, the offender may face a fine ranging from PHP50,000 to PHP100,000, or imprisonment for a period of not less than six months but not more than two years, or both penalties, at the discretion of the court. For subsequent violations, the penalty increases to a fine ranging from PHP100,000 to PHP200,000, or imprisonment for a period of not less than two years but not more than six years, or both, depending on the court’s decision. The injured party may likewise claim damages arising from the criminal offence, as well as moral and exemplary damages.

Solo Parents

Section 7 of Republic Act No 8972, or the “Solo Parents’ Welfare Act of 2000”, provides that no employer shall discriminate against any solo parent employee with respect to terms and conditions of employment on account of their status.

In accordance with Section 52 of the Act’s Revised Implementing Rules and Regulations, the first violation of the Act may result in a fine ranging from PHP10,000 to PHP50,000, or imprisonment for a period of six months to one year, or both, at the discretion of the court. For any subsequent violation, the court may impose a higher penalty, consisting of a fine ranging from PHP100,000 to PHP200,000, or imprisonment for a period of one to two years, or both, as determined by the court. In a similar vein to the aforementioned laws, the injured party may claim damages arising from the criminal offence, as well as moral and exemplary damages.

Videoconferencing

In accordance with the National Labour Relation Commission (NLRC) En Banc Resolution No 13-22, series of 2022, the use of videoconferencing or other electronic means for mandatory conciliation, mediation conferences, and hearings in labour disputes is permissible to ensure the safety and health of personnel and stakeholders and to address other justifiable concerns.

Thus, mandatory conciliation and mediation conferences and other hearings may be conducted face-to-face as far as practicable, or by videoconferencing or other electronic means, or both. If any of the parties have no access to technology for electronic hearings, the NLRC may provide a hearing room and laptop/tablet for their use, subject to the availability of funds.

E-Filing before the Court of Appeals

When the labour dispute has escalated to the Court of Appeals, pursuant to Rule 43 of the Rules of Court, the electronic filing of pleadings is required. From 1 December 2024, all pleadings, motions, and other legal documents within certified judicial regions in the Philippines will be required to be filed and served electronically through email, in PDF format, in accordance with the “Guidelines on Submission of Electronic Copies of Pleadings and Other Court Submissions being Filed before the Lower Courts Pursuant to the Efficient Use of Paper Rule” or A.M. No 10-3-7-SC/A.M. No 11-9-4-SC. This procedure applies to documents filed with the court as well as those served to opposing parties and their legal counsel.

Specialised Employment Forums

Specialised employment forums in the Philippines are provided for by various labour agencies, among which are as follows.

The Single Entry Approach (SEnA) is an administrative approach to provide a speedy, impartial, inexpensive, and accessible settlement procedure for all labour issues or conflicts to prevent them from escalating into full-blown disputes or actual labour cases. Under Article 234 of the Philippine Labour Code, all issues arising from labour and employment shall be subjected to mandatory conciliation-mediation.

If the issue has escalated into a labour dispute, the NLRC is the quasi-judicial body that hears and decides such cases. It has regional arbitration branches across the country to ensure accessibility. The Labour Arbiters are the NLRC representatives in the country’s various regions, having jurisdiction over termination disputes, unfair labour practices, money claims and damages arising from employer-employee relations, among others, based on Article 224 of the Philippine Labour Code.

The DOLE Regional Directors have jurisdiction over enforcement and inspection cases for labour standards compliance, recruitment and placement, occupational health and safety violations under Article 128 of the Philippine Labour Code, union registration-related cases under Article 243 of the Philippine Labour Code, and monetary claims not exceeding PHP5,000, among others.

Med-arbiters and the Bureau of Labour Relations have jurisdiction to hear, conciliate, mediate and decide representation cases, or to assist in the disposition of intra- or inter-union disputes under Article 232 of the Philippine Labour Code.

The Philippine Overseas Employment Administration (POEA) has jurisdiction over violations related to the licensing and registration of recruitment and employment agencies, disciplinary actions involving employers, principals, and contracting partners, particularly with Filipino migrant workers under Section 6, Rule X of the implementing rules of the Migrant Workers Act or Republic Act No 10022.

Collective Actions and Representation

A group of employees can appoint a representative to file a case on their behalf, especially in cases involving common issues such as illegal dismissal or non-payment of benefits. Multiple individual claims arising from the same or similar circumstances can be consolidated into a single case for efficiency and consistency in rulings under Section 3, Rule IV of the 2011 NLRC Rules of Procedure, and Section 1, Rule 31 of the Rules of Court.

Lawyers can represent parties in labour disputes. However, under Section 6, Rule III of the NLRC Rules of Procedure, parties to a case may represent themselves if they choose. Employees who are members of a union may also be represented by their union officers or legal counsel in labour disputes.

All kinds of labour disputes may be submitted to, settled, or resolved through voluntary arbitration by voluntary agreement of the parties, taking precedence over dispute settlement methods.

Parties may mutually agree to submit their disputes to a voluntary arbitrator or panel of arbitrators at any stage of the proceedings. Voluntary arbitration is often employed in labour disputes involving the interpretation or implementation of CBAs and company personnel policies.

Article 273 of the Philippine Labour Code provides that parties to a CBA must establish a grievance machinery for the resolution of disputes. This machinery should address grievances related to the interpretation or implementation of the CBA, as well as issues arising from company personnel policies.

If a grievance is not resolved within seven calendar days, it is automatically referred to voluntary arbitration, in accordance with the process outlined in the CBA.

Damages and attorney’s fees may be awarded to an employee under the conditions outlined below.

• Moral damages may be awarded to compensate one for diverse injuries such as mental anguish, besmirched reputation, wounded feelings, and social humiliation, as provided under 2199 of the Philippine Civil Code.
• Nominal damages under Article 2221 of the Philippine Civil Code may also be awarded when rights are violated, such as in cases of procedural lapses during termination, even if no actual or substantial damage is proven.
• Exemplary damages may be awarded only if the dismissal was shown to have been effected oppressively or maliciously under Article 2208 of the Philippine Civil Code.
• Attorney’s fees are awarded in cases where exemplary damages are recovered, or where the employer acted in a wanton, fraudulent, or grossly negligent manner based on Article 2208 of the Philippine Civil Code.
• Moreover, Article 111 of the Philippine Labour Code allows the award of attorney’s fees in cases of unlawful withholding of wages, where the culpable party may be assessed attorney’s fees equivalent to 10% of the amount of wages recovered.