Dear Employer,

First, you have the option to terminate his employment, as long as the termination follows due process.

Article 297 [282] of the Labor Code provides that an employer may terminate an employment for any of the following causes:

• Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;
• Gross and habitual neglect by the employee of his duties;
• Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;
• Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representatives; and
• Other causes analogous to the foregoing.

Absence without leave or AWOL may constitute abandonment of work, which is considered by jurisprudence as an analogous cause under Article 297 [282] (e). The Court in Samarca v. ARC-Men Industries Inc. (G.R. No. 146118) ruled that for abandonment to be present, it is essential that these two requisites are met:

• That the employee must have failed to report for work or must have been absent without valid or justifiable reason; and
• That there must have been a clear intention to sever the employer-employee relationship manifested by some overt acts.

The burden of proof rests on the employer. So you, as an employer, must show that the two requisites are present.

Next, it is important that the employer also follows procedural due process by giving the employee sought to be terminated the first written notice and a chance to be heard and defend himself. Article 292 [277] of the Labor Code provides that the employer:

• Shall furnish the worker whose employment is sought to be terminated a written notice containing a statement of the causes for termination; and
• Shall afford the latter ample opportunity to be heard and to defend himself with the assistance of his representative if he so desires in accordance with company rules and regulations promulgated pursuant to guidelines set by the Department of Labor and Employment (DOLE).

A second notice, or a written notice of termination is also required. The Court in Unilever Philippines, Inc. v. Maria Ruby M. Rivera (G.R. No. 201701) provided that the second notice must include the following:

• All circumstances involving the charge against the employees have been considered; and
• Grounds have been established to justify the severance of their employment.

Second, regarding the employee’s vehicular damage, the employer has the option to deduct the employee’s unpaid liabilities from the final pay. We refer to Book Three, Rule VIII of the Omnibus Rules Implementing the Labor Code.

Section 14 of Rule VIII provides that “where the employer is engaged in a trade, occupation or business where the practice of making deductions or requiring deposits is recognized to answer for the reimbursement of loss or damage to tools, materials, or equipment supplied by the employer to the employee, the employer may make wage deductions or require the employees to make deposits from which deductions shall be made, subject to the following conditions:

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

Third, for the employee’s outstanding company loan, the employer may withhold the final pay. Article 1706 of the New Civil Code provides that the employer may withhold salary for debts due: “Withholding of the wages, except for a debt due, shall not be made by the employer.”

The Court in Milan v. NLRC (G.R. No. 202961) ruled that “debt” is “any obligation due from the employee to the employer. It includes any accountability that the employee may have to the employer.” Thus, an employer may validly withhold final pay to account for the employee’s outstanding loan to the company. This is also in line with the principle that “no one shall be unjustly enriched or benefited at the expense of another” (Milan v. NLRC, G.R. No. 202961).

Please note though that your employee may retaliate by filing a labor case against you for nonpayment of wages and benefits. So, you need to outweigh the benefit of non-releasing the final pay vs. a potential labor case against you.

Do you have any further questions that need to be addressed? Talk to our team at Duran & Duran-Schulze Law to know more. You may reach us at (+632) 8478 5826 or +63 917 194 0482 email info@duranschulze.com for more information. 

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