Termination is the act of ending an individual’s employment status within a company. It is one of the most challenging responsibilities of a human resources (HR) manager, as it requires proper procedures. A wrongful termination of an employee could result in a company facing legal consequences. Therefore, termination must be handled properly to ensure compliance with labor laws and ethical standards.
What is an Employment Contract?
An employment contract is a written agreement between an employee and an employer. It outlines the job description, benefits and salary, work schedule, employment status, duration of employment, and any confidential information. This document is required to be signed by the employee before they start their employment in a company. There are some companies that do not provide a contract for their employees, but it is advisable to issue a contract for clarity and protection of the rights of both the employer and the employee.
What are the Different Types of an Employment Contract in the Philippines?
There are different types of an employment contract, which includes:
- Fixed-Term Employment Contract includes the specific date of employment, which is used for seasonal or temporary employees, and for employees who are on a project-by-project basis.
- Indefinite Employment Contract is given for employees who work full-time or have a regular employment status. This has no specific end of employment period, meaning it will just end if the employee files a resignation letter or gets terminated by the employer.
- Part-Time Employment Contract has a specific number of working hours per week for the employees who are getting paid on an hourly basis.
- Freelance or Consulting Employment Contract is a type of contract for a short-term project that includes the terms and conditions between the contractor or freelancer and the company or client they are working for.
What are the Grounds for Termination of an Employment Contract in the Philippines?
An employee may either be terminated by the employer or through voluntary resignation.
Termination of Employer
According to Article 282 of the Labor Code, an employer can terminate an employee for just causes, including:
- 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 representatives;
- 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 similar causes.
Additionally, pursuant to Article 283 of the said Code, employers can terminate an employee for authorized causes, such as:
- Installation of labor-saving devices;
- Redundancy;
- Retrenchment or reduction of costs to prevent losses; or
- Cessation of business operation.
Under Article 284 of Labor Code, employers can terminate an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as the health of his colleagues.
Voluntary Resignation
In accordance with Article 285 of the Labor Code, if the resignation is without just cause, the employee must give a 30-day written notice to enable the employer to look for his/her replacement and to prevent any work disruptions. Failure to comply with this requirement may hold the employee liable for damages.
Moreover, an employee may resign immediately without serving the 30-day notice period if the resignation is due to the following:
- Serious insult to the honor and person of the employee;
- Inhuman and unbearable treatment accorded the employee by the employer or his representative;
- Crime committed against the employee’s person or any immediate family member; and
- Other similar causes.
What are the Exemptions to Terminate an Employee in the Philippines?
The following cannot be a reason to terminate an employee:
- An employee who took maternity or paternity leave;
- An employee who is practicing their labor rights;
- Based on an employee’s race, ethnicity, gender, religion, age, and any other characteristics, reflecting to discrimination;
- Based on an employee’s political beliefs or affiliations, which violates their right to political expression; and
- Based on the employee’s physical appearance.
How to Terminate an Employment Contract in the Philippines?
In the Philippines, terminating an employment contract involves procedures, which includes:
- Review the Contract. There are four types of employment contract that serve different purposes, employment period, and working hours. It is important to review the contract since there might be an agreement stated in the contract that could arise any potential problems.
- Identify the Reason of Termination. The employer is entitled to dismiss an employee in any reasons justified in Article 282 and 284 of the Labor Code of the Philippines. However, if the reason is not specified in the Labor Code, the employee may file a case against the employer. In this process, seeking a lawyer is crucial to avoid any disputes between the parties.
- Notify the Employee. If termination is due to just causes, procedural due process must be complied with:
- Written notice specifying the ground(s) for termination and giving the employee a reasonable opportunity/time to send his/her written explanation.
- HR/Admin hearing or conference giving the concerned employee a chance to further explain his/her side verbally and present evidence to rebut the offense(s) against him/her.
However, if the reason for the termination is due to an illness or any business-related grounds, the employer must send a written notice to the employee at least thirty (30) days before the termination date. They must also submit a copy of the notice to the Department of Labor and Employment (DOLE) office.
- Separation Pay. An employee is entitled to receive a separation pay if the termination is due to authorized cases specified under the Labor Code. However, an employee who voluntarily resigns is not entitled to separation pay, except in cases where payment is provided in the employment contract or Collective Bargaining Agreement (CBA) and when it is authorized by an established company practice or policy.
Moreover, the release of separation pay is not addressed in labor law or in any regulations in the Philippines. However, the employers are expected to release the separation pay within thirty (30) days from the date of the employee’s last working day. If an employer fails to release it, the employee may file a complaint to the Department of Labor and Employment (DOLE) or seek legal action to practice their employment rights.
Need further information and assistance regarding Termination of Employment Contract? Talk to our team at Duran & Duran-Schulze Law to know more about the requirements and process. Call us today at (+632) 8478 5826 or +63 917 194 0482, or send an email to info@duranschulze.com for more information.
