Under Philippine labor law, illegal dismissal occurs when an employer terminates an employee’s services without a valid legal ground (substantive due process) or without complying with the legally mandated procedure (procedural due process).
1. The Two-Fold Due Process Requirement
To be declared valid, a dismissal must satisfy two aspects of due process:
- Substantive Aspect: The termination must be based on a just cause (employee’s fault, such as serious misconduct or gross neglect) or an authorized cause (business or economic reasons, such as redundancy or retrenchment).
- Procedural Aspect: The employer must observe the twin-notice rule (a first written notice of the charges, an opportunity to explain, and a second written notice of the decision).
- Note on procedurally defective dismissals: If there is a valid cause to fire the employee but the employer fails to follow procedural due process, the dismissal is still valid, but the employer is liable for nominal damages (typically P30,000 for just cause and P50,000 for authorized cause) to penalize the procedural violation.
How about constructive dismissal? What is it?
Constructive dismissal is an involuntary resignation where an employee is forced to quit because the employer makes continued employment impossible, unreasonable, or unlikely. See indications of a constructive dismissal.
2. Burden of Proof
- On the Employee: The worker must first establish by substantial evidence the fact of their dismissal. If no dismissal actually took place, there is no illegal dismissal case.
- On the Employer: Once the employee establishes the fact of dismissal, the burden of proof shifts to the employer to prove that the termination was valid, legal, and compliant with due process.
3. Reliefs and Remedies
An employee found to have been illegally dismissed is entitled to the following remedies:
- Reinstatement to their former position or a substantially equivalent one without loss of seniority rights and privileges.
- Full Backwages to restore the earnings and benefits lost from the time compensation was withheld up to the time of actual reinstatement.
- Separation Pay in Lieu of Reinstatement (usually one month’s salary for every year of service) if reinstatement is no longer feasible due to strained relations, business closure, or other supervening factors. This is awarded in addition to backwages.
- Damages and Attorney’s Fees: Moral and exemplary damages are awarded if the termination was carried out in bad faith, fraud, or an oppressive manner. Attorney’s fees (10% of the total money award) are granted if the employee was forced to litigate to protect their rights.
Constructive Dismissal
It is legally considered a “dismissal in disguise” because the employer does not explicitly terminate the worker, but instead creates an unbearable working environment to force them out.
1. Common Indications of Constructive Dismissal
- Demotion in Rank or Diminution of Pay: Relegating an employee to a lower position or reducing their salary, benefits, and privileges without a valid cause.
- Hostile Working Conditions: Clear acts of discrimination, insensibility, or disdain by the employer that become so unbearable that the employee is left with no choice but to quit.
- Unlawful or Prejudicial Transfers: Transferring an employee to a different post or location that is highly inconvenient, unreasonable, or represents a demotion in status, without a genuine business necessity.
- Excessive “Floating Status” or Suspension: Placing an employee on temporary “off-detail” (floating status) or preventive suspension that exceeds the maximum legal limit of six (6) months without reinstatement.
2. The Legal Test
The Supreme Court applies an objective test: whether a reasonable person in the employee’s position would have felt compelled to give up their employment under the same circumstances.
3. Burden of Proof
- On the Employee: The worker must first prove the fact of the constructive dismissal (the hostile acts or forced nature of the resignation) by substantial evidence.
- On the Employer: Once the employee establishes the fact of dismissal, the burden shifts to the employer to prove that their actions (such as a transfer or reorganization) were valid, in good faith, and compelled by a genuine business necessity.
4. Remedies Available
An employee who is constructively dismissed is legally treated as an illegally dismissed employee and is entitled to:
- Reinstatement to their former position without loss of seniority.
- Full Backwages computed from the time they were unjustly relieved of duty (when compensation was withheld) up to actual reinstatement.
- Separation Pay in Lieu of Reinstatement (typically one month’s salary for every year of service) if reinstatement is no longer feasible due to severely strained relations.
- Damages and Attorney’s Fees if the constructive dismissal was carried out in bad faith, or in an oppressive and wanton manner.
