d. Separation Pay

Exceptions:

• Separation pay
• Closure of business (Retuya v. Hon. Dumarpa, G.R. No. 148848, 2003)
• Economic Business Conditions (Union of Supervisors v. Secretary of Labor, G.R. No. L39889, 1981)
• Employee’s unsuitability (Divine Word High School v. NLRC, G.R. No 72207, 1986)
• Employee’s retirement / overage (New Phil. Skylanders v. Dekila, G.R. No. 199547, 2012)
• Antipathy and antagonism (Wensha Spa Center v. Yung, G.R. No. 185122, 2010)
• Job with a totally different nature (DUP Sound Phils. v. CA, G.R. No. 168317, 2011)
• Long passage of time
• Inimical to the employer’s interest
• Supervening facts have transpired which make execution unjust or inequitable, to an increasing extent (Emeritus Security v. Dailig, G.R. No. 204761, 2014)

Reinstatement and separation pay – exclusive remedies

Payment of separation pay and reinstatement are exclusive remedies. The payment of separation pay replaces the legal consequences of reinstatement to an employee who was illegally dismissed. (Bank Rural Bank v. De Guzman, G.R. No. 170940, 2013)

Kinds of separation pay

• Statutory separation pay, in authorized causes (Labor Code, Arts. 288-299)
• Separation pay as financial assistance (found in the next section)
• Separation pay in lieu of reinstatement where reinstatement is not feasible; and
• Separation pay as a benefit in the CBA or company policy

First Kind: Statutory separation pay

The employer has a statutory obligation in cases of legal termination due to authorized causes.

Note: A fraction of at least 6 months is considered 1 year

Second Kind: Separation pay as financial assistance

Separation pay may be awarded, in the name of compassionate justice, to an employee dismissed for a “just cause”, except in the following:

• Serious misconduct; or
• Other offenses reflecting on his moral character (PLDT v. NLRC, G.R. No. 80609, 1988)

However: Financial assistance is unavailable where the offense constitutes serious misconduct or reflects on the employee’s moral character, regardless of which just cause in Art. 297 of the Labor Code is invoked. For other valid dismissals, any equitable award depends on the circumstances and is not automatic. (Toyota Motor Phil. Corp. Workers Ass’n. v. NLRC, G.R. No. 158786, 2007)

But note: In the International School case, the Supreme Court granted “separation pay” of ½ month per year of service while upholding the teacher’s dismissal on the ground of “gross inefficiency” resulting from the lack of skills, thereby failing to meet the standards of the employer of the school. (International School v. International School Alliance, 2014)

No financial assistance to dismissed strikers.

Third Kind: Separation Pay in Lieu of Reinstatement

One month salary per year of service.

This happens only in cases where:

• Doctrine of Strained Relations applies when substantial evidence shows that reinstatement is no longer feasible; it is not categorically limited to confidential and managerial employees; or
• When reinstatement would only exacerbate the tension and strained relations between the parties. (Quijano v. Mercury, G.R. No. 126561, 1998)
• The position has been abolished (applies to both managerial and rank and file)

Note: Moral and exemplary damages may also be awarded.

Computation of separation pay

SP as a statutory requirement is computed by integrating the basic salary with regular allowances employee has been receiving (Planters Products v. NLRC, G.R. No. 78524, 1989); allowances include transportation and emergency living allowances (Santos v. NLRC, G.R. No. 76721, 1987)

Commissions included in separation pay; exception to inclusion

Inasmuch as the words "wages", "pay" and "salary" have the same meaning, and commission is included in the definition of "wage", the logical conclusion, therefore, is, in the computation of the separation pay of petitioners, their salary base should include also their earned sales commissions. (Songco v. NLRC, G.R. Nos. 50999-51000, 1990)

Commissions given to a managerial employee who did not perform actual business transactions to earn the commission shall not be included in the salary for purposes of computing separation pay. (Phil. Duplicators v. NLRC, G.R. No. 11068, 1995)

Retirement Benefits and Separation Pay May be Simultaneously Granted; When Not Granted

Yes. (University of the East v. UE Faculty Association, G.R. No. 74007, 1987)

Separation pay is required in the cases enumerated in Articles [298] and [299] of the Labor Code. It is a statutory right designed to provide the employee with the wherewithal during the period that he is looking for another employment.

Retirement benefits, where not mandated by law, may be granted by agreement of the employees and their employer or as a voluntary act on the part of the employer. Retirement benefits are intended to help the employee enjoy the remaining years of his life, lessening the burden of worrying for his financial support, and are a form of reward for his loyalty and service to the employer. (Aquino v. NLRC & Otis Elevator, G.R. No. 87653, 1992)

However: Company policy or CBA may make separation pay and retirement benefits mutually exclusive. (Aquino v. NLRC & Otis Elevator, G.R. No. 87653, 1992)

No Separation Pay in resignation; Exceptions; Waivers and Quitclaims, when valid

General Rule: Separation pay need not be paid to an employee who voluntarily resigns.

However: An employer who agrees to expend such benefit as an incident of the resignation should not be allowed to renege in the performance of such commitment.

Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily entered into and represented a reasonable settlement, it is binding on the parties and may not later be disowned, simply because of a change of mind. (Candido Alfaro v. CA, et al., G.R. No. 140812, 2001)

Requisites for Implementation of a Valid Redundancy Program

• A written notice served on both the employees and the DOLE at least one month prior to the intended date of termination due to redundancy
• Payment of separation pay equivalent to at least one month pay or at least one month pay for every year of service, whichever is higher
• Good faith in abolishing the redundant positions
• Fair and reasonable criteria in ascertaining what positions are to be declared redundant and accordingly abolished. (Lopez Sugar Corporation v. Franco, G.R. No. 148195, 2005)

Entitlement to Separation Pay

GR: Project Ees are not entitled to separation pay if their services are terminated as a result of the completion of project.

XPN: If the projects they are working on have not yet been completed when their services are terminated; project Ees also enjoy security of tenure during the limited time of their employment. (De Ocampo v. NLRC, G.R. No. 81077, 06 June 1990)

Q: Roger Puente was hired by Filsystems, Inc., initially as an installer and eventually promoted to mobile crane operator, and was stationed at the company’s premises. Puente claimed in his complaint for illegal dismissal, that his work was continuous and without interruption for 10 years, and that he was dismissed from his employment without any cause.

Filsystems on its part averred that Puente was a project Ee in the company’s various projects, and that after the completion of each project, his employment was terminated, and such was reported to the DOLE. Is Roger Puente a regular Ee?

A: NO. Puente is a project Ee. The contracts of employment of Puente attest to the fact that he was hired for specific projects. His employment was coterminous with the completion of the projects for which he had been hired. Those contracts expressly provided that his tenure of employment depended on the duration of any phase of the project or on the completion of the construction projects. Furthermore, the company regularly submitted to DOLE reports of the termination of services of project workers. Such compliance with the reportorial requirement confirms that Puente was a project Ee.

The mere rehiring of Puente on a project-to-project basis did not confer upon him regular employment status. (Filipinas Pre-Fabricated Building Systems, Inc. v. Puente, G.R. No. 153832, 18 Mar. 2005)

In the case of Alcatel v. Relos, while the Ee performed tasks that were clearly vital, necessary, and indispensable to the usual business or trade of the company, he was not continuously rehired after the cessation of every project.

Alcatel did not rehire the Ee until after a lapse of 33 months, for the PLDT 1342 project. Alcatel's continuous rehiring of respondent in various capacities was done entirely within the framework of one and the same project – the PLDT 1342 project. This did not make the Ee a regular Ee of Alcatel as he was not continuously rehired after the cessation of a project. (Alcatel v. Relos, G.R. No. 164315, 03 July 1999)

SEASONAL

Due to Installation of Labor-Saving Device

• The employer served a written notice both to the employees and to the DOLE at least 30 days prior to the intended date of termination; and
• The employer pays the employees separation pay equivalent to one month pay or at least one month pay for every year of service, whichever is higher, a fraction of at least six months being considered as one whole year. (Labor Code, Art. 298)

Guidelines in Closure

• Closure or cessation of operations of establishment or undertaking may either be partial or total.
• Closure or cessation of operations of establishment or undertaking may or may not be due to serious business losses or financial reverses. However, in both instances, proof must be shown that:
• It was done in good faith to advance the employer's interest and not for the purpose of defeating or circumventing the rights of employees under the law or a valid agreement; and
• A written notice on the affected employees and the DOLE is served at least one month before the intended date of termination of employment.
• The employer can lawfully close shop even if not due to serious business losses or financial reverses but separation pay, which is equivalent to at least one month pay as provided for by the Labor Code as amended, must be given to all the affected employees.
• If the closure or cessation of operations of establishment or undertaking is due to serious business losses or financial reverses, the employer must prove such allegation in order to avoid the payment of separation pay. Otherwise, the affected employees are entitled to separation pay.
• The burden of proving compliance with all the above-stated falls upon the employer. (Manila Polo Club Employees’ Union v. Manila Polo Club, Inc., G.R. No. 172846, 2013)

Retrenchment vs. Redundancy vs. Closure

Computation of Separation Pay

Note: A fraction of at least 6 months is considered 1 year

TEMPORARY CLOSURE / BONA FIDE SUSPENSION OF OPERATIONS (Labor Code, Art. 301)

A bona fide suspension of business operations for not more than 6 months does not terminate employment.

After 6 months, the employee may be recalled to work or be permanently laid off. (SKM Art Craft Corp v. Bauca, G.R. No. 171282, 183484, 2013)

An employer may validly suspend operations for at most 6 months. Not accepting the workers back to work after the 6-month period is equivalent to termination, which should be for cause and with proper procedure. (Manila Mining Corp. v. Amor, G.R. No. 182800, 2015)

Substantive Elements of Due Process for Termination Due to Ailment or Disease

• An employee has been found to be suffering from any disease, whether contagious or not;
• His continued employment is prohibited by law or prejudicial to his health, or to the health of his co-employees;
• A competent public health authority certifies that the disease is of such nature or at such a stage that it cannot be cured within a period of six months even with proper medical treatment; and
• Payment of separation pay equivalent to at least one month salary or to one-half month salary for every year of service, whichever is greater, a fraction of at least six months being considered as one whole year.