Law Summary
Scope and Coverage
- Rules apply to all employer-employee relationships and legitimate contracting/subcontracting arrangements.
Employer-Employee Relationship Test
- Four-fold test to ascertain relationship: selection/engagement, wage payment, power of dismissal, and the control test.
- Control test, which assesses control over work and manner of performance, is the most critical.
Definitions of Key Terms
- Authorized Causes: Business necessities, economic conditions, employee illness (Arts. 298-299 LC).
- Just Causes: Employee fault or negligence (Art. 297 LC).
- Closure or Cessation: Complete/partial shutdown of employer's operations.
- Commission of Crime: Offense against employer/family/representative by employee.
- Contractor and Contractor’s Employee: Parties in legitimate service agreements.
- Other terms clarified: fraud, neglect, insubordination, loss of confidence, misconduct, redundancy, retrenchment, etc.
Due Process in Termination
- Requires two written notices for just causes: First notice states specific grounds and invites explanation.
- At least five calendar days to respond.
- Employee must be given opportunity to be heard with representation.
- Final notice of termination must indicate consideration of all circumstances.
Just Causes for Termination
- Serious misconduct oriented to job duties.
- Willful disobedience to lawful orders.
- Gross and habitual neglect of duties.
- Fraud or willful breach of trust related to work.
- Loss of confidence where trust is essential.
- Commission of crime against employer or family.
- Analogous causes explicitly enumerated in company policies.
Authorized Causes for Termination
- Installation of labor-saving devices done in good faith.
- Redundancy due to excess of positions or services.
- Retrenchment to avoid/minimize business losses.
- Closure or cessation in good faith with no alternative.
- Disease that is incurable and affects employee and co-workers.
- Applies Last-In, First-Out Rule except for voluntary separations.
Separation Pay
- For authorized causes except closure due to serious losses, separation pay is mandated.
- Rates vary: one month pay or one month per year of service for labor-saving devices/redundancy.
- One month or half month per year of service for retrenchment and closure (non-serious losses).
- Disease-related termination requires separation pay.
- No separation pay for just cause termination unless company policy or CBA provides.
Other Grounds for Termination
- Company-policies-based reasonable and lawful grounds.
- Positive drug tests warrant administrative action.
- Prohibition of termination based on actual or perceived HIV and Hepatitis B status.
- Non-discrimination and rights restoration for Tuberculosis sufferers certified medically fit.
- Sexual harassment is a serious misconduct especially when by persons in moral authority.
Termination under Collective Bargaining Agreements
- Employees may be terminated based on grounds agreed in CBA.
Mandatory Conciliation-Mediation
- All termination disputes subjected to mandatory conciliation-mediation under RA 10396.
- Requests lodged at Single Entry Assistance Desk Officers (SEADOs) in DOLE offices.
- Settlements reduced to writing and binding.
- For organized establishments, grievance machinery under CBA applies.
Compulsory and Voluntary Arbitration
- Arbitration commences after failure of conciliation-mediation.
- Labor Arbiter jurisdiction contingent on referral by SEADO.
Enforcement of Settlement Agreements
- Non-compliance referral to Regional Arbitration Branch of NLRC for enforcement.
- Parties may file cases disregarding settlement if desired.
Repealing Clause
- Previous sections of IRR of Labor Code relative to termination are repealed.
- Supersedes inconsistent rules and regulations.
Separability Clause
- Invalidity of any provision does not affect validity of remaining provisions.
Effectivity
- Order effective fifteen days after publication in two newspapers of general circulation.