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The document discusses four kinds of separation pay under Philippine labor law: as a statutory requirement, as financial assistance for legal dismissal, as a substitute for reinstatement for illegal dismissal, and as an employment benefit from the employer. It provides details on calculating statutory separation pay amounts for different authorized causes of separation like redundancy or disease. It also discusses financial assistance that may be awarded in cases of legal dismissal not involving serious misconduct.

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0% found this document useful (0 votes)
25 views7 pages

Notes

The document discusses four kinds of separation pay under Philippine labor law: as a statutory requirement, as financial assistance for legal dismissal, as a substitute for reinstatement for illegal dismissal, and as an employment benefit from the employer. It provides details on calculating statutory separation pay amounts for different authorized causes of separation like redundancy or disease. It also discusses financial assistance that may be awarded in cases of legal dismissal not involving serious misconduct.

Uploaded by

Cath Villarin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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1.

2.
3. what is a separation pay?
The amount that an employee receives at the time of his separation from his job, and is
designed to provide the employee with the funds during the period she is looking for another
employment.
4. Under the old law, it was construed by the supreme court that the employer has the right to
terminate employement of an employee with or without just cause. The only CONDITION
imposed was that if the dismissal is without jus cause, the employer should serve notice on the
employee at least once a month in advance or pay one-half month salary for every year of
service of the employee, whichever is longer. The failure of employer to serve notice, will render
him liable for separation pay and not the fact that employment was terminated without just
cause. ALSO under that law, even if the employee’s dismissal was found to be without just
cause, abusive, or without due notice, the employer could only be liable for separation pay and
moral damages, and the dismissed employee cannot demand reinstatement.

BUT it was said that the LABOR CODE change all of that, the rue is now plain and direct. If there
is no valid reason, there is no dismissal.

5. Under the present law, there are four kinds separation pay.

AS A STATUTORY REQUIREMENT
AS FINANCIAL ASSISTANCE IN LEGAL DISMISSAL
AS SUBSTITUTE FOR REINSTATEMENT IN ILLEGAL DISMISSAL CASE
AS EMPLOYMENT BENEFIT FROM EMPLOYER

6. FIRST KIND, AS A STATUTORY REQUIREMENT

It Refers to monetary liability of the employer to the employee. For example, an


unemployment has to be terminated because of the so-called authorized causes, such
termination is legal. Since it is not a fault of an employee, but exigencies of the business, it is
fair that, in the context of social justice, the employer give separation pay to the employee.

Art. 298. Closure of establishment and reduction of personnel. The


employer may terminate the employment of any employee due to
the installation of labor-saving devices, redundancy, retrenchment
to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose
of circumventing the provisions of this Title, by serving a written
notice on the workers and the Ministry of Labor and Employment at
least one (1) month before the intended date thereof.

In case of termination due to the installation of labor-saving devices


or redundancy, the worker affected thereby shall be entitled to a
separation pay equivalent to at least his one (1) month pay or to at
least one (1) month pay for every year of service, whichever is
higher. In case of retrenchment to prevent losses and in cases of
closures or cessation of operations of establishment or undertaking
not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least
one-half (1/2) month pay for every year of service, whichever is
higher. A fraction of at least six (6) months shall be considered one
(1) whole year.

Art. 299. Disease as ground for termination. An employer may


terminate the services of 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 to the
health of his co-employees: Provided, That he is paid separation pay
equivalent to at least one (1) month salary or to one-half (1/2) month
salary for every year of service, whichever is greater, a fraction of
at least six (6) months being considered as one (1) whole year.

Art. 297. Termination by employer. An employer may terminate an


employment for any of the following causes. “JUST CAUSES”

a. Serious misconduct or willful disobedience by the employee of


the lawful orders of his employer or representative in connection
with his work;

b. Gross and habitual neglect by the employee of his duties;

c. Fraud or willful breach by the employee of the trust reposed in


him by his employer or duly authorized representative;

d. 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

e. Other causes analogous to the foregoing.

JUST DISMISSAL IS 297, AUTHORIZED DISMISSAL 298 &299


7. AMOUNT OF SEPARATION PAY FOR AUTHORIZED CAUSES

REDUNDANCY

Equivalent to which is higher of either; a one-month pay or one-month pay multiplied by the
employer's year of service.

RETRENCHMENT /CESSATION OF OPERATION NOT DUE TO SERIOUS BUSINESS


LOSSES

Lower than previous causes, because the business is caught in financial restaint.

DUE TO DISEASE

Equivalent to which is higher of either; a one-month pay or one-month pay multiplied by the
employer's year of service.

RETRENCHMENT /CESSATION OF OPERATION DUE TO SERIOUS BUSINESS LOSSES

No separation pay need to be paid.

8. So now, how is a statutory separation pay being computed?


The labor code says that in the computation of your statutory separation pay, the regular
allowances must be included or integrated, not only your basic salary.
Examples are your transportation and emergency living allowances.
However, commissions or override commissions, net deposits incentive, travel
equivalents may not be included.

Note: Labor Code only requires the minimum amount of separation pay for employee separation
for any of the authorized causes. Therefore, employers have the right to create plans or enter into
agreements providing for separation pay higher than the rates provided in the previous articles,
so long that the policy agreement is not contrary law, morals, good customs, public order or
public policy.

9. Second kind of separation pay, AS FINANCIAL ASSISTANCE IN LEGAL


DISMISSAL
When the employee is dismissed for a just cause, but the employee's act does not amount to
serious misconduct or does not reflect on his moral character, the court may require the employer
to pay, as a measure of social justice, a separation pay or "financial assistance".

This serves as an exception to article 297. Artcle 297 enumerates the acts that would justifiably
terminate an employee. For or example an employee committed habitual neglect of his duties, his
reason is that his wife just gave birth so sometimes he has to be absent to accompany his wife. ,
his dismissal is “just” however, under this kind of separation pay, the employee is still entitled to
a separation pay which is also called a financial assistance (despite his just termination). This
exception is crafted by court to cloth with compassion a stiff and indiscriminating dismissal
action based of the so-called “just causes”.

In the given example, It is not the employee's fault if he does not have the necessary aptitude for
his work but on the other hand the company cannot be required to maintain him just the same at the
expense of the efficiency of its operations. He too may be validly replaced. Under these and similar
circumstances, however, the award to the employee of separation pay would be sustainable under
the social justice policy even if the separation is for cause.

But where the cause of the separation is more serious than mere inefficiency, the generosity of the
law must be more discerning.

A security guard found sleeping on the job is doubtless subject to dismissal but may be allowed
separation pay since his conduct, while inept, is not depraved. But if he was in fact not really
sleeping but sleeping with a prostitute during his tour of duty and in the company premises, the
situation is changed completely. This is not only inefficiency but immorality and the grant of
separation pay would be entirely unjustified.

The policy of social justice is not intended to countenance wrongdoing simply because it is
committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone
the offense. Compassion for the poor is an imperative of every humane society but only when the
recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be
refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty.
Those who invoke social justice may do so only if their hands are clean and their motives
blameless and not simply because they happen to be poor. This great policy of our Constitution is
not meant for the protection of those who have proved they are not worthy of it, like the workers who
have tainted the cause of labor with the blemishes of their own character.

It would seem then that length of service is not necessarily a criterion for the grant of separation pay
and neither apparently is the reason for the dismissal.

10. CASE PLDT

Applying the above considerations, we hold that the grant of separation pay in the case at bar is
unjustified. The private respondent has been dismissed for dishonesty, as found by the labor arbiter
and affirmed by the NLRC and as she herself has impliedly admitted. The fact that she has worked
with the PLDT for more than a decade, if it is to be considered at all, should be taken against her as
it reflects a regrettable lack of loyalty that she should have strengthened instead of betraying during
all of her 10 years of service with the company. If regarded as a justification for moderating the
penalty of dismissal, it will actually become a prize for disloyalty, perverting the meaning of social
justice and undermining the efforts of labor to cleanse its ranks of all undesirables.
IF DISHONESTY IS DOUBTED: FINANCIAL ASSISTANCE MAY BE GRANTED

When there is doubt as to that dishonesty committed, financial assistance may be still
awarded to the employee who has rendered long years of services. DOUBT is resolve in
employee’s favor.

PLDT case in 1992. The award of financial assistance to the employee is not a
condonation of his act of dishonesty which was clearly violative of company rules, but
anchored on equitable consideration. the grant of financial assistance in lawful dismissal
case is based on equity and compassionate justice, such being the basis, there can be no
fixed formula to determine the amount of financial assistance. It rest on the sound
judgement if the adjudicating authority, weighting the circumstances of each case.

The grant of financial assistance in lawful dismissal case is based on equity and compassionate justice,
such being the basis, there can be no fixed formula to determine the amount of financial assistance.

11. COMPASSION RECONSIDERED; FINANCIAL ASSISTANCE DENIED


TOYOTA MOTORS PHILS. CORP. WORKERS ASS. VS. NLRC

- This case is a U-turn ruling because this is where the grant of financial assistance
was halted
- In this case, the court declares that the adjudicatory officials and the court of
appeals must demur (object) the award of separation pay based on social justice
when employee’s dismissal is based on misconduct, willful disobedience, gross
and habitual negligence of duty, fraud, or commission of crime against the person
of the employer or his immediate family (grounds under Art 297 par. a-d) IN
SHORT, if dismissal is based on any just causes provided under article 297 a-d,
no financial assistance can be granted, except!! Under par. e or the lst ground
mentioned (analogous causes) where the court, for the sake of social justice, may
grant financial assistance.

*** however, despite the Toyota case, compassionate ground of FA is not completely
disallowed.

(International school vs. international school alliance, feb 2014)


12. CASES Recomm. To be read

13. Third kind, AS SUBSTITUTE FOR REINSTATEMENT IN ILLEGAL DISMISSAL

Also called "SPIR" (Separation pay instead of reinstatement). It is considered as an


acceptable alternative to reinstatement when the latter option is no longer desirable or
feasible.

If the preceding two kinds both involve legal termination, this kind involves illegal
termination.

Two advantages, the payment liberates employee from what could be highly oppressive
work environment. On the other hand, the employer from the grossly unpalatable
obligation of maintaining its worker that it could no longer trust. PARANG MAY
TRUST ISSUES NA SILA SA ISA’T ISA.

Example:

a. In case of termination due to sickness.


b. Where employee position no longer available.
c. When relationship bet employer and employee is no longer viable due to strained
relationship between them.

14. last kind, AS EMPLOYMENT BENEFIT FROM EMPLOYER

Commonly called as resignation pay or gratuity. Its standard requisite is that the employee has
rendered a specified minimum length of service to the employer, usually at least five (5) years.

This is the fourth and last kind of separation pay. It does not arise from legal or dismissal but
from no adversarial mode of leaving one’s employment which is, resignation.

This kind of separation pay is in the form of a pre requisite or employment benefit that depends
on the terms of its grant through a CBA or company policy established practice. It is commonly
called as resignation / gratuity pay.

For example, ANA resigned from the CGPP after her service for 10 years as a revenue collector.
If there is a company policy that an employee who voluntarily resigns, shall be entiled to a
separation pay equivalent to 1 month for every year of service, If there is that policy, then ANA
is entitled to that.
RULE: Employee who voluntarily resigns is not entitled to a separation pay, EXCEPT it is
stipulated in the employment contract or CBA or established by a company practice or policy.

EXCEPTION TO EXCEPTION: it may still be awarded for equitable reason. EXAMPLE :


Health reasons. Article 299

SEPARATION PAY CANNOT BE DEDUCTED FROM BACKWAGES, because they are


distinct and separate.

Illegally dismissed employee entitled both separation pay and

BACKWAGES- the restitution of earnings unduly withheld from employee because of illegal
termination.

If the termination of is legal, employee not entitled to back wages because back wages
presupposes illegal termination.

The court MAY OR MAY NOT AWARD back wages.

Full back wages are computed from the time employee's compensation was withheld up to
the time of his actual reinstatement.

REINSTATEMENT- restores employee who was unjustly dismissed to the position from which
he was removed.

Separation pay is proper substitute for reinstatement but not adequate fpr both reinstatement and
back wages.

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