Installation of Labor-Saving Devices

What is the concept of installation of labor-saving devices?

The law authorizes an employer to terminate the employment of any employee due to the installation of labor saving devices. The installation of these devices is a management prerogative, and the courts will not interfere with its exercise in the absence of abuse of discretion, arbitrariness, or maliciousness on the part of management. (Magnolia Dairy Products Corporation vs. NLRC, G.R. No. 114952, January 29, 1996)

The installation of labor-saving devices contemplates the installation of machinery to effect economy and efficiency in the method of production.

What are the requisites for the ground of installation of labor-saving devices?

In order to validly invoke this ground, the following requisites must concur:

1. The introduction of the machinery, equipment or other devices must be done in good faith;

2. The purpose for such introduction must be valid such as to save on cost, enhance efficiency and other justifiable economic reasons;

3 There is no other option available to the employer than the introduction of the machinery, equipment or device and the consequent termination of employment of those affected thereby;

4. Written notice on the worker and the DOLE at least one (1) month before the intended date of termination;

5. There should be reasonable and fair standards or criteria in selecting who to terminate such as nature of work, status of the employee (whether casual, temporary or regular), experience, efficiency rating and seniority, among other considerations; and

6. Separation pay under the law or company policy or Collective Bargaining Agreement or similar contract, when appropriate, must be paid to the affected employees.

Distinguished from Retrenchment

The institution of “new methods or more efficient machinery, or of automation” is technically a ground for termination of employment by reason of installation of labor-saving devices but where the introduction of these methods is resorted to not merely to effect greater efficiency in the operations of the business but principally because of serious business reverses and to avert further losses, the device could then verily be considered one of retrenchment. (Edge Apparel vs. NLRC, G.R. No. 121314, February 12, 1998)

Modernization program through introduction of machines.

In the 2004 case of Abapo vs. CA, [G. R. No. 142405, Sept. 30, 2004], the company (San Miguel Corporation) conducted a viability study of its business operations and adopted a modernization program. It then brought into its Mandaue plant high-speed machines to be used in the manufacture of its beer. The Supreme Court held that the installation of labor-saving devices at its Mandaue plant was a proper ground for terminating employment.

Installation of machines for more economy and efficiency.

In Philippine Sheet Metal Workers Union vs. CIR, [83 Phil. 433], the termination of employment of the affected employees due to the introduction of machinery in the manufacture of its products for purposes of effecting more economy and efficiency, was declared valid.

Proof of losses, not required.

As earlier mentioned, in installation of labor-saving devices, there is no need for the employer to show proof of losses or imminent losses.

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Redundancy

What is the concept of redundancy?

Redundancy is one of the authorized causes for termination of employment under Article 283 of the Labor Code of the Philippines.


Redundancy exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. 

Succinctly put, a position is redundant where it is superfluous, and superfluity of a position or positions may be the outcome of a number of factors, such as overhiring of workers, decreased volume of business, or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise. 

The employer has no legal obligation to keep in its payroll more employees than are necessary for the operation of its business. Wiltshire File Co., Inc. vs. NLRC, [G.R. No. 82249, February 7, 1991, 193 SCRA 665]


What are the requisites for the ground of redundancy?

For redundancy to be a valid ground to terminate employment, the following requisites must be present:

1. Written notice served on both the affected employees and the Department of Labor and Employment at least one (1) month prior to the intended date of termination;

2. Payment of separation pay equivalent to at least one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher;

3. Good faith in abolishing the redundant positions; and

4. Fair and reasonable criteria in ascertaining what positions are to be declared redundant and accordingly abolished [such as (a) less preferred status [e.g.temporary employee]; (b) efficiency; and (c) seniority].

Burden of proof in redundancy rests on the employer.

It is the burden of the employer to prove the factual and legal basis for the dismissal of its employees on the ground of redundancy.

It is the employer’s burden to show that redundancy exists. It is not enough for a company to merely declare that it has become overmanned. It must produce adequate proof of such redundancy to justify the dismissal of the affected employees (Asufrin vs. San Miguel Corporation, 2004).

Evidence must be presented to substantiate redundancy such as but not limited to the new staffing pattern, feasibility studies/proposal, on the viability of the newly created positions, job description and the approval by the management of the restructuring (Panlilio vs. NLRC, 1997).

Evidence of losses, not required.

Just like installation of labor-saving devices, the ground of redundancy does not require the exhibition of proof of losses or imminent losses. (Dole Philippines, Inc. vs. NLRC, supra). In fact, of all the statutory grounds provided in Article 283 of the Labor Code, it is only retrenchment which requires proof of losses or possible losses as justification for termination of employment. (Coats Manila Bay vs. Ortega, G.R. No. 172628,  February 13, 2009)

Duplication of work, not necessary

Where two or more persons are performing the same work which may be effectively accomplished by only one, the employer may terminate the excess personnel and retain only one.

Redundancy in an employer’s personnel force, however, does not necessarily or even ordinarily refer to duplication of work. That no other person was holding the same position that private respondent held prior to the termination of his services, does not show that his position had not become redundant. Indeed, in any well-organized business enterprise, it would be surprising to find duplication of work and two or more people doing the work of one person. (Wiltshire File Co., Inc. vs. NLRC, supra).

In redundancy, what is looked into is the position itself, the nature of the services performed by the employee and the necessity of such position. (Tierra International Construction Corp. vs. NLRC, 1992)

Abolition of position or department.

The abolition of departments or positions in the company is one of the recognized management prerogatives. In the absence of proof that the act of the employer was ill-motivated, it is presumed that it acted in good faith. (San Miguel Corporation vs. NLRC, G. R. No. 99266, March 2, 1999).

In valid abolition of positions, the Supreme Court cannot erase that initiative simply to protect the person holding the position. (Cosico, Jr. vs. NLRC, G. R. No. 118432, May 23, 1997).

Reorganization through redundancy, valid.

Reorganization as a cost-saving device effected through redundancy is acknowledged as valid by jurisprudence. An employer is not precluded from adopting a new policy conducive to a more economical and effective management. (International Harvester Macleod, Inc. vs. IAC, 149 SCRA 641 [1987]).

Contracting out of abolished position to independent contractors held valid.

In Serrano vs. NLRC, [G. R. No. 117040, January 27, 2000], the act of the employer of phasing-out its security section and the hiring of an independent security agency to perform its task constitutes a legitimate business decision. Consequently, absent proof that management acted in a malicious or arbitrary manner, the Supreme Court will not interfere with the exercise of judgment by an employer.

In Asian Alcohol Corporation vs. NLRC, [G. R. No. 131108, March 25, 1999], the Supreme Court upheld the termination of employment of water pump tenders and their replacement by independent contractors. It ruled that an employer’s good faith in implementing a redundancy program is not necessarily put in doubt by the availment of the services of an independent contractor to replace the services of the terminated employees to promote economy and efficiency.

In De Ocampo vs. NLRC, [213 SCRA 652 (1992)], the Supreme Court upheld the termination of employment of three mechanics in a transportation company and their replacement by a company rendering maintenance and repair services.

Indeed, the management of a company cannot be denied the faculty of promoting efficiency and attaining economy by a study of what units are essential for its operation. To it belongs the ultimate determination of whether services should be performed by its personnel or contracted to outside agencies. While there should be mutual consultation, eventually deference is to be made to what management decides. (Serrano vs. NLRC, supra).

Hiring of casuals after redundancy, held valid.

Private respondent-employees in Dole Philippines, Inc. vs. NLRC, [G. R. No. 120009, September 13, 2001] submit that the subsequent hiring of casual employees to replace the dismissed regular employees on the ground of redundancy is an indication of bad faith. Petitioner company does not deny that they hired casual employees after the implementation of the redundancy program. Petitioner explains, however, that it has always hired casuals to augment the company’s manpower requirements in accordance with the demands of the industry. Petitioner further asserts that the number of casuals remained relatively constant after the implementation of the redundancy program, as shown by the graph appended as Annex “J” of its supplement to the motion for reconsideration before the NLRC. The Court finds the foregoing explanation sufficient to negate the allegations of bad faith by its former employees.

Elimination of undesirables, abusers and worst performers through redundancy, not an indication of bad faith.

In Dole Philippines, Inc. vs. NLRC, [G. R. No. 120009, Sept. 13, 2001], the private respondent-employees point to references in petitioner’s studies of the redundancy program to the elimination of “undesirables,” “abusers” and “worst performers” as another indicia of petitioner’s bad faith. The Supreme Court, however, ruled that it is not too keen on attaching such a sinister significance to these allusions. It may be argued that the elimination of the so-called “undesirables” was merely incidental to the redundancy program or that past transgressions could have been part of the criteria in determining who among the redundant employees is to be dismissed.

Characterization of service as redundant by employer, not subject to review; exception.

As a general rule, the characterization of the services of the employee who was terminated for redundancy is an exercise of business judgment of the employer. The wisdom or soundness of such characterization or decision is not subject to discretionary review by the Labor Arbiter or the NLRC and the Court of Appeals. The only exception is when there is a showing that the same was done in violation of law or attended with arbitrary and malicious action.

It is not enough, therefore, for a company to merely declare that it has become overmanned. It must produce adequate proof that such is the actual situation in order to justify the dismissal of the affected employees for redundancy.

In the 2001 case of Santos vs. CA, Pepsi-Cola Products Phils., Inc., [G. R. No. 141947, July 5, 2001], respondent Pepsi, based on the fact that its Metro Manila Sales Operations were not meeting its sales targets, and on the fact that new positions were subsequently created, wanted to restructure its organization in order to include more complex positions that would either absorb or render completely unnecessary the positions it had previously declared redundant. The soundness of this business judgment of Pepsi has been assailed by petitioners, arguing that it is more logical to implement new procedures in physical distribution, sales quotas, and other policies aimed at improving the performance of the division rather than to reduce the number of employees and create new positions. The Supreme Court, however, said that this argument cannot be accepted.

While it is true that management may not, under the guise of invoking its prerogative, ease out employees and defeat their constitutional right to security of tenure, the same must be respected if clearly undertaken in good faith and if no arbitrary or malicious action is shown.

Similarly, in Wiltshire File Co., Inc. vs. NLRC, [G.R. No. 82249, February 7, 1991, 193 SCRA 665], petitioner company effected some changes in its organization by abolishing the position of Sales Manager and simply adding the duties previously discharged by it to the duties of the General Manager to whom the Sales Manager used to report. In that case, it was held that the characterization of private respondent’s services as no longer necessary or sustainable and, therefore, properly terminable, was an exercise of business judgment on the part of petitioner company.

But the above rule was not applied in the 2001 case of University of the Immaculate Concepcion, vs. U.I.C. Teaching and Non-Teaching Personnel and Employees Union, [G. R. No. 144702, July 31, 2001]. Petitioners do not claim that the position of school electrician has become useless or redundant such that it had to be abolished. That there is need for an electrician is shown by the fact that his work is being performed by the student-scholar. There is no showing that there were two (2) positions for school electricians, and that in order to achieve a reduction in personnel, one position for electrician was abolished resulting in one position for school electrician and the consequent termination of the employment of the person occupying the position. Rather, the facts show that there was only one position for electrician which was occupied by respondent. When the time came that the student-trainee became capable of performing his functions, the latter’s employment was terminated and the student-trainee took the vacated position. Clearly there was here no abolition of position to achieve a reduction in the number of electricians employed by the UIC. In other words, the student-trainee merely replaced respondent as school electrician because petitioners found it to their advantage to let the work be done by the student for free.

Redundancy and retrenchment, distinguished.

Redundancy and retrenchment are not synonymous but distinct and separate grounds under Article 283. 

“Redundancy” exists when the services of an employee are in excess of what is required by an enterprise. “Retrenchment,” on the other hand, is one of the economic grounds for dismissing employees and is resorted to primarily to avoid or minimize business losses. “Redundancy Program,” while denominated as such, is more precisely termed “retrenchment” if it was primarily intended to prevent serious business losses. (Atlantic Gulf and Pacific Company of Manila, Inc. [AG & P], vs. NLRC, G. R. No. 127516, May 28, 1999).

“Last In, First Out” [LIFO] rule.

In the case of Maya Farms Employees Organization vs. NLRC, [G. R. No. 106256, December 28, 1994], involving termination due to redundancy, one of the issues raised was the validity of application of the “Last In, First Out [LIFO]” rule embodied in the CBA which states:

 “Section 2. LIFO RULE. - In all cases of lay-off or retrenchment resulting in termination of employment in the line of work, the Last-In-First-Out (LIFO) Rule must always be strictly observed.” (Section 2, Article III, CBA).

In holding that the employer did not violate said rule, the Supreme Court declared:

“It is not disputed that the LIFO rule applies to termination of employment in the line of work. Verily, what is contemplated in the LIFO rule is that when there are two or more employees occupying the same position in the company affected by the retrenchment program, the last one employed will necessarily be the first to go.

“Moreover, the reason why there was no violation of the LIFO rule was amply explained by public respondent in this wise:

‘xxx. The LIFO rule under the CBA is explicit. It is ordained that in cases of retrenchment resulting in termination of employment in line of work, the employee who was employed on the latest date must be the first one to go. The provision speaks of termination in the line of work. This contemplates a situation where employees occupying the same position in the company are to be affected by the retrenchment program. Since there ought to be a reduction in the number of personnel in such positions, the length of service of each employee is the determining factor, such that the employee who has a longer period of employment will be retained.’”

LIFO rule, exception.

In the same case of Maya Farms [supra], the petitioners contended that the LIFO rule was violated by management in the case of two (2) employees, the Asst. Superintendent for packing and Asst. Superintendent for meat processing, respectively. The union pointed out that the employee who was retained by management was employed on a much later date than the other employee, and both were Assistant Superintendents.

The Supreme Court affirmed the ruling of the NLRC which declared that despite the LIFO rule, the nature of work and experience were correctly taken into account by management, thus:

“We cannot sustain the union’s argument. It is indeed true that Roberta Cabrera was employed earlier (January 28, 1961) and [sic] Lydia Bandong (July 9, 1966). However, it is maintained that in the meat processing department, there were 3 Asst. Superintendents assigned as head of the 3 sections thereat. The reason advanced by the company in retaining Bandong was that as Asst. Superintendent for meat processing, she could ‘already take care of the operations of the other sections.’ The nature of work of each assistant superintendent as well as experience were taken into account by management. Such criteria was not shown to be whimsical nor capricious.” (Maya Farms Employees Organization vs. NLRC, G. R. No. 106256, Dec. 28, 1994).

LIFO or FILO rule, no basis in law.

No law mandates the so-called rule of “Last in, First out” [LIFO] or “First in, Last out” [FILO]. And the reason is simple enough. A host of relevant factors come into play in determining cost efficient measures and in choosing the employees who will be retained or separated to save the company from closing shop. In determining these issues, management has to enjoy a pre-eminent role. (Asian Alcohol Corporation vs. NLRC, supra).

LIFO rule, not controlling, as employer has prerogative to choose who to terminate.

In the 2000 case of De la Salle University vs. De la Salle University Employees Association, [G. R. No. 109002, April 12, 2000], the union proposed the use of the "last-in-first-out" method in case of lay-off, termination due to retrenchment and transfer of employees. The union relied on social justice and equity to support its proposition, and submitted that the University’s prerogative to select and/or choose the employees it will hire is limited, either by law or agreement, especially where the exercise of this prerogative might result in the loss of employment. The union further insists that its proposal is “…in keeping with the avowed State policy ‘(q) To ensure the participation of workers in decision and policy-making processes affecting their rights, duties and welfare’ (Art. 211, Labor Code, as amended).”

On the other hand, the University asserted its management prerogative and countered that “[w]hile it is recognized that this right of employees and workers to ‘participate in policy and decision-making processes affecting their rights and benefits as may be provided by law’ has been enshrined in the Constitution (Article III, [should be Article XIII], Section 3, par. 2), said participation, however, does not automatically entitle the union to dictate as to how an employer should choose the employees to be affected by a retrenchment program. The employer still retains the prerogative to determine the reasonable basis for selecting such employees.”

The Supreme Court ruled as follows:

“We agree with the voluntary arbitrator that as an exercise of management prerogative, the University has the right to adopt valid and equitable grounds as basis for terminating or transferring employees. As we ruled in the case of Autobus Workers' Union (AWU) and Ricardo Escanlar vs. National Labor Relations Commission, [291 SCRA 219 (1998)], ‘[a] valid exercise of management prerogative is one which, among others, covers: work assignment, working methods, time, supervision of workers, transfer of employees, work supervision, and the discipline, dismissal and recall of workers. Except as provided for, or limited by special laws, an employer is free to regulate, according to his own discretion and judgment, all aspects of employment.’” (emphasis supplied)

Hobson’s choice.

Hobson’s choice means no choice at all; a choice between accepting what is offered or having nothing at all. It refers to the practice of Tobias Hobson, an English stable-owner in the 17th century, of offering only the horse nearest the stable door.

This principle was applied in the 2004 case of Asufrin, Jr. vs. San Miguel Corporation, [G. R. No. 156658, March 10, 2004], where the employees, even if given the option to retire, be retrenched or dismissed, were made to understand that they had no choice but to leave the company. More bluntly stated, they were forced to swallow the bitter pill of dismissal but afforded a chance to sweeten their separation from employment. They either had to voluntarily retire, be retrenched with benefits or be dismissed without receiving any benefit at all. All that the employees were offered was a choice on the means or method of terminating their services but never as to the status of their employment. In short, they were never asked if they wanted to work for petitioner-company.

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Security of Tenure

Security of tenure

Security of tenure is the right not to be removed from one’s job without valid cause and valid procedure.

Constitutional Guaranty of Tenure

The policy of the state is to assure the right of workers to “security of tenure.” (Art. VIII, Sec 3, 1987 Constitution) The guaranty is an act of social justice.

When a person has no property, his job may possibly be his only possession or means of livelihood. Therefore, he should be protected against any arbitrary deprivation of his job.  (Rance vs NLRC, G.R. No. 68147, June 30, 1988)

What is the extent of the application of security of tenure?

Security of tenure does not exclusively apply to regular employment only. It also applies to probationary, seasonal, project and other forms of employment during the effectivity thereof.

Terminating a probationary employee needs a valid reason and proper procedure. So also a project or seasonal employee enjoys security of tenure even just for the duration of the limited period of employment.

Managerial employees also enjoy security of tenure. The principle of security of tenure applies not only to rank-and-file employees but also to managerial employees. (PLDT vs. Tolentino, G. R. No. 143171, Sept. 21, 2004).

While an employer its own interest to protect, and pursuant thereto, it may terminate a managerial employee for a just cause, such prerogative to dismiss or lay off an employee must be exercised without abuse of discretion, for what is at stake is not only the employee’s position but also his means of livelihood. The fact that one is a managerial employee does not by itself exclude him from the protection of the constitutional guarantee of security of tenure. (Fujitsu Computer Products Corporation of the Philippines vs. CA, G. R. No. 158232, April 8, 2005; Maglutac vs. NLRC, 189 SCRA 767 [1990]).

● An in-house legal counsel may be an employee – in fact, a regular employee. He is entitled to security of tenure. The relationship is that of an employer-employee, and not that of client-lawyer. To terminate the relationship, the applicable law is the Labor Code, not the Rules of Court.

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Termination by Employee with Just Cause

ARTICLE 285. Termination by employee. -

(a) An employee may terminate without just cause the employee-employer relationship by serving a written notice on the employer at least one (1) month in advance. The employer upon whom no such notice was served may hold the employee liable for damages.

(b) An employee may put an end to the relationship without serving any notice on the employer for any of the following just causes:

1.  Serious insult by the employer or his representative on the honor and person of the employee;

2.  Inhuman and unbearable treatment accorded the employee by the employer or his representative;

3.  Commission of a crime or offense by the employer or his representative against the person of the employee or any of the immediate members of his family; and

4.  Other causes analogous to any of the foregoing.

What are the two kinds of termination by an employee?

      1. termination by employee without just cause (voluntary resignation)

      2. termination by employee with just cause

What are the just causes for termination of employment by employee?

An employee may resign without serving any notice on the employer for any of the following just causes:

1. Serious insult by the employer or his representative on the honor and person of the employee;
2. Inhuman and unbearable treatment accorded the employee by the employer or his representative;
3. Commission of a crime or offense by the employer or his representative against the person of the employee or any of the immediate members of his family; and
4. Other causes analogous to any of the foregoing.

What are the requisites for serious insult as a ground to terminate employment by employee?

In order to be considered a just cause to warrant the valid termination of employment by the employee without notice, the following requisites must concur:

1. The insult must be serious in character;

2. It must be committed by the employer or his representative; and

3. It must injure the honor and person of the employee.

What are the requisites for serious inhumane and unbearable treatment as a ground to terminate employment by employee?

This ground may be invoked if the following requisites concur:

1. The treatment is inhumane and unbearable in nature; and

2. It is perpetrated by the employer or his representative.

What are the requisites for commission of crime as a ground to terminate employment by employee?

The requisites for this ground are as follows:

1. A crime or offense is committed;

2. It was committed by the employer or his representative; and

3. It was perpetrated against the person of the employee or any of the immediate members of his family.

What are other analogous causes that may be invoked as a ground to terminate employment by employee?

Other analogous causes that may be cited are: constructive dismissal or forced resignation.

What is the concept of constructive dismissal?

Constructive dismissal is an employer’s act amounting to dismissal but made to appear as if it were not – a dismissal in disguise. In most cases of constructive dismissal, the employee is allowed to continue to work, but is simply reassigned, or demoted, or his pay diminished without a valid reason to do so.

Constructive dismissal does not always involve forthright dismissal or diminution in rank, compensation, benefit and privileges. There may be constructive dismissal if an act of clear discrimination, insensibility or disdain by an employer becomes so unbearable on the part or the employee that it could foreclose any choice by him except to forego his continued employment. (Hyatt Taxi Services case, G.R. No. 143204, June 26, 2001.)

Constructive dismissal is an involuntary resignation resulting in cessation of work resorted to when continued employment becomes impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to an employee. (Escobin v. NLRC, GR No. 118159, April 15, 1998)

Cases:

1. Diminution of pay. A diminution of pay is prejudicial to the employee and amounts to constructive dismissal. (Francisco vs. NLRC)

2. Demotion of rank. In Globe Telecom, Inc. v. Florendo-Flores, it was held that where an employee ceases to work due to a demotion of rank or a diminution of pay, an unreasonable situation arises which creates an adverse working environment rendering it impossible for such employee to continue working for her employer. Hence, her severance from the company was not of her own making and therefore amounted to an illegal termination of employment. (Cited in Francisco vs. NLRC, G.R. No. 170087, August 21, 2006.)

3.   Reassignment involving demotion of rank or a diminution of pay. One does not need to stretch his imagination to distinguish the work of a security guard and that of a common agricultural labourer in a sugar plantation. Likewise, there was a diminution of salary, for security guard is paid on a monthly basis while a labourer in a plantation is paid either on a daily or piece-work basis. Laborers do not work year round but only when needed and on off-season months they are not required to work at all. (Ledesma vs NLRC, G.R. No. 110930, July 13, 1995)

4. Compulsion to make unnecessary choice. The president claimed that Majaducon stopped teaching on his own volition supposedly because when he discovered that Majaducon was appearing as collaborating lawyer in a case against the former mayor, Majaducon was reminded that the school owed favors to the city government with whom the school had to maintain cordial relations. Eventually, Majaducon was asked to choose whether to continue as a faculty member or to withdraw as a lawyer against the mayor. Such compulsion to make unnecessary choice placed undue and unjustified pressure on the employee who otherwise would not have thought of leaving his employment as a teacher. There was no showing whatsoever that Majaducon’s work as counsel interfered with his duties as a teacher. His cessation from employment could not, therefore, be considered as voluntary on his part and was in the nature of contrivance to effect a dismissal without cause. (RMCFU v NLRC, G.R. Nos. 59012-13, October 12, 1989)

5. Transfer of employee amounting to constructive dismissal. A transfer amounts to constructive dismissal when the transfer is unreasonable, unlikely, inconvenient, impossible, or prejudicial to the employee. (Phil. Industrial Security Agency Corp. vs. Aguinaldo, G.R. No. 149974, June 15, 2005.)

Transfer of employee NOT amounting to constructive dismissal. Transfer of an employee from one area of operation to another is a management prerogative and is not constitutive of constructive dismissal, when the transfer is based on sound business judgment, unattended by a demotion in rank or a diminution of pay or bad faith. (Tan vs. NLRC, G.R. No. 128290, November 24, 1998.)

What are the distinctions between constructive dismissal and forced resignation?

Both forced resignation and constructive dismissal consist in the act of quitting because continued employment is rendered impossible, unreasonable or unlikely as in the case of an offer involving a demotion in rank and a diminution in pay. However, in forced resignation, as distinguished from constructive dismissal, the employee is made to do or perform an involuntary act - submission or tender of resignation - meant to validate the action of management in inveigling, luring or influencing or practically forcing the employee to effectuate the termination of employment, instead of doing the termination himself.

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Disease as Ground for Termination

Article 284. 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 the health of his co-employees: Provided, That he is paid 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.

What are the requisites for the ground of disease?

The following requisites must be complied with before termination of employment due to disease may be justified:

1. The employee is suffering from a disease;

2. His continued employment is either:

a. prohibited by law; or

b. prejudicial to his health; or

c. prejudicial to the health of his co-employees;

3. There is a certification by a competent public health authority that the disease is of such nature or at such stage that it cannot be cured within a period of six (6) months even with proper medical treatment; (Sec. 8, Rule I, Book VI, of the Omnibus Rules Implementing the Labor Code)

4. Notice of termination based on this ground should be served to the employee; and

5. Separation pay shall be paid to him in the amount 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.

Is a medical certificate issued by company doctor acceptable?

A medical certificate issued by a company’s own physician is not an acceptable certificate for purposes of terminating an employment based on Article 284, it having been issued not by a “competent public health authority,” the person referred to in the law. (Cebu Royal Plant [San Miguel Corporation] vs. Hon. Deputy Minister of Labor, G. R. No. 58639, Aug. 12, 1987, 153 SCRA 38 [1987]).

What is meant by “competent public health authority”?

“Competent public health authority” refers to a government doctor whose medical specialization pertains to the disease being suffered by the employee. For instance, an employee who is sick of tuberculosis should consult a government-employed pulmonologist who is competent to make an opinion thereon. If the employee has cardiac symptoms, the competent physician in this case would be a cardiologist.

Medical certificate, an indispensable requisite.

In the absence of the required certification by a competent public health authority, the Supreme Court has consistently ruled against the validity of the employee’s dismissal. (Cruz vs. NLRC, G. R. No. 116384, Feb. 7, 2000).

In the 2003 case of Sy vs. CA, [G. R. No. 142293, February 27, 2003], the High Court reiterated its earlier ruling in Triple Eight Integrated Services, Inc. vs. NLRC, [299 SCRA 608, 614 1998], that the requirement for a medical certificate under Article 284 cannot be dispensed with; otherwise, it would sanction the unilateral and arbitrary determination by the employer of the gravity or extent of the employee’s illness and thus defeat the public policy in the protection of labor.

In the 2001 case of Cathay Pacific Airways, Ltd. vs. NLRC, [G. R. No. 141702-03, August 2, 2001], the dismissal of the employee based on a finding that she was suffering from asthma was declared illegal because of the absence of a certification by a competent public health authority that the disease is of such nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical treatment, a requirement under Section 8, Rule I, Book VI, of the Rules to Implement the Labor Code. Here, the employee was dismissed based only on the recommendation of its company doctors who concluded that she was afflicted with asthma. It did not likewise show proof that the employee’s asthma could not be cured in six (6) months even with proper medical treatment. On the contrary, when she returned to the company clinic five (5) days after her initial examination, the company doctor diagnosed her condition to have vastly improved.

In General Textile, Inc. vs. NLRC, [G. R. No. 102969, April 4, 1995], the termination of the employee due to PTB sickness was declared not justified in the absence of medical certificate issued by a competent public health authority that the disease is of such nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical treatment.

Medical certificate as evidence of illness

Medical certificates presented by an employee to prove (a) his illness, the nature and the duration of the procedures performed by the dentist on him; and (b) the period during which he was incapacitated to work are admissible in evidence and have probative weight even if not notarized. It is sufficient that the physician and the dentist who examined the employee, aside from their respective letterheads, had written their respective license numbers below their names and signatures, hence, they bear all the earmarks of regularity in their issuance and are entitled to full probative weight. Common sense dictates that an ordinary worker does not need to have these medical certificates to be notarized for proper presentation to his company to prove his ailment. It has been said that verification of documents is not necessary in order that the said documents could be considered as substantial evidence. (Union Motor Corporation vs. NLRC, G. R. No. 159738, Dec. 9, 2004)

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Medical certificate issued by Labor Attache and Ministry of Public Health of Kuwait, not sufficient.

In the 2001 case of ATCI Overseas Corporation vs. CA, [G. R. No. 143949, August 9, 2001], involving two (2) overseas Filipino workers who were recruited by the Ministry of Public Health of Kuwait to work as dental hygienists in that country for a period of 2 years but who were terminated after working for only two months based on alleged tuberculosis and heart disease, the Supreme Court, in declaring the termination as illegal, ruled that there is nothing in the records to show that petitioner complied with Sec. 8, Rule I, Book VI of the Rules to Implement the Labor Code before private respondent-doctors were dismissed. In the proceedings before the POEA, petitioner did not present any certification whatsoever. It was only when the case was appealed to the NLRC that petitioner belatedly introduced in evidence a letter from the Ministry stating that private respondents were found to be positive for tuberculosis and heart disease. In addition, petitioner presented a certification issued by the Philippine labor attache attesting to the fact that private respondents were subjected to a medical examination after their arrival in Kuwait and were found to be unfit for employment due to lung defects. The letter from the Ministry and the certification by the Philippine labor attache fall short of the demands of the Omnibus Rules. First of all, there is no finding that the disease allegedly afflicting private respondents is of such nature or at such a stage that it cannot be cured within a period of six (6) months with proper medical treatment. Secondly, even assuming that the letter from the Ministry complied with the Omnibus Rules, petitioner has not proven that the same was presented to private respondents prior to their termination. Rather, the letter appears to have been an afterthought, a belated, yet grossly unsuccessful attempt at compliance with Philippine laws, produced by petitioner after an adverse judgment was rendered against it by the POEA. Clearly, Sec. 8, Rule I, Book VI, of the Omnibus Rules was not complied with, thus making private respondents’ dismissal illegal.

Who should procure the certificate?

It devolves upon the employer the obligation to obtain a certificate from a competent public authority that the employee’s disease is at such stage or of such nature that it cannot be cured within six (6) months even with prior medical treatment. It is the employer, and not the employee, who has the burden of proof to justify that the termination was supported by said certificate. Clearly, it is only where there is such prior certification that the employee could be validly terminated from his job. (Tan vs. NLRC, G. R. No. 116807, April 14, 1997, 271 SCRA 216; See also Phil. Employ Services and Resources, Inc. vs. Paramio, G. R. No. 144786, April 15, 2004; Sy vs. CA, supra).

Who has the burden of proving the existence of a medical certificate?

The burden of proving the existence of such a medical certificate required under the law is upon the employer, not the employee. (ATCI Overseas Corporation vs. CA, G. R. No. 143949, Aug. 9, 2001; Tan vs. NLRC, 271 SCRA 216 [1997]; Cebu Royal Plant vs. Deputy Minister of Labor, supra).

Employee dismissed without the medical certificate is entitled to moral and exemplary damages.

In the same 2001 case of Cathay Pacific Airways [supra], because the employer summarily dismissed the employee from the service based only on the recommendation of its medical officers, in effect, failing to observe the provision of the Labor Code which requires a certification by a competent public health authority, it was held that the award of moral and exemplary damages to the employee should be affirmed. Notably, the decision to dismiss the employee was reached after a single examination only. The employer’s medical officers recommended the employee’s dismissal even after having diagnosed her condition to have vastly improved. It did not make even a token offer for the employee to take a leave of absence as what it provided in its Contract of Service. The employer is presumed to know the law and the stipulation in its Contract of Service with the employee.

Notice to employee and the DOLE regarding termination due to disease, necessary.

Although Article 284 does not require the service of notice to the employee, however, it is necessary under the following circumstances, if only to document the procedure taken by the employer prior to terminating the employment:

1. Notice to the sick employee to submit himself for medical examination by a competent public health authority to determine not only his fitness for work but, more importantly, for the purpose of having his sickness certified that it is of such nature or at such a stage that it can be cured within a period of six (6) months with proper medical treatment; and

2. Notice of termination in case the certification of the competent public health authority is to the effect that the sickness is of such nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical treatment.

The second notice above should be given not only to the employee but also to the Department of Labor and Employment, in accordance with the ruling in the case of Agabon vs. NLRC, [G.R. No. 158693, November 17, 2004], where the Supreme Court opined that if the dismissal is based on authorized causes under Articles 283 and 284, the employer must give the employee and the Department of Labor and Employment written notices thirty (30) days prior to the effectivity of his separation.

Is hearing required in case of termination due to disease?

Being an authorized cause, as distinguished from just cause, hearing is not necessary to be conducted by the employer prior to the termination of employment of the sick employee.

Separation pay in case of lawful dismissal based on disease.

The separation pay of an employee terminated on the ground of disease is equivalent to at least one (1) month salary or to one-half (½) 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. (Article 284, Labor Code; Baby Bus, Inc. vs. Minister of Labor, G. R. No. 54223, Feb. 26, 1988).

Disability distinguished from Disease

Disability should not be confused with disease. Disability itself, even if permanent, is not a ground for termination. The Magna Carta for Disabled Persons prohibits the termination of a disabled employee based on disability alone. This constitutes act of discrimination, a criminal offense for which fine and/or imprisonment may be imposed. (Magna Carta for Disabled Persons)

Right to reinstatement if disease is curable with six months

If the disease or ailment can be cured within six months, the employer shall not terminate the employee but shall ask the employee to take a leave of absence. The employee is entitled to be reinstated to his former position immediately upon the restoration of his normal health. (Sec. 8, Rule I, Book VI, of the Omnibus Rules Implementing the Labor Code)

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