Authorized Cause Procedure
1. Concept
Authorized cause procedure – refers to the steps or process of implementing due process in relation to separation from employment.
2. Procedure
a. In General
The following are the steps:
Step 1: Issuance of 30-day advance notice to DOLE
Step 2: Issuance of 30-day advance notice to employee
Step 3: Payment of Separation Pay (subject to an exception). (DOLE Department Order No. 147, Series of 2015, Sections 5.3 and 5.5)
1) Step 1: 30-day advance notice to DOLE
The employer is required to issue a 30-day advance notice to the DOLE Regional Office which has jurisdiction over the establishment. (DOLE Department Order No. 147, Series of 2015, Sections 5.3)
This is usually accomplished through the RKS Form 5.
This advanced notice is designed to give the concerned office an opportunity to confirm/verify the existence of authorized causes by means of either calling for a hearing/conference or an inspection.
2) Step 2: 30-day advance notice to employees
The employer is required to issue a 30-day advance notice to the employee informing the latter of the circumstances in relation to his/her being separated from employment due to an authorized cause. (DOLE Department Order No. 147, Series of 2015, Sections 5.3)
The advanced notice is designed to give the employee the opportunity to start looking for his/her next gainful employment. This is without prejudice to him/her completing the 30-day period for transition and turn-over.
The purpose for requiring a 30-day written notice before an employee is laid off is not to afford him an opportunity to be heard on any charge against him, for there is none. The purpose rather is to give him time to prepare for the eventual loss of his job and the DOLE an opportunity to determine whether economic causes do exist justifying the termination of his employment. (Serrano v. NLRC, G.R. No. 117040, 27 January 2000)
a) Purpose of notice
This procedure enables an employee to contest the reality or good faith character of the asserted ground for the termination of his services before the DOLE. (Magnolia Products Corporation v. NLRC, G.R. No. 114952, January 29, 1996, Per Francisco, J.)
3) Step 3: Separation Pay
The affected employee is entitled to separation pay. This may be given together with his/her final pay or within a reasonable period of time, subject to completion of clearance, turn-over, and other exit documents or procedures. (DOLE Department Order No. 147, Series of 2015, Section 5.5)
The separation pay varies depending on the authorized cause.
Related: Separation Pay
b. Specific to Disease
The Labor Code and its IRR are silent on the procedural due process required in terminations due to disease. Despite the seeming gap in the law, Section 2, Rule 1, Book VI of the IRR expressly states that the employee should be afforded procedural due process in all cases of dismissals. (Deoferio v. Intel Technology Philippines, Inc., G.R. No. 202996, 18 June 2014, Per Brion, J.)
In Sy v. Court of Appeals and Manly Express, Inc. v. Payong, Jr., promulgated in 2003 and 2005, respectively, the Court finally pronounced the rule that the employer must furnish the employee two written notices in terminations due to disease, namely:
1) The notice to apprise the employee of the ground for which his dismissal is sought; and
2) The notice informing the employee of his dismissal, to be issued after the employee has been given reasonable opportunity to answer and to be heard on his defense. (Sy v. Court of Appeals, G.R. No. 142293, February 27, 2003, and Manly Express, Inc. v. Payong, Jr., G.R. No. 167462, October 25, 2005, both cited in Deoferio v. Intel Technology Philippines, Inc. [2014])
Related: Authorized Causes
1) Step 1: Notice to apprise the employee
Sy v. Court of Appeals, G.R. No. 142293, February 27, 2003, Per Quisumbing, J.:
⦁ Sometime in 1958, [the Complainant] started working as a truck helper for [the Company]’ family-owned trucking business named Vicente Sy Trucking. In 1965, he became a truck driver of the same family business, renamed T. Paulino Trucking Service, later 6B’s Trucking Corporation in 1985, and thereafter known as SBT Trucking Corporation since 1994. Throughout all these changes in names and for 36 years, [the Complainant] continuously served the trucking business of [the Company].
⦁ In April 1994, [the Complainant] was already 59 years old. He had been incurring absences as he was suffering from various ailments. Particularly causing him pain was his left thigh, which greatly affected the performance of his task as a driver. He inquired about his medical and retirement benefits with the Social Security System (SSS) on April 25, 1994, but discovered that his premium payments had not been remitted by his employer.
⦁ [The Complainant] had filed a week-long leave sometime in May 1994. On May 27th, he was medically examined and treated for EOR, presleyopia, hypertensive retinopathy G II…, HPM, UTI, Osteoarthritis…, and heart enlargement…. On said grounds, [B.] Paulino of the SBT Trucking Service management told him to file a formal request for extension of his leave. At the end of his week-long absence, [the Complainant] applied for extension of his leave for the whole month of June, 1994. It was at this time when [the Company] allegedly threatened to terminate his employment should he refuse to go back to work.
⦁ At this point, [the Complainant] found himself in a dilemma. He was facing dismissal if he refused to work, But he could not retire on pension because [the Company] never paid his correct SSS premiums. The fact remained he could no longer work as his left thigh hurt abominably. [The Company] ended his dilemma. They carried out their threat and dismissed him from work, effective June 30, 1994. He ended up sick, jobless and penniless.
⦁ [SC Resolution] Article 284 of the Labor Code authorizes an employer to terminate an employee on the ground of disease, viz:
Art. 284. Disease as a 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 prejudicial to his health as well as the health of his co-employees: xxx
⦁ However, in order to validly terminate employment on this ground, Book VI, Rule I, Section 8 of the Omnibus Implementing Rules of the Labor Code requires:
Sec. 8. Disease as a ground for dismissal- Where the employee suffers from a disease and his continued employment is prohibited by law or prejudicial to his health or to the health of his co-employees, the employer shall not terminate his employment unless there is a certification by 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. If the disease or ailment can be cured within the period, the employer shall not terminate the employee but shall ask the employee to take a leave. The employer shall reinstate such employee to his former position immediately upon the restoration of his normal health…
⦁ As this Court stated in Triple Eight integrated Services, Inc. vs. NLRC, the requirement for a medical certificate under Article 284 of the Labor Code 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 case at bar, the employer clearly did not comply with the medical certificate requirement before [the Complainant]’s dismissal was effected. In the same case of Sevillana vs. I.T. (International) Corp., we ruled:
Since the burden of proving the validity of the dismissal of the employee rests on the employer, the latter should likewise bear the burden of showing that the requisites for a valid dismissal due to a disease have been complied with. In the absence of the required certification by a competent public health authority, this Court has ruled against the validity of the employee’s dismissal. It is therefore incumbent upon the [the Complainant]s to prove by the quantum of evidence required by law that petitioner was not dismissed, or if dismissed, that the dismissal was not illegal; otherwise, the dismissal would be unjustified. This Court will not sanction a dismissal premised on mere conjectures and suspicions, the evidence must be substantial and not arbitrary and must be founded on clearly established facts sufficient to warrant his separation from work.32
⦁ In addition, we must likewise determine if the procedural aspect of due process had been complied with by the employer.
From the records, it clearly appears that procedural due process was not observed in the separation of [the Complainant] by the management of the trucking company. The employer is required to furnish an employee with two written notices before the latter is dismissed: (1) the notice to apprise the employee of the particular acts or omissions for which his dismissal is sought, which is the equivalent of a charge; and (2) the notice informing the employee of his dismissal, to be issued after the employee has been given reasonable opportunity to answer and to be heard on his defense.33 These, the [the Company] failed to do, even only for record purposes. What management did was to threaten the employee with dismissal, then actually implement the threat when the occasion presented itself because of [the Complainant]’s painful left thigh.
⦁ All told, both the substantive and procedural aspects of due process were violated. Clearly, therefore, [the Complainant]’s dismissal is tainted with invalidity.
2) Step 2: Termination Notice
Manly Express, Inc. v. Payong, Jr., G.R. No. 167462, October 25, 2005, Per Ynares-Santiago, J.:
⦁ [Complainant] [the Complainant], Jr. [was a dispatcher]. Sometime in December 1999, he was complaining of eyesight problems. Brought to an eye specialist by [the Company], he was diagnosed to be suffering from eye cataract. Despite having the cataract removed in January of 2000, he was disallowed to return to his work by [the Company]. Much later, on August 1, 2000, he was given a letter of termination of employment.
⦁ The full text of the termination letter reads:
01 August 2000
Dear Mr. [R.] [the Complainant] Jr.,
Our company has been severely affected by the prevailing poor business climate. There is a reduced demand for our bus services – both for shuttle and city operations – and this has substantially reduced our income. At the same time, our operating costs have increased, leaving us with a difficult cash position.
In order to survive, the company has decided to check on the performance of all its employees to determine productivity. Unfortunately, it has been noticed that due to your partial blindness, you can no longer work in the position that you are presently employed for.
In view of the above and the fact that despite the proper medical treatment for more than six months now, the company is constrained to terminate your employment effective immediately. In line with this, you are given a grace period of 15 days to remove all your personal belongings from the company premises counted from this date.
In behalf of the company, I would like to express my gratitude for the services that you have rendered our company. Kindly see the undersigned to coordinate the payment of your financial assistance and other benefits.
Thank you.
(Sgd.)
[C.M.] Ching
Operations Manager
⦁ [SC Resolution] The rule is explicit. For a dismissal on the ground of disease to be considered valid, two requisites must concur: (a) the employee suffers from a disease which cannot be cured within six months and his continued employment is prohibited by law or prejudicial to his health or to the health of his co-employees, and (b) a certification to that effect must be issued by a competent public health authority.
⦁ In the present case, there was no proof that [the Complainant]’s continued employment was prohibited by law or prejudicial to his health and that of his co-employees. No medical certificate by a competent public health authority was submitted that [the Complainant] was suffering from a disease that cannot be cured within a period of six months. In the absence of such certification, [the Complainant]’s dismissal must necessarily be declared illegal.
⦁ [The Company]’s contention that the requirement for a medical certification does not apply in the instant case since it was [the Complainant] who refused to undergo medical treatment and his resignation from work was of his own free will, is untenable. [the Company] has not established [the Complainant]’s refusal to undergo a medical examination or that he resigned from work on his own accord. On the contrary, the termination letter dated August 1, 2000 showed that it was [the Company] who initiated the termination in view of the prevailing poor business climate and [the Complainant]’s partial blindness. Moreover, evidence shows that even before the termination letter was served on [the Complainant], he was no longer allowed to work which shows [the Company]’s intent to dismiss him from work.
⦁ The burden of proving the validity of the dismissal rests on the employer. As such, the employer must prove that the requisites for a valid dismissal due to a disease have been complied with. In the absence of the required certification by a competent public health authority, this Court has ruled against the validity of the employee’s dismissal.
⦁ We also note that [the Company] failed to comply with the procedure for terminating an employee. In dismissing an employee, the employer has the burden of proving that the employee has been served two notices: (1) one to apprise him of the particular acts or omissions for which his dismissal is sought, and (2) the other to inform him of his employer’s decision to dismiss him. The first notice must state that dismissal is sought for the act or omission charged against the employee, otherwise, the notice cannot be considered sufficient compliance with the rules.
Deoferio v. Intel Technology Philippines, Inc., G.R. No. 202996, 18 June 2014, Per Brion, J.:
⦁ On February 1, 1996, [the Company]… employed [the Complainant] as a product quality and reliability engineer with a monthly salary of ₱9,000.00. In July2001, [the Company] assigned him to the United States as a validation engineer for an agreed period of two years and with a monthly salary of US$3,000.00. On January 27, 2002, [the Complainant] was repatriated to the Philippines after being confined at Providence St. Vincent Medical Center for major depression with psychosis. In the Philippines, he worked as a product engineer with a monthly salary of ₱23,000.00.
⦁ [The Complainant] underwent a series of medical and psychiatric treatment at [the Company]’s expense after his confinement in the United States. In 2002, Dr. [E.] Rondain of Makati Medical Center diagnosed him to be suffering from mood disorder, major depression, and auditory hallucination. He was also referred to Dr. [N.] Balderrama, [the Company]’s forensic psychologist, and to a certain Dr. [C.] Leynes who both confirmed his mental condition. On August 8, 2005, Dr. [P.] Lee, a consultant psychiatrist of the Philippine General Hospital, concluded that [the Complainant] was suffering from schizophrenia. After several consultations, Dr. Lee issued a psychiatric report dated January 17,2006 concluding and stating that [the Complainant]’s psychotic symptoms are not curable within a period of six months and “will negatively affect his work and social relation with his co-worker[s].”Pursuant to these findings, [the Company] issued [the Complainant] a notice of termination on March 10, 2006.
⦁ [SC Resolution] [The Company] had an authorized cause to dismiss [the Complainant] from employment
⦁ Concomitant to the employer’s right to freely select and engage an employee is the employer’s right to discharge the employee for just and/or authorized causes. To validly effect terminations of employment, the discharge must be for a valid cause in the manner required by law. The purpose of these two-pronged qualifications is to protect the working class from the employer’s arbitrary and unreasonable exercise of its right to dismiss. Thus, in termination cases, the law places the burden of proof upon the employer to show by substantial evidence that the termination was for a lawful cause and in the manner required by law.
⦁ In concrete terms, these qualifications embody the due process requirement in labor cases – substantive and procedural due process. Substantive due process means that the termination must be based on just and/or authorized causes of dismissal. On the other hand, procedural due process requires the employer to effect the dismissal in a manner specified in the Labor Code and its IRR.
⦁ The present case involves termination due to disease – an authorized cause for dismissal under Article 284 of the Labor Code. As substantive requirements, the Labor Code and its IRR33 require the presence of the following elements:
(1) An employer has been found to be suffering from any disease.
(2) His continued employment is prohibited by law or prejudicial to his health, as well as to the health of his co-employees.
(3) 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. With respect to the first and second elements, the Court liberally construed the phrase “prejudicial to his health as well as to the health of his co-employees” to mean “prejudicial to his health or to the health of his co-employees.” We did not limit the scope of this phrase to contagious diseases for the reason that this phrase is preceded by the phrase “any disease” under Article 284 of the Labor Code, to wit:
Art. 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 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. [underscores, italics and emphases ours]
⦁ Consistent with this construction, we applied this provision in resolving illegal dismissal cases due to non-contagious diseases such as stroke, heart attack, osteoarthritis, and eye cataract, among others. In Baby Bus, Inc. v. Minister of Labor, we upheld the labor arbitration’s finding that [J.] Mangalino’s continued employment – after he suffered several strokes – would be prejudicial to his health. In Duterte v. Kingswood Trading Co., Inc., we recognized the applicability of Article 284 of the Labor Code to heart attacks. In that case, we held that the employer- company’s failure to present a certification from a public health authority rendered [R.] Duterte’s termination due to a heart attack illegal. We also applied this provision in Sy v. Court of Appeals to determine whether [J.] Sahot was illegally dismissed dueto various ailments such as presleyopia, hypertensive retinopathy, osteoarthritis, and heart enlargement, among others. In Manly Express, Inc. v. Payong, Jr., we ruled that the employer-company’s non-presentment of a certification from a public health authority with respect to [R.] Payong Jr.’s eye cataract was fatal to its defense.
⦁ The third element substantiates the contention that the employee has indeed been suffering from a disease that: (1) is prejudicial to his health as well as to the health of his co-employees; and (2) cannot be cured within a period of six months even with proper medical treatment. Without the medical certificate, there can be no authorized cause for the employee’s dismissal. The absence of this element thus renders the dismissal void and illegal.
⦁ Simply stated, this requirement is not merely a procedural requirement, but a substantive one. The certification from a competent public health authority is precisely the substantial evidence required by law to prove the existence of the disease itself, its non-curability within a period of six months even with proper medical treatment, and the prejudice that it would cause to the health of the sick employee and to those of his co-employees.
⦁ In the current case, we agree with the CA that Dr. Lee’s psychiatric report substantially proves that [the Complainant] was suffering from schizophrenia, that his disease was not curable within a period of six months even with proper medical treatment, and that his continued employment would be prejudicial to his mental health. This conclusion is further substantiated by the unusual and bizarre acts that [the Complainant] committed while at [the Company]’s employ.
⦁ The Labor Code and its IRR are silent on the procedural due process required in terminations due to disease. Despite the seeming gap in the law, Section 2, Rule 1, Book VI of the IRR expressly states that the employee should be afforded procedural due process in all cases of dismissals.
In Sy v. Court of Appeals and Manly Express, Inc. v. Payong, Jr., promulgated in 2003 and 2005, respectively, the Court finally pronounced the rule that the employer must furnish the employee two written notices in terminations due to disease, namely: (1) the notice to apprise the employee of the ground for which his dismissal is sought; and (2) the notice informing the employee of his dismissal, to be issued after the employee has been given reasonable opportunity to answer and to be heard on his defense. These rulings reinforce the State policy of protecting the workers from being terminated without cause and without affording them the opportunity to explain their side of the controversy.
From these perspectives, the CA erred in not finding that the NLRC gravely abused its discretion when it ruled that the twin-notice requirement does not apply to Article 284 of the Labor Code. This conclusion is totally devoid of any legal basis; its ruling is wholly unsupported by law and jurisprudence. In other words, the NLRC’s unprecedented, whimsical and arbitrary ruling, which the CA erroneously affirmed, amounted to a jurisdictional error.
3. Proof of service
All notices mentioned herein should be properly documented on how it was served.
The notices should be served personally, whenever practicable. This act of service may be proven through a receiving copy or an affidavit of service, in case the employee unjustifiably refuses to sign a receiving copy.
If personal service is not available such as the employee being absent, the notice may be sent to his last known address through mail. This act of service may be proven through the official receipt of the mailing or an affidavit of service on the mailing.
Related: Proof of Service
4. No right to be heard
There is no right to be heard in dismissal for an authorized cause. In terminating the employees’ services due to the installment of labor-saving devices, redundancy, retrenchment to prevent losses, or closure of business, the employer has no obligation to provide the employees the opportunity to disprove the business and financial reasons for termination. (Philippine Airlines, Inc. v. Dawal, G.R. No. 173921, February 24, 2016, Per Leonen, J.)
a) Contest before labor courts
This is not to say that the employee may not contest the reality or good faith character of the retrenchment or redundancy asserted as grounds for termination of services. The appropriate forum for such controversion would, however, be the Department of Labor and Employment and not an investigation or hearing to be held by the employer itself. It is precisely for this reason that an employer seeking to terminate services of an employee or employees because of “closure of establishment and reduction of personnel”, is legally required to give a written notice not only to the employee but also to the Department of Labor and Employment at least one month before effectivity date of the termination. (Wiltshire File Co, Inc. v. NLRC, G.R. No. 82249, February 17, 1991, Per Feliciano, J.)
Thus, the employee has the right to contest or challenge the validity of an authorized cause before the appropriate and competent labor courts, such as the Department of Labor and Employment (DOLE), the National Labor Relations Commission (NLRC), or the National Conciliation and Mediation Board (NCMB), as the case may be.
5. Effects for non-compliance of procedure
If there is an authorized cause but procedural due process is not observed, the following are the effects:
1) The defective/ineffectual termination will be upheld;
2) The employer will be held liable for nominal damages; and
3) The employer will be required to pay separation pay if the same has not yet been paid.
a. Defective/ineffectual termination upheld
Jurisprudence characterizes the termination as a “defective termination”, and not “illegal dismissal”. Thus, while there is no compliance with the authorized cause procedure but there is a valid authorized cause for installation of labor-saving device, there is no illegal dismissal. The proper terminology is defective termination. (See Magnolia Dairy Products Corporation v. NLRC [1996])
If an employee is laid off for any of the causes in Arts. 283-284, i.e., installation of a labor-saving device, but the employer did not give him and the DOLE a 30-day written notice of termination in advance, then the termination of his employment should be considered ineffectual and he should be paid backwages. However, the termination of his employment should not be considered void but he should simply be paid separation pay as provided in Art. 283 in addition to backwages. (Serrano v. NLRC [2000], supra.)
With respect to Art. 283 of the Labor Code, the employer’s failure to comply with the notice requirement does not constitute a denial of due process but a mere failure to observe a procedure for the termination of employment which makes the termination of employment merely ineffectual. (Ibid.)
1) No illegal dismissal
To stress, despite the employer’s failure to comply with the one-month notice to the DOLE prior to respondent’s termination, it is only a procedural infirmity which does not render the retrenchment illegal. (International Management Services v. Logarta, supra.)
b. Nominal damages
Failure to comply strictly with the requirements-of procedural due process for dismissing an employee will not render such dismissal ineffectual if it is based on a just or an authorized cause. The employer, however, must be held liable for nominal damages for non-compliance with the requirements of procedural due process. (Santos v. Integrated Pharmaceutical, Inc., G.R. No. 204620, 11 July 2016)
Nominal damages are awarded to the employee in recognition of his/her right to procedural due process which was violated by the employer.
Magnolia Dairy Products Corporation v. NLRC, G.R. No. 114952, January 29, 1996, Per Francisco, J.:
• The failure of [the employer] to serve the written notice to private respondent and to the DOLE, however, does not ipso facto make private respondent’s termination from service illegal so as to entitle her to reinstatement and payment of backwages. If at all, her termination from service is merely defective because it was not tainted with bad faith or arbitrariness and was due to a valid cause.
• The well settled rule is that the employer shall be sanctioned for non-compliance with the requirements of, or for failure to observe due process in terminating from service its employee.
Related: Nominal Damages
c. Separation pay
If in proceedings for reinstatement under Art. 283, it is shown that the termination of employment was due to an authorized cause, then the employee concerned should not be ordered reinstated even though there is failure to comply with the 30-day notice requirement. Instead, he must be granted separation pay in accordance with Art. 283. (Serrano v. NLRC, G.R. No. 117040, 27 January 2000)
When an employer declares redundancy, Article 298 of the Labor Code requires that the employer provides a separation pay equivalent to at least one (1) month pay of the affected employee, or at least one (1) month pay for every year of service, whichever is higher. ((Manggagawa ng Komunikasyon sa Pilipinas v. Philippine Long Distance Telephone Company Incorporated, supra.)
Related: Separation Pay
