Illegal Dismissal

Summary

▪ Illegal dismissal is the termination or separation from employment without just cause or authorized cause.

▪ Illegal dismissal may result in reinstatement, full backwages, moral damages, exemplary damages, nominal damages, and attorney’s fees.

1. Concept

“Illegal dismissal” – refers to a termination or separation from employment without just cause or authorized cause.

“Constructive dismissal” – refers t o

A quitting because continued employment is rendered impossible, unreasonable or unlikely; as, an offer involving a demotion in rank and a diminution in pay.” (Philippine Japan Active Carbon Corporation v. Quiñanola, G.R. No. 83239, 08 March 1989)

2. Illegal dismissal

Under the principle on security of tenure, no employee may be dismissed without just cause or authorized cause and after observance of due process. (See Article 294, P.D. 442, Labor Code)

In several previous labor jurisprudence, illegal dismissal is the result of violating the security of tenure. Meaning, if a termination or separation of employment did not have either just cause nor authorized cause, as well as the corresponding due process was not observed, it would result in a finding of illegal dismissal.

However, in the landmark case of Agabon v. NLRC (2004), the dismissal of employees for just causes or authorized causes, even if without procedural due process, will be upheld subject to the employer being penalized with nominal damages.

Otherwise stated, an illegal dismissal is a termination or separation of employment without just cause or authorized cause – whether or not procedural due process was observed.

a. Constructive dismissal

Constructive dismissal is a form of illegal dismissal.

“Constructive dismissal” – refers to “[a] quitting because continued employment is rendered impossible, unreasonable or unlikely; as, an offer involving a demotion in rank and a diminution in pay.” (Philippine Japan Active Carbon Corporation v. Quiñanola, G.R. No. 83239, 08 March 1989)

More: Constructive dismissal

3. Consequences for illegal dismissal

The following are the consequences of illegal dismissal:

1) Reinstatement or, if not feasible, separation pay;

2) Full backwages;

3) Moral damages;

4) Exemplary damages;

5) Nominal damages; and

6) Attorney’s fees.

The above consequences are in addition to whatever monetary claims owing to the employees such as salary differentials and benefits.

a. Reinstatement

An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges. (Article 294 [279], Ibid.)

For more discussions, refer to Reinstatement.

b. Full backwages

An employee who is unjustly dismissed from work shall be entitled to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement. (Article 294 [279], Ibid.)

For more discussions, refer to Full backwages.

c. Moral damages

Moral damages are recoverable where the dismissal of the employee was attended by bad faith or fraud or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs or public policy. (San Miguel Corporation v. Teodosio, G.R. No. 163033, 02 October 2009)

For more discussions, refer to Moral Damages.

d. Exemplary damages

Exemplary damages are proper when the dismissal was effected in a wanton, oppressive or malevolent manner, and public policy requires that these acts must be suppressed and discouraged. (Ibid.)

For more discussions, refer to Exemplary Damages.

e. Attorney’s fees

In cases of unlawful withholding of wages, the culpable party may be assessed attorney’s fees equivalent to ten percent of the amount of wages recovered. (Article 111[a], Labor Code)

It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings for the recovery of wages, attorney’s fees which exceed ten percent of the amount of wages recovered. (Article 111[b], Ibid.)

In a catena of cases, the Court awarded attorney’s fees in favor of illegally dismissed employees who were compelled to file an action for the recovery of their lawful wages, which were withheld by the employer without any valid and legal basis. (Alva v. High Capacity Security Force, Inc., G.R. No. 203328, 08 November 2017)

For more discussions, refer to Attorney’s Fees.

4. Solidary liability

A corporation, as a juridical entity, may act only through its directors, officers and employees. Obligations incurred as a result of the directors’ and officers’ acts as corporate agents, are not their personal liability but the direct responsibility of the corporation they represent. As a rule, they are only solidarily liable with the corporation for the illegal termination of services of employees if they acted with malice or bad faith. (Polymer Rubber Corporation v. Salamuding, G.R. No. 185160, 24 July 2013)

To hold a director or officer personally liable for corporate obligations, two requisites must concur:

1) It must be alleged in the complaint that the director or officer assented to patently unlawful acts of the corporation or that the officer was guilty of gross negligence or bad faith; and

2) There must be proof that the officer acted in bad faith. (Ibid.)

5. Burden of proof

Employers and employees have their respective burden of proof when it comes to the issue on illegal dismissal.

a. When by the employer

When employees file a labor case, they tend to claim illegal dismissal even if due process was observed. The burden of proof is with the employer to establish that the dismissal was valid. Accordingly, the employer is required to show documentation to support the claim and defense of due process.

ALPS TRANSPORTATION v. RODRIGUEZ, G.R. No. 186732, 13 June 2013

[The employee – a Bus Conductor – was dismissed based on an irregularity report which stated that “he had collected bus fares without issuing corresponding tickets to passengers” and the report came with an annotation “Terminate” on it.]

The Labor Code provides that the burden of proving that the termination of an employee was for a just or authorized cause lies with the employer. If the employer fails to meet this burden, the conclusion would be that the dismissal was unjustified and, therefore, illegal.

Here, we agree with [the employee’s] position that the 26 January 2005 irregularity report, which served as the basis of his dismissal, may only be considered as an uncorroborated allegation if unsupported by substantial evidence. On this matter, we quote with favor the ruling of the appellate court:

The nature of work of a bus conductor involves inherent or normal occupational risks of incurring money shortages and uncollected fares. A conductor’s job is to collect exact fares from the passengers and remit his collections to the company. Evidence must, therefore, be substantial and not based on mere surmises or conjectures for to allow an employer to terminate the employment of a worker based on mere allegations places the latter in an uncertain situation and at the sole mercy of the employer. An accusation that is not substantiated will not ripen into a holding that there is just cause for dismissal. A mere accusation of wrongdoing or a mere pronouncement of lack of confidence is not sufficient cause for a valid dismissal of an employee. Thus, the failure of [the employers] to convincingly show that [the employee] misappropriated the bus fares renders the dismissal to be without a valid cause…

Thus, we rule that [the employers] have failed to prove that the termination of [the employee’s] employment was due to a just cause. #

If the employer is able to establish by substantial evidence that the dismissal was valid, then there is no illegal dismissal.

a. When by the employee

The employees are required to prove that they were dismissed first.

In some cases, the employees initiate an illegal dismissal case even if they were not terminated from employment by the employer. If this happens, the burden of proof is with the employees who have to show first that they were dismissed.

The rule is that one who alleges a fact has the burden of proving it; thus, [the employees] were burdened to prove their allegation that [the employers] dismissed them from their employment.  It must be stressed that the evidence to prove this fact must be clear, positive and convincing. The rule that the employer bears the burden of proof in illegal dismissal cases finds no application here because the [the employers] deny having dismissed the [employees]. (Machica v. Roosevelt Services Center, Inc., G.R. No. 168664, 04 May 2006)

Accordingly, the employees cannot simply allege that they were dismissed from employment. The employer should remember this important rule so as to avoid any liability for illegal dismissal.

NOBLEJAS v. ITALIAN MARITIME ACADEMY PHILS. INC., G.R. No. 207888, 09 June 2014

[The employee – a Training Instructor/Assessor – filed a complaint for illegal dismissal after the employer denied several of his demands. Through a letter, “he wrote Capt. Terrei a letter… requesting that a new contract be executed to reflect the following provisions that they had allegedly agreed upon during their conversation on May 19, 2009, to wit: 1] that his monthly salary would be P75,000.00, tax excluded, and that 50% of his SSS premium would be shouldered by the company; and 2] that after the completion of his 3-month contract, he would be given the option to choose either – a) to be regularly employed as an instructor of IMAPI; or b) to go on board a vessel with the company extending him financial aid for the processing of pertinent documents, which amount would be later on deducted from his salary. Likewise in the same letter, Noblejas intimated that he was electing to continue working for the company as its regular instructor.”]

There was… no illegal dismissal.

Fair evidentiary rule dictates that before employers are burdened to prove that they did not commit illegal dismissal, it is incumbent upon the employee to first establish by substantial evidence the fact of his or her dismissal. The Court is not unmindful of the rule in labor cases that the employer has the burden of proving that the termination was for a valid or authorized cause. It is likewise incumbent upon the employees, however, that they should first establish by competent evidence the fact of their dismissal from employment. It is an age-old rule that the one who alleges a fact has the burden of proving it and the proof should be clear, positive and convincing. Mere allegation is not evidence.

Aside from his mere assertion, no corroborative and competent evidence was adduced by [the employee] to substantiate his claim that he was dismissed from employment. The record is bereft of any indication that he was prevented from returning to work or otherwise deprived of any work assignment. It is also noted that no evidence was submitted to show that… Ferrez, the secretary of Capt. Terrei, was actually authorized by IMAPI to terminate the employment of the company’s employees or that Ferrez was indeed instructed by Capt. Terrei to dismiss him from employment.

The Court finds it odd that, instead of clarifying from Capt. Terrei what he heard from Ferrez, Noblejas immediately instituted an illegal dismissal case against the [the employer] the day following the alleged incident and never reported back for work since then. The Court quotes with approval the observation of the NLRC on this score:

[The employee’s] allegation that he was dismissed from employment cannot be accorded credence for it is obvious that being unhappy with not being granted his demands, it was he himself who is no longer interested to continue his employment with [the employer] The filing of a complaint for illegal dismissal with numerous money claims on March 17, 2010, against [the employer] is obviously intended to compel [the employer] to abide with his demands.

[The employer’s] refusal to grant complainant’s demands does not constitute an overt act of dismissal. On the contrary, it is rather the apparent disinterest of [the employee] to continue his employment with [the employer] that may be considered a covert act that severed his employment when the latter did not grant the litany of his demands…

Let it be underscored that the fact of dismissal must be established by positive and overt acts of an employer indicating the intention to dismiss. Indeed, a party alleging a critical fact must support his allegation with substantial evidence, for any decision based on unsubstantiated al legation cannot stand without offending due process. Here, there is no sufficient proof showing that [the employee] was actually laid off from work. In any event, his filing of a complaint for illegal dismissal, irrespective of whether reinstatement or separation pay was prayed for, could not by itself be the sole consideration in determining whether he has been illegally dismissed. (Emphasis supplied.) #

There cannot be an illegal dismissal when there was no termination from the beginning. In Exodus International Construction Corporation v. Biscocho, the employees simply claimed that they were illegally dismissed without any proof.

EXODUS INTERNATIONAL CONSTRUCTION CORPORATION v. BISCOCHO, G.R. No. 166109, 23 February 2011

“[T]his Court is not unmindful of the rule that in cases of illegal dismissal, the employer bears the burden of proof to prove that the termination was for a valid or authorized cause.” But “[b]efore the [employers] must bear the burden of proving that the dismissal was legal, [the employees] must first establish by substantial evidence” that indeed they were dismissed. ‘[I]f there is no dismissal, then there can be no question as to the legality or illegality thereof.’”

There was no dismissal in this case, hence, there is no question that can be entertained regarding its legality or illegality.

As found by the Labor Arbiter, there was no evidence that [the employees] were dismissed nor were they prevented from returning to their work. It was only [the employees’] unsubstantiated conclusion that they were dismissed. As a matter of fact, [the employees] could not name the particular person who effected their dismissal and under what particular circumstances. #

During the hearings for the labor case, the employers should clearly emphasize that no dismissal was made and that the employees should be required to establish it in the first place.

References

1987 Philippine Constitution

Book VI, Presidential Decree No. 442, a.k.a. Labor Code of the Philippines

DOLE Department Order No. 147, Series of 2015

/Updated: February 5, 2023

Disclaimer: All information is for educational and general information only. These should not be taken as professional legal advice or opinion. Please consult a competent lawyer to address your specific concerns. Any statements or opinions of the author are solely his own and do not reflect that of any organization he may be connected.

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