At-will employment is neither recognized nor permitted under Philippine Labor Law.
What is at-will employment?
At-Will employment is when an employer may terminate employment at any time and without need of any cause or ground. As the term suggests, the employment is at the will or desire of the employer.
While certain countries allow at-will employment, the Philippines follow due process termination. In such a framework, the employee may only be dismissed via just or authorized causes, accompanied by the corresponding two notices. This is in line with the constitutional right to security of tenure by the employees.
Even if at-will employment is stipulated in the employment contract or in the Company Policies, it will be declared invalid or void for being contrary to labor law. Under Contract Law, it is a basic principle that “laws are written into contracts.” Meaning, even if not agreed upon, applicable laws can render certain contractual provisions without any legal effect.
Further, the principle of autonomy in contracts allows parties to enter into terms and conditions that they are willing to agree on provided they are not contrary to law, morals, good customs, or public policy. Thus, any agreement to at-will employment will go against the law on due process termination in Labor Law and thus will result in its invalidity.
a. Exception: Overseas Employment with Foreign Principal
The rules are different when it comes to overseas employment with foreign principals/employers. As discussed earlier, certain countries allow or recognize at-will employment.
If an employee signs an employment contract with a foreign principal/employer and the agreement provides for a clause on employment at will, the employee cannot claim illegal dismissal as that was their agreement.
GBMLT Manpower Services, Inc. v. Malinao G.R. No. 189262, 06 July 2015 [The employee – a teacher – was dismissed when her foreign principal/employer invoked the clause on employment at will. When she came back, she sued for illegal dismissal her overseas recruitment and placement agency.] Article X of the POEA-approved Contract of Employment, as well as the second contract given to [the employee] for signing upon her arrival in Ethiopia, provides: ARTICLE X- TERMINATION x x x 3. This contract may be terminated by either party, at any time and for no cause by giving three months notice to the other party… Based on the foregoing provisions, the Contract of Employment may be terminated by either party for cause or at any time for no cause, as long as a three-month notice is given to the other party. In the latter case, [the employee] shall still be fully engaged and entitled to her salary and allowances for the three-month period provided in the notice of termination The Contract of Employment signed by [the employee] is first and foremost a contract, which has the force of law between the parties as long as its stipulations are not contrary to law, morals, public order, or public policy. We had occasion to rule that stipulations providing that either party may terminate a contract even without cause are legitimate if exercised in good faith. Thus, while either party has the right to terminate the contract at will, it cannot not act purposely to injure the other. Neither can we impute bad faith on the part of Alemaya University in the exercise of its right to terminate the Contract of Employment at will for several reasons. x x x In the exercise of the right to terminate a contract without cause, one party need only to give the other prior written notice as provided in the contract. Despite the grounds cited in the notice of termination, Alemaya University opted to take the "no cause" route in terminating the Contract of Employment. In this case, the contract provided that the other party be given a three-month advance notice, a requirement that Alemaya University complied with. It is well to note that the right to terminate the Contract of Employment at will was also available to the employee, who exercised that right when she signified her change of mind and rejected the job at the Internal Audit Department...
In the above case, the employee filed the case against the overseas recruitment and placement agency which found her employment for a foreign employer. Further, the employee signed a Contract of Employment for Foreign Academic Personnel – which was approved by the Philippine Overseas Employment Administration (POEA).
For emphasis, and to avoid miscommunication, local employers in the Philippines cannot rely on an at-will employment clause to summarily dismiss an employee. The constitutional right of an employee – whether a Filipino or a foreigner – working in the Philippines to security of tenure requires that due process be observed.