Overview: two legal “tracks” for lawful termination

Under Philippine labor law, an employer may lawfully end employment only if (1) there is a valid cause and (2) due process is observed. “Valid cause” falls into two main categories:

Just causes: termination due to the employee’s fault or misconduct (disciplinary in nature).
Authorized causes: termination due to business, operational, health, or other non-disciplinary reasons recognized by law (not primarily fault-based).

These categories matter because they determine:

What must be proven
Which procedure applies
Whether separation pay is owed
How courts evaluate proportionality and fairness
What notices must be served and to whom

I. Legal foundations in the Labor Code

A. Just causes (disciplinary termination)

Just causes are found under Labor Code, Article 297 [formerly Article 282]. These are employee-fault grounds:

Serious misconduct
Willful disobedience / insubordination
Gross and habitual neglect of duties
Fraud or willful breach of trust
Commission of a crime or offense against the employer, employer’s family, or representative
Other causes analogous to the foregoing

B. Authorized causes (non-disciplinary termination)

Authorized causes are under Labor Code, Articles 298–299 [formerly Articles 283–284]:

Article 298 includes:

Installation of labor-saving devices
Redundancy
Retrenchment to prevent losses
Closure or cessation of business operations (with distinctions on whether due to serious losses)

Article 299 includes:

Disease as a ground for termination, subject to conditions.

II. Core distinction: “fault-based” vs “situation-based”

Just cause: employee is blameworthy

A just-cause termination is punitive/disciplinary. The employer asserts that the employee’s act or omission is sufficiently serious to sever the relationship.

Key implications:

The employer must prove employee misconduct or breach, and that dismissal is proportionate.
Separation pay is generally not required (with limited, exceptional equitable awards in some cases depending on jurisprudential factors, but not as a rule).

Authorized cause: business/health realities justify termination

An authorized-cause termination is not a penalty. The employer asserts it must terminate due to legitimate business exigencies or health-related reasons.

Key implications:

The employer must prove the factual basis of the authorized cause (e.g., redundancy is genuine; retrenchment is necessary; closure is bona fide; disease meets legal standards).
Separation pay is generally required (except in certain closure scenarios when due to serious business losses, and other specific legal nuances).

III. The required due process differs

Philippine law requires due process in all terminations, but the type of due process differs.

A. Due process for just cause: “two-notice rule” + hearing opportunity

For just cause, the recognized standard is procedural due process through:

First notice (Notice to Explain / Charge Sheet)
- Must state the specific acts/omissions complained of
- Must cite the rule/policy violated (ideally)
- Must give the employee a reasonable opportunity to submit a written explanation
Opportunity to be heard
- Often done via administrative conference or hearing
- Not every case requires a full trial-type hearing, but there must be a meaningful chance to respond and present evidence
Second notice (Notice of Decision)
- Must inform the employee of the employer’s findings and the penalty imposed
- Should state that termination is for a just cause, and specify which one

Common procedural pitfalls

Vague accusations (“loss of trust” without particulars)
No real opportunity to explain
Predetermined outcomes
Using a “template” notice without factual details
Relying on hearsay without investigation

B. Due process for authorized cause: written notices + DOLE notice requirement

For authorized causes, due process is more notice-driven:

Written notice to the employee
Written notice to DOLE
These are typically required at least 30 days before the intended date of termination (the familiar “30-day notice rule” for Article 298 grounds).

For disease termination (Article 299), due process includes ensuring the statutory conditions are met (discussed below), and notice is still required.

Common procedural pitfalls

Terminating immediately without the 30-day prior notices
Treating authorized cause as a disciplinary case (wrong process)
Using redundancy/retrenchment labels to mask performance or misconduct issues

IV. Burden of proof: what the employer must establish

A. Just cause: substantial evidence of misconduct + proportionality

Employers must show:

The employee committed the act charged, supported by substantial evidence
The act falls under a recognized just cause
The penalty of dismissal is proportionate considering:
- Severity of offense
- Intent
- Past record
- Company rules and consistency of discipline

Proportionality is crucial. Even if there was misconduct, dismissal can be struck down if it is too harsh relative to the offense and surrounding circumstances.

B. Authorized cause: compliance with legal elements unique to each ground

Authorized causes require proof of the cause itself and its proper implementation.

1) Redundancy

Typically requires showing:

The position is in excess of what the business reasonably needs
There is a good-faith reorganization or streamlining
Fair and reasonable criteria were used to select affected employees (e.g., efficiency, seniority, status, performance, etc.)
The redundancy is not a sham to remove a disliked employee

2) Retrenchment to prevent losses

Generally requires showing:

Retrenchment is reasonably necessary and likely to prevent losses
Losses are serious, actual or imminent, and supported by evidence (often financial statements)
Measures were made in good faith
Selection of employees is based on fair criteria

3) Installation of labor-saving devices

Requires showing:

The devices were actually installed/implemented
Termination is a direct result of the installation
Good faith + fair selection criteria

4) Closure or cessation of business

Requires showing:

The closure is bona fide (not a subterfuge)
If closure is due to serious losses, the law generally treats separation pay differently (see separation pay section)
If only a department or branch closes, evidence should support that specific closure and the impact on positions

5) Disease (Article 299)

Generally requires showing:

The employee suffers from a disease such that:
- continued employment is prohibited by law or prejudicial to health (employee’s or coworkers/public)
- the disease is not curable within a period contemplated by law/standards even with proper medical treatment (as interpreted in practice through medical evaluation)
The decision is anchored on competent medical findings, not mere suspicion

V. Separation pay: the biggest practical difference

A. Just cause: generally no separation pay

Because just causes are punitive, separation pay is typically not owed.

There are narrow, exceptional situations where some form of financial assistance has been awarded on equitable grounds in certain cases, but this is not the standard rule and is fact-sensitive.

B. Authorized cause: separation pay usually required

For authorized causes under Article 298, separation pay is commonly:

Installation of labor-saving devices / Redundancy: typically higher statutory rate
Retrenchment / Closure not due to serious losses: typically lower statutory rate
Closure due to serious losses: separation pay may not be required if the employer proves serious losses

For disease termination, separation pay is also generally required at a statutory rate.

(Specific computations depend on the ground and the employee’s length of service; employers typically compute by months/years of service and “one month pay” equivalents. In practice, “one month pay” is often based on the employee’s regular wage, with common debates about which earnings are included depending on wage structure.)

VI. Choosing the correct ground matters (and mislabeling can be fatal)

A. Disguised disciplinary dismissal as “redundancy”

A common legal problem is when an employer terminates an underperforming or troublesome employee but labels it “redundancy” to avoid the two-notice rule. Courts typically scrutinize:

Whether redundancy is genuine
Whether the role truly became superfluous
Whether others similarly situated were retained
Whether selection criteria were fair
Whether a replacement was hired shortly after

If the redundancy is found sham, the dismissal is illegal, even if separation pay was offered.

B. Disguised authorized cause as “just cause”

Another issue is treating a true business reorganization as “just cause” to avoid separation pay. If the real reason is business-driven, calling it “misconduct” without substantial evidence can backfire.

VII. Standards of fairness: good faith, consistency, and documentation

A. Good faith is central in authorized causes

Authorized causes demand good faith. Employers must show they are not using the ground to target a specific employee. Documentation typically includes:

Board/management approvals
Reorganization plans
Org charts before/after
Workload studies
Financial statements (especially for retrenchment/closure due to losses)
Selection matrix and criteria

B. Consistency and company rules matter in just cause

For just cause:

Clear company policies
Proof employee knew the rules (handbook acknowledgment)
Consistent penalties for similar offenses
Evidence integrity (proper incident reports, investigation notes, CCTV chain-of-custody, witness statements)

VIII. Substantive vs procedural defects: what happens if one is missing?

Philippine labor adjudication separates:

Substantive validity (was there a valid cause?)
Procedural due process (was the correct procedure followed?)

General consequences:

If there is no valid cause, termination is illegal regardless of procedure.
If there is a valid cause but procedure was defective, employers can still be held liable for monetary sanctions (the exact remedy depends on the type of dismissal and prevailing doctrine), even if dismissal stands.

Practically, employers should treat procedure as non-negotiable because procedural defects are common and avoidable.

IX. Quick comparison table (conceptual)

Nature

Just cause: disciplinary / fault-based
Authorized cause: non-disciplinary / business-health-based

Legal basis

Just cause: Art. 297
Authorized cause: Arts. 298–299

Due process

Just cause: two notices + opportunity to be heard
Authorized cause: 30-day written notice to employee + DOLE (generally), plus compliance with ground-specific requirements

Separation pay

Just cause: generally none
Authorized cause: generally required (with exceptions depending on ground and proof)

Typical evidence

Just cause: incident facts, investigations, policies, witness statements, admissions
Authorized cause: financials, reorg plans, redundancy studies, org charts, selection criteria, medical certifications (disease)

X. Practical guidance: how to properly frame and execute each termination

A. If the issue is misconduct or performance-related

Consider just cause only when the facts fit the statutory grounds and the company can prove:

The act happened
It is serious enough
Dismissal is proportionate
The two-notice rule is followed cleanly

If the issue is performance, it is often mishandled. Employers must be careful not to “force-fit” performance into just causes without meeting standards for neglect, insubordination, or analogous causes, and should ensure fair performance management systems and documentation.

B. If the issue is organizational change

Use authorized causes when:

The job truly becomes unnecessary
The business must reduce headcount to prevent losses
Operations are closing
Technology replaces roles

And ensure:

Documentary basis exists before termination
Selection criteria are objective and pre-set
Notices to employee and DOLE are timely
Statutory separation pay is computed correctly

C. If the issue is health/disease

Do not terminate on assumptions. Employers should:

Obtain competent medical evaluation
Consider reasonable accommodations or reassignment where practicable, consistent with company policy and safety rules
Follow required notice and separation pay rules

XI. Common misconceptions clarified

“If we pay separation pay, it’s automatically legal.” False. Separation pay does not cure lack of a valid cause or lack of proper process.
“Loss of trust means we can terminate anytime.” False. “Breach of trust” requires a position of trust and confidence and a factual basis; it cannot be conclusory.
“Redundancy means we can pick anyone.” False. The employer must use fair criteria and show genuine superfluity.
“Retrenchment is just downsizing.” Not exactly. It is specifically tied to preventing losses and requires proof of necessity and good faith.
“Authorized cause doesn’t need hearing.” Authorized causes typically do not require a disciplinary hearing, but they require statutory notices and compliance with ground-specific proof requirements.

XII. What “all there is to know” means in real disputes: litigation posture and remedies

In contested terminations, the deciding bodies focus on:

Narrative coherence: does the employer’s stated cause match the evidence?
Paper trail: do documents predate termination and reflect good faith?
Comparators: were similarly situated employees treated similarly?
Selection fairness: for authorized causes, why this employee and not others?
Timing: sudden redundancy after a complaint or conflict can look retaliatory
Remedies: illegal dismissal cases can involve reinstatement, back wages, separation pay in lieu of reinstatement in some scenarios, and other monetary awards depending on findings

Conclusion

In Philippine employment termination, just cause and authorized cause are not interchangeable labels—they are legally distinct regimes. Just causes discipline employee wrongdoing and generally do not require separation pay but demand strict observance of the two-notice rule and proof of misconduct and proportionality. Authorized causes respond to legitimate business or health realities, usually require separation pay, and demand compliance with statutory notice requirements (including DOLE notice in many cases) and proof that the cause is real, implemented in good faith, and applied using fair criteria.

If you want, I can also provide:

A checklist for employers (per ground)
A checklist for employees evaluating if their termination was lawful
Sample notice templates (NTE, decision notice, 30-day DOLE/employee notices)