General information only, not legal advice.

Big picture

In the Philippines, a written employment contract is not required to create an employer–employee relationship. Employment may be proven by conduct, payroll records, control over work, and similar facts. This means you may discipline and even lawfully terminate an employee even if no contract was signed, provided you (1) have a lawful ground, and (2) observe due process under the Labor Code and jurisprudence.

When is there an employer–employee relationship if nothing’s signed?

Courts use the four-fold test:

Selection and engagement of the worker
Payment of wages
Power of dismissal
Control test (the most important): the right to control not just the result, but the means and methods of the work

If these are present, the worker is an employee—even with no written contract, ID, or HR file.

Why this matters for discipline: Once the relationship exists, the employer must follow labor standards and due process, and the worker gains security of tenure.

Status of employment without a contract

Probationary employment: Valid only if the reasonable standards for regularization were made known at the time of engagement. Without written communication of standards, a probationary hire becomes regular from Day 1.
Project / seasonal / fixed-term: Must be clearly shown by objective facts (e.g., project documents, seasonality). Absent clarity, the default inference skews toward regular employment.
Casual employment: If tasks are usually necessary or desirable in the employer’s business, employment tends to become regular after the law’s threshold period.

Implication: If no signed paper exists, HR should assume the safest status (often regular) for purposes of discipline and termination.

Grounds for discipline and termination

“Just causes” (employee fault)

Common lawful grounds include:

Serious misconduct or willful disobedience of lawful orders
Gross and habitual neglect of duties
Fraud or willful breach of trust (loss of trust and confidence)
Commission of a crime or offense against the employer or co-workers
Analogous causes (e.g., conflict of interest), if clearly established

Standard of proof: Substantial evidence—that amount of relevant evidence a reasonable mind might accept as adequate. Employers carry the burden of proof.

“Authorized causes” (business/health reasons; no employee fault)

Installation of labor-saving devices, redundancy, retrenchment, closure
Disease (incurable within six months and prejudicial to health/safety, with a competent physician’s certification)

Authorized causes have notice to DOLE and the employee (30 days) and separation pay rules. These apply regardless of whether a contract was signed.

Due process: the twin-notice rule (and hearing)

For just-cause discipline (from written warning up to dismissal):

First notice (Notice to Explain, “NTE”)
- Specific facts and company rules/policies allegedly violated
- Evidence available at that stage (reports, screenshots, CCTV references, audit logs)
- A clear directive to submit a written explanation and the reasonable period to do so (commonly at least 5 calendar days)
Meaningful opportunity to be heard
- May be a conference or hearing where the employee can present evidence and rebut witnesses; not always mandatory, but recommended especially if credibility is at issue.
Second notice (Decision)
- Findings of fact, policy basis, analysis of the defense
- Penalty imposed and effectivity date

For authorized-cause terminations: use the statutory 30-day notice to the employee and DOLE; the twin-notice format is not required, but clear documentation is.

No contract? Due process still applies. The law protects the employee’s security of tenure, not the paper they signed.

Lesser penalties and progressive discipline

Discipline must be proportionate and consistent. Common tools:

Coaching / counseling memos
Written warning → final written warning
Suspension (with due process)
Demotion or reassignment (lawful business reason; avoid constructive dismissal)
Termination (last resort, when just cause is proven)

Preventive suspension (PS): Allowed up to 30 days if the employee’s presence poses a serious and imminent threat to property, operations, or co-workers (e.g., theft, violence, evidence tampering). If you extend beyond 30 days, pay wages/benefits during the extension while the investigation continues, and explain why.

Company rules and handbooks—are they enforceable without signatures?

Yes, if you can prove communication and knowledge (e.g., orientation attendance, email blast, posted policies, time-stamped acknowledgment via HRIS, practice over time). A wet signature helps but is not essential.

Best practice to bolster enforceability:

Keep version-controlled policies and audit trails showing when employees were informed (emails, screenshots, read-receipts, LMS logs).
Ensure rules are reasonable, clear, and consistently applied.

Documentation that wins (even with no contract)

201 file (even if later-built): IDs, government numbers, payroll forms, attendance
Incident reports by supervisors, security, IT; affidavits of witnesses
CCTV clips / system logs / emails / chat exports (respect data privacy; collect only what’s necessary)
NTE and Decision with delivery proofs (personal service with acknowledgment, registered mail, and/or company email)
Matrix of offenses and penalties (consistency evidence)
Minutes of administrative conferences/hearings
Computation sheets for final pay (and Certificate of Employment upon request)

Wages, deductions, and penalties

No deductions from wages except those allowed by law (taxes, SSS/PhilHealth/Pag-IBIG, court orders, written employee authorizations for lawful purposes).
“Fines” or monetary penalties require strong legal footing; safer to use suspension or non-monetary sanctions unless your rules comply with DOLE regulations.
Suspension without pay is a valid disciplinary penalty if due process is observed and the penalty is proportional.

Private-sector due process timelines (practical)

Receipt of report → NTE: promptly after preliminary fact-finding
Employee explanation: give ≥ 5 calendar days
Administrative hearing: within the explanation period or shortly after
Decision: within a reasonable time; if PS was imposed, aim to resolve within 30 days

Special scenarios

Probationary employees (no contract)

If standards were not communicated at engagement, the employee is regular; the bar for termination rises.
If standards were communicated (even by email or onboarding deck), you may terminate for failure to meet standards, but still observe due process and base it on objective appraisals.

Loss of trust and confidence (LOTC)

Limit LOTC dismissals to managerial employees or those in positions of trust (custodians, cashiers, buyers, payroll, system admins).
Show a real, founded basis (audit variances, access logs, approvals trail). Avoid using LOTC as a catch-all.

Abandonment

Requires (1) failure to report for work and (2) clear intent to sever employment.
Send return-to-work directives; document attempted contacts before concluding abandonment.

Unionized workplaces

Follow the CBA and grievance machinery in addition to statutory due process.

Data Privacy

Collect and process only proportionate data for investigations; limit access; secure storage; time-bound retention.

Remedies if the employer gets it wrong

An employee who is illegally dismissed may obtain:

Reinstatement without loss of seniority rights and full backwages, or
Separation pay in lieu of reinstatement (if reinstatement is no longer viable), plus backwages

Even when the ground is valid but procedural due process was not observed, employers may be liable for nominal damages. Hence, paperwork matters.

Practical playbook for HR when no contract exists

Confirm the relationship
- Gather payroll, timekeeping, supervision records; apply the four-fold test.
Lock down the facts
- Incident report, evidence preservation (CCTV, emails, logs), witness statements.
Check the rulebook
- Identify the policy violated; ensure it was communicated (emails, handbook, onboarding slides).
Issue the NTE
- Facts, rule invoked, attachments list, and ≥ 5 days to explain.
Conduct a fair hearing
- Allow counsel/representative if policy provides; document minutes.
Weigh and decide
- Apply proportional penalties and consistency with past cases.
Serve the Decision
- Clear findings, rationale, penalty, effectivity; proof of service.
Process pay and clearances
- Final pay, COE, release of documents; for authorized causes, DOLE notice and separation pay compliance.
Strengthen forward
- Roll out written standards, job descriptions, a signed handbook acknowledgment, and onboarding attestations.

Frequently asked questions

Q: Can we discipline someone hired via chat or text only? Yes—if the four-fold test is met. Document communications, payroll, and control.

Q: Our rules are only in an email—enforceable? Yes, if you prove communication and knowledge. Keep time-stamped copies.

Q: Is a hearing mandatory? A meaningful opportunity to be heard is mandatory; a formal hearing is required when requested or when credibility is central.

Q: Can we extend preventive suspension beyond 30 days? Yes, but with pay after day 30 and with a written explanation for the extension.

Q: Can we deduct the cost of damage from wages? Generally no, unless within narrow legal allowances and with written authorization; safer to pursue civil liability separately while using disciplinary penalties for the misconduct.

Sample templates (adapt as needed)

Notice to Explain (NTE)

Subject: Notice to Explain – [Alleged Offense] To: [Employee Name], [Position]

This refers to the incident on [date/time] at [location/system] where you allegedly [describe specific acts/omissions], in violation of [Policy/Section].

Attached are [list of documents/evidence].

You are required to submit a written explanation within five (5) calendar days from receipt of this Notice and you may attach any evidence or identify witnesses. If you wish, you may request an administrative conference.

Failure to respond may result in a decision based on available records.

[HR/Disciplining Officer] Received by: ___________ Date/Time: ___________

Decision Notice

Subject: Decision on Administrative Case – [Employee Name]

After evaluating the records, including your explanation dated [date] and the evidence presented, we find that you [state findings of fact] in violation of [Policy/Section].

Applying our Table of Offenses and Penalties and considering [mitigating/aggravating factors], the Company imposes the penalty of [warning/suspension (dates)/termination effective (date)].

You may elevate this decision through [internal appeal/grievance step] within [days].

[Authorized Signatory] Received by: ___________ Date/Time: ___________

Compliance checklist (quick scan)

Relationship established (four-fold test evidence)
Policy violated identified and communicated
NTE served with sufficient particulars; ≥ 5 days to explain
Hearing/opportunity to be heard documented
Decision notice states facts, rules, reasoning, penalty
Preventive suspension (if any) lawful and ≤ 30 days (paid after)
Final pay/separation pay/DOLE notice (if authorized cause) complied
Records retained securely; privacy observed
Consistency with past cases checked

Bottom line

You can discipline even without a signed contract because the law looks at the relationship and the facts, not the paper trail alone. But to withstand scrutiny, you must (1) prove the ground, (2) observe due process meticulously, and (3) document communication of policies and consistency. When in doubt, err on the side of more notice, more opportunity to be heard, and better records.