Dismissal of an Employee for Poor Performance Arising from Mental-Health Issues
(Philippine legal perspective – updated to 1 May 2025)
1. Why this topic matters
- Productivity pressures meet evolving health norms. Employers rely on just cause dismissal for “poor performance,” yet the 2018 Mental Health Act (RA 11036), the Magna Carta for Disabled Persons (RA 7277, as amended), and new DOLE directives re-frame many mental conditions as protected disabilities requiring accommodation rather than sanction.
- The law now fuses labor, disability, and health policy. A mistake in handling a mentally-ill worker can trigger illegal-dismissal damages plus discrimination penalties, putting management prerogative under unprecedented scrutiny.
2. Core statutory anchors
| Source | Key provisions relevant to dismissal |
|---|---|
| Labor Code (PD 442, as renumbered) | Art. 297(c) “gross and habitual neglect of duties” and Art. 297(a) “serious misconduct” cover persistent incompetence; Art. 299 allows termination for disease if (1) a competent public-health authority certifies the illness is incurable within six months and (2) continued employment is prejudicial to the employee or co-workers. |
| RA 11036 (Mental Health Act) | Recognizes mental conditions as disabilities; mandates “reasonable workplace accommodations” and psychosocial support; requires employers ≥ 50 workers to adopt a mental-health policy and referral system. |
| RA 7277 / RA 10754 | Declares it unlawful to discriminate in hiring, promotion, or dismissal on the basis of disability, including mental impairment, unless the impairment is a “bona-fide occupational disqualification” and no accommodation is possible. |
| Occupational Safety & Health Standards (RA 11058, DO 198-18) | Employers must identify psychosocial hazards and provide medical services; failure may constitute a separate DOLE violation. |
| Civil Code Arts. 19-21 (abuse of rights, acts contra bonos mores) | Invoked in suits for moral damages where dismissal is tainted with bad faith or humiliation. |
3. The analytical framework the NLRC and courts apply
Substantive justification
- Is poor performance a “just cause” or a manifestation of illness?
- Is the mental condition temporary, treatable, or a permanent impairment?
- Did the employer first provide performance coaching and medical aid before concluding incompetence?
Interaction with disease clause (Art. 299)
- Employer may opt for Art. 299 termination, not “poor performance,” if a psychiatrist certifies the employee’s condition is incurable within six months and harmful to workplace safety.
- Must pay separation pay (½-month per year of service) and follow DOLE inter-office certification procedure.
Reasonable accommodation test (RA 7277 §5)
- Can duties be modified (re-assignment, adjusted quotas, remote work, flexible hours) without “undue hardship”?
- Employer bears the burden of proving no accommodation is feasible.
Procedural due process (two-notice + hearing)
- 1st notice: Detailed charge (specific performance metrics, dates, past coaching, offer to explain).
- Ample opportunity to be heard: often a meeting with HR, a representative, or counsel; employee may present medical evidence.
- 2nd notice: Decision explaining why dismissal (or disease termination) is warranted and why accommodation was impossible.
- Mere issuance of a medical certificate is never enough; skipping any step is fatal.
4. Leading jurisprudence
| Case | G.R. No. / Date | Guiding principle | |---|---| | G.R. No. 173133 Sy v. Neat Inc. (19 Feb 2014) | Reiterated that poor performance must be “gross and habitual”; single-instance errors or unsubstantiated quotas can’t justify dismissal. | | G.R. No. 196033 Aliling v. Feliciano (25 Apr 2017) | Laid down the “performance-improvement-plan” expectation: dismissal invalid when employer jumps from low metrics straight to termination without documented coaching. | | G.R. No. 186040 BPI Family Bank v. NLRC (10 Oct 2018) | Schizophrenic employee dismissed for “incompetence”; SC held bank liable for illegal dismissal because it failed to obtain a DOH certification under Art. 299 and offered zero accommodation despite medical reports. | | G.R. No. 246271 PeopleSupport Phils. v. Jalijali (20 Jan 2021) | Call-center agent with anxiety; Court ruled resignation was constructive dismissal after employer refused flexi-schedule recommended by doctor. Showed how non-accommodation = discrimination. | | G.R. No. 250380 Maersk Filipinas v. Micaller (22 Mar 2023) | Upheld dismissal where (a) bipolar employee falsified sales data, (b) three performance plans failed, (c) psychiatrist opined condition unlikely to remit. Emphasized management right when continued errors risk corporate integrity. |
5. Distinguishing poor performance from disease termination
| Element | Poor-Performance Just Cause | Disease Clause (Art. 299) | |---|---| | Termination label | “Gross and habitual neglect” / “Incompetence” | “Disease prejudicial to health or safety” | | Proof required | Documented KPIs, evaluations, counseling records | DOH/DOLE-recognized medical certificate (specialist), showing incurability in 6 mos + risk | | Separation pay | None (unless CBA grants) | Mandatory: ½-month per year of service | | Accommodation duty | Yes (RA 11036 & 7277) | Also yes; but if proven impossible, dismissal survives | | May the parties agree to resignation w/ exit package? | Yes, but resignation must be voluntary and supported by quitclaim; mental capacity to consent can be challenged | Yes |
6. Liability exposure for a mishandled case
- Illegal dismissal: Full back-wages + reinstatement or separation pay (1-month per year).
- Disability discrimination (RA 7277 §46): ₱50,000-₱100,000 fine and/or 6 mos-2 yrs imprisonment of corporate officers; exemplary damages.
- Moral & exemplary damages under Arts. 2224-25 Civil Code.
- Labor standards fines under OSH law for omitting mental-health programs (up to ₱100,000/day of violation).
- Tort suits for negligent infliction of emotional distress (rare but viable).
7. Best-practice roadmap for employers
- Adopt a written mental-health policy (required if ≥ 50 workers).
- Train front-line supervisors on early warning signs and referral protocols.
- Use performance-improvement plans (PIPs) spanning at least 30-60 days, with clear metrics and coaching logs.
- Offer accommodations:
- Job re-crafting (altered quota, clerical tasks)
- Shift or location flexibility
- Temporary medical leave (convertible from SIL, VL, or SSS sickness)
- EAP or HMO psychiatric sessions
- Document every step—emails, minutes, medical opinions—to survive NLRC audit.
- If considering termination for disease:
- Secure two independent psychiatric certifications.
- Get a DOH-licensed physician to sign the DOLE-NCMB form.
- Give the employee the right to bring her own doctor.
- If termination proceeds, issue comprehensive 2nd notice explaining:
- Why KPIs remain unmet after accommodation attempts; or
- Why medical evidence shows non-remission & safety risk.
- Pay everything due on the last day (separation pay, final pay, 13th-month prorated, unused leaves) within 30 days to avoid DOLE Labor Advisory 06-20 penalties.
8. Remedies and support for employees
| Forum | Typical relief |
|---|---|
| DOLE Single-Entry Assistance Desk (SEAD) | Mediation; often yields separation-pay settlements. |
| NLRC / Labor Arbiter | Illegal-dismissal complaints, including damages & attorney’s fees. |
| Civil courts (RTC) | Disability-discrimination damages (RA 7277). |
| CHR / Commission on Human Rights | Discrimination investigation & policy recommendations. |
| SSS & ECC | Sickness benefit (up to 120 days) or EC disability benefit if mental illness is work-aggravated. |
| PhilHealth | In-patient and out-patient mental-health package reimbursements. |
9. Practical take-aways
- Document or accommodate—failure to do either is fatal.
- Mental conditions are presumptively protected; the employer must disprove feasibility of accommodation before invoking poor performance.
- Art. 299 disease termination is safer but costlier (separation pay) and procedurally heavier.
- The trend in Supreme Court decisions (2018-2024) is to favor employee retention unless real, well-proved safety or business harm exists.
10. Checklist before signing a dismissal notice
- □ Was there a PIP or coaching plan of reasonable duration?
- □ Has the employee been medically evaluated by a competent psychiatrist or psychologist?
- □ Did we explore and document accommodations?
- □ Are the two notices complete, specific, and delivered personally?
- □ If using Art. 299, do we have the DOH certification and will we tender separation pay on release?
- □ Have we conducted the hearing with the employee’s representative present?
- □ Have we considered redeployment to any vacant position?
- □ Are we releasing final pay within 30 days and issuing a Certificate of Employment?
If any box is unchecked, postponing dismissal and correcting the gap is strongly advised.
Bottom line
Philippine employers may validly dismiss an employee whose mental illness results in consistently sub-standard performance—but only after exhausting statutory accommodation duties, fulfilling rigorous medical certification rules, and observing full due process. Skipping a single requirement almost certainly turns the dismissal into a costly illegal-termination and discrimination case.