Employer Issuance of a “Not Cleared” Certificate of Employment & Final Pay Disputes (Philippines)

A comprehensive, practice-oriented legal guide

1) Why this topic matters

Your Certificate of Employment (COE) is often required for new jobs, visas, and loans. Your final pay (a.k.a. last pay) is the bundle of monetary benefits due on separation. Employers sometimes condition both on “clearance”—the return of company property, settlement of accountabilities, etc. Problems arise when a company (a) refuses to release a COE, (b) issues a COE with prejudicial remarks like “NOT CLEARED,” or (c) withholds final pay beyond what the law and policy allow.

2) Core legal framework (plain-English recap)

Labor Code & Implementing Rules. Protect wages, regulate lawful deductions, and prohibit withholding wages except in specific, allowed situations and with due process.
13th-Month Pay (P.D. 851). Requires prorated 13th-month pay up to separation within the calendar year.
Service Incentive Leave (SIL). At least 5 days SIL per year for eligible workers; unused SIL is generally commutable to cash, including upon separation, subject to coverage rules and established policies/practice.
Separation Pay (Authorized Causes). Where the separation is due to redundancy or installation of labor-saving devices, the floor is at least one (1) month pay or one (1) month per year of service, whichever is higher. For retrenchment, closure not due to serious losses, or disease, the floor is at least one-half (1/2) month pay per year of service (with typical rounding rules for at least six months = one year).
Final Pay & COE (DOLE guidance).
- COE must be issued upon request, and promptly (practice standard: within 3 working days). A COE states neutral facts: employment dates, position(s), and (when requested) salary—not performance or clearance status.
- Final pay is typically released within 30 days from separation, unless a shorter timeline is set by company policy/collective agreement. Reasonable verification/clearance steps are allowed, but they cannot be used to indefinitely delay or deny amounts that are already due and demandable.
Conciliation & Adjudication. Money claims (unpaid wages/benefits, illegal deductions, separation pay) may be brought through SEnA (Single-Entry Approach) mandatory conciliation-mediation at DOLE, and if unresolved, escalated to the NLRC (Labor Arbiters) or appropriate forum.
Prescription. Money claims generally prescribe in 3 years from accrual. Act promptly.

Big picture: Employers may run a clearance process and make lawful deductions (see §6) but may not: (i) refuse a neutral COE, (ii) stamp it with prejudicial labels like “NOT CLEARED,” or (iii) sit on final pay beyond reasonable/allowed time, especially where only contested or unliquidated items remain.

3) The Certificate of Employment (COE)

What a COE is—and isn’t

Is: A neutral certification of (a) employment dates, (b) position(s) held, and—if the employee asks—(c) last salary rate.
Isn’t: A reference letter, performance review, disciplinary record, or clearance document. Reasons for separation and remarks are not required and should not be inserted unless requested by the employee.

“Not Cleared” on a COE—may an employer do that?

Best practice & regulatory spirit: No. “Not Cleared” is not part of a COE. It is a separate clearance document. Putting prejudicial labels on a COE can unfairly disadvantage the worker and can be challenged as improper (and, in extreme cases, as a form of bad-faith interference with the right to work).
What employers may do instead: Issue the COE as required; if needed, separately issue a clearance status memo or statement of account to address unreturned property or unsettled obligations.

If your employer refuses or issues a prejudicial COE

Write a formal request (keep a copy/email trail).
Cite your right to a neutral COE and ask that any clearance comments be placed in a separate document.
Escalate via HR/Management.
File SEnA with DOLE if still refused or if the COE includes harmful, unnecessary remarks.

4) What’s inside “final pay”?

While policies vary, final pay commonly includes:

Unpaid wages (last cutoff), overtime/night diff/holiday pay due;
Pro-rated 13th-month pay up to separation;
Cash conversion of unused leave credits (SIL and any above-minimum leaves per policy or practice);
Separation pay (if applicable by cause of termination or by CBA/contract/company practice);
Tax refund for over-withholding;
Other accrued, contractually-earned benefits (e.g., commissions already earned under the plan’s rules).

Note: Retirement pay (if applicable under law or plan) is separate from separation pay; they may not be set off against each other unless the plan or law clearly allows.

5) Timing & clearance: what’s reasonable?

COE: Promptly, typically within 3 working days of request—clearance is not a lawful precondition.
Final pay: Within 30 days from separation is the commonly observed benchmark—shorter if company policy says so. A clearance process may verify return of property and compute lawful deductions, but it shouldn’t delay release of undisputed, liquidated amounts.

Good practice split:

Release undisputed items (wages, prorated 13th month, unused SIL) now;
Hold or offset only those amounts directly tied to documented losses/loans/property (see §6), following due process.

6) Deductions & set-offs: what employers can (and can’t) do

Allowed—if all requirements are met:

Statutory deductions: Taxes, SSS/PhilHealth/Pag-IBIG, court-ordered garnishments.
Employee-authorized deductions: Loans, advances, or company benefits with written consent.
Loss/damage deductions: For company loss/damage after due process, where the employee is clearly responsible, the amount is reasonable, and the deduction is permitted by law and policy.
Unreturned property: Fair value of unreturned assets (e.g., laptop, tools), supported by acknowledgment receipts and inventory records.

Not allowed:

Blanket/penalty deductions without basis or due process.
Training bonds/lock-ins that operate as unreasonable restraints on employment or penalties not grounded in actual costs and a valid, freely-consented agreement.
“We’ll withhold everything until cleared”—when used to indefinitely delay the undisputed portion of final pay.

Due process for deductions generally means: written notice of claim, opportunity to explain, and a reasoned determination before deducting.

7) Typical scenarios & remedies

COE refused because “not cleared.”
- Remedy: Put request in writing; reiterate COE is neutral and separate from clearance. If ignored, SEnA at DOLE. You may also claim nominal damages where bad faith is shown (case-by-case).
COE issued with “NOT CLEARED” stamp.
- Remedy: Demand a revised, neutral COE; keep the stamped copy as evidence. If employer refuses, SEnA and potential money/damage claims if you can prove harm (e.g., job offer withdrawn due to the prejudicial remark).
Final pay withheld pending laptop return, but wages also frozen.
- Remedy: Ask for partial release of undisputed items; offer return or pay fair value for the laptop with receipts/inventory references. If still withheld across-the-board, SEnA; escalate to NLRC for money claim.
Large “loss” deduction without notice.
- Remedy: Challenge as illegal deduction; insist on due process and proof of actual loss and responsibility. Seek refund with damages if bad faith is provable.
Separation pay disputed (redundancy vs. resignation).
- Remedy: Evidence rules—check the notice of termination and company announcement. If redundancy, insist on the correct separation pay formula plus release of other final pay items.

8) How to act—step-by-step

A) For a proper COE

Send a written request specifying: dates of employment, positions, and (optional) last salary.
State that COE should be neutral and that clearance remarks are not part of a COE.
Give a short deadline (e.g., 3 working days).
Escalate to HR head/management; then file SEnA if still refused.

B) For final pay

Ask for an itemized breakdown: earned wages, 13th month, leave conversion, separation pay (if any), taxes/deductions.
Return company property with turnover receipts.
Contest improper deductions in writing; offer documentary rebuttal.
Demand partial release of undisputed amounts.
SEnA if unresolved within a reasonable time; prepare for NLRC money claims if conciliation fails.

9) Computation quick guide

Wages & allowances: Up to last day worked, including differentials due under law/policy.
13th-month (pro-rated): Total basic salary earned in the year up to separation ÷ 12.
SIL & other leaves: Convert unused credits per law/policy/practice.
Separation pay (if applicable):
- Redundancy / Labor-saving devices: ≥ 1 month pay or 1 month per year of service, whichever is higher.
- Retrenchment / Closure not due to serious losses / Disease: ≥ 1/2 month pay per year of service.
- Fraction of at least 6 months = 1 year (typical rounding).
Taxes: Withhold as required; compute tax refund for over-withholding.

10) Evidence checklist (employee)

Employment contract/handbook/CBA; policy on COE/final pay;
Payroll records, payslips, leave ledger;
Turnover/acknowledgment receipts (laptop, ID, tools);
Notices of termination/resignation;
Emails/letters requesting COE and final pay;
Any COE issued with improper remarks;
Proof of damages (job offer emails, recruiter notes) where relevant.

11) Model letters

A) COE request (neutral format)

Subject: Request for Certificate of Employment Dear HR, I respectfully request my Certificate of Employment stating my employment dates and positions held [and last salary]. Kindly issue a neutral COE (no clearance or performance remarks) within three (3) working days. Clearance status, if needed, may be addressed in a separate document. Thank you.

B) Final pay demand (with partial-release request)

Subject: Final Pay & Itemized Breakdown Dear HR, Please release my final pay and provide an itemized computation (wages through [date], 13th-month pro-rated, unused leave conversion, separation pay if applicable, taxes/deductions). I have returned all company property as per attached turnover receipts. If any item is disputed, kindly release the undisputed amounts now and specify the basis for any proposed deduction with supporting documents. Thank you.

12) FAQs

Can my employer refuse a COE until I’m cleared? No. COE issuance is a stand-alone obligation and should be prompt, independent of clearance.

Can they stamp “NOT CLEARED” on my COE? They shouldn’t. COE is neutral. Clearance is a separate document.

They say final pay will come only after clearance—even if it takes months. Unreasonable delays are improper. Undisputed sums should be released; only documented liabilities may be offset after due process.

What if I resigned without full notice? Employers may recover actual, provable loss if your contract/policy allows (and the loss is shown), but they cannot impose penalty deductions beyond what the law and due process allow.

What’s my first legal step? File a SEnA request at the DOLE regional/field office for conciliation-mediation. If unresolved, proceed to NLRC.

13) For employers (quick compliance notes)

Issue COEs neutrally and promptly; keep clearance status separate.
Time-bound final pay processing; release undisputed portions even if some items remain under review.
Deductions must be lawful, documented, reasonable, and preceded by notice and opportunity to explain.
Maintain clear policies on clearance, asset valuation, commission cut-offs, and leave conversion; train HR to avoid prejudicial remarks on COEs.

Bottom line

A COE is a neutral factual certificate, not a clearance form.
Final pay must be computed and released within a reasonable, defined timeline, with only lawful, documented deductions.
Use SEnA swiftly when voluntary resolution stalls—money claims prescribe in 3 years. Keep everything in writing, return property promptly, and insist—politely but firmly—on your neutral COE and timely final pay.