In the Philippines, the right to security of tenure is a constitutionally protected right. Under the Labor Code, no employee shall be dismissed from employment except for a just cause or an authorized cause and only after due process has been observed. When an employer terminates an employee without satisfying these substantive and procedural requirements, the dismissal is deemed illegal.

I. Substantive Requirements: Just vs. Authorized Causes

For a dismissal to be valid, it must be based on one of the grounds specifically provided by law. These are categorized into Just Causes (fault-based) and Authorized Causes (business-based).

1. Just Causes (Article 297, Labor Code)

These are grounds where the employee is at fault. In these cases, the employee is generally not entitled to separation pay.

Serious Misconduct: Improper or wrong conduct that is serious in nature and relates to the performance of the employee's duties.
Willful Disobedience (Insubordination): Refusal to obey a lawful and reasonable order of the employer connected to the work.
Gross and Habitual Neglect of Duties: Repeated failure to perform duties. Note that "habitual" is key; a single instance of negligence is usually insufficient unless it results in significant loss.
Fraud or Willful Breach of Trust: Often cited for employees holding positions of trust and confidence (e.g., managers, cashiers).
Commission of a Crime: When the employee commits a crime against the employer, their immediate family, or their authorized representative.
Analogous Causes: Other causes similar to those mentioned above.

2. Authorized Causes (Articles 298–299, Labor Code)

These are grounds arising from business necessity or health reasons. In these cases, the employee is usually entitled to separation pay.

Installation of Labor-Saving Devices: Introduction of machinery to replace manual labor.
Redundancy: When the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise.
Retrenchment: A business strategy to prevent serious losses.
Closure or Cessation of Operations: Closing the business (provided it is not done to circumvent labor laws).
Disease: When the employee suffers from a disease that is prohibited by law or is prejudicial to their health or that of their co-employees.

II. Procedural Requirements: Due Process

Even if a valid ground exists, the dismissal can still be declared illegal (or the employer may be fined) if the Two-Notice Rule is not followed.

For Just Causes:

First Written Notice: Detailing the specific grounds for termination and giving the employee an opportunity to explain their side (usually within at least 5 calendar days).
Hearing or Conference: Giving the employee a chance to defend themselves, often with the assistance of counsel if desired.
Second Written Notice: The notice of decision indicating that all circumstances have been considered and the grounds for termination have been established.

For Authorized Causes:

The employer must serve a written notice to both the employee and the Department of Labor and Employment (DOLE) at least one month before the intended date of termination.

III. Legal Remedies for Illegal Dismissal

If an employee believes they were illegally dismissed, they may file a complaint before the Labor Arbiter of the National Labor Relations Commission (NLRC). The primary remedies available are:

1. Reinstatement

The employee is entitled to be restored to their former position without loss of seniority rights. If the relationship between the employer and employee has become so strained that reinstatement is no longer viable (Strained Relations Doctrine), "separation pay in lieu of reinstatement" may be awarded instead.

2. Full Backwages

This refers to the restoration of the income the employee lost from the time of illegal dismissal until actual reinstatement. This includes:

Basic salary
Allowances
Other benefits (e.g., 13th-month pay)

3. Separation Pay

This is awarded in two scenarios:

As a penalty/remedy for illegal dismissal when reinstatement is not possible (usually 1 month's salary per year of service).
As a statutory requirement for authorized causes (1 month's pay or 1/2 month's pay per year of service, depending on the ground).

4. Moral and Exemplary Damages

These are awarded if the dismissal was attended by bad faith, fraud, or was oppressive to labor, or done in a manner contrary to morals, good customs, or public policy.

5. Attorney’s Fees

In cases of unlawful withholding of wages or illegal dismissal, the employee may be awarded attorney's fees equivalent to 10% of the total monetary award.

IV. Burden of Proof

In illegal dismissal cases, the burden of proof rests squarely on the employer. The employer must prove by substantial evidence (that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion) that the termination was for a valid cause and that due process was followed. If the employer fails to satisfy this burden, the dismissal is deemed illegal.