1) The Constitutional and Statutory Core: Security of Tenure

In Philippine labor law, security of tenure means an employee who is legally classified as an employee (not a true independent contractor) cannot be dismissed except for a cause allowed by law and only after observing due process. Illegal dismissal is, in essence, a termination that fails substantive legality (no valid ground) and/or procedural legality (no due process).

The main framework comes from the Labor Code and extensive Supreme Court jurisprudence. The Labor Code provisions are commonly cited in their renumbered form:

Article 297 (formerly Art. 282) – Just causes (employee fault)
Article 298 (formerly Art. 283) – Authorized causes (business reasons)
Article 299 (formerly Art. 284) – Disease as a cause

2) What Counts as “Dismissal” (Not Just the Termination Letter)

A “dismissal” is not limited to a written notice that says you are fired. It can include acts that effectively end employment, such as:

A. Actual Dismissal

A clear termination—verbal or written—ending the employment relationship.

B. Constructive Dismissal

This happens when the employer makes continued work impossible, unreasonable, or unlikely, so the employee is forced to resign or leave. Common indicators include:

Demotion with loss of pay/benefits or dignity
Harassment, humiliation, or hostile work environment
Unjustified transfer designed to inconvenience or punish
Unreasonable quotas or impossible performance demands used as a pretext
Repeated non-payment or severe diminution of benefits
Preventive suspension abused as punishment, or prolonged “floating status” without lawful basis

Constructive dismissal is treated as dismissal, so the employer must still prove valid grounds and due process.

C. “Floating Status” / Temporary Layoff

In certain industries (notably security services and some project-based setups), employees may be placed on temporary off-detail due to lack of assignment. This is not automatically illegal—but it becomes problematic if it exceeds lawful limits, is used as a disguised termination, or is done in bad faith.

3) The Two Big Legality Tests

To be valid, termination usually must satisfy both:

A. Substantive Due Process (Valid Ground)

There must be a lawful cause: Just Cause, Authorized Cause, or Disease (with strict requirements).

B. Procedural Due Process (Correct Process)

Even with a valid cause, the employer must follow the legally required procedure—the process differs depending on the ground.

Failing substantive due process typically makes the dismissal illegal. Failing procedural due process may still make the employer liable for damages even if a valid ground exists.

4) Valid Grounds for Termination

A. Just Causes (Employee-Fault Grounds) – Art. 297

These generally require that the employee committed an act or omission that justifies termination.

1) Serious Misconduct

Misconduct must be serious, related to work, and show unfitness to continue working. Examples often litigated: theft, fighting at work, grave insubordination, serious dishonesty, workplace violence, gross sexual harassment.

2) Willful Disobedience / Insubordination

Requires:

A lawful and reasonable order
The employee’s refusal must be willful (intentional) Not every disagreement is insubordination, especially if the order is unlawful, unsafe, or unreasonable.

3) Gross and Habitual Neglect of Duties

Neglect must be both gross (serious) and habitual (repeated). One isolated mistake is usually not enough unless extremely severe.

4) Fraud or Willful Breach of Trust / Loss of Trust and Confidence (LOTAC)

Frequently invoked—often abused—so courts scrutinize it closely. Key points:

Commonly applied to managerial employees and those occupying positions of trust (cashiers, auditors, property custodians, etc.).
Requires substantial evidence of an act that justifies loss of trust; it cannot be based on mere suspicion.
It cannot be used to cover up discrimination, retaliation, or union-busting.

5) Commission of a Crime or Offense Against the Employer or Employer’s Family/Representative

The crime must be directed against the employer or its representatives, typically connected to the employment relationship.

6) Other Analogous Causes

Causes similar in nature and seriousness to the listed just causes, recognized by jurisprudence (e.g., certain severe violations of company policy, depending on context and proportionality).

Important: Proportionality and Past Service

Even where a violation exists, the penalty must be proportionate, considering the gravity, intent, harm, employee’s record, and circumstances. Dismissal is the ultimate penalty; not every infraction warrants it.

B. Authorized Causes (Business/Economic Grounds) – Art. 298

These are not based on employee fault. They relate to business needs and require strict compliance with notice and, usually, separation pay.

1) Installation of Labor-Saving Devices

Termination may be valid if technology or machinery reduces the need for manpower. Requirements often include:

Good faith
Reasonable necessity
Fair selection criteria (who gets terminated)
Proper notices and separation pay

2) Redundancy

Positions become in excess of what the business reasonably needs. Redundancy is valid if:

It is done in good faith
There is a reasonable basis (organizational plan, efficiency needs, duplication of functions, etc.)
There are fair and reasonable criteria for selection (e.g., efficiency ratings, seniority, status, skills)
Notices and separation pay are provided

3) Retrenchment (Downsizing to Prevent Losses)

Highly scrutinized. Typically requires proof that:

Retrenchment is necessary to prevent losses
Losses are substantial, serious, and reasonably imminent (or already incurred)
Measures are in good faith, with no intent to defeat workers’ rights
Selection criteria are fair
Proper notices are served Employers often support this with audited financial statements and business records.

4) Closure or Cessation of Business

Termination due to closure may be valid. Separation pay rules differ:

If closure is not due to serious losses: separation pay is generally due
If closure is due to serious business losses: separation pay may not be required, but the employer must prove the losses and still comply with notice requirements

C. Disease as a Ground – Art. 299

Termination due to illness is tightly regulated. Typically requires:

Certification by a competent public health authority that:
1. the disease cannot be cured within a period (commonly discussed in jurisprudence as within six months even with proper medical treatment), and
2. continued employment is prohibited by law or prejudicial to the employee’s or co-workers’ health
Payment of separation pay as required by law
Observance of due process appropriate to the situation

Disease termination is not a shortcut around disability accommodation or medical leave issues; employers must act carefully and consistently with labor standards and anti-discrimination principles where applicable.

5) Employment Status Matters (Because “End of Contract” Isn’t Always Legal)

A. Regular Employees

Regular employees enjoy security of tenure. Dismissal must be for just/authorized cause and with due process.

B. Probationary Employees

Probationary employees can be terminated for:

A just cause; or
Failure to meet reasonable standards made known at the time of engagement If standards were not properly communicated at hiring, terminating for “failure to qualify” becomes legally vulnerable.

C. Project / Seasonal / Fixed-Term Employees

Employers can end employment upon legitimate expiration of a project/season/term only if the arrangement is genuine and not used to evade regularization. Misclassification (e.g., repeatedly rehiring for continuous work) can convert status to regular and make “end of contract” terminations illegal.

D. Independent Contractors vs Employees

If the worker is economically dependent and the company controls the means and methods of work, the relationship may be deemed employment regardless of labels (“talent,” “consultant,” “freelancer”). If an employer-employee relationship is found, security of tenure applies.

6) Due Process Requirements (Procedural Legality)

A. For Just Causes: The “Two-Notice Rule” and Opportunity to Be Heard

For just-cause termination, procedural due process generally includes:

First Written Notice (Notice to Explain / Charge Sheet) Must specify:

The acts/omissions complained of
The company rules violated (if applicable)
A directive to submit a written explanation within a reasonable period (commonly at least 5 calendar days in practice and DOLE guidance)

Genuine Opportunity to Be Heard This can be through:

Written explanation
Conference or hearing (especially when facts are disputed) A formal trial-type hearing is not always required, but the employee must have a real chance to respond.

Second Written Notice (Notice of Decision) Must state:

The employer’s findings
The grounds and reasons for termination
The effectivity date

Common procedural defects: vague accusations, no time to respond, predetermined outcome, denial of access to evidence, failure to consider defenses, and no written decision notice.

B. For Authorized Causes: 30-Day Notice to Both Employee and DOLE + Separation Pay

For authorized causes (redundancy, retrenchment, labor-saving devices, closure not due to serious losses), the employer generally must:

Serve written notice to the affected employee(s) at least 30 days before effectivity; and
Serve written notice to DOLE at least 30 days before effectivity; and
Pay the required separation pay (amount depends on the specific authorized cause)

Authorized cause terminations do not follow the two-notice rule used for just causes; they follow the notice-to-employee and notice-to-DOLE model.

C. For Disease: Medical Certification and Procedural Fairness

Because disease termination is sensitive, compliance with statutory medical certification requirements and appropriate written notice is crucial.

7) Separation Pay Rules (Typical Statutory Baselines)

Separation pay depends on the ground and is often computed using “one month salary” or “one-half month salary” per year of service rules (with a fraction of at least six months typically counted as one year in many computations). Common statutory baselines discussed in practice:

Redundancy or installation of labor-saving devices: commonly at least one month pay per year of service (or one month pay, whichever is higher)
Retrenchment or closure not due to serious losses: commonly at least one-half month pay per year of service (or one month pay, whichever is higher)
Disease: commonly at least one-half month pay per year of service (or one month pay, whichever is higher)
Closure due to serious business losses: separation pay may be not required, but losses must be proven and notices still apply

Because jurisprudence can affect computation details (what counts as “salary,” inclusion of regular allowances, etc.), disputes often arise over the proper base pay and inclusions.

8) The Burden of Proof and Evidence Standard

In illegal dismissal cases, the employer generally bears the burden to prove:

The dismissal occurred (or to refute constructive dismissal allegations), and
The dismissal was for a valid cause, and
Due process was observed

Labor cases rely on substantial evidence (such relevant evidence as a reasonable mind might accept as adequate), not proof beyond reasonable doubt.

9) Typical Patterns of Illegal Dismissal

These fact patterns commonly lead to findings of illegality:

A. No Valid Cause / Pretext Termination

“Performance issues” with no documented standards, coaching, evaluations, or objective metrics
“Company policy violation” with selective enforcement or unclear policy
LOTAC invoked without a specific, provable breach
Termination based on rumor, suspicion, or anonymous complaints without verification

B. Retaliation and Discrimination Patterns

While Philippine labor law does not mirror all foreign anti-discrimination frameworks, termination can be illegal when it is a pretext for prohibited acts (e.g., anti-union discrimination, retaliation for asserting labor rights, bad-faith termination for pregnancy-related reasons where protected conditions apply under labor laws and special statutes, etc.). Union-related dismissals may also implicate unfair labor practice issues.

C. Constructive Dismissal Tactics

Demotion, forced resignation, punitive transfers
“Floating” without genuine business necessity
Harassment or humiliation to force resignation
Unjustified preventive suspension or withholding of work

D. Authorized Cause Abuses

“Redundancy” without reorganization proof, or where the position continues under a new title
Retrenchment without credible financial basis
Closure claims while business continues through another entity (possible labor-only contracting or bad faith restructuring)
Selection criteria that targets union officers or outspoken employees

10) Remedies for Illegal Dismissal

A. Reinstatement (Primary Remedy)

A worker illegally dismissed is generally entitled to reinstatement without loss of seniority rights. Reinstatement can be:

Actual reinstatement (return to work), or
Payroll reinstatement (paid while case/appeal is pending, in appropriate situations)

In NLRC practice, reinstatement orders can have immediate executory effects even pending appeal, subject to rules and exceptions recognized in jurisprudence.

B. Full Backwages

Backwages are typically awarded from the time compensation was withheld due to dismissal up to actual reinstatement (or finality of the decision if separation pay is awarded in lieu of reinstatement, depending on how the ruling is structured). Backwages generally aim to restore what the employee should have earned, which may include applicable benefits and legally mandated increases.

C. Separation Pay in Lieu of Reinstatement

If reinstatement is no longer viable (e.g., strained relations in appropriate cases, abolition of position, closure, or other supervening circumstances), adjudicators may award separation pay instead of reinstatement, often computed as a function of years of service (commonly one month per year, though outcomes vary by case context and rulings).

D. Damages and Attorney’s Fees

Depending on the circumstances, the employee may also recover:

Moral damages (when dismissal was attended by bad faith, fraud, oppression, or in a manner contrary to morals/public policy)
Exemplary damages (as a deterrent, when employer acted in a wanton or malevolent manner)
Attorney’s fees (commonly up to 10% in appropriate cases, especially when the employee was forced to litigate to recover what is due)

E. When There Is a Valid Cause but Due Process Was Defective: Nominal Damages

Even if the employer proves a valid just/authorized cause, failure to observe the proper procedure can result in nominal damages (a monetary award recognizing violation of statutory due process). Philippine jurisprudence has commonly referenced benchmark amounts (often discussed as ₱30,000 for just-cause dismissals with procedural defects and ₱50,000 for authorized-cause dismissals without required notices), though courts may adjust based on circumstances and later rulings.

This category is important: the dismissal may be upheld as valid, but the employer pays damages for violating procedural rights.

11) Procedural Path: Where and How Illegal Dismissal Cases Are Filed

A. SEnA (Single Entry Approach)

Many disputes go first through a mandatory or strongly encouraged conciliation-mediation track under DOLE’s SEnA framework, intended to facilitate settlement before litigation.

B. NLRC / Labor Arbiter (Main Forum)

Illegal dismissal complaints are typically filed with the Labor Arbiter under the NLRC. The employer-employee relationship and the fact of dismissal are litigated here, along with monetary claims related to termination.

C. Appeals

Decision of Labor Arbiter → appeal to the NLRC (subject to strict rules and timelines)
NLRC decisions are commonly challenged before the Court of Appeals via special civil action (Rule 65), and potentially elevated to the Supreme Court under appropriate modes

12) Prescription Periods (Time Limits)

Time limits depend on the nature of the claim:

Illegal dismissal complaints have been treated in jurisprudence as actions that may be subject to a longer prescriptive period than ordinary money claims, while
Money claims (wages, benefits, etc.) are often subject to the Labor Code prescriptive period commonly cited for such claims.

Because mixed claims are typical (reinstatement/backwages plus benefits, differentials, damages), prescription arguments can become technical and case-specific.

13) Practical Case Themes That Often Decide Outcomes

Adjudicators commonly focus on these:

A. Documentation Quality

Written notices, investigation records, emails, incident reports
Performance metrics and communicated standards
Proof of service of notices (receipt, registry, acknowledgments)

B. Credibility and Consistency

Consistent enforcement of policies
Past practice and treatment of similarly situated employees
Timing (e.g., termination immediately after protected activity or complaint)

C. Good Faith in Authorized Causes

Reorganization plan, audited financials, board resolutions
Fair criteria and non-discriminatory selection
Proof that positions were actually abolished or business conditions required downsizing

14) Key Distinctions to Remember

Just cause = employee fault → two-notice rule + opportunity to be heard
Authorized cause = business reason → 30-day notice to employee + DOLE + separation pay
Disease = medical ground → competent public health authority certification + separation pay + fair process
No valid ground = illegal dismissal → reinstatement + backwages (or separation pay in lieu) + possible damages
Valid ground but wrong process = dismissal may stand but employer pays nominal damages

15) A Note on High-Stakes Use

This is a general legal discussion of Philippine labor standards and jurisprudential doctrines. Outcomes depend heavily on evidence, job status classification, company documents, and the specific way the termination was carried out.