Philippine labor law is built around security of tenure: an employee who is legally “dismissed” (or whose employment is ended in a manner treated as dismissal) may recover reinstatement, backwages, and damages if the employer cannot justify both the substantive ground and the proper procedure.

This article explains the legal ways employment may end, the grounds and due process required, and the money consequences (final pay, separation pay, and liabilities).

1) The framework: when “termination” is legally valid

A lawful end of employment typically requires:

Correct legal basis (substantive due process)
Correct procedure (procedural due process)

These apply most strictly to termination by the employer. Some employment relationships end without “dismissal,” such as expiration of a fixed term or completion of a project, but misclassification or bad faith can convert these into illegal dismissal.

2) Employment classifications that affect termination rules

Termination rules vary depending on what kind of employment relationship exists:

A) Regular employment

A regular employee may be terminated only for:

Just causes (fault-based), or
Authorized causes (business/health-based), plus proper procedure.

B) Probationary employment

A probationary employee may be terminated for:

A just cause, or
Failure to meet reasonable standards that were made known at the time of engagement.

Even probationary termination still requires due process (notice and a chance to respond).

C) Fixed-term employment

Employment ends upon expiration of the term if the fixed term is valid (not used to defeat security of tenure). If a “fixed-term” arrangement is a disguise for regular work, termination rules for regular employees can apply.

D) Project employment

Employment ends upon completion of the project (or phase) if genuinely project-based and properly documented. Misuse can lead to regular status and illegal dismissal exposure.

E) Seasonal employment

Employment ends at the end of the season, but repeated seasonal engagement can create regularity for the season or activity.

F) Casual employment

Casual employees may become regular if they work for at least one year, or if the work is usually necessary/desirable to the business.

3) Termination by the employer: the legal grounds

The Labor Code (as renumbered) places the main grounds under:

Article 297 (formerly Art. 282) – Just causes
Article 298 (formerly Art. 283) – Authorized causes
Article 299 (formerly Art. 284) – Disease

3.1. Just causes (fault-based) — Art. 297

These involve employee misconduct or fault. Common just causes include:

Serious misconduct
Willful disobedience / insubordination (lawful and reasonable orders)
Gross and habitual neglect of duties
Fraud or willful breach of trust (includes loss of confidence in appropriate cases)
Commission of a crime or offense against the employer, employer’s family, or authorized representatives
Other causes analogous to the above (must be similar in nature and gravity)

Notes that often decide cases

“Loss of trust and confidence” is typically easier to invoke for managerial employees and for employees in positions of trust (cashiers, auditors, property custodians), but it still requires a factual basis and good faith.
Abandonment is treated as a form of neglect/just cause but is often misused; it generally requires (a) failure to report for work and (b) a clear intent to sever the employment relationship—intent is the hard part and must be shown by overt acts.

3.2. Authorized causes (business-related) — Art. 298

These are not about employee fault. The common authorized causes are:

Installation of labor-saving devices
Redundancy
Retrenchment to prevent losses
Closure or cessation of business (full or partial)

Good-faith requirements matter

Redundancy must be real and typically requires fair selection criteria (e.g., efficiency, seniority, status) and documentation showing positions are truly excess.
Retrenchment requires evidence of actual or imminent substantial losses and a reasonably necessary cost-cutting plan; it cannot be a pretext.
Closure may be for business reasons; if closure is due to serious business losses, separation pay rules change (see below).

3.3. Disease as a ground — Art. 299

Termination may be valid if:

The employee suffers from a disease not curable within six (6) months even with proper medical treatment, and
Continued employment is prohibited by law or prejudicial to the employee’s health or to the health of co-employees,
Supported by the required medical certification (commonly framed as certification by a competent public health authority or as otherwise required by law/jurisprudence).

Disease termination is often invalidated when employers skip the required medical basis or confuse it with ordinary absenteeism/poor performance.

4) Procedural due process: the “how” of termination

Even with a valid ground, failure to follow due process can create liability.

4.1. For just causes: the Twin-Notice Rule

Standard due process for just-cause dismissal typically requires:

First written notice (Notice to Explain / Charge Sheet)
- States the specific acts/omissions and the policy/rule violated
- Gives a reasonable period to respond (commonly at least 5 calendar days in practice standards)
Opportunity to be heard
- Written explanation, conference, or hearing depending on circumstances
Second written notice (Notice of Decision)
- Communicates the employer’s decision and reasons after evaluation

Preventive suspension

If the employee’s continued presence poses a serious and imminent threat to life/property or to the investigation, preventive suspension may be used (commonly limited in duration and must not become punitive without basis).

4.2. For authorized causes (and disease): 30-day notices

For authorized causes, the usual requirement is written notice at least 30 days before effectivity to:

The affected employee(s), and
The DOLE (through the appropriate office)

For disease terminations, employers typically follow a similar notice approach and must ensure the medical/legal prerequisites are met.

5) Separation pay: when it is required and how it is computed

Separation pay is typically due for authorized causes and disease, but not for just causes.

5.1. Standard formulas (minimums)

For installation of labor-saving devices or redundancy:

At least one (1) month pay, or
One (1) month pay per year of service, whichever is higher

For retrenchment or closure/cessation not due to serious losses:

At least one (1) month pay, or
One-half (1/2) month pay per year of service, whichever is higher

For disease:

At least one (1) month pay, or
One-half (1/2) month pay per year of service, whichever is higher

Rounding rule: A fraction of at least six (6) months is commonly counted as one (1) whole year.

5.2. Closure due to serious business losses

If closure is genuinely due to serious business losses, separation pay may not be required—but the employer must be able to prove the losses with credible evidence (often audited financial statements and consistent business records).

6) End of employment that is not “dismissal” (but can become one)

Some relationships end “by operation of the contract,” but employers must be careful: bad faith or misclassification can convert the event into illegal dismissal.

6.1. Expiration of fixed-term contract

Valid if:

The fixed term was genuinely agreed and not used to defeat security of tenure,
The employee’s work does not show a pattern of regularization disguised by repeated short terms.

6.2. Completion of project / phase

Valid if:

The employee was truly hired for a project with a defined scope and duration,
The project completion is documented, and required reports/records are properly maintained.

6.3. Temporary layoff / floating status

Philippine law recognizes temporary suspension of employment for bona fide business reasons (often discussed under the Labor Code’s temporary layoff provision). If the employee is placed on “floating status” beyond the legally tolerated period (commonly referenced as six months) without recall or valid termination, it can ripen into constructive dismissal.

7) Termination by the employee (resignation and “just causes” for quitting)

Under Article 300 (formerly Art. 285):

7.1. Ordinary resignation

Employee gives written notice at least 30 days in advance, unless a shorter period is accepted.

7.2. Immediate resignation for just causes

An employee may resign without notice for causes such as:

Serious insult by the employer/representative
Inhuman and unbearable treatment
Commission of a crime or offense by the employer/representative against the employee or immediate family
Other analogous causes

8) Constructive dismissal: “termination without a termination letter”

Constructive dismissal happens when the employer makes continued employment impossible, unreasonable, or unlikely, such as:

Demotion in rank or diminution of pay/benefits without valid basis
Harassment, discrimination, or hostile working conditions
Forced resignation
Unjustified “floating status” beyond the allowable period
Transfer designed to penalize or force the employee out

Constructive dismissal is treated like illegal dismissal, with similar remedies.

9) Final pay and post-employment obligations

Even after lawful separation, employers typically must address:

9.1. Final pay components (common)

Unpaid wages
Pro-rated 13th month pay (if applicable)
Cash conversion of unused leave credits (if company policy/CBA or practice provides)
Separation pay (if due)
Other earned benefits/commissions subject to company policy and proof

DOLE issuances commonly push for release of final pay within a set period (often framed as within 30 days unless a more favorable policy applies), but disputes can arise when accountabilities and clearances are invoked improperly.

9.2. Certificate of Employment (COE)

Employees generally have the right to a COE stating periods of employment and position, and employers are expected to issue it within a reasonable time.

9.3. Clearance and accountabilities

Clearance can be used to document return of company property and settle accountabilities, but it should not be used to unlawfully withhold wages or benefits without lawful basis and due process.

10) Illegal dismissal: consequences and remedies

If termination is illegal (no valid ground and/or defective procedure with substantive invalidity), common remedies include:

Reinstatement (to former position or equivalent) without loss of seniority rights, and
Full backwages from dismissal until actual reinstatement

If reinstatement is no longer feasible (e.g., strained relations doctrine in appropriate cases), the remedy can shift to separation pay in lieu of reinstatement, plus backwages.

Other possible monetary awards:

Moral and exemplary damages (typically when bad faith or oppressive conduct is proven)
Attorney’s fees in proper cases

Burden of proof: The employer generally bears the burden to prove that dismissal was for a valid cause and that due process was observed.

11) Common compliance pitfalls (the usual reasons employers lose)

Using the wrong ground (e.g., calling a redundancy “performance issue” without evidence)
Weak documentation (no written standards for probationary employees; vague allegations)
Skipping the twin-notice process for just causes
No 30-day DOLE/employee notice for authorized causes
Declaring retrenchment without credible proof of losses
Treating repeated fixed-term/project contracts as a shield against regularization
Using clearance/accountabilities to delay final pay without lawful justification
“Loss of trust” invoked without concrete factual basis

12) Practical termination roadmap (Philippine setting)

Step 1: Identify the relationship correctly (regular, probationary, project, fixed-term, etc.). Step 2: Match the facts to a legally recognized ground (just cause vs authorized cause vs disease). Step 3: Follow the correct procedure (twin notices and hearing for just cause; 30-day notices for authorized causes; medical requirements for disease). Step 4: Compute separation pay and final pay properly, and document computation. Step 5: Keep a clean paper trail (incident reports, investigation records, minutes of conference, notices, DOLE filings, medical certifications, selection criteria).