In the Philippines, the right to security of tenure is constitutionally protected. While the Labor Code recognizes Redundancy and Retrenchment as authorized causes for termination, these are strictly scrutinized by the courts. When an employer fails to comply with the stringent legal requirements, the dismissal becomes illegal, entitling the employee to specific legal remedies.
Understanding the Authorized Causes
Before exploring remedies, it is vital to distinguish the two grounds:
- Redundancy: Occurs when an employee’s services are in excess of what is reasonably demanded by the actual requirements of the enterprise (e.g., duplication of functions, decrease in volume of business, or adoption of new technology).
- Retrenchment: A socio-economic ground used to significantly reduce personnel to prevent serious business losses.
For either to be valid, the employer must prove:
- Good Faith in the implementation of the program.
- Substantial Evidence of the grounds (e.g., audited financial statements for retrenchment).
- Fair and Reasonable Criteria in selecting who to dismiss (e.g., Last-In, First-Out rule, efficiency ratings).
- Notice Requirement: 30-day prior written notice to both the employee and the Department of Labor and Employment (DOLE).
- Payment of Separation Pay.
Primary Remedies for Illegal Dismissal
If a Labor Arbiter finds that the redundancy or retrenchment was a sham, "union-busting," or procedurally infirm, the following remedies are usually awarded:
1. Reinstatement
The employee is entitled to be restored to their former position without loss of seniority rights.
- Exception (Strained Relations): If the relationship between the employer and employee has been so severely damaged that reinstatement is no longer viable, "Separation Pay in lieu of Reinstatement" is awarded instead.
2. Full Backwages
This represents the compensation the employee lost from the time of illegal dismissal up to the time of actual reinstatement. This includes:
- Basic salary.
- 13th-month pay.
- Allowances and other benefits (e.g., Rice subsidy, HMO) normally received.
3. Separation Pay
In the context of a "legal" redundancy or retrenchment, separation pay is a statutory requirement. However, in an illegal dismissal case, it serves two roles:
- As a substitute for reinstatement: (One month salary for every year of service).
- As a statutory benefit: Even if the dismissal is valid, the employer must pay:
- Redundancy: 1 month pay or 1 month for every year of service, whichever is higher.
- Retrenchment: 1 month pay or 1/2 month for every year of service, whichever is higher.
Moral and Exemplary Damages
These are not automatically granted in every illegal dismissal case. They are awarded only when the dismissal was attended by:
- Bad Faith or Fraud: For example, if the employer claimed redundancy just to get rid of a whistleblower.
- Oppressive Conduct: If the manner of dismissal was unnecessarily harsh or humiliating.
- Social Humiliation: When the employer’s actions cast doubt on the employee's integrity or reputation.
Attorney’s Fees
Under the Civil Code and the Labor Code, an employee who is forced to litigate to protect their rights is entitled to attorney’s fees, typically capped at 10% of the total monetary award.
The "Nominal Damages" Rule (The Agabon Doctrine)
There are instances where a "just" cause (like a genuine redundancy) exists, but the employer failed to follow the procedural due process (the 30-day notice).
In such cases, the dismissal is upheld (the employee is not reinstated), but the employer is ordered to pay Nominal Damages.
- For violations of due process in Authorized Causes, the prevailing rate of nominal damages is usually PhP 50,000.00, as established in Jaka Food Processing vs. Pacot.
Summary Table of Monetary Awards
| Remedy | Basis for Award | Amount/Calculation |
|---|---|---|
| Backwages | Compensation for lost income | Full pay from dismissal to reinstatement |
| Separation Pay | Substitute for Reinstatement | 1 month pay per year of service |
| Moral Damages | Proof of bad faith/malice | Discretionary by the Labor Arbiter |
| Nominal Damages | Violation of 30-day notice only | Typically PhP 50,000 (Authorized Cause) |
| Attorney's Fees | Cost of litigation | 10% of total monetary judgment |
Procedural Step: Filing the Complaint
To seek these remedies, the aggrieved employee must file a complaint for Illegal Dismissal at the National Labor Relations Commission (NLRC) having jurisdiction over the workplace. The process begins with mandatory conciliation-mediation (SENA) to explore the possibility of an amicable settlement before the case proceeds to the Labor Arbiter for decision.