Rescinded Employment Contract Legal Remedies Philippines

Rescinded Employment Contract Legal Remedies in the Philippines

Introduction

In the Philippine legal system, an employment contract establishes the rights and obligations between an employer and an employee, governed primarily by labor laws that prioritize worker protection. Rescission of an employment contract refers to its cancellation or termination, which can occur mutually, unilaterally, or by operation of law. When rescinded improperly—such as through illegal dismissal or breach—it triggers legal remedies to restore the aggrieved party or compensate for losses. This is particularly relevant in a context where labor disputes are common, often involving issues like unjust termination, non-payment of benefits, or contractual violations.

Remedies vary depending on the party at fault: employees typically seek reinstatement and backwages for unlawful rescission, while employers may pursue damages for employee breaches. The process emphasizes due process, security of tenure, and social justice principles enshrined in the 1987 Constitution (Article XIII, Section 3). This article comprehensively explores the topic, including legal foundations, grounds for rescission, available remedies, procedural mechanisms, evidentiary requirements, special considerations, and potential challenges. It draws from established Philippine labor statutes, the Civil Code, and Supreme Court jurisprudence. This is not legal advice; parties should consult the Department of Labor and Employment (DOLE), National Labor Relations Commission (NLRC), or a labor lawyer for case-specific guidance.

Legal Basis

The rescission of employment contracts and associated remedies are rooted in a blend of labor-specific laws and general contract principles:

1. Labor Code of the Philippines (Presidential Decree No. 442, as amended):

   • Security of Tenure (Articles 279-286): Regular employees cannot be dismissed without just or authorized cause and due process. Rescission without these is illegal, entitling the employee to remedies.
   • Just Causes (Article 282): Includes serious misconduct, willful disobedience, neglect of duties, fraud, breach of trust, crime, or analogous causes.
   • Authorized Causes (Article 283-284): Closure, retrenchment, redundancy, installation of labor-saving devices, or disease.
   • Probationary Employment (Article 281): Can be rescinded if the employee fails to qualify, but with evaluation and notice.
   • Termination Procedure (Article 277): Requires written notice and opportunity to be heard.
   • Remedies (Article 279): Reinstatement without loss of seniority and full backwages for illegal dismissal.

2. Civil Code of the Philippines (Republic Act No. 386):

   • Contracts (Articles 1159-1422): Employment contracts are consensual, binding, and subject to rescission for breach (Article 1191), with mutual restitution. However, labor contracts are not purely civil; labor laws supersede where conflicting.
   • Damages (Articles 2199-2235): Actual, moral, exemplary, and nominal damages for bad faith rescission.
   • Obligations (Articles 1156-1304): Breach by one party allows the other to seek resolution or damages.

3. Department Orders and Implementing Rules:

   • DOLE Department Order No. 174-17: Regulates contracting and subcontracting; rescission of service contracts can affect workers' employment.
   • DOLE Department Order No. 147-15: Amends rules on termination, emphasizing due process.
   • Omnibus Rules Implementing the Labor Code: Details procedures for dismissal and remedies.

4. Special Laws:

   • Migrant Workers and Overseas Filipinos Act (RA 8042, as amended by RA 10022): Protects OFWs from illegal rescission abroad, with remedies via POEA/NLRC.
   • Kasambahay Law (RA 10361): Domestic workers have similar protections against unjust rescission.
   • Anti-Sexual Harassment Act (RA 7877) and Safe Spaces Act (RA 11313): Rescission related to harassment can lead to administrative or criminal remedies.

5. Jurisprudence:

   • Serrano v. NLRC (G.R. No. 117040, 2000): Declared that dismissal without due process entitles to indemnity; later modified by Agabon v. NLRC (G.R. No. 158693, 2004) to nominal damages.
   • Wenphil Corp. v. NLRC (G.R. No. 80587, 1989): Established the "Wenphil doctrine" allowing post-dismissal hearings in some cases.
   • Jaka Food Processing v. Pacot (G.R. No. 151378, 2005): Clarified computation of separation pay for authorized causes.
   • PLDT v. NLRC (G.R. No. 80609, 1988): Emphasized that constructive dismissal (forced rescission via intolerable conditions) is illegal.

Constitutional underpinnings include due process (Article III, Section 1) and labor protection, making remedies mandatory for violations.

Grounds for Rescission of Employment Contract

Rescission can be lawful or unlawful, determining available remedies:

1. Lawful Rescission:

   • By Mutual Agreement: Both parties consent; requires release-quitclaim to be voluntary and with consideration.
   • Expiration of Term: For fixed-term or project-based contracts (Article 280).
   • Just or Authorized Causes: As above, with due process (two-notice rule: notice of intent, hearing, notice of decision).
   • Resignation: Voluntary by employee, but if coerced, it's constructive dismissal.

2. Unlawful Rescission:

   • Without cause or due process.
   • Discriminatory (e.g., based on union activity, pregnancy per RA 9710 Magna Carta of Women).
   • Retaliatory (e.g., after filing complaints).
   • Breach by employer (e.g., non-payment of wages, unsafe conditions).

In unlawful cases, the contract is deemed not rescinded, and the employment relationship persists legally.

Legal Remedies Available

Remedies aim to restore status quo or compensate, depending on the aggrieved party.

For Employees (Primary Beneficiaries)

1. Reinstatement:

   • Actual (back to position) or payroll (wages without work) pending appeal (Article 223, Labor Code).
   • Mandatory for illegal dismissal unless strained relations exist (e.g., managerial positions).

2. Backwages:

   • Full from dismissal to reinstatement, including allowances and benefits (computed per Bustamante v. NLRC, G.R. No. 111651, 1996).
   • Incremental if promotions would have occurred.

3. Separation Pay:

   • Alternative to reinstatement (one month per year of service, minimum half-month).
   • For authorized causes (Article 283) or when reinstatement is impossible.

4. Damages:

   • Moral (for bad faith, anxiety), exemplary (to deter), attorney's fees (10% of award), per Civil Code and Mendoza v. Transworld, G.R. No. 172001, 2010.

5. Other Benefits:

   • Unpaid wages, 13th month pay (PD 851), holiday pay, etc.
   • Retirement benefits if applicable (RA 7641).

6. Administrative Sanctions:

   • Against employer: Fines by DOLE (P1,000-P10,000 per violation).

For Employers

1. Damages for Breach:

   • If employee abandons post or breaches non-compete clauses (Article 285), claim actual damages (e.g., training costs).
   • Hold departure orders or blacklisting for OFWs who breach.

2. Disciplinary Actions:

   • Termination for just cause; no liability if due process followed.

3. Injunctions:

   • To prevent employee from working for competitors if valid restrictive covenants exist.

Procedure for Seeking Remedies

Disputes are resolved through labor arbitration, not regular courts.

1. Mandatory Conciliation-Mediation:

   • File with DOLE Single Entry Approach (SEnA) within 30 days; 30-day conciliation period.

2. Formal Complaint:

   • If unresolved, file with NLRC Regional Arbitration Branch (position paper, evidence).
   • Jurisdiction: NLRC for money claims over P5,000; DOLE Regional Director for under P5,000 (Article 129).
   • For OFWs: POEA or NLRC.

3. Hearing and Decision:

   • Labor Arbiter decides within 30 days post-submission.
   • Appeals: To NLRC Commission (60 days), Court of Appeals (Rule 65), Supreme Court.

4. Execution:

   • Writ of execution for monetary awards; sheriff enforces.

Timeline: 6-12 months for initial decision; appeals can extend to years.

Evidence and Requirements

• For Employees: Dismissal notice, payslips, company ID, witness affidavits, medical records (if disease-related).
• For Employers: Incident reports, memos, performance evaluations.
• Burden of Proof: Employer proves lawful cause; employee proves employment relationship.
• Electronic Evidence: Admissible per Rules on Electronic Evidence.

Challenges and Special Considerations

1. Probationary Employees: Easier rescission but still requires cause and notice.
2. Fixed-Term Contracts: Rescission before term may require indemnity unless for cause.
3. Constructive Dismissal: Remedies same as illegal dismissal; prove intolerability.
4. Unionized Workers: CBA may provide additional remedies; strikes if mass dismissal.
5. COVID-19 Impacts: Flexible work under RA 11165 (Telecommuting Act); pandemic-related rescissions scrutinized for good faith.
6. Prescription: Claims prescribe in 3 years for money, 4 years for injury (Article 291, Labor Code).
7. Costs: No filing fees for employees; legal aid via PAO or IBP.
8. Enforcement Issues: Employer insolvency; NLRC backlogs.

Conclusion

Rescinded employment contracts in the Philippines trigger a robust framework of remedies designed to uphold labor rights, with illegal rescission often resulting in reinstatement and backwages for employees. Anchored in the Labor Code and Civil Code, these mechanisms balance contractual freedom with social equity, as affirmed in jurisprudence. Employers must adhere to due process to avoid liability, while employees benefit from accessible dispute resolution. As labor dynamics evolve, vigilance against abuses remains key. Parties facing such issues should promptly seek DOLE assistance or legal counsel to navigate complexities effectively.

Disclaimer: This is general information; consult a labor specialist or authority for advice.