In the Philippines, the security of tenure is a constitutionally protected right. Under the Labor Code of the Philippines, an employer cannot terminate the services of an employee except for a just cause or an authorized cause, and only after following due process. When a termination lacks these grounds, it is classified as illegal dismissal.

1. The Right to Substantive Due Process

For a termination to be valid, it must be based on specific grounds recognized by law. If an employer fires an employee for reasons not listed below, the dismissal is without just cause.

Just Causes (Article 297/282)

These are acts attributable to the employee’s fault or negligence:

Serious misconduct or willful disobedience.
Gross and habitual neglect of duties.
Fraud or willful breach of trust (Loss of Confidence).
Commission of a crime against the employer or their family.
Other analogous cases.

Authorized Causes (Article 298-299)

These are business-related reasons or health issues:

Installation of labor-saving devices.
Redundancy or Retrenchment to prevent losses.
Closing or cessation of operation.
Disease (if continued employment is prohibited by law or prejudicial to health).

2. The Right to Procedural Due Process

Even if a valid reason exists, failure to follow the "Two-Notice Rule" renders the dismissal defective.

First Written Notice: Specifying the grounds for termination and giving the employee an opportunity to explain (at least 5 calendar days).
Hearing/Conference: Giving the employee a chance to present evidence or rebut the accusations.
Second Written Notice: Communicating the final decision to dismiss.

3. Financial Claims and Remedies

An employee terminated without just cause is entitled to several forms of relief, often referred to as "Legal Redress."

Full Backwages

The employee is entitled to full backwages, inclusive of allowances and other benefits (or their monetary equivalent), computed from the time compensation was withheld up to the time of actual reinstatement. This restores the income lost due to the illegal act.

Reinstatement

The primary remedy is for the employee to be returned to their former position without loss of seniority rights.

Separation Pay in Lieu of Reinstatement: If "strained relations" exist between the employer and employee, or if the position no longer exists, the court may award separation pay instead. This is typically computed at one month’s salary for every year of service.

Pro-rated Benefits

Regardless of the cause of termination, the employee is entitled to the following earned benefits:

13th Month Pay: Pro-rated based on the months worked during the calendar year.
Service Incentive Leave (SIL): Commutation to cash of unused SIL (5 days per year of service).
Unpaid Salaries: For the days actually worked prior to termination.

Damages and Attorney's Fees

Moral Damages: Awarded if the dismissal was attended by bad faith, fraud, or was oppressive to labor.
Exemplary Damages: Awarded to set an example for the public good if the dismissal was done in a wanton or malevolent manner.
Attorney’s Fees: Usually 10% of the total monetary award, if the employee was forced to litigate to protect their rights.

4. Burden of Proof

In illegal dismissal cases, the burden of proof rests entirely on the employer. They must prove by substantial evidence that the termination was for a valid cause and that due process was observed. If the employer fails to provide this proof, the dismissal is automatically deemed illegal.

5. Prescription Period

An employee has four (4) years from the date of termination to file a complaint for illegal dismissal before the Labor Arbiter of the National Labor Relations Commission (NLRC). Claims for money only (without illegal dismissal) prescribe in three (3) years.