Termination of Employment Due to Disease under Philippine Law
(A comprehensive legal article – updated to 27 June 2025)
Caveat: This is an academic overview. Employers and employees should consult counsel or the Department of Labor and Employment (DOLE) for situation-specific advice.
1. Statutory & Constitutional Foundations
| Source | Key Provision |
|---|---|
| 1987 Constitution | Art. XIII sec. 3 guarantees workers’ security of tenure and humane conditions. |
| Labor Code of the Philippines (PD 442), as renumbered | Art. 299 (old Art. 284) – “Disease” is an authorized cause for dismissal when: 1️⃣ the employee is suffering from a disease not curable within six months even with proper medical treatment and 2️⃣ continued employment is prejudicial to the employee’s health or that of co-workers, certified by a competent public health authority. |
| Book VI, Rule I, §8 of the Implementing Rules | Re-states Art. 299 and mandates separation pay. |
| DOLE Department Order (D.O.) 147-15 (Series 2015) | Consolidates rules on termination for both just and authorized causes; details procedural due process for disease cases. |
| Republic Act 11058 & D.O. 198-18 | Employers’ Occupational Safety & Health (OSH) duties to maintain a workplace free from conditions injurious to health. |
| RA 7277 (Magna Carta for Persons with Disability), as amended by RA 10524 | Prohibits discrimination against qualified PWDs; disease-related termination must not mask discrimination where reasonable accommodation is viable. |
2. Elements of a Valid “Disease” Dismissal
Existence of Disease – medically established.
Certification – Competent public health authority (normally a government physician or a duly licensed specialist in a public institution) must attest that:
- a. The disease cannot be cured within six (6) months even with proper treatment; and
- b. Continued employment will endanger the employee’s or co-workers’ health.
Employer’s Good-Faith Compliance with:
- Substantive requirements (above); and
- Procedural requirements (section 3 below).
⚠️ Absence of the medical certificate is fatal – dismissal is illegal even if the employee is actually ill (e.g., Tan v. NLRC, G.R. 78625, 1990; Jarco Marketing Corp. v. CA, G.R. 129792, 1998).
3. Procedural Due Process
Although “disease” is an authorized cause, the Supreme Court treats it as requiring the “twin-notice rule” familiar in just-cause cases (see Deoferio v. Intel, G.R. 240717, 2022):
| Step | Timing & Content |
|---|---|
| 1st Notice | Inform the employee of the intent to dismiss due to disease. Attach or reference preliminary medical findings, and give at least 5 calendar days to respond/submit contrary medical opinion. |
| Opportunity to be Heard | A conference or written exchange where the employee may: • present a second medical opinion; • seek reassignment or accommodation. |
| 2nd Notice | Communicate the final decision + effective date + computation of benefits. |
Failure to observe due process makes the dismissal defective, exposing the employer to nominal damages (typically ₱30,000-₱50,000), even if the substantive grounds exist (Agabon v. NLRC, G.R. 158693, 2004).
4. Monetary Entitlements
| Item | Rule |
|---|---|
| Separation Pay | At least ½-month salary per year of service (₱225 per month minimum) or one-month salary, whichever is higher – a fraction ≥6 months counts as 1 year. |
| Pro-rated 13th-Month Pay | Up to last working day. |
| Conversion of Earned Leaves | As provided by CBA/company policy. |
| SSS/EC Disability Benefits | If disability rating ≥ partial permanent. |
| PhilHealth Coverage | The employee remains covered until last premium month; serious diseases may qualify for “Z” benefit packages. |
Separation pay is not a substitute for disability benefits; both may be claimed concurrently.
5. Employer’s Ancillary Duties
- Reasonable Accommodation – Before dismissal, explore transfer, modified duties, flexible scheduling, or remote work (Art. 13, RA 7277; Gonzales v. Catholic School of Midsayap, G.R. 226220, 2021).
- OSH Compliance – Provide free mandatory medical examination at hiring and at regular intervals; maintain health records.
- Report to DOLE – File Establishment Termination Report (RKS Form 5) within 30 days from effectivity.
- Preserve Personnel Records for 3 years (Labor Code Art. 305).
6. Jurisprudential Highlights
| Case | Gist |
|---|---|
| Tan v. NLRC (1990) | Dismissal illegal for lack of competent certification; diagnostic note from private MD insufficient. |
| Jarco Marketing Corp. v. CA (1998) | Certification must explicitly state the 6-month incurability; otherwise dismissal void. |
| Manila Hotel Corp. v. De la Cruz (G.R. 221057, 2016) | Even TB (a curable disease) justifies dismissal only if proven incurable within six months and prejudicial to others. |
| San Miguel Foods, Inc. v. Diaz (G.R. 217781, 2017) | Employer must show reasonable efforts at accommodation; abrupt dismissal sans accommodation was illegal. |
| Deoferio v. Intel (2022) | Clarified that disease cases observe two-notice + hearing despite being under Art. 299. |
| Villarama v. PAL (G.R. 202424, 2022) | Distinction between sickness “leave” and “authorized termination”; employer may allow extended leave past six months in lieu of dismissal. |
7. Interplay with Anti-Discrimination & Data-Privacy Laws
- RA 10911 (Anti-Age Discrimination) & RA 11166 (HIV & AIDS Policy Act) prohibit termination solely because of age/HIV status; medical evidence of actual risk is still required.
- Medical data are “sensitive personal information” (RA 10173, Data Privacy Act). Disclosure requires consent, or must be on a strictly need-to-know basis for OSH compliance.
8. Tax Treatment
- Separation pay due to employee’s sickness or disability is tax-exempt under NIRC §32(B)(6)(b).
- SSS & EC disability benefits are exempt; PhilHealth reimbursements are not taxable income.
9. Remedies of an Aggrieved Employee
| Option | Relief |
|---|---|
| File Illegal Dismissal complaint (NLRC/DOLE)** within 4 years | • Reinstatement w/ back-wages or separation pay in lieu thereof; • Moral/exemplary damages & atty.’s fees; |
| Claim SSS / ECC Disability | Partial/total permanent disability pensions or lump-sum. |
| NLRC - Interim Reinstatement | Possible if employer fails to substantiate dismissal prima facie at mandatory conference. |
10. Practical Compliance Checklist for Employers
- ✅ Immediately require the employee to undergo company-initiated medical exam or submit results.
- ✅ If disease confirmed: request certificate from DOH/City/Provincial hospital or government specialist.
- ✅ Evaluate alternative work or modifications; document efforts.
- ✅ Serve First Notice + give at least 5 days to respond.
- ✅ Hold conference; consider employee’s contrary medical evidence.
- ✅ Decide; if dismissal: compute benefits, prepare Second Notice.
- ✅ Pay all monetary dues on or before last working day.
- ✅ File RKS Form 5 with DOLE Field Office within 30 days.
- ✅ Retain records; maintain confidentiality of medical information.
11. Re-employment After Recovery
Art. 299 does not expressly guarantee re-hiring; however, employers may re-employ a previously dismissed worker once certified fit. Best practice is to treat it as a new hire (since dismissal ended the employment tie) but give preference consistent with company policy or CBA.
12. Conclusion
Termination due to disease in the Philippines balances public health, employee welfare, and management prerogative. The employer bears the burden of:
- substantiating the medical basis with a competent public health certificate;
- respecting procedural due process; and
- paying statutory separation and social-insurance benefits.
Failure in any respect converts the dismissal into an illegal termination, exposing the employer to reinstatement liabilities and damages. Conversely, employees must cooperate in medical evaluations and heed safety directives; refusal without just cause can itself become willful disobedience.
Understanding these nuances—and documenting every step—ensures lawful, humane resolution when illness collides with the employment relationship.
Prepared by: [Your Name], Labor-Management Relations Specialist