Unfair Dismissal of a Corporate President in the Philippines
A doctrinal, jurisprudential, and practical guide (as of 15 July 2025)
1. Conceptual framework
| Key roles | Governed primarily by | Relevant statutory bases |
|---|---|---|
| Rank‑and‑file / supervisory employee | Labor Code (PD 442, as amended) | Arts. 294‑300 (security of tenure & termination) |
| “Corporate officer” (President, Treasurer, Secretary, etc.) | Revised Corporation Code (RCC, RA 11232, 2019), formerly BP 68 | RCC § 25 (election & removal), § 27 (fiduciary duties) |
“Unfair (or illegal) dismissal” is a Labor‑Code term. The President, however, is typically a corporate officer, not an employee; her ouster is an intra‑corporate controversy and follows corporate, not labor, procedure. The complexity arises because Philippine law protects employees against arbitrary dismissal while allowing shareholders/directors wide latitude to replace officers „for cause”.
2. Determining status: officer vs employee
The Supreme Court repeatedly holds that the label “President” is not conclusive. The controlling test (see Matling Industrial & Commercial Corp. v. Coros, G.R. 148297, 8 Feb 2007; Peckson v. Robinsons Supermarket, G.R. 198534, 3 July 2013) asks:
- Source of authority – Was she elected/appointed pursuant to the by‑laws or by the Board acting under § 25 RCC?
- Nature of functions – Are they executive/policy‑making (officer) or subordinate/operational (employee)?
- Evidence of a distinct employment contract – salaries, SSS/PhilHealth remittances, inclusion in collective bargaining units, etc.
Resulting dichotomy Officer → governed by corporate law; removal is intra‑corporate; Labor Arbiters/NLRC lack jurisdiction. Employee (even if titled “President”) → governed by labor law; dismissal cases go to Labor Arbiter.
3. Jurisdictional map
| Period | Forum for removal disputes | Statutory basis / doctrine |
|---|---|---|
| Before 30 June 2001 | Securities & Exchange Commission (SEC) | PD 902‑A § 5 |
| 1 July 2001 – present | Regional Trial Court (designated Special Commercial Court) | § 5.2, RA 8799 (Securities Regulation Code) & Interim Rules on Intra‑Corporate Controversies (2001, as revised 2022) |
| If claimant shown to be employee | Labor Arbiter → NLRC → CA → SC | Art. 224 Labor Code; Tabang v. NLRC, G.R. 75501 (1994); Abraham v. NLRC, G.R. 92545 (1992) |
4. Grounds for removal of a President
The RCC is silent on specific causes; jurisprudence borrows from fiduciary and agency concepts. Recognised justifications include:
- Serious breach of fiduciary duty (self‑dealing, fraud, conflict of interest).
- Gross negligence or willful misconduct causing corporate loss.
- Disloyalty – competition with corporation, diversion of opportunity.
- Incapacity – physical/mental inability to perform.
- Loss of confidence by the Board/shareholders (a broader, business‑judgment ground unique to officers).
Removal “without cause” is legally permitted if the by‑laws or a Board/shareholder resolution so provide, but the ousted President may claim damages for breach of contract and violation of due‑process undertakings (see Section 5 below).
5. Due process requirements
Philippine corporate practice grafts the Labor‑Code twin‑notice & hearing model onto intra‑corporate removals, even though it is not textually mandated. Best practice—endorsed in Digital Microwave Corp. v. NLRC, G.R. 120009 (1997) and South East Asia Food, Inc. v. CA, G.R. 122211 (1999)—is:
- Prior written notice stating specific charges, served personally or by registered mail.
- Opportunity to be heard (oral or written) before the Board or a committee.
- Board resolution (at a duly called meeting, with quorum & minutes).
- Post‑decision notice informing the President of the Board’s action and remedies.
Failure to observe corporate due process does not void the dismissal (which stands if the Board has authority) but can give rise to liability for nominal damages (akin to Agabon doctrine in labor cases).
6. Compensation, benefits & separation pay
There is no statutory separation pay for corporate officers. Rights stem from:
Employment contract/by‑laws – may stipulate golden‑parachute payouts.
Negotiated exit – common in family or conglomerate setups to avoid litigation.
Court‑awarded damages – if removal is oppressive or in bad faith:
- Actual (salaries for unexpired term, benefits)
- Moral & exemplary damages (proved bad faith, malice)
- Attorney’s fees (when officer compelled to litigate).
Tax treatment follows ordinary compensation‐income rules; separation or retirement packages are taxable unless qualified under the Tax Code’s retirement benefits exemption (§ 32(B)(6)(a)) or BIR Ruling.
7. Remedies & procedure
| If treated as officer | If treated as employee |
|---|---|
| Complaint filed in Special Commercial Court (“SCC”) – verified complaint with certificate of non‑forum shopping | Complaint before Labor Arbiter (NLRC Regional Arbitration Branch) |
| Possible interim reliefs: injunction to stop ouster, appointment of receiver, accounting | Reinstatement (actual or payroll), backwages, damages |
| Appeal from SCC to Court of Appeals (§ 2 Rule 43); thence to Supreme Court via Rule 45 | Appeal within NLRC (Art. 229), then Rule 65 petition to CA, Rule 45 to SC |
| Prescription: 4 years (injury to rights, Civil Code § 1146) | 4 years (illegal dismissal, Callanta v. Carnation, 1986) |
8. Doctrinal developments (selected landmark cases)
| Case | G.R. No. / Date | Doctrine clarified |
|---|---|---|
| Matling Industrial v. Coros | 148297, 8 Feb 2007 | Election under by‑laws makes one an officer; NLRC had no jurisdiction. |
| Peckson v. Robinsons | 198534, 3 Jul 2013 | Even if titled “AVP”, employee status proven by HR records → NLRC proper. |
| South Seas Paper Mills v. CA | 102538, 30 Nov 1992 | Removal of President without notice actionable; damages awarded. |
| Gamboa v. Victoriano | 177990, 1 Oct 2013 | Bad‑faith ouster of Chief Operating Officer → moral & exemplary damages. |
| Edwards v. NLRC | 110287, 4 Oct 1994 | President may be simultaneously an employee; dual capacities recognized. |
| Oro‑Port Realty v. Flores | 206181, 4 Dec 2019 | Clarified that “corporate office” must be provided in the by‑laws; otherwise holder is an employee. |
9. Interplay with other laws
- Corporate Governance Codes – SEC Memorandum Circular 19‑2016 (Revised Code of Corporate Governance) stresses fair treatment of key officers; quoted often in court to define “bad faith”.
- Whistle‑blower, anti‑retaliation rules – RA 11032 (Ease of Doing Business) and SEC Guidelines protect Presidents who expose graft; retaliatory dismissal can be void for public policy.
- Anti‑Violence Against Women & Children Act – if dismissal targets a woman‑President for gender‑based bias, additional liabilities may attach (V‑AWC jurisprudence: Tolentino v. Nielsen, 2022).
- Data‑privacy – investigations preceding removal must observe the Data Privacy Act (RA 10173) when accessing emails/documents.
10. Best‑practice checklist for Boards
- Review by‑laws: ensure the President’s term, removal mechanics, and voting thresholds are explicit.
- Document just cause in Board minutes; attach evidence.
- Observe twin‑notice rule even if not strictly required.
- Offer a negotiated exit (e.g., separation package, non‑disparagement) to mitigate litigation risk.
- File timely disclosures with SEC (Form 17‑C) for publicly listed companies.
- Secure tax clearances for any lump‑sum payouts.
- Preserve digital evidence in anticipation of possible court discovery.
11. Key take‑aways
- The core question is status: Is the President primarily corporate officer or concurrently an employee?
- Jurisdiction flows from that determination: Special Commercial Court vs. NLRC.
- Due process is evolving; while corporate statutes are terse, courts increasingly import labor‑law safeguards.
- Removal without cause is not per se invalid but can be expensive if handled in bad faith.
- The 2019 Revised Corporation Code amplifies fiduciary‑duty language, raising the bar for “just cause”.
Practice pointer: Before firing a President, Boards should treat the matter as both a corporate‑governance and a labor‑risk issue—engage counsel conversant in both fields, run a mock NLRC audit, and document everything.
This article summarizes existing statutes and Supreme Court doctrine current to 15 July 2025. It is for information only and not a substitute for individualized legal advice.