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How to Properly Terminate Employees

By December 10, 2019May 2nd, 2020No Comments

It is a common sentiment in Philippine business circles that terminating erring employees is difficult. As such, many employers feel discouraged to increase headcount as they feel that they will be held hostage by erring employees. While there may be some truth to that sentiment, terminating employees is actually a management prerogative provided that the proper process is followed.

The first step in terminating employees is to figure out what the cause for termination is. To put it simply, there are two types/causes for termination of employees:

1. Termination due to Just CauseĀ 

2. Termination due to Authorized Cause

Just cause covers terminations due to serious misconduct, willful disobedience, gross and habitual neglect of duty, fraud/willful breach of trust, commission of a crime, and other analogous causes.

Authorized cause covers terminations due to installation of labor saving devices, redundancy, retrenchment, closure of business, and disease.

Essentially, Just Causes cover instances where the employee is at fault while Authorized Causes cover instances where the employee is not at fault.

It is important to correctly identify the proper cause for termination because the procedure involved is different for both. This procedure is what we call procedural due process.

For just causes, procedural due process requires that the employer must give the employee an opportunity to explain his side of story. The employer is required to: (1) issue a Notice to Explain clearly stating the charge against the employee and giving the employee a period of at least 5 days to submit a written explanation; (2) conduct an administrative conference where the employee may defend himself personally or with counsel; and (3) issuing a Notice of Termination informing the employee of his termination.

On the other hand, for authorized cause, procedural due process, in general, requires (1) notice to the DOLE and the employee 30 days before the effective date of termination; and (2) payment of separation pay (exceptions may apply).

That being said, we encourage all employers to properly follow the above process in terminating employees to avoid a case of illegal dismissal, the consequence of which is back wages and reinstatement. (more on that in future posts)

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