Published 31 January 2020, The Daily Tribune

Change is the only permanent thing in the world, and the same holds true in the realm of business and employment. There are authorized causes which may result in an employee’s involuntary separation from work for reasons which may be beyond his control and may not be attributable to his acts. In such instance, separation law is mandated to be paid to the employee.

Separation pay is awarded, equivalent to one-half-month pay for every year of service (where a fraction of at least six months being considered as one whole year), to employees who are terminated from their employment due to the following instances:

1. Retrenchment to prevent losses, or reduction of personnel to prevent further economic loss;
2. Closure or cessation of operation of an establishment when it is not due to serious losses or financial reverses. If closure or cessation is due to serious losses, no separation pay is required to be paid; and
3. When the employee is suffering from a disease not curable within a period of six months and continued employment is prejudicial to his/her health or to the health of his/her co-employees.
On the other hand, separation pay equivalent to one month pay for every year of service (a fraction of at least six months being considered as one whole year) must be paid to the employee if separation is due to any of the following:
1. Installation by employer of labor-saving devices;
2. Redundancy; and,
3. In cases of illegal dismissal where reinstatement is no longer possible.

Separation pay is not required in case of an employee’s resignation. But if it has become company practice to give separation pay for resigning employees, or if the employment contract provides for the payment of such separation pay, the same must be paid.

It is also not warranted when the cause for termination is attributable to the employee’s fault, based on the theory that an erring employee should not benefit from their wrongful acts (Claudia’s Kitchen Inc. vs Tanguin, GR 221096, 28 June 2017).

However, as an exception, separation pay or financial assistance to a legally-dismissed employee may be granted as a measure of social justice or on grounds of equity. In PLDT vs NLRC (GR 80609, 23 August 1988), the Supreme Court (SC) ruled that separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. But if the reason for the valid dismissal is, for example, habitual intoxication or an offense involving moral turpitude, the employer may not be required to give the dismissed employee separation pay on the ground of social justice.

In cases involving claims for separation pay, the burden rests upon the employer to prove the existence of the foregoing authorized causes. In Ever Electrical Manufacturing Inc. (EEMI) vs Samahang Manggagawa ng Ever Electrical (GR 194795, 13 June 2012), EEMI’s closure of its business operations resulted in the termination of its employees, prompting the latter to file a complaint for illegal dismissal with prayer for payment of separation pay.

Upon reaching the SC, it was held that indeed, closure or cessation of operation of the establishment is an authorized cause for terminating an employee, and employees who are laid off from work due to closures that are not due to business insolvency should be paid separation pay. However, it is still essential that the alleged losses in the business operations be proven convincingly, lest it would be susceptible to abuse by conniving employers, who might be merely feigning business losses or reverses in their business ventures in order to ease out employees. EEMI failed to establish that the cessation of its business was directly brought about by serious business losses or financial reverses, rather the evidence points to the enforcement of a judgment against it as the reason for such closure. Thus, it was directed to pay separation pay to its affected employees.

There are various reasons for why an employee may be separated from work. The important thing to consider is whether the cause is among those authorized by law and separation pay is required to be paid, in order for the employer to be compliant with the laws and avoid a labor lawsuit, and for the employee to receive what the law has deemed rightfully his.

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