Due Process

Due process refers to the procedure in which an employee is terminated. It is a requirement by law to provide fairness to the employee by being notified of the reason for dismissal and in some cases, to give the employee ample opportunity to defend himself or herself.

In just causes of termination, the due process involves a 2-notice rule while in authorized causes of termination, the due process is deemed complied by serving a 30 days notice to the employee.

If due process is not accorded to the employee before the termination of the employment, the employee shall be entitled to payment of indemnity or nominal damages even if the termination is for a valid cause.

Penalty for failure to follow Due Process

In cases whereby the employer fails to comply with the due process requirements before terminating the employee for a just cause, the employer may have to indemnify the employee of not more than 30,000 pesos. In the case of an authorized cause, it’s 50,000 pesos.

Constructive Dismissal

In a constructive dismissal, the employee resigned involuntarily due to unbearable working conditions created by the employer. Since the resignation is involuntary, it is essentially a termination of employment.

Constructive dismissal exists when continued employment is rendered impossible, unreasonable or unlikely due to one or more of the following acts: demotion; diminution in pay; or, a clear discrimination, insensibility, or disdain to the employee. It may also happen when an employee is placed on preventive suspension for more than 30 days or on a floating status for more than 6 months.

And in the case of a transfer of an employee, the employer is required to show that the act of transferring the employee is out of a legitimate business decision. And that the transfer is not unreasonable, inconvenient or prejudicial to the employee. Otherwise, the act of transferring the employee may also be an act of unlawful constructive dismissal.

Case 1 - TRANSFER OF EMPLOYEE

In the case of Philippine XXX Corporation, vs. NLRC, the employee was transferred from Executive Secretary to the Executive Vice President and General Manager to Production Secretary with the same salary and workload. The court has ruled that since the transfer is not unreasonable, nor inconvenient, nor prejudicial to the employee, and it does not involve a demotion in rank or a diminution of the employee’s salaries, benefits, and other privileges, constructive dismissal, in this case, is invalid.

Separation Pay

An employee who is terminated for an authorized cause is entitled to separation pay of at least 1 month pay. It is a form of compensation provided for the transitional period during which the employee is looking for another employment after the employee is separated from the company. The fraction of at least six (6) months is considered as one (1) whole year.

The employer may terminate the employment of any employee due to the above-mentioned authorized causes by serving a written notice on the employee and the Department of Labor and Employment through its regional office having jurisdiction over the place of business at least one (1) month before the intended date thereof.

The salary base properly used in computing the separation pay should include not just the basic salary but also the regular allowances that an employee has been receiving.

Notes: Resigned or Terminated by Just Cause employees are not entitled to the separation pay.

One-half (1/2) Month Pay per Year of Service

● Retrenchment to prevent losses

● Closure or cessation of operation of an establishment not due to serious losses or financial reverses

● When the employee is suffering from a disease not curable within a period of six (6) months

Authorized Causes of Termination

The Labor Code of the Philippines has established the authorized causes of termination that permits the employer to dismiss the employee on grounds that do not necessarily arise from the employee’s fault or negligence.

1. Installation of Labor-Saving Devices

The installation of labor-saving devices is an authorized cause of termination as it results in lesser manpower requirement for company operations. However, to effect the termination of employment, the employer must prove that there is an introduction of such labor-saving devices; the introduction is for an economic reason; and the employer must adopt fair and reasonable criteria in selecting the employees to be terminated.

2. Redundancy

Redundancy is a situation whereby the number of employees is in excess than what is reasonably required by the company’s operations. Therefore the employer has no obligation to keep the excess number of employees on the payroll.

3. Retrenchment to prevent Losses

Retrenchment is an economic ground to reduce the number of employees due to serious business losses or economic difficulties. The employer is required to provide proof of such economic difficulties for retrenchment to be a valid cause of termination.

4. Closure or cessation of Operation

The continuation of the business is the employer’s prerogative. Therefore, the employer may, in good faith, choose to cease the company operations. In the event that the cessation of the establishment or undertaking is due to serious financial losses, the employer may not be obligated to pay separation pay.

5. Disease/Illness

An employer may terminate the services of an employee who has been found suffering from an disease that cannot be cured within a period of 6 months even with proper medical treatment certified by a competent public health authority and his continued employment is prohibited by law or prejudicial to his health or to the health of his co-employees.

Just Causes of Termination

The termination of employment must be accordance with established rules, principles and in a manner as required by law. The employer may only terminate an employee when there is a valid cause of termination and in accordance with the due process.

Just Causes of Termination

Just causes of termination refer to valid causes of termination arising from an employee’s fault and or negligence. In such cases of termination, the employer bears the burden of proof that the employee has committed an infraction of such grave that commensurate with the sanction of termination.

1. Serious Misconduct

Serious misconduct is a just cause for termination of employment, however, not every act of misconducts is a valid cause for dismissal. For misconduct to be a just cause for dismissal:

● The misconduct must be serious. Mere error in judgment is not a misconduct;

●  It must relate to the performance of the employee’s duties;

●  Must show that the employee has become unfit to continue working for the employer;

(Examples)

The employee’s (an accounting manager) act of willfully understating the company’s profits or financial position, committed as it was in order to “save” costs, which to her warped mind, was supposed to benefit her employer, partakes serious misconduct. It was not merely a violation of company policy, but of the law itself, and put the employer at risk of being made legally liable. The dismissal in this case is warranted. An employer cannot be compelled to retain in its employ someone whose services are inimical to its interests. 

Labor Dispute

When a dispute can’t be resolved inside the company, the employee will file a complaint to National Labor Relations Commission (NLRC). If the complaint is accepted, both you and the employee will be summoned to the arbiter’s office in NLRC.

In many cases, it will be settled amicably with the help of arbiter even though their major role is to protect employee. You’d better secure enough tangible proofs to present before the office and this is the reason why HR should produce a lot of documents.

However, if both parties can’t reach a consensus the employer/employee might bring it to the court. Nobody wants to be involved in this tedious, costly and time consuming legal case.

Notes: There is a valid period of a complaint.

For Unfair Labor Practice, file the case within one (1) year from the time the acts complained of were committed; 

For Money Claims, file the case within three (3) years from accrual of the cause of action; 

For Illegal Dismissal, file the case within four (4) years from the date of termination; and 

For Criminal Offenses penalized under the Labor Code, file the case within three (3) years from the commission thereof.

Quit Claim and Final Pay

It’s the employee’s responsibility to follow the company policy including notice period on severance regardless of the reason. General steps are as follows:

1. Once the severance is finalized, the employee has to go through clearance procedure such as turning over tasks, returning company properties, and other accountabilities.

2. The company will prepare/release Final Pay and other documents such as Certificate of Employment, Income Tax Return within 60 days since the cleared date even though there is no clear law or rule which governs final pay release date.

The final pay generally includes the followings:

● Last salary due to the employee;

● Monetized unused service incentive leave credit;

● Income tax return;

● Prorated 13^th month pay;

● Separation pay if applicable;

● Other compensations agreed upon in the Collective Bargaining Agreement (CBA) or employment contract;

3. The company will ask the employee to sign Quit Claim form.

A quitclaim, in relation to labor law, is defined as a waiver of a claim by an employee against his employer. A quitclaim is executed in order to settle once and for all the disputes arising from such employment relation and to close the lid on an impending litigation.

Separation

END OF CONTRACT

Except for the regular employees, there will be contract period for all employees. You are still encouraged to prepare/notice end of contract letter at least 30 days before the actual end date.

And, make sure the end of contract provisions (if any) stipulated in the contract paper are satisfied.

For example, a seasonal employee will be dismissed on the end date regardless of her/his performance but for a probationary employee you need to provide the basis/assessment result why the probationary employee cannot be a regular one.

RESIGNATION

An employee may terminate without just cause the employee-employer relationship by serving a written notice on the employer at least one month in advance. The employer upon whom no such notice was served may hold the employee liable for damages.

However, if the employee and employer has a written contract of employment or there exists a collective bargaining agreement (CBA) between them that stipulates a period less than one month, then the written notice of resignation may be submitted in such agreed period.

Disciplinary Action

Obviously, taking disciplinary actions is not ideal; a disciplinary program should not designed to create a threatening or fearful work environment. It’s important to remember that unsafe behavior doesn’t only affect you, but puts both your coworkers and your company at risk. A disciplinary program gives you access to knowing what’s expected of you and your commitment to safety as a member of your workplace team.

BENEFITS OF A DISCIPLINARY PROGRAM

● First, it’s to protect you and your coworkers. The goal of an effective disciplinary program is primarily to discourage employees from behaving in a manner that would put themselves or others at risk.

● An employee has clear guidelines for what it expected, and what the consequences are for not adhering to those guidelines.

● A disciplinary program is built with fairness and equality in mind. An employee is subject to its policies in exactly the same manner as anyone else working for your company, from entry-level employees to upper management.

● For non-serious infractions, an employee has the opportunity to modify unsuitable behavior. This can be particularly helpful should the employee not aware of the behavior was an issue.

● A disciplinary program provides the opportunity for improvement. When problematic behavior is identified, the employer can give the employee suggestions and coaching on how to work more safely.

● A safe workplace is a happy workplace. Because an employee knows that everyone is subject to the same expectations, an employee can rest assured another worker behaving unsafely will be corrected also.

STEPS OF A DISCIPLINARY PROGRAM

Normal steps of disciplinary actions in the following order:

1. Verbal Warning

2. Written Warning

3. Suspension

4. Termination

Employment Contract

It is not mandatory to have a written employment contract and Civil Code of the Philippines recognizes the freedom of the parties to stipulate or establish the terms and conditions of a contract, provided these are not contrary to law, morals, good customs and public policy.

Notes: Labor law and standard provisions are deemed to be written into all employment contracts even though they are not explicitly included in the contract. Any terms or conditions that violate the applicable labor standards are null and void.

Employment contract may include the followings:

1. Job Title and Expected Job Functions

Your employment contract should also include your job title as well as a breakdown of the responsibilities expected of you. It is important that you review these responsibilities to ensure your skills, talents, and work experience are in-line with the position and if it’s the same as what was discussed with you during the interview.

The contract should also clearly stipulate what you should receive for your work, whether it’s an hourly wage, a monthly salary, or commission-based remuneration. Additional monetary (or non-monetary) incentives that have been discussed during the interview such as sales bonus, health benefits, and vehicle or travel expense reimbursements should also be in the contract. Should you receive any type of bonus, its terms and conditions must also be outlined clearly within the document.

2. Job Scope and Limitation, Exclusivity, and Termination of Service

The employment contract should include information on whether you will be working part-time or full-time and if you’re starting out as a probationary or a contractual employee. If the contract includes an exclusivity clause (whether you’re allowed to take on additional work on the side or not), this should be explained in details clearly. More importantly, in many countries employment contract should not prevent you from pursuing your interests on your free time as long as it does not conflict with the things you will be doing for the company.

Notice of Personal Action (NPA)

Unfortunately, running a company in the Philippines requires a lot of wasteful (?) paper works regardless of the size, business sector, etc. NPA (Notice of Personal Action) is to be filled out by the employer for any action that will take place, such as:

● Salary Change

● Transfer

● Status or Position Change

● Leave of Absence

● Disciplinary Action like Warning

● Termination

There is no specific form but important thing is that the employee’s signature on it as an acknowledgement or agreement.

SAMPLE Notice of Personal Action 

NAME:	EMPLOYEE NUMBER:
POSITION:	DATE PREPARED:

Notice to Explain (NTE)

The issuance of the Notice to Explain is a legal requirement as part of the due process of termination but even it’s not the case of termination, you’d better follow the procedure for documentation purpose.

The employer must provide the employee at least 5 calendar days from receipt of the notice to study the accusation, consult a union official or lawyer, gather data and evidence, and decide on the defenses against the complaint.

Furthermore, for sanctions of suspension or dismissal, the employer must conduct an administrative hearing to ensure that ample opportunity is provided for the employee to be heard. However, this may not be required if the employee expressly admits to committing the infractions.

After determining that the sanction of suspension or dismissal is justified, the employer shall serve the employee the 2nd written notice indicating that all circumstances involving the charge against the employee have been considered; and the grounds have been established to justify the corresponding sanction.

How to issue Notice to Explain

● Prepare 2 copies of the Notice to Explain (NTE)

● Serve the NTE to the charged employee with a witness

Condominium Act - RA 4726

1. What is a condominium?
The law defined a condominium as an “interest in a real property consisting of a separate interest in a unit in a residential, industrial, or commercial building and an undivided interest in common, directly or indirectly, in the land in which it is located and in other common areas of the building.

Title to the common areas, including the land, or the appurtenant interests in such areas, may be held by a corporation specially formed for the purpose, condominium corporation, in which the holders of separate interest shall automatically be members or shareholders, to the exclusion of others, in proportion to the appurtenant interest of their respective units in the common areas.

Notes: "Common areas" means the entire project excepting all units separately granted or held or reserved.

Notes: Any transfer or conveyance of a unit or an apartment, office or store or other space therein, shall include the transfer or conveyance of the undivided interests in the common areas.

2. Who can own condominiums and/or condominium units?

Condominiums include the land, so the constitution of the Philippines is applied. Means, the maximum foreign ownership is 40% of the capital stocks.

In terms of condominium units, it depends on who owns the land.

a) When the condominium corporation leased the land from Filipino.
In this case, the condominium company and units can be wholly-owned by foreigners.

Foreign ownership in real estate - Land Part II

The following story is what happened to a foreign husband.

This summary is the Supreme Court Decision dated June 22, 2009.
(The names below are not their real name.)

1. Foreign Husband : Benz
2. Filipino Wife : Rose
3. Married : June 30, 1988

4. Petitioner : Lessee
5. Situation
They bought/improved a parcel of land in Boracay Island in 1989 under the name of Rose using Benz's money. It eventually became a resort and get all the business permit using Rose's sister's name. In June, 1992, Rose executed a Special Power of Attorney (SPA) in favor of Benz authorizing the latter to maintain, sell, lease, and sub-lease and otherwise enter into contract with third parties with respect to their Boracay property. In July, 1992, Rose leased out the property for a period of 25 years. It was duly notarized. Therefore, the lessee started the resort businesses. Rose ran away with another guy.

Benz claimed against Rose and Lessee that the lease agreement is void and null since there was no consent from him.

6. Regional Trial Court (RTC) declared the agreement null and void in 1994 since lessee didn't answer to the court. However, Court Appeal (CA) ordered RTC to allow lessee to file his answer. He said that it's owned by Rose, so he thought there was no problem with the contract. Besides, there was a signature of Benz on the Witness portion.

Foreign ownership in real estate - Land Part I

NO! THERE ARE NO WAYS FOREIGNER CAN LEGALLY, ACTUALLY, FULLY, PRACTICALLY, PERMANENTLY OWN LAND IN THE PHILIPPINES.

Exceptions
1. Acquisition by hereditary succession being the legal heir.

2. Acquisition of not more than 40% interest in a condominium project pursuant to R.A. 4726;

3. Former natural born citizen of the Philippines who became a citizen of another country but is now returning to the Philippines to reside permanently, subject to limitations;

4. Filipina who marries a foreigner but retains her Philippine citizenship can acquire and own land;

Notes: Former natural born citizen can re-acquire citizenship. Just be the citizen again. 

5. PD 713 (May 27, 1975) Allows Americans who were formerly Filipino citizens, Americans who became permanent residents of the Philippines and Americans who have resided in the Philippines continuously for at least 20 years and are in good faith had acquired private residential lands for
family dwelling purposes in the Philippines prior to July 3, 1974 to continue holding such lands and transfer ownership over the same to qualified persons or entities.

The same right is hereby granted to those citizens of the United States who become permanent residents of the Philippines and who acquired private residential lands in the Philippines of not more than five thousand (5,000) square meters for a family dwelling.

First of all, land and the building on it is a separate issue. Foreigners can own the building but not the land. Technically, it still can be regarded as a long term lease which you can sell. So, wanna buy a 2~3 story commercial/residential building?

Public Domain Land of the Philippines

I saw some beach resorts fenced out even to the shores. Do they own the shores or leased out? How about village roads? It's gated. We cannot pass through even though it's a short cut. I guess the village or subdivision has also great role in the terrible Manila traffic. TT

Property is either of public dominion or of private ownership.

Public Dominion
Public dominion or property owned by the State (or its political subdivisions) in its public or sovereign capacity and intended for public use and not for the use of the State as a juridical person.

The following things are property of public dominion:
1. Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, road steads, and others of similar character;

2. Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth;

3. Property for public use, in the provinces, cities, and municipalities, consist of the provincial roads, city streets, municipal streets, the squares, fountains, public waters, promenades, and public works for public service paid for by said provinces, cities, or municipalities.

Notes: Subdivision, as a whole, is privately owned land. It means even the roads inside is held privately. 

Notes: shores are belong to the state. No private person can own them.

Land Use reclassification and Land Use Conversion in the Philippines: Inter-agency functions

Reclassification of agricultural land refers to the act of specifying how agricultural lands shall be utilized for non-agricultural uses such as residential, industrial, commercial, as embodied in the land use plan.

Land Use Conversion is the ac or process of changing the current physical use of a piece of agricultural land into some other use or for another agricultural use other than the cultivation of the soil, planting of crops, growing of trees, including harvesting of produce therefrom.

RA 6657 or the Comprehensive Agririan Reform Law, allows the conversion of awarded lands under the Comprehensive Agrarian Reform Program (CARP) after the lapse of five (5) years from the granting of the award, if they are no longer economically feasible and sound for agricultural purpose, or the locality has become urbanized giving the subject lands greater economic value for residential, commercial or industrial purposese.

RA 7916 or Special Economic Zone Act identifies areas for economic zone development and prescribe the manner of identifying such areas.

Mandatory Benefits Compliance Guide Table

It is based on business sector and number of employees.

Notes: "O" means "applied", "N/A" means "not applied".
Notes: As you can see, there is almost no exceptions.
Notes: There would be excluded employees for each item. For example, managerial employees are not entitled to 13th month pay.

Labor Standards	Retail & Service Establishments		Non-Agriculture
	Employing 1 to 5 workers	Employing 1 to 5 workers
Minimum Wage	O	O	O
Holiday Pay	N/A	N/A	O
Premium Pay	O	O	O
Overtime Pay	O	O	O
Night Shift Differential	N/A	O	O
Service Charges	O	O	O
SIL	N/A	N/A	O
Maternity Leave	O	O	O
Paternity Leave	O	O	O
Parental Leave	O	O	O
Leave for VAWC	O	O	O
Special leave for women	O	O	O
13th month Pay	O	O	O
Separation Pay	O	O	O
Retirement Pay	N/A	N/A	O
ECC benefits	O	O	O
PhilHealth Benefits	O	O	O
SSS Benefits	O	O	O
Pag-IBIG Benefits	O	O	O