Tag Archives: Termination of Employment

Loss of Confidence as Ground for Termination

Loss of confidence is one of the just causes for termination of employment and may be used in the situation of an employee who occupies trust and confidence.

A position is said to be one of trust and confidence when the employee is entrusted with confidence in delicate matters such as the custody, handling, or care and protection of the employer’s property, such as a Bank Branch Manager.

A basic requirement for loss of confidence terminations is that the act complained of is “work-related” such as one that would show the employee’s unfitness to continue working for the employer.

In a case, the firing of a branch manager who issued 2 Certificates of Time Deposit (CTDs) knowing that these were unfunded was considered valid by the Supreme Court, even if the same branch manager later canceled the CTDs.

 (Leandro M. Alcantara vs. PCIB, Oct. 20, 2010, GR No. 151349)

Computation of Termination Pay

A requirement for valid dismissal of employment is the payment of the correct value of termination pay. The Labor Code prescribes minimum standards for the computation of termination pay.

The minimum amount of a terminated or dismissed employee’s termination pay depends on the reason or ground for his dismissal, either a half month’s pay or one month’s pay for every year of service, but in no case will an employee get the equivalent of less than one month’s pay.

Cases where employee is entitled to a half month’s pay for every year of service:

  1. Retrenchment to prevent losses, i.e. reduction of personnel affected by management to prevent losses
  2. Closure or cessation of operation of an establishment not due to serious losses or financial reverses; and
  3. When the employee is suffering from a disease not curable within a period of six (6) months and his continued employment is prejudicial to his health or to the health of his co-employees.

Situations when an employee is entitled to one month’s pay for every year of service:

  1. Installation of labor-saving device, such as replacement of employees by machineries or computerization;
  2. Redundancy, as when the position of the employee has been found to be surplusage or unnecessary in the operation of the enterprise;
  3. Impossible reinstatement of the employee to his former position or to a substantially equivalent position for reasons not attributable to the fault of the employer, as when the reinstatement ordered by a competent authority cannot be implemented due to closure or cessation of operations of the establishment or employer, or when the position to which he is to be reinstated no longer exists and there is not substantially equivalent position in the establishment to which he can be assigned.

Read more about the proper computation of termination pay and other legal requirements for dismissing employees from Guide to Valid Dismissal of Employees by Atty. Elvin Villanueva.

Termination of Employment

A weak economy sees the emergence of more small and medium enterprises and the closure or re-engineering of large companies. To stay afloat, a business establishment usually resorts to cutting costs, including that of manpower.
 
Termination of employment by retrenchment is usually to prevent serious business losses. Existing labor laws require the employer to give a 30-day notice to the employee regarding management’s decision to terminate the employment and to submit an Employment Retrenchment Report to the Department of Labor and Employment at least 30 days prior to the intended date of termination.  Click here for a template of this report.
 
Upon the expiry of the 30-day notice, the employer then becomes liable to pay the terminated employee his separation pay, computed at a minimum of a half-month’s salary for every year of service. Those employed for less than a year with the company shall be entitled to the equivalent of one month’s salary.