Issue of March 19, 2017

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When is an employee entitled to separation pay?

Recently at a conference I overheard a conversation between two co-workers who were sharing their frustration about how they were being treated by their managers. One of them, let’s call her Michelle, said she hated her job so much, she had basically given up trying to make it work. She ended the conversation by saying to the other, “Magre-resign na ako at wala akong pakialam kung ano nang mangyayari” or “Maghahanap na along ako ng bagong trabaho o kaya magbi-business na lang ako.”

This is not the firs time I heard these kinds of conversation, but it made me think about how unhappy and disgruntled employees are in today’s workplace. Many employees today, no matter the industry or job function, have declared, publicly and in private, that all bets are off.

Some employees are demoralized by slowly rising salaries or, in some places, salary cuts. They’ve grown tired of flexible and working long hours, only to get disappointed when that flexibility isn’t reciprocated by their companies in the way they want. Employees can’t be faulted for having certain expectations, and employers can’t be faulted for making business decisions that are required for them to stay afloat in today’s economy. Nonetheless, in many cases, trust has eroded. Employees expect more and so do companies.

So what happened to Michelle? She resigned. Question: “Is she entitled to separation pay?” Separation pay is the amount an employee receives at the time of his severance and is designed to provide the employee with the wherewithal during the period he is looking for another employment. However, this broad definition must not be taken at face value. There are only limited instances wherein separation pay can be granted. These instances are: Termination for any of the authorized causes under the Labor Code. Employment may be terminated for the following authorized causes under the Labor Code: Introduction of labor-saving devices; redundancy, retrenchment, closure or cessation, and disease the employee found to be suffering and whose continued employment is prohibited by law or is prejudicial to his health as well as the health of his co-employees. As such, separation pay must be paid when the termination is based on the above-mentioned authorized causes except when the closure of the company is due to financial losses.

For authorized causes, the law requires the employer to give written notices to both the worker and the Department of Labor and Employment 30 days ahead of the projected separation.

Second, where there is illegal dismissal and reinstatement is no longer feasible. An illegally dismissed employee is entitled to two reliefs, namely backwages and reinstatement. However, where reinstatement is no longer feasible because of strained relations between the employee and the employer, separation pay is granted.

Third is as a measure of social justice where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. In this instance, the Supreme Court coined separation pay as financial assistance and allowed as a measure of social justice and based on exceptional circumstances. Hence, courts, in their discretion may grant separation pay based on compassionate justice taking into consideration the length of service of the employee, the amount involved, whether the act is the first offense, the performance of the employee, etc.

However, the Supreme Court sternly warned 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. However, where the reason for the valid dismissal is habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker, there is no need to invoke compassionate justice.

In view of the foregoing, an employee is not entitled to separation pay when he is terminated based on just causes. Pertinently, he is also not entitled to separation pay when he tenders his resignation. Resignation is defined as the voluntary act of an employee who finds himself in a situation where he believes that personal reasons cannot be sacrificed in favor of the exigency of the service and he has no other choice but to disassociate himself from his employment.

Thus, the elementary rule is that an employee who resigns from employment is not entitled to separation pay, except when it is stipulated in the employment contract or collective bargaining agreement or based on established employer practice in the company.

The computation of separation pay is based on the ground on which it is based. In case of termination due to the installation of labor saving devices or redundancy, the employee affected is entitled to a separation pay equivalent to at least his one month pay or to at least one month pay for every year of service, whichever is higher.

In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses including termination of employment on the ground of disease, the separation pay shall be equivalent to one month pay or at least one-half month pay for every year of service, whichever is higher.

In illegal dismissal cases, where reinstatement is no longer viable as an option, separation pay equivalent to one month salary for every year of service should be awarded as an alternative. It must be emphasized that this payment of separation pay is in addition to payment of backwages. A fraction of at least six months shall be considered as one whole year.

The DOLE family of Agencies extends its condolences to the bereaved family of sir Manuel Z. Dominguez, Attorney IV of the Regional Tripartite Wages and Productivity Board-Cordillera who passed away last March 14. If tears could build a stairway and memories were a lane, we would walk right up to heaven and bring you back again. No farewell words were spoken, no time to say goodbye, you were gone before we knew it and only God knows why. Rest in peace good sir, for you will surely be missed.

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