Contracting: Termination of Contractual Employees

Details

Category: HR, Labor and Office

(Part 4 of a 6-part series. On 14 November 2011, the Department of Labor and Employment (DOLE) issued Department Order No. 18-A, which becomes effective fifteen (15) days after completion of its publication in a newspaper of general circulation. Considering that Department Order 18-A was published on 19 November 2011, it shall take effect on 4 December 2011.)

All the employees of any contract enjoy security of tenure regardless of whether the contract of employment is co-terminus with the service agreement, or for a specific job, work or service, or phase thereof.

Observance of required standards of due process

In all cases of termination of employment, the standards of due process laid down in Article 277(b) of the Labor Code, as amended, and settled jurisprudence on the matter, must be observed. The new rules clarified the standards of due process that must be observed in terminating a contractual employee.

For termination of employment based on just causes as defined in Article 282 of the Labor Code, the requirement of two written notices served on the employee shall observe the following:

1. The first written notice which should contain:

a. The specific causes or grounds for termination;

b. Detailed narration of the facts and circumstances that will serve as basis for the charge against the employee. A general description of the charge will not suffice;

c. The company rule, if any, that is violated and/or the ground under Art. 282 that is being charged against the employee; and

d. A directive that the employee is given opportunity to submit a written explanation within a reasonable period. “Reasonable period” should be construed as a period of at least five (5) calendar days from receipt of the notice to give the employee an opportunity to study the accusation, consult a union official or lawyer, gather data and evidence, and decide on the defenses against the complaint.

2. After serving the first notice, the employer should afford the employee ample opportunity to be heard and to defend himself/herself with the assistance of his/her representative if he/she so desires, as provided in Article 277(b) of the Labor Code, as amended. “Ample opportunity to be heard” means any meaningful opportunity (verbal or written) given to the employee to answer the charges against him/her and submit evidence in support of his/her defense, whether in a hearing, conference or some other fair, just and reasonable way. A formal hearing or conference becomes mandatory only when requested by the employee in writing or substantial evidentiary disputes exist or a company rule or practice requires it, or when similar circumstances justify it.

3. After determining that termination of employment is justified, the employer contractor shall serve the employee a written notice of termination indicating that: (1) all circumstances involving the charge against the employees have been considered; and (2) the grounds have been established to justify the severance of their employment. The foregoing notices shall be served on the employee’s last known address.

For termination of employment based on authorized causes defined in Article 283 of the Labor Code, the requirement of due process shall be deemed complied with upon service of a written notice to the employee and the appropriate regional office of the Department of Labor and Employment at least thirty days before the effectivity of the termination, specifying the ground or grounds for termination.

If the termination is brought about by the completion of the contract or phase thereof, no prior notice is required. If the termination is brought about by the failure of a probationary employee to meet the reasonable standards of the employer, which was made known to the employee at the time of his/her employment, it shall be sufficient that a written notice is served upon the employee within a reasonable time prior to the expiration of the probationary period.

Effect of termination of employment

The termination of employment of the contractor employee prior to the expiration of the Service Agreement shall be governed by Articles 282, 283 and 284 of the Labor Code.

In case the termination of employment is caused by the pre-termination of the Service Agreement not due to authorized causes under Article 283, the right of the contractor employee to unpaid wages and other unpaid benefits including unremitted legal mandatory contributions, e.g.,  SSS, ECC, Philhealth, Pagibig, shall be borne by the party at fault, without prejudice to the solidary liability of the parties to the Service Agreement.

Where the termination results from the expiration of the service agreement, or from the completion of the phase of the job, work or service for which the employee is engaged, the latter may opt for payment of separation benefits as may be provided by law or the Service Agreement, without prejudice to his/her entitlement to the completion bonuses or other emoluments, including retirement benefits whenever applicable.

You may also want to read:

New Guidelines for Contracting or Subcontracting

Contracting: Contracts and Rights of of Contractual Employees

Contracting: Liabilities of Principal and Contractor

Contracting: Registration of Legitimate Contractors

Contracting: Financial Relief Program

Full text of Department Order No. 18-A