CONSTRUCTIVE DISMISSAL IN THE PHILIPPINES
Constructive Dismissal in the Philippines is when an employee resigns due to an extremely difficult work environment.
In this article, I’ll define:
- What is Constructive Dismissal in the Philippines?
- Illegal Dismissal vs Constructive Dismissal
- Constructive Dismissal and Diminution, Demotion, Discrimination and Transfers
- How do you prove Constructive Dismissal
- What is the process in a Labor Case?
This is a thorough article with several Constructive Dismissal examples to show in detail how the idea pays out in real life, how to prove it and how a labor case is processed (Hint: it takes a long time.)
What is Constructive Dismissal in the Philippines?
Constructive dismissal is a dismissal in disguise. (G.R. No. 193421)
It happens when an employee resigns because continuing to work is “impossible, unreasonable or unlikely … involving a demotion in rank and a diminution in pay.” (G.R. No. 83239)
It isn’t due to minor irritations.
It must be a display of utter discrimination or insensibility on the part of the employer so intense that it becomes unbearable for the employee to continue with his employment. (G.R. No. 159195)
Illegal Dismissal vs Constructive Dismissal
Illegal Dismissal vs Constructive Dismissal is that in the first, the employer openly seeks the termination of an employee.
Second, it is not readily indicated by any act of the employer that openly and expressly shows the desire and intent to terminate the employment relationship. (G.R. No. 229881)
In a dismissal case, the below 2 things are examined:
- Non-existence of just or authorized cause of the dismissal
- Non-observance of due process requirements (R. No. 191825)
Of the 2 things, the more important question is whether or not there was a just or authorized cause.
If there were incomplete due process requirements but there was dismissal due to a just or authorized case, the employer may only be liable for damages. G.R. No. 158693
However, if just or authorized cause cannot be proved, then the employer may be liable for back wages, separation pay, and other penalties.
In Illegal Dismissal, the case is marked by the fact that the employer dismissed the employee and of course, the lack of just or authorized cause primarily.
On the other hand, Constructive dismissal is marked by an extremely hostile or difficult work environment such that the employee himself quits.
Constructive Dismissal and Diminution in Rank, Pay or Benefits
Constructive Dismissal may exist when there is a Diminution of Pay, Rank or benefits.
Let’s discuss a few examples.
In G.R. No. 204684, the court ruled that there was Constructive Dismissal due to the Diminution of Pay.
In this case, MHC, reduced regularized employee Regala’s regular work days to two (2) days from the normal five (5) day work week starting December 2, 2009 without any cause.
The reduction of Regala’s regular work days from five (5) days to two (2) days resulted in a diminution in pay.
Regala’s change in his work schedule resulting in the diminution of his take-home salary is, therefore, tantamount to constructive dismissal.
The second example of Diminution of Pay is G.R. No. 150488.
In this case, employee Domingo’s resignation was brought about by the decision of the management of Siemens Philippines not to renew ― or work for the renewal of ― his consultancy contract with Siemens Germany which clearly resulted in the substantial diminution of his salary.
The situation brought about the feeling of oppression which compelled Domingo to resign. The diminution in pay created an adverse working environment that rendered it impossible for Domingo to continue working for Siemens Philippines.
So far, employees have won in our examples.
Let’s take a look at what happens when an employer wins and let’s take a look at a Diminution of Benefit case.
In G.R. No. 201396, the Court held that there was no Constructive Dismissal.
The petitioner alleged in this case is a diminution of his benefits as the service car and local driver was removed.
However, this benefit was not based on express policy or a written contract. It could also not be proved that it was company practice.
The record showed that these benefits were granted by Toyota’s former President specifically to the petitioner at the time he was hired, in a verbal agreement.
As such, the grant of the benefits may be viewed more as an accommodation given to the petitioner by virtue of him being a fellow Japanese working in a foreign, and presumably unfamiliar, land. Petitioner cannot demand a right to the service car and driver indefinitely, especially under new administration, when the benefit ostensibly sprung only from the magnanimity of his former superior rather than actual company practice.
Thus, the court ruled that there was no Constructive Dismissal due to Diminution in Benefit.
Constructive Dismissal and Demotion
Constructive Dismissal can exist when there was a Demotion.
For example, in Globe Telecom vs. Galang, the Court held that there was constructive dismissal.
Although the respondent continued to have the rank of a supervisor, her functions were reduced to a mere house-to-house sales agent or direct sales agent.
This was tantamount to a demotion.
The court also held that there was Constructive Dismissal in Diwa vs. De Leon.
In this case, the Respondent was excluded from important HR decisions which she was expected not only to be privy to but also to have a say in, by virtue of her position in the company.
The reduction in the respondent’s duties and responsibilities as HR Manager amounted to a demotion that was tantamount to constructive dismissal.
So, there is constructive dismissal when an employee’s functions, which were originally supervisory in nature, were reduced; and such reduction is not grounded on valid grounds such as genuine business necessity.
Constructive Dismissal where there was an act of discrimination or disdain leading to a case of Constructive Dismissal
Discrimination can lead to a case of Constructive Dismissal.
In the same Globe Telecom vs. Galang case, the Respondent was singled out by her immediate superior who discriminated against her without reason – not preparing and submitting her performance evaluation report that would have been the basis for her increased salary; not forwarding her project proposals to management that would have been the source of commendation; diminishing her supervisor stature by assigning her to house-to-house sales or direct sales; and withholding from her the enjoyment of bonuses, allowances and other similar benefits that were necessary for her efficient sales performance.
Though the respondent might not have suffered any diminution in her basic salary, the petitioners did not dispute her allegation that she was deprived of all benefits due to another of her rank and position, benefits which she apparently used to receive.
Constructive Dismissal and Transfer of an Employee
In a valid transfer, the employer must be able to show that the transfer is not unreasonable, inconvenient, or prejudicial to the employee.
The transfer must also not involve a demotion in rank or a diminution of salary and other benefits.
However, a valid transfer is usually not Constructive Dismissal.
The management’s prerogative of transferring and reassigning employees from one area of operation to another in order to meet the requirements of the business is generally not constitutive of constructive dismissal.
The transfer in the case of Bisig Manggagawa vs. NLRC does not entail a demotion in rank or diminution of salaries, benefits and other privileges of the petitioner.
The employer, Tryco, transferred its production activities from Caloocan City to San Rafael, Bulacan. The transfer orders did not entail a demotion in rank or diminution of salaries, benefits and other privileges of the employees.
The employees only anchored their objection on the ground that it would cause them great inconvenience since they are all residents of Metro Manila and they would incur additional expenses to travel daily from Manila to Bulacan.
The Court has previously declared that mere incidental inconvenience is not sufficient to warrant a claim of Constructive Dismissal.
When the transfer is not unreasonable, or inconvenient, or prejudicial to the employee, and it does not involve a demotion in rank or diminution of salaries, benefits, and other privileges, the employee may not complain that it amounts to a constructive dismissal.
This was reinforced in Tinio vs. CA.
The Supreme Court ruled that an employee’s right to security of tenure does not give him a vested right to his position as would deprive the company of its prerogative to change his assignment or transfer him where he will be most useful.
The petitioner, in this case, was not demoted since his transfer from Cebu to Makati was being implemented due to a valid corporate reorganization to streamline management operations.
Constructive Dismissal when there was no reemployment within 6 months after suspension
Constructive Dismissal can exist when an employee’s suspension exceeds 6 months.
In G.R. No 116593, the court stated:
Where an employee is not reemployed within six (6) months from the suspension of her “suspension” of her employment, she is deemed to have been constructively dismissed.
How do you prove Constructive Dismissal?
In constructive dismissal, there is Involuntary Resignation due to the harsh, hostile, and unfavorable conditions set by the employer.
In resignation, it is the voluntary act of an employee who is in a situation where one believes that personal reasons cannot be sacrificed in favor of the exigency of the service, and one has no other choice but to dissociate oneself from employment. (G.R. No. 177167)
Resignation is a relinquishment of an office and must be made with the intention of relinquishing the office accompanied by the act of relinquishment. The act of the employee before and after the alleged resignation must be considered to determine whether in fact, he or she intended to relinquish such employment. (G.R. No. 150668)
On the other hand, constructive dismissal is an involuntary resignation resorted to when continued employment is rendered impossible, unreasonable or unlikely; or when there is a demotion in rank and/or a diminution in pay.
The law does not require employers to pay employees that have resigned any separation pay, unless there is a contract that provides otherwise or there exists a company practice of giving separation pay to resignees. (G.R. No. 221411)
In another case, the Court held that the separation pay given to two employees who voluntarily resigned was not intended as a separation pay but as a promise that they would be paid a benefit if they tender their resignation. An employee who voluntarily resigns from employment is not entitled to separation pay, except when it is stipulated in the employment contract or the CBA, or it is sanctioned by established employer practice or policy. (G.R. No. 211525)
What are the penalties for Constructive Dismissal in the Philippines?
The case of Siemens vs. Domingo (G.R. No. 150488) explained the penalties for an employer and the benefits awarded to an employee.
The Court held that an illegally or constructively dismissed employee is entitled to: (1) either reinstatement, if viable, or separation pay if reinstatement is no longer viable; and (2) backwages.
- Separation Pay is awarded to an illegally dismissed employee, computed at the rate of one month pay per year of service.
- Backwages are wages that should have been earned if the employee was not constructively dismissed and are counted from the time the constructive dismissal took effect until the finality of a decision
- Moral damages can be given when the dismissal of the employee was tainted by bad faith or fraud; or when it constituted an act oppressive to labor or done in a manner contrary to morals, good customs or public policy.
- Exemplary damages are recoverable if the dismissal was done in a wanton, oppressive, or malevolent manner.
For the calculation of separation pay, please see Separation Pay Philippines (link to our article).
How to file a Labor case at DOLE
The process of how to file a Labor Case at DOLE starts first with a SEnA and then proceeds to the Labor Arbitrar.
If the case is appealed it then goes to the NLRC Commission, then the Court of Appeals and then the Supreme court.
While it starts off cheap and relatively quickly (the SEnA and Labor Arbitrar takes maybe a year and is mostly photocopying, travel and service expenses), a case for Constructive Dismissal gets very costly if it moves beyond this.
It is best to settle if you can because a case can reach the hundreds of thousands and can take 10 years if it reaches the Supreme Court.
For more details on the process, timeline, costs and percentage of winning a labor case for Illegal Dismissal check out our How to file a case at DOLE article (please link to our How to file a case at DOLE).