Separation Pay Cannot be Granted to an Employee Dismissed for Serious MisconductAtty Elvin
Separation pay is a benefit granted under Article 298 of the Labor Code for termination of employees due to authorized cause. These authorized causes are termination due to installation of labor-saving devices, redundancy, retrenchment, and closure not due to losses.
Separation is also granted for employees retrenched or terminated after the company has taken bonafide suspension of operations under Article 301 of the Labor Code. The same is given to an employee terminated due to disease under Article 299 of the Labor Code.
Another instance which a separation pay is awarded is when the labor tribunal finds termination illegal but reinstatement cannot be carried out due to strained relations. Hence, separation pay is awarded in lieu of reinstatement.
There were instances in the past when separation pay was awarded on the ground of social justice and equity although the dismissal of an employee was held valid. There were many Supreme Court decisions that followed reversing such judicial course.
In the January 2020 case of Herma Shipping and Transport Corporation vs. Cordero, [G.R. No. 244144/G.R. No. 244210 January 27, 2020], the employees were terminated due to significant losses of oil and petroleum products under their watch. (Read the full digest of Herma Shipping case here)
As a result, employees filed an illegal dismissal case. However, the Labor Arbiter found the dismissal valid. The NLRC affirmed the decision of the Labor Arbiter. However, while the CA upheld the validity of dismissal, it found the termination too harsh and awarded separation pay.
This prompted the company to appeal to the Supreme Court. The SC held, citing the case of Manila Water
Company vs. Del Rosario [72 Phil. 641 (1988)], that as a general rule, an employee who has been dismissed for any of the just causes enumerated under Art. 282 [now 297] of the Labor Code is not entitled to separation pay. In exceptional cases, however, the Court has granted separation pay to a legally dismissed employee as an act of “social justice” or on “equitable grounds.” In both instances, it is required that the dismissal (1) was not for serious misconduct; and (2) did not reflect on the moral character of the employee.
In the cases of Philippine Long Distance Telephone Company vs. NLRC and subsequently Toyota Motor Phils. Corp. Workers Association vs. NLRC, the Court stressed “separation pay shall be allowed as a measure of social justice only in the instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character.”
In this case, the Supreme Court held that having established that Cordero’s employment was terminated for just cause and that he was therefore validly dismissed, as well as the fact that the infractions he committed against HSTC involve moral turpitude and constitute Serious Misconduct, the award of separation pay in his favor is devoid of basis in fact an in law. Accordingly, the SC held that the same must be deleted.