Rules on separation pay

As a general rule, an employee who has been dismissed for any of the just causes enumerated under Article 282[1] of the Labor Code is not entitled to a separation pay.[2] Section 7, Rule I, Book VI of the Omnibus Rules implementing the Labor Code provides:
Sec. 7. Termination of employment by employer. — The just causes for terminating the services of an employee shall be those provided in Article 282 of the Code. The separation from work of an employee for a just cause does not entitle him to the termination pay provided in the Code, without prejudice, however, to whatever rights, benefits and privileges he may have under the applicable individual or collective agreement with the employer or voluntary employer policy or practice.
In exceptional cases, however, the Supreme Court has granted separation pay to a legally dismissed employee as an act of "social justice" or on "equitable grounds."[3] 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.[4]

In the leading case of Philippine Long Distance Telephone Company v. NLRC,[5] it was ruled that 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 reflecting his moral character. The High Court clarified that:
We hold that henceforth 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. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be required to give the dismissed employee separation pay, or financial assistance, or whatever other name it is called, on the ground of social justice.

A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than punishing the erring employee for his offense. And we do not agree that the punishment is his dismissal only and that the separation pay has nothing to do with the wrong he has committed. Of course it has. Indeed, if the employee who steals from the company is granted separation pay even as he is validly dismissed, it is not unlikely that he will commit a similar offense in his next employment because he thinks he can expect a like leniency if he is again found out. This kind of misplaced compassion is not going to do labor in general any good as it will encourage the infiltration of its ranks by those who do not deserve the protection and concern of the Constitution.

The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the underprivileged. At best[,] it may mitigate the penalty but it certainly will not condone the offense. Compassion for the poor is an imperative of every humane society but only when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty. Those who invoke social justice may do so only if their hands are clean and their motives blameless and not simply because they happen to be poor. This great policy of our Constitution is not meant for the protection of those who have proved they are not worthy of it, like the workers who have tainted the cause of labor with the blemishes of their own character.[6]

In the subsequent case of Toyota Motor Phils. Corp. Workers Association (TMPCWA) v. National Labor Relations Commission,[7] there was expansion in the exclusions and the Court elucidated that separation pay shall be allowed as a measure of social justice only in instances where the employee is validly dismissed for causes other than serious misconduct, willful disobedience, gross and habitual neglect of duty, fraud or willful breach of trust, commission of a crime against the employer or his family, or those reflecting on his moral character. In the same case, it was instructed that the labor officials must be most judicious and circumspect in awarding separation pay or financial assistance as the constitutional policy to provide full protection to labor is not meant to be an instrument to oppress the employers.[8] The commitment of the court to the cause of the labor should not embarrass us from sustaining the employers when they are right, as here. In fine, there must be caution in awarding financial assistance to the undeserving and those who are unworthy of liberality of the law.[9]

Case law has carefully treaded the path of compassionate justice in the subsequent cases so as not to slip and favor labor at the expense of management.

In Tirazona v. Phillippine EDS Techno-Service, Inc. (PET, Inc.),[10] the Supreme Court denied the award of separation pay to an employee who was dismissed from employment due to loss of trust and confidence.

While [this] Court commiserates with the plight of Tirazona, who has recently manifested that she has since been suffering from her poor health condition, the Court cannot grant her plea for the award of financial benefits based solely on this unfortunate circumstance. For all its conceded merit, equity is available only in the absence of law and not as its replacement. Equity as an exceptional extenuating circumstance does not favor, nor may it be used to reward, the indolent or the wrongdoer for that matter. This Court will not allow a party, in guise of equity, to benefit from its own fault.[11] (Emphasis supplied).

In the recent case of Daabay v. Coca-Cola Bottlers,[12] the High Court reiterated the ruling in Toyota and disallowed the payment of separation pay to an employee who was found guilty of stealing the company’s property. An award of separation pay in such an instance is misplaced compassion for the undeserving who may find their way back and weaken the fiber of labor.

That an employee has rendered many years of service to the company will not save the day for him. To this argument, Central Pangasinan Electric Cooperative, Inc. v. National Labor Relations Commission is on all fours, thus:

Although long years of service might generally be considered for the award of separation benefits or some form of financial assistance to mitigate the effects of termination, this case is not the appropriate instance for generosity under the Labor Code nor under our prior decisions. The fact that private respondent served petitioner for more than twenty years with no negative record prior to his dismissal, in our view of this case, does not call for such award of benefits, since his violation reflects a regrettable lack of loyalty and worse, betrayal of the company. If an employee’s length of service is to be regarded as a justification for moderating the penalty of dismissal, such gesture will actually become a prize for disloyalty, distorting the meaning of social justice and undermining the efforts of labor to cleanse its ranks of undesirables.[13] (Emphasis supplied).

[1] ART. 282. Termination by employer. - An employer may terminate an employment for any of the following causes:

Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;

Gross and habitual neglect by the employee of his duties;

Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;

Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representative; and

Other causes analogous to the foregoing.

[2] Central Pangasinan Electric Cooperative, Inc. v. National Labor Relations Commission, 555 Phil. 134, 138-139 (2007).

[3] Unilever Philippines v. Rivera, supra note 19.

[4] Id.

[5] 247 Phil. 641 (1988).

[6] Id. at 649-650.

[7] 562 Phil. 759 (2007).

[8] Id. at 810-811.

[9] Id.

[10] G.R. No. 169712, 20 January 2009, 576 SCRA 625.

[11] Id. at 633.

[12] Daabay v. Coca-Cola Bottlers Phils., Inc., G.R. No. 199890, 19 August 2013.

[13] Central Pangasinan Electric Cooperative, Inc. v. National Labor Relations Commission, 555 Phil. 134, 139-140 (2007).