Any decision to let go of an employee is rarely a straightforward one. Whether the issue is performance-related, behavioral, or tied to broader business realities, terminating someone’s livelihood carries real consequences. In this post, as part of our business blog section, we’ll explore 7 legal reasons employers can terminate employment in the Philippines.
As an employer, you’re expected not only to make the right call but also to ensure that the process is legal, fair, and defensible. But that can be difficult, especially when emotions are involved or internal policies aren’t clearly defined. But here’s the good news: if you’re grounded in Philippine labor law and supported by a legal professional who specializes in a practice like restructuring and insolvency, it is entirely possible to carry out terminations professionally and without unnecessary conflict.
Under the Labor Code of the Philippines, employment may be ended only for legally specified reasons. These fall under two main categories: just causes and authorized causes. Just causes are tied to an employee’s own behavior—such as misconduct, dishonesty, or failure to meet job responsibilities. Authorized causes, on the other hand, stem from business circumstances or medical conditions that make continued employment impossible.
These two categories also come with different obligations. For instance, separation pay is generally not required in just cause terminations, but it is required in most authorized cause cases, subject to the proper documentation and process.
Here are some of the most common legal grounds for termination in the Philippines:
1) Serious Misconduct
Few things undermine workplace order more quickly than behavior that violates basic standards of conduct. When an employee engages in acts like physical assault, harassment, or theft, the impact extends beyond the immediate parties involved and puts the entire organization at risk. In such cases, Philippine labor law allows employers to take decisive action.
For a charge of serious misconduct to hold, the act must be willful, wrongful, and directly related to the employee’s duties. Importantly, it must also be severe enough to justify immediate termination, as lesser forms of misconduct may warrant only disciplinary action.
2) Willful Disobedience of Lawful Orders
A functioning workplace depends on reasonable compliance with directives, especially those issued by a superior within the scope of employment. If an employee deliberately refuses to follow clear and lawful instructions, and that refusal is both unjustified and repeated, it may cross the threshold of willful disobedience.
Not every instance of disagreement or hesitation qualifies, though. The order must be work-related, clearly communicated, and not contrary to law or public policy. Employers must also be able to show that the disobedience was not an isolated lapse but a deliberate rejection of authority.
3) Gross and Habitual Neglect of Duties
Whenever an employee consistently fails to meet basic job expectations, it doesn’t just hurt productivity; it also signals a breakdown in accountability. Chronic tardiness, frequent unexcused absences, and failure to complete assigned tasks may constitute neglect of duty.
But to justify termination under the law, the neglect must be both “gross” (serious in nature) and “habitual” (repeated over time). A single missed deadline or occasional lateness may not be enough. Employers must build a clear record of patterns and document the impact on the business before pursuing dismissal on these grounds.
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4) Fraud or Breach of Trust
Trust is a non-negotiable element in any employment relationship, especially when the role involves handling money, sensitive information, or confidential company resources. When that trust is broken—say, through falsifying documents, misappropriating funds, or leaking proprietary data—it can be grounds for immediate termination.
The law makes special mention of positions of trust, such as cashiers, accountants, or managerial staff, where even a single act of dishonesty may be enough. To ensure a dismissal holds up legally, the employer must establish both the act of fraud and the resulting loss of confidence with clear, factual evidence.
5) Redundancy
A position may be declared redundant when it becomes unnecessary due to operational changes, like automation, business restructuring, or the consolidation of responsibilities. Rather than being about poor performance or misconduct, redundancy is about ensuring that a business runs efficiently and sustainably.
That said, employers are legally required to handle redundancy transparently and fairly. They’re generally required to give both the employee and the Department of Labor and Employment (DOLE) written notice at least 30 days ahead of the termination date. Affected employees are also entitled to separation pay, usually equivalent to one month’s salary for every year of service, whichever is higher.
6) Retrenchment to Prevent Losses
Difficult financial circumstances sometimes require hard decisions. Retrenchment may be necessary to stay afloat when a company is facing actual or imminent losses. Philippine labor law permits this, but only under strict conditions. Employers must provide solid evidence—such as audited financial statements—that demonstrate the need to cut costs by reducing staff.
Like redundancy, retrenchment requires at least 30 days’ written notice and the payment of separation pay equivalent to one month’s salary or at least one-half month’s pay for every year of service, whichever is higher.
7) Disease Not Curable within Six Months
In cases where an employee develops a medical condition that renders them unfit to work and the illness is not curable within six months, employers may consider termination. This provision is not meant to penalize the employee but to protect both their well-being and that of others in the workplace.
However, the law imposes a high standard of proof: the illness must be certified by a competent public health authority, and the employer must show that continued employment would be seriously detrimental. If these conditions are met, the employee is entitled to separation pay and should be treated with utmost dignity throughout the process.
You should never take the option to end someone’s employment lightly, but when you do it for the right reasons and in the right way, it can be both lawful and professional. As an employer, your responsibility isn’t just to protect your business, but also to uphold fair practices that reflect respect for every individual’s rights.
