When am I entitled to separation pay, and how much is it?

Why

The trigger for separation pay is the reason for the ending, and the Labor Code sorts reasons into two families. Just causes under Article 297 are things the employee did, such as serious misconduct, wilful disobedience, gross and habitual neglect, fraud or breach of trust, and commission of a crime against the employer. Authorised causes under Articles 298 and 299 are business or health grounds that are nobody's fault. Separation pay follows the authorised causes, not the just ones.

Article 298 sets two rates. Installation of labour-saving devices and redundancy carry separation pay of at least one month pay, or one month pay for every year of service, whichever is higher. Retrenchment to prevent losses and closure or cessation of operations not due to serious business losses carry at least one month pay, or one-half month pay for every year of service, whichever is higher. In both, a fraction of at least six months is treated as one whole year.

Article 299 covers disease. Where an employee suffers from a disease and continued employment is prohibited by law or prejudicial to their health or that of their co-workers, the employee is paid at least one month salary or one-half month salary for every year of service, whichever is greater. The safeguard is procedural and strict: there must be a certification from a competent public health authority that the disease is of such nature or at such a stage that it cannot be cured within six months even with proper medical treatment. Without that certification the dismissal is illegal, and employers lose on this point regularly.

Two situations produce nothing. Closure due to serious business losses, genuinely proven with financial statements audited by an independent auditor, carries no separation pay. And dismissal for a just cause carries none either, though the Supreme Court has sometimes awarded financial assistance as a measure of social justice, a concession withheld where the cause was serious misconduct or an offence reflecting on moral character.

The procedure is as important as the amount. For every authorised cause, the employer must serve a written notice on both the worker and the DOLE regional office at least one month before the intended date. Missing that notice does not make the dismissal illegal where the cause is real, but it exposes the employer to nominal damages, and redundancy in particular must be supported by fair and reasonable criteria for choosing who goes rather than an unexplained list of names.

Resigning does not earn separation pay unless a company policy, a collective bargaining agreement, or an established practice grants it. What you always keep on resignation is your final pay: unpaid wages, pro-rated 13th-month pay, and the cash value of unused service incentive leave.

What to do

• Identify which ground your employer actually invoked, and get it in writing. The ground determines both entitlement and the rate.
• Count your years of service and remember that a fraction of at least six months counts as a full year.
• Check that the one-month written notice went to you and to the DOLE regional office. Ask for proof of the DOLE filing.
• For redundancy, ask what criteria were used to select employees. Fair and reasonable criteria are required, and the absence of any is a common ground for reversal.
• For closure claimed to be due to serious losses, ask for audited financial statements. The burden of proving the losses sits with the employer.
• If the amount or the ground looks wrong, file with DOLE under SEnA or with the NLRC. Illegal dismissal claims prescribe in four years, money claims in three.

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