Under Philippine law, an employee
is not entitled to separation pay when he is terminated for just causes such as
serious misconduct or habitual neglect of duty. An employee is also not
entitled to separation pay when he tenders his resignation voluntarily.
However, by way of exception, there can be certain occasions when voluntary
resignation can still lead to payment of separation pay such as when grant of
separation pay to resigning employee has been established by prior agreement or
by standard business practice. Further, when an employee has been forced to
resign due to authorized causes such as retrenchment or redundancy, he is given
separation pay under our labor laws.
In some companies, however, employers resort to what labor lawyers call as “constructive dismissal”—when employees are harassed and practically coerced to resign from the company. In labor law, constructive dismissal occurs when continued employment is rendered impossible, unreasonable or unbearable on the part of the resigning employee. It also occurs when there is a demotion in rank or diminution in pay or whenever an employer ostracizes, condemns or chastises an employee causing the latter to resign. In Philippine jurisprudence, there may be constructive dismissal if an act of clear discrimination, insensibility or disdain by an employer becomes so unbearable on the part of the employee that it could foreclose any choice by him except to forego his continued employment. (Hyatt Taxi Services Inc. v. Catinoy, 412 Phil. 295). In case where there is an atmosphere of animosity and antagonism between the employer and the employee, the doctrine of strained relations calls for the payment of separation pay. On one hand, such payment liberates the employee from what could be a highly oppressive work environment. On the other hand, it releases the employer from the grossly unpalatable obligation of maintaining in its employ a worker it could no longer trust. (Dreamland Hotel Resort v. Johnson, 729 Phil. 384)
PBF has been an executive for a respectable company for more than half of his professional career. For reasons only known to his employer, he was unceremoniously demoted in rank, but not in pay. While PBF felt that such situation was humiliating and intolerable to the extent that he wanted to resign, he stayed on like a good boy scout. The situation got worse when, due to some changes in senior management, PBF was asked to report to an affiliate of his employer, seemingly without legitimate grounds and without his prior consent. This time, PBF protested since the terms of his supposed temporary reassignment outside his employer’s premises was not time bound, and worse, failed to provide specific scope of functions and responsibilities. It has been held in various court cases that constructive dismissal occurs when a transfer or demotion of an employee is done without valid grounds such as genuine business necessity, even in the exercise of management prerogative.
In most jurisdictions, examples of constructive dismissal include a pay cut without consent, unilateral variation of working hours, forced relocation outside the original place of assignment, and loss/reduction of job responsibility without agreement. Constructive dismissal is seen as a cumulative series of acts taken together that is tantamount to a loss of trust and confidence. Considered as a just cause for termination, breach of trust is a ground often used to terminate managerial employees. In most companies, employers offer a severance package to such managers as a Solomonic solution. The employer is relieved of the administrative task of proving such loss of confidence while the employee need not be subjected to the humiliating process of defending himself on a charge that can be very subjective. From a financial standpoint, such grant of separation pay is a cost-efficient way of getting rid of employees who can no longer be relied upon nor trusted by the company.
But from a bigger perspective, separation or severance pay can be taken as a blessing for all. On the part of the employee, he receives some kind of financial cushion to soften the impact of unemployment while searching for his next employment. On the part of the employer, such gesture can be seen as a legal necessity to prevent litigation. On the part of those employees left behind, they see such payment of severance pay to those who resigned as a compassionate act of kindness or gratitude for services rendered.
In severing employer-employee relationships, servant leaders in management should find inspiration and guidance in the Bible, for it is written in Lamentations 3:32-33: “Though He brings grief, He will show compassion, so great is His unfailing love. For He does not willingly bring affliction or grief to anyone.” In termination cases, management will likely cause grief to its employees, however brief. Yet, servant leaders should be releasing and letting them go with a severance package, even to those who do not deserve it, not by reason or justice or equity, but by grace and compassion.
For questions and comments, please e-mail me at sbmison@gmail.com.