Fire-at-will

As a general proposition in the United States, particularly in the State of California, employment, having no specified term, may be terminated at the will of either party on notice to the other. An “at-will” employment may be ended by either party “at any time without cause,” for any or no reason, and subject to no procedure except the statutory requirement of notice.1 Interestingly enough, the requirement of “cause” in their jurisdiction is the exception rather than the rule, on a ratiocination based on the fundamental freedom of parties to freely contract. The statute does not prevent the parties from agreeing to any limitation, otherwise lawful, on the employer’s termination rights.

The existence or permissibility of an at-will employment arrangement in our jurisdiction is quite a common point of inquiry. After all, the arrangement leaves much freedom on the part of the employer. If the agreement is such that “the employment relationship will continue indefinitely, pending the occurrence of some event such as the employer’s dissatisfaction with the employee’s services or the existence of some cause for termination,” then the employee essentially serves, in its fundamental sense, at the pleasure of the employer — termination becomes a matter of course at the employer’s mere whim.

The Philippines does not recognize this type of arrangement. As an aspect of due process under the Labor Code, an employer cannot terminate the services of an employee except for just or authorized cause, which arises out of the fault of the employee, or from business exigency, respectively. There must also compliance with procedural due process, i.e., twin notice and conduct of administrative hearing.

This is security of tenure, enshrined as a matter of policy in no less than the 1987 Constitution of the Philippines.2 Contrary to other jurisdictions, our laws expressly require that such cause exists as a precondition to termination of employment. The existence of cause cannot be waived through contractual stipulations or otherwise, as such a waiver is contrary to law. Note that security of tenure is not limited to regular employment as may be inferred from Art. 294 of the Labor Code. All employees in the Philippines possess security of tenure, but employees who are not “regular” in the legal sense may be dismissed for other causes in addition to the causes under the law (e.g., a probationary employee may be dismissed due to failure of the employee to qualify in accordance with the regularization standards made known to him/her at the time of engagement, in addition to just and authorized causes).

Termination without cause exposes the employer to significant liabilities, i.e., reinstatement with full back wages and other benefits or its monetary equivalent computed from the time compensation was withheld up to the time of actual reinstatement.3 Damages and attorney’s fees may also be awarded to the illegally dismissed employee.

Interestingly, however, in GMBT v. Malinao (July 2015), the Supreme Court upheld the right of the employer to dismiss a Filipino migrant worker based on an employment contract which provides that the “contract may be terminated by either party, at any time and for no cause by giving three months’ notice to the other party.”

The Supreme Court ruled that “the Contract of Employment signed by the respondent [therein] is first and foremost a contract, which has the force of law between the parties as long as its stipulations are not contrary to law, morals, public order, or public policy.” Citing Avon Cosmetics v. Luna, where the Court held that either party may terminate a contract even without cause is legitimate if exercised in good faith. Thus, while either party has the right to terminate the contract at will, it cannot act purposely to injure the other. However, it is important to note that the Avon Cosmetics case involves an independent retailer/dealer governed by the general contract law, not an employer-employee relationship governed by the Labor Code. Thus, it is the opinion of this author that Avon was improperly cited in this case.

To be sure, parties to overseas employment contracts are allowed to stipulate other terms and conditions and other benefits not provided under these minimum requirements; provided the whole employment package should be more beneficial to the worker than the minimum. It must be emphasized though that the same cannot be contrary to law, public policy, and morals.

Following a legal luminary’s disquisition on the matter, we should note that the GMBT case cannot and should not be interpreted to allow contract stipulations providing for at-will employment in the Philippines. That case was decided based on the circumstance that a contract was voluntarily agreed upon by the employee to perform work in a country (Ethiopia) where at-will employment is permissible. Although questions may be raised as to why a contract with such a stipulation was approved by the POEA despite public policy concerns, it remains true that employment-at-will does not have a leg to stand on under Philippine law.

1 Guz v. Bechtel, Inc., 24 Cal. 4th 317 (2000).
2 See 1987 Const., art. XIII § 3.
3 Labor Code, art. 294.

This article is for informational and educational purposes only. It is not offered and does not constitute legal advice or legal opinion.

Miguel Antonio N. Alonzo is an associate of the Labor and Employment (LED) of the Angara Abello Concepcion Regala & Cruz Law Offices, located at Bonifacio Global City, Taguig City, Metro Manila, Philippines.

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