IRR of Book VI of the Labor Code

BOOK SIX

POST-EMPLOYMENT

As amended by Department Order No. 147-15, September 7, 2015.

Rule I
TERMINATION OF EMPLOYMENT AND RETIREMENT

SECTION 1. Coverage. – This rule shall apply to all establishments and undertakings, whether operated for profit or not, including educational, medical, charitable and religious institutions and organizations, in cases of regular employment with the exception of the Government and its political subdivision including government-owned or controlled corporations.

SECTION 2. Security of Tenure. – (a) In cases of regular employment, the employer shall not terminate the services of an employee except for just or authorized causes as provided by law, and subject to the requirements of due process.

The foregoing shall also apply in cases of probationary employment; Provided, however, That in such cases, termination of employment due to failure of the employee to qualify in accordance with the standards of the employer made known to the former at the time of engagement may also be a ground for termination of employment.

In cases of employment covered by contracting or subcontracting arrangement, no employee shall be dismissed prior to the expiration of the contract between the principal and contractor or subcontractor as defined in Rule VIII-A, Book III of these Rules, unless the dismissal is for just or authorized cause, or is brought about by the completion of the phase of the contract for which the employee was engaged, but in any case, subject to the requirements of due process or prior notice.

In all cases of termination of employment, the following standards of due process shall be substantially observed:

For termination of employment based on just causes as defined in Article [288] of the Labor Code:

(i) A written notice served on the employee specifying the ground or grounds for termination, and giving said employee reasonable opportunity within which to explain his side.

(ii) A hearing or conference during which the employee concerned, with the assistance of counsel if he so desires is given opportunity to respond to the charge, present his evidence, or rebut the evidence presented against him.

(iii) A written notice of termination served on the employee, indicating that upon due consideration of all the circumstances, grounds have been established to justify his termination.

For termination of employment as defined in Article [289] of the Labor Code, the requirement of due process shall be deemed complied with upon service of a written notice to the employee and the appropriate Regional Office of the Department of Labor and Employment at least thirty days before effectivity of the termination, specifying the ground or grounds for termination.

If the termination is brought about by the completion of a contract or phase thereof, or by failure of an employee to meet the standards of the employer in the case of probationary employment, it shall be sufficient that a written notice is served the employee within a reasonable time from the effective date of termination.

SECTION 3. Reinstatement. – An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and to backwages.

SECTION 4. Reinstatement to Former Position. – (a) An employee who is separated from work without just cause shall be reinstated to his former position, unless such position no longer exists at the time of his reinstatement, in which case he shall be given a substantially equivalent position in the same establishment without loss of seniority rights.

(b) In case the establishment where the employee is to be reinstated has closed or ceased operations or where his former position no longer exists at the time of reinstatement for reasons not attributable to the fault of the employer, the employee shall be entitled to separation pay equivalent at least to one month salary or to one month salary for every year of service, whichever is higher, a fraction of at least six months being considered as one whole year.

SECTION 5. (a) Regular Employment. – The provisions of written agreements to the contrary notwithstanding and regardless of the oral agreements of the parties, employment shall be deemed regular for purposes of Book VI of the Labor Code where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the job, work or service to be performed is seasonal in nature and the employment is for the duration of the season.

(b) Casual Employment. – There is casual employment where an employee is engaged to perform a job, work or service which is merely incidental to the business of the employer, and such job, work or service is for a definite period made known to the employee at the time of engagement: Provided, That any employee who has rendered at least one year of service, whether such service is continuous or not, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists.

Notwithstanding the foregoing distinctions, every employee shall be entitled to the rights and privileges, and shall be subject to the duties and obligations, as may be granted by law to regular employees during the period of their actual employment.

SECTION 6. Probationary Employment. – There is probationary employment where the employee, upon his engagement, is made to undergo a trial period during which the employer determines his fitness to qualify for regular employment based on reasonable standards made known to him at the time of engagement.

Probationary employment shall be governed by the following rules:

(a) Where the work for which the employee has been engaged is learnable or apprenticeable in accordance with the standards prescribed by the Department of Labor and Employment. The period of probationary employment shall be limited to the authorized learnership or apprenticeship period, whichever is applicable.

(b) Where the work is neither learnable nor apprenticeable, the period of probationary employment shall not exceed six months reckoned from the date the employee actually started working.

(c) The services of any employee who has been engaged on probationary basis may be terminated only for a just or authorized cause, when he fails to qualify as a regular employee in accordance with reasonable standards prescribed by the employer.

(d) In all cases of probationary employment, the employer shall make known to the employee the standards under which he will qualify as a regular employee at the time of his engagement. Where no standards are made known to the employee at that time, he shall be deemed a regular employee.

SECTION 7. Termination of Employment by Employer. – The just causes for terminating the services of an employee shall be those provided in Article [288] 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 bargaining agreement with the employer or voluntary employer policy or practice.

SECTION 8. Disease as a Ground for Dismissal. – Where the employee suffers from a disease and his continued employment is prohibited by law or prejudicial to his health or to the health of his co employees, the employer shall not terminate his employment unless there is a certification by a competent public health authority that the disease is of such nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical treatment. If the disease or ailment can be cured within the period, the employer shall not terminate the employee but shall ask the employee to take a leave. The employer shall reinstate such employee to his former position immediately upon the restoration of his normal health.

SECTION 9. Termination Pay. – (a) An employee shall be entitled to termination pay equivalent to at least one month salary for every year of service, a fraction of at least six months being considered as one whole year, in case of termination of his employment due to the installation of labor-saving devices or redundancy.

(b) Where the termination of employment is due to retrenchment to prevent losses and in case of closure or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, or where the employee suffers from a disease and his continued employment is prohibited by law or is prejudicial to his health or to the health of his co-employees, the employee shall be entitled to termination pay equivalent to at least one-half month pay for every year of service, a fraction of at least six months being considered as one whole year.

SECTION 10. Basis of Termination Pay. – The computation of the termination pay of an employee as provided herein shall be based on his latest salary rate, unless the same was reduced by the employer to defeat the intention of the Code, in which case the basis of computation shall be the rate before its deduction.

SECTION 11. Termination of Employment by Employee. – The just causes for putting an end to the employer-employee relationship by the employee shall be those provided in Article [291] of the Labor Code.

SECTION 12. Suspension of Relationship. – The employer-employee relationship shall be deemed suspended in case of suspension of operation of the business or undertaking of the employer for a period not exceeding six (6) months, unless the suspension is for the purpose of defeating the rights of the employees under the Code, and in case of mandatory fulfillment by the employee of a military or civic duty. The payment of wages of the employee as well as the grant of other benefits and privileges while he is on a military or civic duty shall be subject to special laws and decrees and to the applicable individual or collective bargaining agreement and voluntary employer practice or policy.

SECTION 13. Retirement. – (Superseded by Rule II, Book VI)

SECTION 14. Retirement Benefits. – (Superseded by Rule II, Book VI)

RULE II
RETIREMENT BENEFITS

SECTION 1. General Statement on Coverage. This Rule shall apply to all employees in the private sector, regardless of their position, designation or status and irrespective of the method by which their wages are paid, except to those specifically exempted under Section 2 hereof. As used herein, the term “Act” shall refer to Republic Act No. 7641 which took effect on January 7, 1993.

SECTION 2. Exemptions. This Rule shall not apply to the following employees:

2.1 Employees of the National Government and its political subdivisions, including Government-owned and/or controlled corporations, if they are covered by the Civil Service Law and its regulations.

2.2 Domestic helpers and persons in the personal service of another. (Note: This provision has been deleted by D.O. No. 20 dated May 31, 1994.)

2.3 Employees of retail, service and agricultural establishment or operations regularly employing not more than ten (10) employees. As used in this subsection:

(a) “Retail establishment” is one principally engaged in the sale of goods to end-users for personal or household use. It shall lose its retail character qualified for exemption if it is engaged in both retail and wholesale sale of goods.

(b) “Service establishment” is one principally engaged in the sale of service to individuals for their own or household use and is generally recognized as such.

(c) “Agricultural establishment/operations” refers to an employer which is engaged in “agriculture.” This terms refers to all farming activities in all its branches and includes among others, the cultivation and tillage of the soil, production, cultivation, growing and harvesting of any agricultural or horticultural commodities, dairying, raising of livestock or poultry, the culture of fish and other aquatic products in farms or ponds, and any activities performed by a farmer or on a farm as incident to or in conjunction with such farming operations, but does not include the manufacture and/or processing of sugar, coconut, abaca, tobacco, pineapple, aquatic or other farm products.

SECTION 3. Retirement under CBA/Contract. –

3.1 Any employee may retire or be retired by his employer upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract or retirement plan subject to the provisions of Section 5 hereof on the payment of retirement benefits.

3.2 In case of retirement under this Section, the employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and any collective bargaining agreement and other agreements; Provided, however, That an employee’s retirement benefits under any collective bargaining and other agreements shall not be less than those provided under this Rule, and provided, further, That if such benefits are less, the employer shall pay the difference between the amount due the employee under this Rule and that provided under the collective or individual agreement or retirement plan.

3.3 Where both the employer and the employee contribute to a retirement fund in accordance with an individual or collective agreement or other applicable employment contract, the employer’s total contribution thereto shall not be less than the total retirement benefits to which the employee would have been entitled had there been no such retirement fund. In case the employer’s contribution is less than the retirement benefits provided under this Rule, the employer shall pay the deficiency.

SECTION 4. Optional: Compulsory Retirement. –

4.1 Optional Retirement. – In the absence of a retirement plan or other applicable agreement providing for retirement benefits of employees in an establishment, an employee may retire upon reaching the age of sixty (60) years or more if he has served for at least five (5) years in said establishment.

4.2 Compulsory Retirement. – Where there is no such plan or agreement referred to in the immediately preceding sub-Section, an employee shall be retired upon reaching the age of sixty-five (65) years.

4.3 Upon retirement of an employee, whether optional or compulsory, his services may be continued or extended on a case to case basis upon agreement of the employer and employee.

4.4 Service Requirement. – The minimum length of service in an establishment or with an employer of at least five (5) years required for entitlement to retirement pay shall include authorized absences and vacations, regular holidays and mandatory fulfillment of a military or civic duty.

SECTION 5. Retirement Benefits. –

5.1 In the absence of an applicable agreement or retirement plan, an employee who retires pursuant to the Act shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year.

5.2 Components of One-half (1/2) Month Salary. – For the purpose of determining the minimum retirement pay due an employee under this Rule, the term “one-half month salary” shall include all of the following:

(a) Fifteen (15) days salary of the employee based on his latest salary rate. As used herein, the term “salary” includes all remunerations paid by an employer to his employees for services rendered during normal working days and hours, whether such payments are fixed or ascertained on a time, task, piece of commission basis, or other method of calculating the same, and includes the fair and reasonable value, as determined by the Secretary of Labor and Employment, of food, lodging or other facilities customarily furnished by the employer to his employees. The term does not include cost of living allowances, profit-sharing payments and other monetary benefits which are not considered as part of or integrated into the regular salary of the employees;

(b) The cash equivalent of not more than five (5) days of service incentive leave;

(d) All other benefits that the employer and employee may agree upon that should be included in the computation of the employees retirement pay.

5.3 One-half month salary of employees who are paid by results. – For covered workers who are paid by results and do not have a fixed monthly rate, the basis for determination of the salary for fifteen days shall be their average daily salary (ADS), subject to the provisions of Rule VII-A, Book III of the Rules Implementing the Labor Code on the payment of wages of workers who are paid by results. The ADS is the average salary for the last twelve (12) months reckoned from the date of their retirement, divided by the number of actual working days in that particular period.

SECTION 6. Exemption from Tax. – The retirement pay provided in the Act may be exempted from tax if the requirements set by the Bureau of Internal Revenue under Sec. 2(b) item (1) of Revenue Regulations No. 12-86 dated August 1, 1986 are met, to wit:

Pensions, retirement and separation pay. – Pensions, retirement and separation pay constitute compensation subject to withholding, except the following:

(1) Retirement benefits received by officials and employees of private firms under a reasonable private benefit plan maintained by the employer, if the following requirements are met:

(i) The benefit plan must be approved by the Bureau of Internal Revenue;
(ii) The retiring official or employee must have been in the service of the same employer for at least ten (10) years and is not less than fifty (50) years of age at the time of retirement; and
(iii) The retiring official or employee shall not have previously availed of the privilege under the retirement benefit plan of the same or another employer.

SECTION 7. Penal Provision. – It shall be unlawful for any person or entity to circumvent or render ineffective the provisions of the Act. Violations thereof shall be subject to the penal provisions provided under Article [294] of the Labor Code of the Philippines.

SECTION 8. Relation to Agreements and Regulations. – Nothing in this Rule shall justify an employer from withdrawing or reducing any benefits, supplements or payments as provided in existing laws, individual or collective agreements or employment practices or policies.

All rules and regulations, policy issuances or orders contrary to or inconsistent with these rules are hereby repealed or modified accordingly.

SECTION 9. Effectivity. – This Rule took effect on January 7, 1993 when the Act went into force.

RULE II-A
RETIREMENT AGE FOR UNDERGROUND MINE EMPLOYEES*

*D.O. No. 09, series of 1998.

SECTION 1. General Statement on Coverage. – This Rule shall apply to all underground mine – employees as contemplated under Republic Act No. 8558 for these purpose, an underground mine employee refers to any person employed to extract mineral deposits underground or to work in excavations or workings such as shafts, winzes, tunnels, drifts, crosscuts, raises, working places whether abandoned or in use beneath the earth’s surface for the purpose of searching for and extracting mineral deposits.

SECTION 2. Optional Retirement and Compulsory Retirement. –

2.1 Optional Retirement. – In the absence of a retirement plan or other applicable agreement providing for retirement benefits of underground mine employees in the establishment, any such employee may retire upon reaching the age of fifty (50) years or more if he has served for at least five (5) years as underground mine employee or in underground mine of the establishment.

2.2 Compulsory Retirement – Where there is no such plan or agreement referred to in the immediately preceding subsection, an underground mine employee shall be retired upon reaching the age of sixty (60) years.

2.3 Service Requirement. – The minimum length of service of at least five (5) years for entitlement to retirement pay shall include authorized absences and vacations, holidays, and mandatory fulfillment of a military or civic duty.

SECTION 3. Retirement under CBA/ Contract. –

3.1 any underground mine employee may retire or be retired by his employer upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract or retirement plan subject to the provisions of Section 4 hereof on the payment of retirement benefits.

3.2 In case of retirement under this Section, the underground mine employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and collective bargaining agreement and other agreements; Provided, however, That an employee’s retirement benefits under any collective bargaining and other agreements shall not be less than those provided under this Rule, and provided, further, That if such benefits are less, the employer shall pay the difference between the amount due the employee under this Rule and that provided under the collective bargaining agreement or other applicable employment contract.

3.3 Where both the employer and the employee contribute to a retirement fund in accordance with a collective bargaining agreement or other applicable employment contract, the employer’s total contribution thereto shall not be less than the total retirement benefits to which the employee would have been entitled had there been no such retirement fund. In case the employer’s contribution is less than the retirement benefits provided under this Rule, the employer shall pay the deficiency.

SECTION 4. Retirement Benefits. –

4.1 In the absence of an applicable employment contract, an underground mine employee who retires pursuant to the Act shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year.

4.2 Components of One-half (1/2) Month Salary. – For the purpose of determining the minimum retirement pay due an employee under this Rule, the term “one-half month salary” shall include all of the following:

(b) The cash equivalent of not more than five (5) days of service incentive leave;

(d) All other benefits that the employer and employee may agree upon that should be included in the computation of the employee’s retirement pay.

4.3 One-half month salary of employees who are paid by results. – For covered workers who are paid by results and do not have a fixed monthly rate, the basis for determination of the salary for fifteen days shall be their average daily salary (ADS), subject to the provisions of Rule VII-A, Book III of the Rules Implementing the Labor Code on the payment of wages of workers who are paid by results. The ADS is the average salary for the last twelve (12) months reckoned from the date of their retirement, divided by the number of actual working days in that particular period.

SECTION 5. Exemption from Tax. – The retirement pay provided in the Act may be exempted from tax consistent with the requirements set by the Bureau of Internal Revenue.

SECTION 6. Penal Provision. – It shall be unlawful for any person or entity to circumvent or render ineffective the provisions of the Act. Violations thereof shall be subject to the penal provisions provided under Article [294] of the Labor Code of the Philippines.

SECTION 7. Relation to Agreements. – Nothing in this Rule shall justify an employer from withdrawing or reducing any benefits, supplements or payments as provided in existing laws, individual or collective agreements or employment practices or policies.

All rules and regulations, policy issuances or orders contrary to or inconsistent with this Rule are hereby repealed or modified accordingly.

SECTION 8. Effectivity. – This Rule took effect on March 22, 1998 when the R.A. No. 8558 went into force.

Myline Cordial