The Department of Labor and Employment (DOLE) recently issued Labor Advisory No. 06, Series of 2020, or the “Guidelines on the Payment of Final Pay and Issuance of Certificate of Employment” (LA 06-20). LA 06-20 prescribes the periods within which an employee’s final pay should be released by the employer and within which the certificate of employment should be issued by the employer, and the enforcement mechanism in settling any issue, claim, or dispute in connection therewith.
Prior to this DOLE issuance, there was no specific period prescribed for the release of the separated employees’ final pay and certificate of employment. LA 06-20 effectively imposes an obligation upon employers to comply with the prescribed periods. Non-compliance with the provisions of LA 06-20 may expose an employer to a complaint for such violation, which shall be dealt with accordingly by the DOLE.
Payment of Final Pay
Under LA 06-20, “Final Pay” was defined as the sum or totality of all the wages or monetary benefits due the employee regardless of the cause of the termination of employment, including but not limited to the following:
a) Unpaid earned salary of the employee;
b) Cash conversion of unused Service Incentive Leave (SIL) pursuant to Article 95 of the Labor Code;
c) Cash conversions of remaining unused vacation, sick or other leaves pursuant to a company policy, or individual or collective agreement, if applicable;
d) Pro-rated 13th month pay pursuant to Presidential Decree No. 851 (PD 851);
e) Separation pay pursuant to Articles 298-299 of the Labor Code, as renumbered, company policy, or individual or collective agreement, if applicable;
f) Retirement pay pursuant to Article 302 of the Labor Code, as renumbered, if applicable;
g) Income tax claim for the excess of taxes withheld, if applicable;
h) Other types of compensation stipulated in an individual or collective agreement, if any; and
i) Cash Bond/s or any kind of deposit/s due for return to the employee, if any.
Accordingly, these amounts shall be released to the employee within thirty (30) days from the date of separation or termination of employment, unless there is a more favorable company policy, individual or collective agreement thereto.
Possible legal exception to the prescribed period: Doctrine in the case of Milan v. NLRC
Nevertheless, in certain instances, an employer may take an aggressive stance and delay the release of the separated employee’s final pay beyond the prescribed 30-day period such as when the employee refuses to complete the company’s clearance process or has pending accountabilities with the company (e.g., unreturned company properties in the employee’s possession). In such cases, the employer may invoke the ruling in the case of Milan v. NLRC (G.R. No. 202961, 04 February 2015) where the Supreme Court upheld the withholding of the employees’ salaries pending return of company property. The Supreme Court in the Milan case noted that the law supports the employers’ institution of clearance procedures before the release of the employees’ final pay, being a valid exercise of management prerogative. This is also consistent with the equitable principle that “no one should be unjustly enriched or benefited at the expense of another.”
Thus, the prescribed 30-day period may be taken as a guideline for both the separated employee and the employer, that is for the former to complete the necessary clearance procedure before or soon after the commencement of the 30-day period in order to afford the latter sufficient time and opportunity to be able to release the employee’s final pay in accordance with LA 06-20.
Issuance of Certificate of Employment
A “Certificate of Employment” refers to a certificate from the employer specifying the dates of an employee’s engagement and the termination of his/her employment and the type or types of work in which he/she is employed. An employee whose employment is not yet terminated may also ask for a Certificate of Employment.
Under LA 06-20, the employer shall issue a certificate of employment within three (3) days from the time of the request by the employee.
LA 06-20 further provides that any issue or claim dispute arising out or relating to the payment of final pay, or issuance of certificate of employment, shall be filed before the DOLE Regional/Provincial/Field Office which has jurisdiction over the workplace.
In view of this legal development, employers may be held liable for withholding the final pay and certificate of employment of separated employees beyond the periods prescribed. Employers may invoke the Milan case as a defense in the event of a labor complaint pursuant to LA 06-20 against it.
Nevertheless, in order to minimize any possible exposure to litigation, it may be worthwhile to ensure effective communication between the management and the employees in connection with each other’s responsibilities under the law in order to comply with the prescribed 30-day period.