No Separation Pay for Employees Who Resigned

Someone asked me, "I have a friend who...

resigned from his job recently. He had worked there for 10 years already. Is he not entitled to any separation pay?

My answer is employees who resign voluntarily are not entitled to any severance pay. The Labor Code only stipulates separaton pay in the following instances:

• One (1) months salary for every year of service
  - labor saving devices
  - redundancy
• Half (1/2) month salary for every year of service
  - retrenchment
  - cessation of operation not due to business losses
  - disease

When the separation is for just causes authorized by law or when it is at the volition of the employee, then separation pay is not required, unless the company has specific policy of giving such.

The Supreme Court, however, in the recent J Marketing v. Taran (June 18, 2009) ruled that where the employer offered such benefit to induce the employee to voluntarily resign, the employer cannot later on renege on the fulfillment of such commitment.

In this case, Taran, as credit and collection officer, was subject of an investigation for illegal custody of colored TV unit in violation of the company rule. Upon verbal arrangement with the OIC of the branch, Taran tendered his resignation from the company due to poor health, provided he is given 100% separation pay and other benefits. The company later on refused to grant such benefit contending that Taran was terminated with cause and because of poor performance. The Court ruled that the agreement to sweeten the pot for an alternative exit is not illegal and may even be considered humanitarian so as not to smear his employment record. If the parties already agreed to such a graceful exit, the employer cannot go back on his words and refuse to grant the separation pay promised.