Losing a job is already difficult, but it becomes even more complex when the circumstances surrounding termination are unclear or unfair. In the Philippines, employees are protected under the Labor Code, which requires that dismissals be both legally justified and procedurally valid. However, confusion often arises between two key concepts: illegal dismissal and constructive dismissal.
What is illegal dismissal?
Illegal dismissal occurs when an employee is terminated without a valid cause or without due process.
Under the Labor Code, employers must meet two requirements:
- Substantive due process (valid cause). Termination must be based on lawful grounds, such as serious misconduct, willful disobedience, gross neglect of duties, fraud or breach of trust, and redundancy or retrenchment (for authorized causes).
- Procedural due process. Employers must follow the two-notice rule: notice to explain and notice of decision. Employees must be allowed to be heard.
In this case, a dismissal becomes illegal if there is no valid reason, due process is not followed, and termination is arbitrary or retaliatory.
If proven to be such, illegal dismissal may result in reinstatement without loss of seniority rights, full back wages, and payment of damages and attorney’s fees
Cases are typically filed before the National Labor Relations Commission (NLRC).
What is constructive dismissal?
Constructive dismissal happens when an employee is not formally terminated, but is effectively forced to resign due to the employer’s actions.
The Supreme Court of the Philippines has consistently ruled that constructive dismissal exists when continued employment becomes impossible, unreasonable, or unlikely. Namely, if there is/are:
- significant salary reduction (diminution of benefits)
- demotion without valid reason
- transfer to a hostile or distant work environment
- harassment or discrimination
- forcing resignation under threat of termination
Constructive dismissal focuses on the effect of the employer’s actions, not just their intent. Because of this, even without a termination letter, the law may treat the situation as a dismissal.
Key differences between illegal and constructive dismissal
| Illegal Dismissal | Constructive Dismissal | |
| Nature | Direct termination | Forced resignation |
| Employer action | Explicit firing | Indirect pressure/hostile environment |
| Proof required | Lack of cause or due process | Unreasonable working conditions |
| Employee status | Terminated | Resigned (but involuntary) |
Role of resignation
Resignation in these cases is one of the most common misconceptions.
In many cases, constructive dismissal requires resignation, as the claim is based on being forced to leave. However, courts look at the totality of circumstances, and resignation letters stating coercion or unfair conditions may support a claim.
Strong documentation is critical in both types of cases, such as employment contracts, termination notices, emails and messages, performance evaluations, payslips (for salary disputes), and witness statements.
A clear paper trail significantly strengthens any claim before the NLRC.
International perspective on dismissal
The Philippines’ framework aligns with global labor standards, particularly those promoted by the International Labour Organization (ILO).
Under international labor principles, employees must not be dismissed without a valid reason, due process must be observed, and workers must be protected from unfair or forced resignation.
Many jurisdictions, such as the UK, Australia, and EU countries, recognize constructive dismissal under similar standards, reinforcing the principle that employers cannot indirectly force employees out.
Is it worth filing a case?
A good case depends on factors such as the strength of evidence, financial and emotional cost, potential recovery (e.g., back wages), and timeline of proceedings. While cases may take time, successful claims can provide meaningful compensation and accountability.
To summarize
Illegal dismissal and constructive dismissal both arise from unfair employment practices, but they differ in how the termination occurs.
Illegal dismissal is direct and explicit. Constructive dismissal is indirect but equally unlawful.
Understanding these distinctions allows employees to better assess their situation and take appropriate action.
Need legal guidance? If you’re facing termination issues or workplace disputes, STLAF’S professional legal team can help you evaluate your case, gather evidence, and pursue the right remedy.
Disclaimer: The content of this blog is intended for general informational and educational purposes only and does not constitute legal advice. Laws and regulations may vary by jurisdiction, and the applicability of the information herein may differ depending on specific facts and circumstances. Accessing or reading this content does not create an attorney–client relationship. For legal concerns or tailored guidance, please consult a qualified lawyer licensed in your jurisdiction.
Whether you are based in the Philippines or overseas, STLAF offers legal services to both local and international clients. Our team is equipped to assist with cross-border matters, provide jurisdiction-specific guidance, and help you navigate complex legal challenges with confidence.
To read more STLAF legal tidbits, visit https://stlaf.global/bits-of-law.
For comments, suggestions, and inquiries, email legal@sadsadtamesislaw.com.
Author(s): Patricia Minimo