Company Policy: Elements of Administrative Investigation and Progressive Discipline. July 24, 2014. Philippines. Prepared and delivered by Atty. Apollo X.C.S. Sangalang.

2. Atty. Apollo X.C.S. Sangalang
“PoL”
Business Lawyer & Legal Coach

3. Philippine Spring Water Resources Inc.,
and Danilo Y. Lua
-versus-
Court of Appeals and
Juvenstein B. Mahilum
G.R. No. 205278
June 11, 2014
Supreme Court of the Philippines

4. Disclaimers
• No lawyer-client relationship.
• Consult your own legal counsel.
• Legal opinions differ.
• Respect for the sub judice rule.
• Avoid conflict of interest.

5. This seminar is INTERACTIVE

6. LABOR LAW MADE EASY
1. Learn something NEW about
Labor Law DAILY.
2. Links to useful MATERIALS,
SITES and EVENTS.
3. Quick consultation for FREE
(thru private message).

7. LABOR LAW MADE EASY
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8. 3 Key Words
• Company POLICY
• ADMINISTRATIVE Investigation
• PROGRESSIVE Discipline

9. What’s the basis?

10. Employer’s Rights?
• Law on Ownership (Civil Code):
“The owner has the right to enjoy and dispose of a
thing, without other limitations other than those
established by law.” (Art. 428, Civil Code).
• A “thing” can be:
– Physical Capital (e.g. land, building, equipment)
– Financial Capital (e.g. financing)
– Intellectual Capital (e.g. business model)
– Human Capital (e.g. organization)

11. Employer’s Rights?
• Law on Contracts (Civil Code):
“The contracting parties may establish such
stipulations, clauses, terms and conditions as may
be deemed convenient, provided they are not
contrary to law, morals, good customs, public order,
or public policy.” (Art. 1306, Civil Code)
• Employment is a contract.

12. Employer Power Equation
Ownership Contracts Power

13. Employer Power!
• Law on Management Prerogative:
“The State recognizes the indispensable role
of the private sector, encourages private
enterprises, and provides incentives to needed
investments.” (Sec. 20, Art. II, Constitution)
“The State…x x x… recognizing the right of
enterprises (1) to reasonable returns on
investments, and (2) to expansion and
growth.” (Sec. 3, Art. XIII, Constitution)

14. Management Prerogative
1. Right to hire employees of their
(employers’) own choice;
2. Right to fire (and discipline) them;
3. Right to determine their compensation
and benefits; and
4. Right to control their employees.

16. What’s the problem?

17. What’s the purpose?

18. What’s the purpose?

19. What’s the problem?

20. Limitation No. 1
• Article 291 paragraph 2, Labor Code
• (Formerly Article 277)

21. Limitation No. 2
• Article 4, Labor Code

22. Full Protection Equation
Burden
of Proof
All
Doubts
E.A.P.G.

23. 3 Ways to Investigate, Discipline
and Terminate Employees
• Efficient but NOT necessarily legal.
• Legal but NOT necessarily effective.
• Effective (which is more than legal).

24. 3 Reasons to Avoid
ILLEGAL Dismissal Cases
• Monetary and Business Costs.
• Emotional, Mental, Physical and
Spiritual Costs.
• Social and Macro-Economic Costs.

25. 3 Most Fearsome Monetary
and Business COSTS
• Reinstatement.
• Backwages.
• Damages.

26. 3 Hidden Monetary and
Business COSTS
• Direct Costs of Litigation.
• Indirect Costs of Litigation.
• Business Losses and Closure.

27. 3 Kinds of Workers to I.D.T.
• Employees guilty of JUST CAUSE.
• Employees NOT guilty of just cause.
• Workers who are NOT employees.

28. 3 Kinds of Employees who
are Guilty of Just Cause
• Guilty under Article 296 Labor Code.
• Guilty under Causes Analogous.
• Guilty under Company Policy.

29. Article 296*, Labor Code
1. Serious misconduct;
2. Willful disobedience (or insubordination);
3. Gross and habitual neglect of duties;
4. Fraud;
5. Willful breach of trust; and
6. Crime against person of the employer or
his immediate family or representatives.

30. Causes Analogous
1. Loss of trust;
2. Gross negligence coupled with a grave
consequence;
3. Incompetence without improvement;
4. Habitual commission of minor offenses;
and
5. Unfit for continued employment based on
the “Totality of Infraction” doctrine.

31. Company Policy
• Causes Analogous is the LEGAL BASIS
for employers to create new offenses
penalized by termination.
• New offenses must have the same
gravity as the offenses in Article 296.
• Must be written, well defined and
circulated (e.g. Employee Handbook).

32. Other Problem Employees
1. Employee isn’t the problem (what then?);
2. Problem employee, yes; but he isn’t
dismissible (yet);
3. Problem employee, yes; but he can be
severed without firing him;
4. Employee who lacks motivation or skills;
and
5. Non-employee worker;

33. 3 Ways to I.D.T.
• Efficient but not necessarily legal.
• Legal but not necessarily effective.
• Effective (which should be legal).

34. Legal Way To I.D.T.
• Substantive Due Process.
• Procedural Due Process.
• Substantial Evidence.

35. Substantive
Due Process
• Just Cause
• Reasonableness
• Good Faith
Procedural
Due
Process
• Notice to Explain
• Notice of Hearing
• Notice of
Termination
Substantial
Evidence
• Proof of Substantive
Due Process
• Proof of Procedural
Due Process
• Proof of Good Faith
LEGAL
WAY

36. Substantive Due Process
• Just Cause.
• Reasonableness.
• Good Faith.

37. Substantive Due Process
• JUST CAUSE:
– based on Article 296*, Labor Code.
– based on “Causes Analogous”.
– must overcome:
“Security of Tenure.”

38. Article 296*, Labor Code
1. Serious misconduct;
2. Willful disobedience (or insubordination);
3. Gross and habitual neglect of duties;
4. Fraud;
5. Willful breach of trust; and
6. Crime against person of the employer or
his immediate family or representatives.

39. Causes Analogous
1. Loss of trust;
2. Gross negligence coupled with a grave
consequence;
3. Incompetence without improvement;
4. Habitual commission of minor offenses;
and
5. Unfit for continued employment based on
the “Totality of Infraction” doctrine.

40. Substantive Due Process
• REASONABLENESS:
– Penalty is proportionate to the
offense.
– Offense is NOT against Law or
Public Policy.
– Offense is business-related or
employment-connected.

41. Substantive Due Process
• GOOD FAITH:
– Good faith is presumed.
– Bad faith must be proven.
– But in labor law, it’s the reverse!
• Because ALL DOUBTS
favor employees!

42. Procedural Due Process
• Notice to Explain.
• Notice of Hearing.
• Notice of Termination.

43. Procedural Due Process
• NOTICE TO EXPLAIN:
– Describes the who, what, when, where,
why and the how much or the manner the
offense was committed.
– Gives at least 5 DAYS to submit the
written explanation.
– Specifies TERMINATION as possible
penalty, if found guilty.

44. Procedural Due Process
• NOTICE OF HEARING:
– Gives opportunity to the employee to
verbally explain his side and present his
evidence.
– States that he has right to counsel or
representative of his own choice.
– Lays down the hearing procedure.

45. Procedural Due Process
• NOTICE OF TERMINATION:
– Summarizes what happened since the
start of the disciplinary process.
– Enumerates the basis of the decision.
– States the verdict clearly, including
monetary liability (if any); and advises
employee of the next step.

46. Substantial Evidence
• Proof of substantive due process.
• Proof of procedural due process.
• Proof of good faith.

47. Substantial Evidence
• PROOF OF SUBSTANTIVE DUE
PROCESS:
– Offense is defined and justified.
– Employee committed the offense.
• Affidavits and Testimonial Evidence.
• Admissions.
• Documentary Evidence.
• Object Evidence.

48. Substantial Evidence
• PROOF OF PROCEDURAL DUE
PROCESS:
– Notices are written and served.
• Personal service.
• Substituted service.
– Hearings are recorded.
• Attendance.
• Minutes.

49. Substantial Evidence
• PROOF OF GOOD FAITH:
– Show the effect of the offense on the
organization or on the business.
– Show that you walked the Extra Mile.
• Because employers have the
BURDEN OF PROOF*.
• Because ALL DOUBTS favor the
employees.

50. Substantive
Due Process
• Just Cause
• Reasonableness
• Good Faith
Procedural
Due
Process
• Notice to Explain
• Notice of Hearing
• Notice of
Termination
Substantial
Evidence
• Proof of Substantive
Due Process
• Proof of Procedural
Due Process
• Proof of Good Faith
LEGAL
WAY

51. CONSTRUCTIVE DISMISSAL
• A form of ILLEGAL TERMINATION;
• No formal termination or disciplinary
proceeding was initiated;
– No due process; Presumably, no just or
authorized cause as well.
• Employee was forced to resign because:
– Demotion or diminution of benefits; or
– Impossible or unbearable for the employee to
continue with his employment; or
– Directed by the employer to resign.

52. PREVENTIVE SUSPENSION
Ground:
– Serious and imminent threat to the:
• Life and/or property of the…
• Employer and/or co-workers.
Maximum period: 30 days.
Otherwise, it shall be CONSTRUCTIVE DISMISSAL.
Ideally, the Notice of Preventive Suspension is incorporated in the
Notice to Explain (or 1st Notice) issued to the employee.
It may be credited to the penalty of suspension, if Employee is
found guilty of an offense punishable with suspension.

53. TEMPORARY TRANSFER
Requirements:
– Genuine business need or necessity;
– Good faith;
– No undue hardship upon employee; and
– Not meant as a form of penalty.
Otherwise, the transfer will be considered as a form of
CONSTRUCTIVE DISMISSAL.
If there is just cause, transfer may be resorted to as an
alternative to preventive suspension; but a
disciplinary proceeding must be initiated.

54. Effective Way
• Legal Way isn’t enough. Why?
• Because…
– Filing a labor case is so easy and it’s free;
– An employee who felt mistreated will try to
vindicate himself or get even;
– A guilty employee will try to save face;
– Many lawyers, paralegals, and labor
leaders accept contingency fees.

55. What’s the Effective Way?
D.O.C.U.M.E.N.T.© 2013

56. How to D.O.C.U.M.E.N.T. © 2013
D ocumentation, documentation, documentation!!!
O pen-mindedness.
C larity.
U nderstand LR.
M aster HR.
E mbrace best practices: Progressive Discipline
N egotiate, negotiate, negotiate!!!
T ake advice only from experts.

57. Documentation X 3
• Pre-Employment Documentation.
• Employment Documentation.
• Pre-Termination & Post
Employment Documentation.

58. Open-Mindedness
• Be tolerant with your employees.
• Be receptive to new ideas and
possibilities.
• Be accepting of the outcome.

59. Clarity
• Clarity in written communication.
• Clarity in oral communication and
action.
• Clarity in purpose and objective.

60. Understand ER/LR
• Understand that:
1. ER/LR is a “Game”.
2. the “Rules of the Game”.
3. the “Goals of the Game”.

61. Anatomy of a Labor Dispute
Capitalist Worker

62. Evolution of Work Arrangement
Slavery
Serfdom
Contractual

63. Capitalism

64. Capitalist Model
Social
Benefits
Free Market
Competition

65. Communism

66. Capitalist Exploitation
Profit,
Expansion and
Growth
Workers’
Compensation
and Benefits

67. Revolution!!!
Socialist
Democratic

68. Socialist Model
People’s Ownership
Management’s
Stewardship
Party’s
Guardianship

69. Democratic Model
Elite
Class
Middle
Class
Working Class

70. Labor Law Revolution!
Unionism +
Strike
Labor
Standards
Social
Justice
Security of
Tenure

71. Shared Responsibility Model
Business
Labor
Progress
and
Development

72. Tripartite Model
Government
BusinessLabor

73. What is Social Justice?
Business Labor
Law
Law
Law
Law
Law

74. Rule of Law
Constitution
Laws (including Labor Laws)
Rules & Regulations
Jurisprudence
Public Policies
and Principles
of Equity
Contracts
Company
Policies

75. Elements of Labor Law
Labor
Law
Shared
Responsibility
Social
Justice
Rule of
Law

76. Anatomy of a Labor Dispute
Capitalist Worker

77. Win-Win Lose-Win
Win-Lose Lose-Lose
Conflict
Resolution
Scenarios

78. 3 Kinds of Win Scenarios
• Win – Lose
• Compromise (or Half-baked Win)
• Win – Win (Mindset)
– “Think Win-Win” by Steven Covey

79. 3 Ways To Win
• By “Hook” or by “Crook”.
• Out Last. Out Wit. Out Pay!
(“Survivor”).
• WIN with INtegrity (“WIN-wIN”).
– It’s more than just winning legally.

80. Why WIN-wIN?
• I can’t compartmentalize my life.
• I can’t justify the means with the end.
• I reaped what I’ve sown.
• I almost lost my soul.

81. What’s WIN-wIN?
“… what king would go to war against
another king without first sitting down with
his counselors to discuss whether his army
of 10,000 could defeat the 20,000 soldiers
marching against him? And if he can’t, he
will send a delegation to discuss terms of
peace while the enemy is still far away.”
- Jesus Christ
(Luke 14:31-32 NLT)

82. What’s the Win-Win Way?
D.O.C.U.M.E.N.T.© 2013

83. How to D.O.C.U.M.E.N.T. © 2013
D ocumentation, documentation, documentation!!!
O pen-mindedness.
C larity.
U nderstand LR.
M aster HR.
E mbrace best practices: Progressive Discipline
N egotiate, negotiate, negotiate!!!
T ake advice only from experts.

84. Master HR
• ER/LR is essentially HR.
• HR is exemplified by MR.
• MR is enhanced by GR.

85. Embrace Best Practices
• Good Practices.
• Better Practices.
• Best Practices:
PROGRESSIVE
DISCIPLINE

86. Embrace Best Practices
PROGRESSIVE DISCIPLINE
System
Documentation
Mindset

87. Progressive Discipline Mindset
1. Do no harm.
2. Make things better.
3. Respect others.
4. Be fair.
5. Be compassionate.

88. Negotiate X 3
• Negotiate before a labor dispute.
• Negotiate during a labor dispute.
• Negotiate after a labor dispute.

89. Take advice only from experts
• Licensed or seasoned experts.
• Local labor law experts.
• Practical and trust-worthy experts.

90. How to D.O.C.U.M.E.N.T. © 2013
D ocumentation, documentation, documentation!!!
O pen-mindedness.
C larity.
U nderstand LR.
M aster HR.
E mbrace best practices: Progressive Discipline
N egotiate, negotiate, negotiate!!!
T ake advice only from experts.

91. Progressive Discipline
Definition:
It is a system of discipline where penalties
increase upon repeat occurrences.
Purpose:
It primarily aims to correct the negative behavior
rather than to punish the erring employee.
Range of Responses:
1. Counseling or coaching.
2. Verbal warning.
3. Written warning.
4. Suspension or demotion or fine or forfeiture.
5. Performance Improvement Plan.
6. Termination.

92. Progressive Discipline
Advantages:
1. It addresses the silence of the Labor Code
regarding “Incompetence” as a ground for
termination.
2. It helps the Employer document habitual
negative behaviors, which is essential in
establishing “Gross and Habitual
Negligence” as a ground for termination.
3. It helps the Employer prove that he was in
Good Faith in dealing with the Employee.

93. Progressive Discipline
Advantages (continuation):
4. It helps build up a case for “Analogous Cause”
as a ground for termination.
5. Since it is corrective in approach, it helps
preserve the existing members of the team while
improving their performance and behavior.
6. It saves the Employer costly recruitment and
training expenses for new hires, as well as
prevents downtime due to vacancies.
7. It promotes Employee morale.

94. Progressive Discipline
Requirements:
1. Employee Manual (with List of Offenses and
Penalties).
2. Step-by-step Implementation Guide.
3. Training for Managers and Supervisors.
a. Counseling or Coaching Skills.
b. Verbal and Written Warnings.
c. Performance Improvement Plan.
4. Employee Interview Log Sheets.
5. 201 File.
6. Templates and Scripts.

95. Progressive Discipline Process
1. Pre-Investigation Stage.
a. Prepare: Company Policies and Employee Manual.
b. Prepare: Employment Contracts and 201 File.
c. Progressive Discipline: Train the Managers.
d. Progressive Discipline: Counsel or Warn Employees.
e. Preliminary: Fact-finding Activities.
2. Investigation Proper.
a. Start: Notice to Explain or Show Cause Memo.
b. Progressive Discipline: Performance Improvement Plan.
c. End: Notice of Decision.
3. Post-Investigation Stage.
a. Review: Company Policies and Employee Manual.
b. Review: Employment Contracts and 201 File.
c. Progressive Discipline: Re-train the Managers.

96. Pre-Investigation
Coaching/
Counseling
Investigation
1st Notice
PIP
Investigation
2nd Notice
Post-
Investigation

97. ER Best Practices
• Probationary Employment.
• Code of Discipline.
• Code of Ethics.

98. HR Best Practices
• Performance Appraisal.
• Performance Improvement Plan.
• Performance-based Rewards.

99. LR Best Practices
• Walk-in Compromise Settlement.
• SEnA (Single Entry Approach).
• “The Cordial Resignation Letter.”

100. Ethical Best Practices
• Rotary Code of Conduct:
– “Be fair in all dealings with others and treat
them with the respect due to them as fellow
human being.”
• Human Relations, Civil Code:
– “Article 19. Every person must, in the exercise
of his rights and in the performance of his
duties, act with justice, give everyone his due,
and observe honesty and good faith.”

101. Rotary’s 4-Way Test
How?
Truth
Fair
Goodwill and
Better Friendships
Beneficial

102. Spiritual Best Practices
• ‘For the whole law can be
summed up in this one
command: "Love your
neighbor as yourself.”’
• Galatians 5:14, The Bible (New Living Translation)

103. WHAT IS GOOD FAITH?

104. Progressive Discipline Mindset
1. Do no harm.
2. Make things better.
3. Respect others.
4. Be fair.
5. Be compassionate.

105. LABOR LAW MADE EASY
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