16 July 2015

TO
:
DSL
FROM:
CPV
RE
:
Rules on Final Pay when an Employee Resigns
______________________________________________________________________________
This memorandum is to address the question on whether an employer
has the right to hold on to the final pay of a resigning employee and the
length of time that the employer can on hold the final pay.
Discussion
As a rule, an employee may terminate his contract of employment by
means of resignation and, generally, he must serve his employer a written
notice of the intended resignation at least one month in advance prior to the
date of its effectivity. This is expressly provided for under Article 285 of the
Labor Code:
Article 285 (1) An employee may terminate without just cause
the employee-employer relationship by serving a written notice
on the employer at least one month in advance. The employer
upon whom no such notice was served may hold the employee
liable for damages. x x x

The same article, however, gives an employee the right to terminate

his employment, provided that the cause or causes of such termination is
due to the following circumstances:
Article 285 (2) An employee may put an end to the
relationship without serving any notice on the employer for any
of the following just causes:
1. Serious insult by the employer or his representative on
the honor and person of the employee;
2. Inhuman and unbearable treatment accorded the
employee by the employer or his representative;
3. Commission of a crime or offense by the employer or his
representative against the person of the employee or
any of the immediate members of his family; and
4. Other causes analogous to any of the foregoing.

Employee Rights upon Resignation

An employees right to receive his salary while in the period prior to
the effectivity of his resignation continues to accrue, since within this period
the employee still has to render services for the employer, which under the
law must be compensated.
In addition, the resigning employee is also entitled to other benefits.
One of which is that a resigning employee is still entitled to the payment of
his 13th month pay. Under the Revised Guidelines on the Implementation of
the 13th Month Pay Law, an employee who has resigned or whose service
was terminated at any time before the time for payment of the 13th month
pay is entitled to this monetary benefit in proportion to the length of time he
has worked during the calendar year up to the time of his resignation or
termination from the service.
Further, the employee is also entitled to the commutation of his
accumulated service incentive leave credits to cash as provided under Book
III, Rule V, Section 5 of the Implementing Rules and Regulations of the Labor
Code.

However, the employer may not give yet the salary and benefits due to
the employee for the reason that he still has to be cleared from any
accountability with the company before the final pay is released. The
rationale of such is that the employer should be given a chance to clear the
employee from any liability, should there be any, before the release of the
employees last salary.
Conclusion
There is no law, jurisprudence, rule or guidelines on the release of the
final pay of resigning employees.
It has to be noted that every employee has a contract of employment
with his/her company and that contract binds both the employer and the
employee. Obligations arising from contracts have the force of law between
the contracting parties and should be complied with in good faith (Article
1159 of the Civil Code).
In contracts, the contracting parties may establish such stipulations,
clauses, terms and conditions as they may deem convenient, provided they
are not contrary to law, morals, good customs, public order, or public policy
(Article 1306, Civil Code). Thus, if there are stipulations as to the manner of
release of salary within the thirty-day period in the contract of employment
(should there be any) prior to resignation, it will bind the employee, provided
that they do not run counter to any law, public policy or morals. In the
absence of a contract, the customary practice of the company should be
consulted.
It is the policies of the company that generally govern the withholding
of the salary due to an employee on account of his resignation.