Constructive Dismissal: When Quitting Counts as Being Fired

The Labor Code does not use the words "constructive dismissal". The idea comes from Supreme Court rulings. In Lagamayo v. Cullinan Group (2021), the Court defined it as "quitting or cessation of work because continued employment is rendered impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution of pay and other benefits."

So there are two kinds of situations:

• the employee leaves because staying has become impossible or unreasonable; or
• the employee is demoted or loses pay or benefits, even without leaving.
• The term is also explained in constructive dismissal.

The Court in Lagamayo used this test: "whether a reasonable person in the employee's position would have felt compelled to give up his [or her] employment under the circumstances."

The test looks at the situation from the side of an ordinary, reasonable employee, not from the side of the most sensitive person or of the employer.

Both sides carry part of the burden:

1. The employee first. In Lagamayo, the Court said that even in constructive dismissal cases, the employee must first prove the fact of dismissal by substantial evidence.
2. Then the employer. The employer must show that its act, such as a transfer or demotion, had valid or legitimate grounds, "such as genuine business necessity," and was "not a mere subterfuge to get rid of an employee."

Courts have looked at situations like these:

• Transfer with demotion or pay cut. In Telus International Philippines v. De Guzman (2019), the Court said that for a transfer not to be constructive dismissal, the employer must show it "is not unreasonable, inconvenient, or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits." The transfer there failed this test. See Can your employer transfer you?
• Long [preventive suspension](/law/glossary/preventive-suspension). In Lagamayo, the Court said a "mere extension" of the 30-day preventive suspension alone is not constructive dismissal. The prolonged suspension must be shown to be "tainted with bad faith or malice". See Preventive suspension: how long can it last?

In Lagamayo, the Court also said that a just cause for dismissal under [Article 297 [282]](/law/labor-code/article-297) is "inherently incompatible" with constructive dismissal. In that case, the employee was found not constructively dismissed.

The same as an employee who is illegally dismissed. In Lagamayo, the Court listed the remedy as "reinstatement without loss of seniority rights, full backwages, inclusive of allowances, and other benefits or their monetary equivalent, computed from the time his compensation was withheld from him up to the time of his actual reinstatement."

This follows the security of tenure rule in Article 294 [279] of the Labor Code ([279] is its number before the 2015 renumbering):

See Illegally dismissed: what can you get?

No. A resignation is a voluntary act of the employee. Under [Article 300 [285]](/law/labor-code/article-300), an employee may resign with one month's written notice, or without notice for just causes such as serious insult or inhuman and unbearable treatment by the employer. In constructive dismissal, the claim is that the leaving was not really voluntary: the employer's acts forced it. See Can I resign immediately?

For resignation and termination side by side, see resignation vs termination.

These are made-up examples to show how the rules work. They are not advice for any real case.

Grace, a branch supervisor, is moved to a clerk post at a lower salary with no explanation. A demotion with a cut in pay is one of the situations named in the Court's definition. Her employer would have to show a genuine business reason.

Mark is placed on preventive suspension for 30 days, then the company extends it for two more weeks and pays his wages during the extension. Under Lagamayo, the extension alone is not constructive dismissal unless bad faith is shown.

Joan is told every day by her manager, in front of co-workers, that she is useless and should quit, and she is given no work. If she leaves, the question is whether a reasonable person in her position would have felt forced to give up the job.

Talk to a lawyer before you stop reporting for work, if you were demoted or had your pay cut, or if you are an employer planning a transfer or reorganization. Whether leaving was forced is decided on the evidence, and a case usually starts with conciliation at DOLE: see How to file a labor complaint. If you cannot afford a lawyer, see Free legal help in the Philippines.