Risks of Labor Law Non-Compliance
What happens when an employer violates labor and employment laws
Risks of Labor Law Non-Compliance | Two of the most important areas of Philippine law that businesses must be familiar with (or get solid legal advice) are labor and tax law.
Failure to pay the right taxes before the deadline results in steep surcharges, interests and penalties. The worry of tax deadlines is usually managed by retaining competent accounting services who keep tax filing calendars and remind clients of tax obligations in advance of the deadlines.
While tax compliance is mostly a matter of paying taxes on time, compliance with labor law can be more complicated than computation and payment of the proper salaries and benefits.
The problem usually occurs in deciding to terminate an employee. Ignoring the proper procedure results in the DOLE making a finding of illegal dismissal, in spite of any serious fault or negligence on the part of the employee.
In monetary terms, a finding of illegal dismissal means the employer now has to pay either damages or back pay, or both.
If the only defect in the dismissal was a lack of proper procedure, and the employee files a complaint, the employer will be on the hook for damages pursuant to the case of Agabon v. NLRC and Jaka Food Processing Corporation v. Pacot.
A steeper penalty applies if the employer terminated an employee without any sufficient lawful cause for termination. Here, the employer will have to pay back wages reckoned from the time of the illegal dismissal counted up to the date of actual reinstatement of the illegally dismissed employee.
The law treats the dismissal as void. That means you have to pay salaries even after the employee was already terminated from work and not generating revenue for the company.
Businesses have to be careful in terminating employees. Nurturing a healthy company culture goes a long way in avoiding labor litigation. The first line of defense is good human resource management. Labor problems are a people problem before they become a legal problem.
But it’s a common misconception to think that lawyers only come in after a complaint is filed with the DOLE. Lawyers are also valuable in overseeing or reviewing a company’s personnel policies, ensuring compliance with labor standards and making it easier to manage arbitrary or spiteful labor complaints.
As a company scales and hires more people, it becomes ever more prudent to retain solid legal counsel to mitigate the risk of labor litigation.
About Atty. Kenneth
Atty. Kenneth C. Varona is a lawyer with experience in civil and criminal litigation, contracts, immigration law, and intellectual property law. He worked in Metro Manila for three years before starting his own firm Varona Law in 2020. He also writes at Economerienda, a blog offering snackable insights on personal finance, business and life.