Company Policy: Elements of Administrative Investigation and Progressive Discipline. July 24, 2014....

Atty. Apollo X.C.S. Sangalang

“PoL”

Business Lawyer & Legal Coach

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

Disclaimers

• No lawyer-client relationship.

• Consult your own legal counsel.

• Legal opinions differ.

• Respect for the sub judice rule.

• Avoid conflict of interest.

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3 Key Words

• Company POLICY

• ADMINISTRATIVE Investigation

• PROGRESSIVE Discipline

What’s the basis?

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)

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.

Employer Power Equation

Ownership Contracts Power

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)

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.

What’s the problem?

What’s the purpose?

What’s the problem?

Limitation No. 1

• Article 291 paragraph 2, Labor Code • (Formerly Article 277)

Limitation No. 2

• Article 4, Labor Code

Full Protection Equation

Burden of Proof

All Doubts E.A.P.G.

3 Ways to Investigate, Discipline and Terminate Employees

• Efficient but NOT necessarily legal.

• Legal but NOT necessarily effective.

• Effective (which is more than legal).

3 Reasons to Avoid ILLEGAL Dismissal Cases

• Monetary and Business Costs.

• Emotional, Mental, Physical and Spiritual Costs.

• Social and Macro-Economic Costs.

3 Most Fearsome Monetary and Business COSTS

• Reinstatement.

• Backwages.

• Damages.

3 Hidden Monetary and Business COSTS

• Direct Costs of Litigation.

• Indirect Costs of Litigation.

• Business Losses and Closure.

3 Kinds of Workers to I.D.T.

• Employees guilty of JUST CAUSE.

• Employees NOT guilty of just cause.

• Workers who are NOT employees.

3 Kinds of Employees who are Guilty of Just Cause

• Guilty under Article 296 Labor Code.

• Guilty under Causes Analogous.

• Guilty under Company Policy.

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.

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.

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).

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;

3 Ways to I.D.T.

• Efficient but not necessarily legal.

• Legal but not necessarily effective.

• Effective (which should be legal).

Legal Way To I.D.T.

• Substantive Due Process.

• Procedural Due Process.

• Substantial Evidence.

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


• Just Cause.

• Reasonableness.

• Good Faith.

Substantive Due Process • JUST CAUSE:

– based on Article 296*, Labor Code.

– based on “Causes Analogous”.

– must overcome:

“Security of Tenure.”

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.

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.

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.

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!

Procedural Due Process

• Notice to Explain.

• Notice of Hearing.

• Notice of Termination.

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.

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.

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.


• Proof of substantive due process.

• Proof of procedural due process.

• Proof of good faith.

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.

Substantial Evidence • PROOF OF PROCEDURAL DUE

PROCESS: – Notices are written and served.

• Personal service. • Substituted service.

– Hearings are recorded. • Attendance. • Minutes.

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.


• Just Cause • Reasonableness • Good Faith

Procedural Due

Process

• Notice to Explain • Notice of Hearing • Notice of

Termination


• Proof of Substantive Due Process

• Proof of Procedural Due Process

• Proof of Good Faith

LEGAL WAY

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.

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.

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.

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.

What’s the Effective Way?

D.O.C.U.M.E.N.T. © 2013

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.

Documentation X 3

• Pre-Employment Documentation.

• Employment Documentation.

• Pre-Termination & Post Employment Documentation.

Open-Mindedness

• Be tolerant with your employees.

• Be receptive to new ideas and possibilities.

• Be accepting of the outcome.

Clarity

• Clarity in written communication.

• Clarity in oral communication and action.

• Clarity in purpose and objective.

Understand ER/LR • Understand that:

1. ER/LR is a “Game”.

2. the “Rules of the Game”.

3. the “Goals of the Game”.

Anatomy of a Labor Dispute

Capitalist Worker

Evolution of Work Arrangement

Slavery

Serfdom Contractual

Capitalism

Capitalist Model

Social Benefits

Free Market Competition

Communism

Capitalist Exploitation Profit, Expansion and Growth

Workers’ Compensation and Benefits

Revolution!!!

Socialist Democratic

Socialist Model

People’s Ownership

Management’s Stewardship

Party’s Guardianship

Democratic Model Elite Class Middle Class

Working Class

Labor Law Revolution!

Unionism + Strike

Labor Standards

Social Justice

Security of Tenure

Shared Responsibility Model

Business

Labor

Progress and

Development

Tripartite Model

Government

Business Labor

What is Social Justice? Business Labor

Law

Law

Law

Law

Law

Rule of Law

Constitution Laws (including Labor Laws)

Rules & Regulations

Jurisprudence Public Policies and Principles

of Equity

Contracts

Company Policies

Elements of Labor Law

Labor Law

Shared Responsibility

Social Justice

Rule of Law

Anatomy of a Labor Dispute

Capitalist Worker

Win-Win Lose-Win

Win-Lose Lose-Lose

Conflict Resolution Scenarios

3 Kinds of Win Scenarios • Win – Lose

• Compromise (or Half-baked Win)

• Win – Win (Mindset) – “Think Win-Win” by Steven Covey

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.

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.

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)

Master HR

• ER/LR is essentially HR.

• HR is exemplified by MR.

• MR is enhanced by GR.

Embrace Best Practices

• Good Practices.

• Better Practices.

• Best Practices: PROGRESSIVE

DISCIPLINE

Embrace Best Practices PROGRESSIVE DISCIPLINE

System

Documentation

Mindset

Progressive Discipline Mindset 1. Do no harm.

2. Make things better.

3. Respect others.

4. Be fair.

5. Be compassionate.

Negotiate X 3

• Negotiate before a labor dispute.

• Negotiate during a labor dispute.

• Negotiate after a labor dispute.

Take advice only from experts • Licensed or seasoned experts.

• Local labor law experts.

• Practical and trust-worthy experts.

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.

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.

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.

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.

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.

Pre-Investigation

Coaching/ Counseling

Investigation 1st Notice

PIP

Investigation 2nd Notice

Post-Investigation

ER Best Practices

• Probationary Employment.

• Code of Discipline.

• Code of Ethics.

HR Best Practices

• Performance Appraisal.

• Performance Improvement Plan.

• Performance-based Rewards.

LR Best Practices

• Walk-in Compromise Settlement.

• SEnA (Single Entry Approach).

• “The Cordial Resignation Letter.”

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.”

Rotary’s 4-Way Test

How?

Truth

Fair

Goodwill and Better Friendships

Beneficial

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)

WHAT IS GOOD FAITH?

Progressive Discipline Mindset 1. Do no harm.

2. Make things better.

3. Respect others.

4. Be fair.

5. Be compassionate.

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Company Policy: Elements of Administrative Investigation and Progressive Discipline. July 24, 2014....

Law

Transcript of Company Policy: Elements of Administrative Investigation and Progressive Discipline. July 24, 2014....