Company Policy: Elements of Administrative Investigation and Progressive Discipline. By Atty. Apollo X.C.S. Sangalang. Presentation delivered on February 26, 2014 at AIM Center, Makati City, Philippines. Sponsored by Ariva! Events Management, Inc.

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

3. Disclaimers
• No lawyer-client relationship.
• Consult also your own legal counsel.
• Legal opinions differ.
• Respect the sub judice rule.
• Conflict of interest.

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7. Equal Justice at DZRJ 810 AM

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’s Power Equation
Ownership
Contracts
Power

13. Employer’s 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 problem?

20. 3 Ways to Investigate, Discipline
and Terminate Employees
• Efficient but NOT necessarily legal.
• Legal but NOT necessarily effective.
• Effective (which should be legal).

21. 3 Reasons to Avoid
ILLEGAL Dismissal Cases
• Monetary and Business Costs.
• Emotional, Mental, Physical and
Spiritual Costs.
• Social and Macro-Economic Costs.

22. 3 Most Fearsome Monetary
and Business COSTS
• Reinstatement.
• Backwages.
• Damages.

23. 3 Hidden Monetary and
Business COSTS
• Direct Costs of Litigation.
• Indirect Costs of Litigation.
• Business Losses and Closure.

24. 3 Kinds of Workers to I.D.T.
• Employees guilty of JUST CAUSE.
• Employees NOT guilty of just cause.
• Workers who are NOT employees.

25. 3 Kinds of Employees who
are Guilty of Just Cause
• Guilty under Article 296 Labor Code.
• Guilty under Causes Analogous.
• Guilty under Company Policy.

26. 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.

27. 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.

28. 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).

29. 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;

30. 3 Ways to I.D.T.
• Efficient but not necessarily legal.
• Legal but not necessarily effective.
• Effective (which should be legal).

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

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

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

34. Substantive Due Process
• JUST CAUSE:
– ased on Article 296*, Labor Code.
b
– ased on “Causes Analogous”.
b
– ust overcome “Security of
m
Tenure.”

35. 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.

36. 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.

37. Substantive Due Process
• REASONABLENESS:
– enalty is proportionate to the
P
offense.
– ffense is NOT against Law or
O
Public Policy.
– ffense is business-related or
O
employment-connected.

38. Substantive Due Process
• GOOD FAITH:
– ood faith is presumed.
G
– ad faith must be proven.
B
– ut in labor law, it’s the reverse!
B
• ecause ALL DOUBTS
B
favor employees!

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

40. 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.

41. 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.

42. 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.

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

44. 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.

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

46. 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.

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

48. CONSTRUCTIVE DISMISSAL
• A form of ILLEGAL TERMINATION;
• No 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.

49. 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.

50. 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.

51. 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 and labor leaders accept
contingency fees.

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

53. 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.
N egotiate, negotiate, negotiate!!!
T ake advice only from experts.

54. Anatomy of a Labor Dispute
Capitalist
Worker

55. Evolution of Work Arrangement
Contractual
Serfdom
Slavery

56. Capitalism

57. Capitalist Model
Social
Benefits
Free Market
Competition

58. Communism

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

60. Revolution!!!
Socialist
Democratic

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

62. Democratic Model
Elite
Class
Middle
Class
Working Class

63. Labor Law Revolution!
Unionism
and Right
to Strike
Social
Justice
Labor
Standard
Security of
Tenure

64. Shared Responsibility Model
Business
Progress
and
Development
Labor

65. Tripartite Model
Government
Labor
Business

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

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

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

69. Anatomy of a Labor Dispute
Capitalist
Worker

70. Win-Win
Lose-Win
Conflict
Resolution
Scenarios
Win-Lose
Lose-Lose

71. 3 Kinds of Win Scenarios
• Win – Lose
• Compromise (or Half-baked Win)
• Win – Win (Mindset)
– Think Win-Win” by Steven Covey
“

72. 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.

73. 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.

74. 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)

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

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

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

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

79. Understand ER/LR
• Understand:
1. that ER/LR is a “Game”.
2. the “Rules of the Game” of
ER/LR.
3. the “other aspects” of the
ER/LR Game.

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

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

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

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

84. 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.

85. 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.

86. Progressive Discipline
Advantages:
1. It addresses the silence of the Labor Code
regarding “Incompetence” as a ground for just
cause termination, especially when the Employee
is placed under the Performance Improvement
Plan (PIP).
2. It helps the Employer document habitual negative
behaviors, which is essential in establishing
“Gross and Habitual Negligence” as a ground for
just cause termination.
3. It helps the Employer show that he is in Good
Faith in dealing with the Employee.

87. Progressive Discipline
Advantages (continuation):
4. It helps build up a case for “Analogous Cause” as
a ground for just cause 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.

88. 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.

89. Progressive Discipline Process
1. Pre-Investigation Stage.
a.
b.
c.
d.
e.
Prepare: Company Policies and Employee Manual.
Prepare: Employment Contracts and 201 File.
Progressive Discipline: Train the Managers.
Progressive Discipline: Counsel or Warn Employees.
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.
a. Review: Company Policies and Employee Manual.
b. Review: Employment Contracts and 201 File.
c. Progressive Discipline: Re-train the Managers.

90. Progressive Discipline Process
PreInvestigation
Post
Investigation
PIP
Coaching/
Counseling
Investigation

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

92. HR Best Practices
• Right-sizing the Organization.
• Flexible Work Arrangements.
• Contracting Out Work.

93. LR Best Practices
• Walk-In Settlement.
• SEnA (Single Entry Approach).
• “The Voluntary Cordial Letter.”

94. 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.”

95. Rotary’s 4-Way Test

96. Spiritual Best Practices
• Love GOD with all your heart, mind,
spirit and strength.
• Love your EMPLOYEE as yourself.
• Love yourself (…TOUGH LOVE!!!).
– upport! Don’t Rescue!!!
S

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