Dear Atty. Angela,

I am an owner of a store and one of my former staff sent a letter complaining that his final pay has not been released even after 30 days. However, he has not completed his clearance and in fact still has several accountabilities that need to be settled. He is insisting that the DoLE labor advisory for payment of final pay states that it must be released within 30 days from date of separation. Am I obligated to release his final pay even when he has pending clearance?

Jing

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Dear Jing,

No, you are not obligated to release his final pay unless he fully accomplishes his clearance with the Company.

As a general rule, employers are prohibited from withholding wages from employees (Art. 116, Labor Code). However, our law supports the employers’ institution of clearance procedures before the release of wages.

In the case of Emer Milan, et al. v. NLRC, G.R. No. 202961 (4 February 2015), the Supreme Court held that requiring clearance before the release of last payments to the employee is a standard procedure among employers, whether public or private. Clearance procedures are instituted to ensure that the properties, real or personal, belonging to the employer but are in the possession of the separated employee, are returned to the employer before the employee’s departure.

An employee’s failure to complete his turnover and clearance procedure (i.e., unreconciled loan payment accounts, missing loan payments, etc.) should be included in the term “accountability,” the clearance and/or submission of which became an obligation or liability on the part of the employee when the employer-employee relationship ceased. Thus, the Company has the right to withhold the employee’s salaries and benefits because of this existing debt or liability.

Do note, however, that withholding of payment does not mean that the employer may renege on its obligation to pay employees their wages, termination payments and due benefits. It is only subjected to the condition that the employee completes the turnover and/or return the Company’s properties, consistent with the equitable principle that “no one shall be unjustly enriched or benefited at the expense of another.”

Atty. Angela Antonio