Clearance process

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  • Clearance process is valid and has legal bases.
  • Wages may be withheld for debts or obligations to the employer.

Concept

Clearance process is a requirement imposed by the management on an employee to settle all debts and obligations, including return of Company properties or documents, to be cleared of any accountability and be issued a clearance document.

Valid and has legal bases

“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.” (Milan v. NLRC, Solid Mills, Inc., G.R. No. 202961, 04 February 2015)

No clearance, no final pay

“The law does not sanction a situation where employees who do not even assert any claim over the employer’s property are allowed to take all the benefits out of their employment while they simultaneously withhold possession of their employer’s property for no rightful reason. Withholding of payment by the employer does not mean that the employer may renege on its obligation to pay employees their wages, termination payments, and due benefits. The employees’ benefits are also not being reduced. It is only subjected to the condition that the employees return properties properly belonging to the employer. This is only consistent with the equitable principle that ‘no one shall be unjustly enriched or benefited at the expense of another.’” (Milan v. NLRC, Solid Mills, Inc., G.R. No. 202961, 04 February 2015)

Withholding of wages, has legal basis

The general rule is that employers are prohibited from withholding wages from employees under the Labor Code. “However, our law supports the employers’ institution of clearance procedures before the release of wages.” (Milan v. NLRC, Solid Mills, Inc., G.R. No. 202961, 04 February 2015)

The Civil Code provides: “Article 1706. Withholding of the wages, except for a debt due, shall not be made by the employer.”

The debt described in that provision refers to “any obligation due from the employee to the employer,” as well as accountability, whether for Company properties, equipment, uniforms, or otherwise. (Milan v. NLRC, Solid Mills, Inc., G.R. No. 202961, 04 February 2015)

In addition, employees or their unions may consent or agree with the employer that the release of their final pay and/or benefits be “less accountabilities”. Accountability, “in its ordinary sense, means obligation or debt. The ordinary meaning of the term “accountability” does not limit the definition of accountability to those incurred in the worksite. As long as the debt or obligation was incurred by virtue of the employer-employee relationship, generally, it shall be included in the employee’s accountabilities that are subject to clearance procedures.” (Milan v. NLRC, Solid Mills, Inc., G.R. No. 202961, 04 February 2015)