Philippine Labor Law Glossary
Definition: Moral and Exemplary Damages are separate monetary awards available in an illegal dismissal case under the Civil Code of the Philippines, recoverable only when the employee proves that the dismissal was attended by bad faith, fraud or malice, or was carried out in a wanton, oppressive or malevolent manner, and not merely because the dismissal itself was found illegal.
Sa Filipino · Filipino Explanation
Ano ang moral and exemplary damages?
Ang moral at exemplary damages ay hiwalay na monetary award na maaaring igawad sa isang illegal dismissal case sa ilalim ng Civil Code. Nakukuha lamang ito kapag napatunayan ng empleyado na ang dismissal ay may kasamang bad faith, fraud o malice, o isinagawa sa paraang wanton, oppressive o malevolent — at hindi dahil lamang sa mismong pagiging iligal ng dismissal.
Hiwalay ang mga danyos na ito sa backwages at separation pay, at may sariling pamantayan ng patunay.
What Moral and Exemplary Damages Mean
Moral and exemplary damages are not part of the Labor Code. They are civil-law remedies found in the Civil Code of the Philippines and are applied to illegal dismissal cases through Supreme Court jurisprudence because a dismissal case is, at its core, a claim arising from the employment relationship that may be attended by a civil wrong.
Moral damages compensate an employee for mental anguish, serious anxiety, wounded feelings, social humiliation and similar injury actually suffered because of the manner of dismissal. Under Civil Code Article 2217, moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and similar injury, and though incapable of pecuniary estimation, may still be recovered if they are the proximate result of the wrongful act complained of. Article 2219 lists the general instances in which moral damages may be recovered, and Article 2220 specifically allows moral damages in a breach of contract, such as an employment relationship, where the defendant acted fraudulently or in bad faith.
Exemplary damages serve a different purpose. Under Civil Code Article 2229, they are imposed by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages already awarded. Under Article 2232, in contractual and quasi-contractual relationships such as employment, exemplary damages may be awarded only if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. Because exemplary damages are accessory, an employee cannot recover them unless a base award, most commonly moral damages, has already been established.
The Bad-Faith Standard in Illegal Dismissal Cases
The single most important rule in this area is that a finding of illegal dismissal, by itself, does not automatically entitle the employee to moral or exemplary damages. Illegal dismissal and bad-faith dismissal are separate questions. An employer may lose an illegal dismissal case simply because it failed to prove a valid ground or failed to observe due process, without that failure amounting to fraud, malice or oppression.
Philippine jurisprudence has consistently required the employee to additionally show that the dismissal, or the manner in which it was carried out, was attended by bad faith, fraud or malice, or was effected in a wanton, oppressive or malevolent manner. Conduct that has supported such findings in decided cases includes dismissing an employee based on a fabricated or clearly baseless charge, humiliating or publicly disgracing the employee in connection with the termination, using the dismissal to circumvent security of tenure or retaliate against a protected activity, or otherwise acting with a dishonest purpose or moral obliquity rather than a mere error in judgment.
The Supreme Court has directly applied this standard. In Agapito v. Aeroplus Multi-Services, Inc. (G.R. No. 248304, April 20, 2022), the Court, citing Leus v. St. Scholastica’s College Westgrove, held that a dismissal may be contrary to law but by itself alone does not establish bad faith sufficient to entitle the dismissed employee to moral damages, reaffirming that illegal dismissal and bad faith are separate findings that each require their own proof.
Where the employer’s error is limited to a mistaken assessment of the evidence, a defective procedure, or an honest but ultimately unsuccessful defense of the dismissal, moral and exemplary damages are ordinarily not awarded even though the dismissal itself is declared illegal and backwages and reinstatement (or separation pay in lieu of reinstatement) are granted.
How Damages Differ From Backwages and Separation Pay
Backwages and separation pay are compensatory remedies tied to the fact of illegal dismissal itself. They restore what the employee lost in income and employment status; they do not require proof of bad faith. Moral and exemplary damages are different in kind. Moral damages compensate a separate, additional injury, the emotional and reputational harm caused by bad-faith conduct, and exemplary damages punish and deter that conduct. This is why an employee can win an illegal dismissal case and recover backwages and separation pay while still losing the claim for moral and exemplary damages if bad faith was not proven.
Relationship to Attorney’s Fees
Attorney’s fees frequently accompany a moral and exemplary damages award, but they also have an independent basis in ordinary illegal dismissal cases. Labor Code Article 111 allows an award of attorney’s fees, generally understood as not exceeding ten percent (10%) of the monetary award, in cases of unlawful withholding of wages. Civil Code Article 2208 supplies additional grounds, including when exemplary damages are awarded, when the defendant’s act or omission compelled the employee to litigate, and in actions for recovery of wages of household helpers, laborers and skilled workers. Because of this dual basis, attorney’s fees may be granted in a straightforward illegal dismissal case even without proof of bad faith, and they are separately available once exemplary damages are established.
Comparative Overview of Illegal Dismissal Monetary Awards
| Award | Purpose | Primary legal basis | When it may be awarded |
|---|---|---|---|
| Backwages | Compensatory; restores lost earnings | Labor Code Article 294 | Upon a finding of illegal dismissal, without needing proof of bad faith |
| Separation pay (in lieu of reinstatement) | Compensatory; substitutes for reinstatement | Labor Code Article 294 and jurisprudence | When reinstatement is no longer feasible or advisable |
| Moral damages | Compensates mental anguish and similar injury | Civil Code Articles 2217, 2219, 2220 | Only if the dismissal was attended by bad faith, fraud or malice |
| Exemplary damages | Punitive and corrective; deters similar conduct | Civil Code Articles 2229, 2232 | Only after moral (or another base) damages are established, and the conduct was wanton, fraudulent, reckless, oppressive or malevolent |
| Attorney’s fees | Reimburses litigation cost | Labor Code Article 111; Civil Code Article 2208 | In wage-withholding or illegal dismissal cases generally, or once exemplary damages are awarded |
Legal Basis
| Authority | Classification | Rule supported | Official source |
|---|---|---|---|
| Civil Code of the Philippines, Articles 2217, 2219 and 2220 | Civil Code provision | Defines moral damages and the fraud- or bad-faith requirement for recovery in a breach of contract, including an employment relationship. | LawPhil Project, Civil Code of the Philippines |
| Civil Code of the Philippines, Articles 2229 and 2232 | Civil Code provision | Authorizes exemplary damages as an accessory award and requires wanton, fraudulent, reckless, oppressive or malevolent conduct in contractual relationships. | LawPhil Project, Civil Code of the Philippines |
| Civil Code of the Philippines, Article 2208 | Civil Code provision | Supplies grounds for attorney’s fees, including when exemplary damages are awarded and in wage-recovery actions. | LawPhil Project, Civil Code of the Philippines |
| Labor Code, Article 111 | Labor Code provision | Caps attorney’s fees at ten percent (10%) of the monetary award in cases of unlawful withholding of wages. | Department of Labor and Employment |
Practical Example
Hypothetical example: An employee is dismissed after the employer publicly accuses her, without any supporting evidence, of theft in front of coworkers, then refuses to conduct any investigation and blocks her access the same day. The labor tribunal later finds the dismissal illegal for lack of a proven just cause. Because the employer’s conduct, humiliating the employee on an unproven accusation and denying any real opportunity to be heard, reflects bad faith and an oppressive manner rather than an honest mistake, the tribunal may additionally award moral damages, exemplary damages and attorney’s fees on top of backwages and reinstatement or separation pay.
Common Misunderstandings
Misunderstanding: Every illegal dismissal automatically means moral and exemplary damages are due.
Correct approach: Illegal dismissal only establishes that the termination lacked a valid cause or violated due process. Moral and exemplary damages require separate proof that the employer acted in bad faith, with fraud or malice, or in a wanton, oppressive or malevolent manner.
Misunderstanding: Moral and exemplary damages are the same as backwages, just under a different name.
Correct approach: Backwages compensate lost income and exist independently of bad faith. Moral and exemplary damages address a separate injury and a separate punitive purpose, and require their own evidentiary showing.
Misunderstanding: Exemplary damages can be awarded on their own if the employer’s conduct was bad enough.
Correct approach: Under Civil Code Article 2229, exemplary damages are accessory. They cannot stand alone and require an underlying award, most commonly moral damages, as their base.
Continue Exploring
Related Glossary Terms
Practical Guides and Tools
Sources and Legal Citations
- Civil Code of the Philippines (Republic Act No. 386), Articles 2217, 2219 and 2220, official text via the LawPhil Project. Classification: Civil Code provision. Supports: definition and bad-faith requirement for moral damages.
- Civil Code of the Philippines (Republic Act No. 386), Articles 2229 and 2232, official text via the LawPhil Project. Classification: Civil Code provision. Supports: accessory nature and conduct standard for exemplary damages.
- Civil Code of the Philippines (Republic Act No. 386), Article 2208, official text via the LawPhil Project. Classification: Civil Code provision. Supports: grounds for attorney’s fees.
- Labor Code of the Philippines, Article 111, official DOLE text. Classification: Labor Code provision. Supports: statutory cap on attorney’s fees in wage-withholding cases.
- Agapito v. Aeroplus Multi-Services, Inc., G.R. No. 248304, April 20, 2022, Supreme Court E-Library, full text of the decision. Classification: Supreme Court decision. Supports: the bad-faith standard, holding that a dismissal may be contrary to law but by itself alone does not establish bad faith to entitle the dismissed employee to moral damages.
Sources rechecked as of: August 10, 2026
Disclaimer
This glossary entry is for general educational and legal-information purposes and is not legal advice. Whether moral and exemplary damages are available in a specific dismissal case depends on the evidence of bad faith, fraud or malice, the findings of the labor tribunal and controlling Supreme Court jurisprudence.