Philippine Labor Law Glossary
Definition: Bona fide is Latin for “in good faith.” In Philippine dismissal law it is a distinct requirement: the employer’s stated business reason must be genuine, and not a device for removing a particular employee.
Sa Filipino · Filipino Explanation
Ano ang bona fide?
Ang bona fide ay Latin para sa “sa mabuting loob” o good faith. Sa mga kaso ng pagtatanggal sa trabaho, hiwalay itong requirement: kailangang totoo talaga ang dahilan ng kumpanya, at hindi lamang dahilan upang matanggal ang isang partikular na empleyado.
Hindi ito ipinapalagay na lamang. Ang employer ang may pasan na patunayan ang good faith, hindi ang empleyado ang kailangang magpatunay ng masamang intensyon.
What Bona Fide Means
Good faith is not a mood, and in Philippine dismissal cases it is not assumed. It is an element the employer must establish alongside the business reason itself. An employer may have a real financial problem and still lose, if the way it chose who to remove shows the problem was a pretext.
The phrase runs through the authorized causes — redundancy, retrenchment, closure — and through the rule on temporary suspension of operations.
Good Faith in Redundancy
The Supreme Court’s requisites for a valid redundancy dismissal are four, and good faith is the third:
- Written notice served on both the employees and DOLE at least one month before the intended date;
- Payment of separation pay equivalent to at least one month pay, or one month pay for every year of service, whichever is higher;
- Good faith in abolishing the redundant positions; and
- Fair and reasonable criteria in ascertaining which positions are to be declared redundant and abolished.[1]
Note that items 3 and 4 are separate. An employer can abolish a genuinely surplus position in good faith and still fail on the criteria used to pick the person who occupied it.
On what those criteria look like, the Court has accepted “less preferred status (e.g., temporary employee), efficiency, and seniority” as examples.[2]
Redundancy itself exists “where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise.”[3] See the full entry on redundancy for how this plays out.
Good Faith in Retrenchment
For retrenchment the Court requires that “the employer exercises its prerogative to retrench employees in good faith for the advancement of its interest and not to defeat or circumvent the employees’ right to security of tenure,” and that “the employer used fair and reasonable criteria in ascertaining who would be dismissed and who would be retained.”[1]
The losses relied on must also clear a standard: they “should be substantial and not merely de minimis in extent,” must be “reasonably imminent,” the retrenchment must be “reasonably necessary and likely to effectively prevent the expected losses,” and the losses must be “proved by sufficient and convincing evidence.”[4]
Good Faith in Closure
An employer may close a business. Article 298 [283] treats closure as an authorized cause “unless the closing is for the purpose of circumventing the provisions of this Title.”
The Court requires closure to be “bona fide in character and not impelled by a motive to defeat or circumvent the tenurial rights of employees.”[5] The consequence for pay follows the reason: closure due to serious business losses carries no separation pay; closure not due to serious losses carries separation pay.
Separation Pay by Cause
Article 298 [283] fixes the rates:
| Cause | Separation pay |
|---|---|
| Installation of labor-saving devices, or redundancy | One month pay, or one month pay per year of service, whichever is higher |
| Retrenchment to prevent losses | One month pay, or one-half month pay per year of service, whichever is higher |
| Closure not due to serious business losses | Same as retrenchment |
| Closure due to serious business losses | None |
For the computation itself see the separation pay entry and the full separation pay guide.
Bona Fide Suspension of Operations
The phrase also appears in the rule behind floating status: “The bona fide suspension of the operation of a business or undertaking for a period not exceeding six (6) months, or the fulfilment by the employee of a military or civic duty shall not terminate employment.”[6]
After six months the employer must either recall the employee or permanently retrench them following the requirements of the law; failing to do either is tantamount to dismissal.[7] The word bona fide is doing real work in that sentence — a suspension invented to park an inconvenient employee is not one.
Bona Fide Occupational Qualification
Philippine law also recognises the bona fide occupational qualification, though narrowly. The Court has said “[t]he concept of a bona fide occupational qualification is not foreign in our jurisdiction,” and applies a two-part test: that the qualification is “reasonably related to the essential operation of the job involved,” and that “there is a factual basis for believing that all or substantially all persons meeting the qualification would be unable to properly perform the duties of the job.”[8]
The employer bears the burden of showing reasonable business necessity, and a restriction cannot be justified “on the ground of a general principle, such as the desirability of spreading work in the workplace.”[8]
Common Misunderstanding
Misunderstanding: “The company really was losing money, so the retrenchment was valid.”
Correct approach: Real losses are necessary but not sufficient. Good faith and fair, reasonable selection criteria are separate requirements, and the losses themselves must be substantial, imminent and proved by convincing evidence.
Misunderstanding: “Good faith is assumed unless the employee proves bad faith.”
Correct approach: In an authorized-cause dismissal the employer carries the burden of proof on the validity of the termination, which includes the good-faith element.
Related and Contrasting Terms
Broader term: Authorized Cause
Related terms:
Do not confuse with:
- Illegal Dismissal — what an authorized-cause dismissal becomes when good faith is not established
Related LaborCode.ph Guides
- Authorized cause termination in the Philippines
- Closure of business in the Philippines
- Floating status and the six-month rule
Sources and Legal Citations
- Asian Alcohol Corporation v. National Labor Relations Commission, G.R. No. 131108, 25 March 1999, Supreme Court E-Library. Supports: the four requisites of valid redundancy and the good-faith and criteria elements of retrenchment.
- Golden Thread Knitting Industries, Inc. v. NLRC, G.R. No. 119157, 11 March 1999, LawPhil Project. Supports: examples of fair and reasonable selection criteria.
- Wiltshire File Co., Inc. v. NLRC, G.R. No. 82249, 7 February 1991, LawPhil Project. Supports: the definition of redundancy.
- Lopez Sugar Corporation v. Federation of Free Workers, G.R. Nos. 75700-01, 30 August 1990, LawPhil Project. Supports: the standards governing losses relied on for retrenchment.
- Zambrano v. Philippine Carpet Manufacturing Corporation, G.R. No. 224099, 21 June 2017, LawPhil Project. Supports: closure must be bona fide in character.
- Labor Code of the Philippines, Article 301 [286]. Supports: bona fide suspension of operations not exceeding six months.
- Airborne Maintenance and Allied Services, Inc. v. Egos, G.R. No. 222748, 3 April 2019, Supreme Court E-Library. Supports: consequence of the six-month lapse.
- Star Paper Corporation v. Simbol, G.R. No. 164774, 12 April 2006, LawPhil Project. Supports: recognition and two-part test of the bona fide occupational qualification.
- Labor Code of the Philippines, Article 298 [283]. Supports: authorized causes and separation-pay rates.
Sources rechecked as of: 9 September 2026
Disclaimer
This glossary entry is for general educational and legal-information purposes and is not legal advice. Labor disputes depend on specific facts and current law. LaborCode.ph is independent and is not a government website, tribunal or law firm.