MARLO A.

DEOFERIO, Petitioner,
vs.
INTEL TECHNOLOGY PHILIPPINES, INC. and/or MIKE WENTLING, Respondents.

Facts:

On February 1, 1996, respondent Intel Technology Philippines, Inc. (Intel)employed Deoferio as a

product quality and reliability engineer with a monthly salary of ₱9,000.00.

In July2001, Intel assigned him to the United States as a validation engineer for an agreed period of
two years and with a monthly salary of US$3,000.00.

On January 27, 2002, Deoferio was repatriated to the Philippines after being confined at Providence
St. Vincent Medical Center for major depression with psychosis.4 In the Philippines, he worked as a
product engineer with a monthly salary of ₱23,000.00.5

Deoferio underwent a series of medical and psychiatric treatment at Intel’s expense after his
confinement in the United States. In 2002, Dr. Elizabeth Rondain of Makati Medical Center diagnosed
him to be suffering from mood disorder, major depression, and auditory hallucination.6 He was also
referred to Dr. Norieta Balderrama, Intel’s forensic psychologist, and to a certain Dr. Cynthia Leynes
who both confirmed his mental condition.7

On August 8, 2005, Dr. Paul Lee, a consultant psychiatrist of the Philippine General Hospital,
concluded that Deoferio was suffering from schizophrenia. After several consultations, Dr. Lee issued
a psychiatric report dated January 17,2006 concluding and stating that Deoferio’s psychotic symptoms
are not curable within a period of six months and "will negatively affect his work and social relation
with his co-worker[s]."8 Pursuant to these findings, Intel issued Deoferio a notice of termination on
March 10, 2006.9

Deoferio responded to his termination of employment by filing a complaint for illegal dismissal with
prayer for money claims against respondents Intel and Mike Wentling (respondents). He denied that
he ever had mental illness and insisted that he satisfactorily performed his duties as a product
engineer. He argued that Intel violated his statutory right to procedural due process when it summarily
issued a notice of termination.

In defense, the respondents argued that Deoferio’s dismissal was based on Dr. Lee’s certification that:
(1) his schizophrenia was not curable within a period of six months even with proper medical treatment;
and (2) his continued employment would be prejudicial to his and to the other employees’ health.11

The respondents also insisted that Deoferio’s presence at Intel’s premises would pose an actual harm
to his co-employees as shown by his previous acts:

On May 8, 2003, Deoferio emailed an Intel employee with this message: "All soul’s day back
to work Monday WW45.1."

On January 18, 2005, he cut the mouse cables, stepped on the keyboards, and disarranged
the desks of his co-employees.12 The respondents also highlighted that Deoferio incurred
numerous absences from work due to his mental condition, specifically, from January 31, 2002
until February 28, 2002,13 from August 2002 until September 2002,14 and from May 2003 until
 July 2003.15 Deoferio also took an administrative leave with pay from January 2005 until
December 2005.16

The respondents further asserted that the twin-notice requirement in dismissals does not apply to
terminations under Article 284 of the Labor Code.17 They emphasized that the Labor Code’s
implementing rules (IRR) only requires a competent public health authority’s certification to effectively
terminate the services of an employee.18 They insisted that Deoferio’s separation and retirement
payments for ₱247,517.35 were offset by his company car loan which amounted to ₱448,132.43.19 He
was likewise not entitled to moral and exemplary damages, as well as attorney’s fees, because the
respondents faithfully relied on Dr. Lee’s certification that he was not fit to work as a product engineer.20

Issue:

This case presents to us the following issues:

(1) Whether Deoferio was suffering from schizophrenia and whether his continued
employment was prejudicial to his health, as well as to the health of his co-employees; -YES

(2) Whether the twin-notice requirement in dismissals applies to terminations due to disease;
- YES

Held:

Intel had an authorized cause to dismiss Deoferio from employment

The present case involves termination due to disease – an authorized cause for dismissal under Article
284 of the Labor Code. As substantive requirements, the Labor Code and its IRR 33 require the
presence of the following elements:

(1) An employer has been found to be suffering from any disease.

(2) His continued employment is prohibited by law or prejudicial to his health, as well as to
the health of his co-employees.

(3) A competent public health authority certifies that the disease is of such nature or at such
a stage that it cannot be cured within a period of six months even with proper medical
treatment. With respect to the first and second elements, the Court liberally construed the
phrase "prejudicial to his health as well as to the health of his co-employees" to mean
"prejudicial to his health or to the health of his co-employees." We did not limit the scope of
this phrase to contagious diseases for the reason that this phrase is preceded by the phrase
"any disease" under Article 284 of the Labor Code, to wit:

Art. 284. Disease as ground for termination. – An employer may terminate the services of an employee
who has been found to be suffering from any disease and whose continued employment is prohibited
by law or is prejudicial to his health as well as to the health of his co-employees: Provided, That he is
paid separation pay equivalent to at least one (1) month salary or to one-half (1/2) month salary for
every year of service, whichever is greater, a fraction of at least six (6) months being considered as
one (1) whole year.
The third element substantiates the contention that the employee has indeed been suffering from a
disease that: (1) is prejudicial to his health as well as to the health of his co-employees; and (2) cannot
be cured within a period of six months even with proper medical treatment. Without the medical
certificate, there can be no authorized cause for the employee’s dismissal. The absence of this
element thus renders the dismissal void and illegal.

Simply stated, this requirement is not merely a procedural requirement, but a substantive one. The 1âwphi1

certification from a competent public health authority is precisely the substantial evidence required by
law to prove the existence of the disease itself, its non-curability within a period of six months even
with proper medical treatment, and the prejudice that it would cause to the health of the sick employee
and to those of his co-employees.

In the current case, we agree with the CA that Dr. Lee’s psychiatric report substantially proves that
Deoferio was suffering from schizophrenia, that his disease was not curable within a period of six
months even with proper medical treatment, and that his continued employment would be prejudicial
to his mental health. This conclusion is further substantiated by the unusual and bizarre acts that
Deoferio committed while at Intel’s employ.

The twin-notice requirement applies

to terminations under Article 284 of
the Labor Code

The Labor Code and its IRR are silent on the procedural due process required in terminations due to
disease. Despite the seeming gap in the law, Section 2, Rule 1, Book VI of the IRR expressly states
that the employee should be afforded procedural due process in all cases of dismissals.38

In Sy v. Court of Appeals39 and Manly Express, Inc. v. Payong, Jr.,40 promulgated in 2003 and 2005,
respectively, the Court finally pronounced the rule that the employer must furnish the employee two
written notices in terminations due to disease, namely: (1) the notice to apprise the employee of the
ground for which his dismissal is sought; and (2) the notice informing the employee of his dismissal,
to be issued after the employee has been given reasonable opportunity to answer and to be heard on
his defense. These rulings reinforce the State policy of protecting the workers from being terminated
without cause and without affording them the opportunity to explain their side of the controversy.

From these perspectives, the CA erred in not finding that the NLRC gravely abused its discretion when
it ruled that the twin-notice requirement does not apply to Article 284 of the Labor Code. This
conclusion is totally devoid of any legal basis; its ruling is wholly unsupported by law and jurisprudence.
In other words, the NLRC’s unprecedented, whimsical and arbitrary ruling, which the CA erroneously
affirmed, amounted to a jurisdictional error.
BANK OF LUBAO, INC., Petitioner,
vs.
ROMMEL J. MANABAT and the NATIONAL LABOR RELATIONS COMMISSION, Respondents.

Facts:

Sometime in 2001, Rommel J. Manabat (respondent) was hired by petitioner Bank of Lubao, a rural
bank, as a Market Collector. Subsequently, the respondent was assigned as an encoder at the Bank
of Lubao’s Sta. Cruz Extension Office, which he manned together with two other employees, teller
Susan P. Lingad (Lingad) and May O. Manasan. As an encoder, the respondent’s primary duty is to
encode the clients’ deposits on the bank’s computer after the same are received by Lingad.

In November 2004, an initial audit on the Bank of Lubao’s Sta. Cruz Extension Office conducted by
the petitioner revealed that there was a misappropriation of funds in the amount of ₱3,000,000.00,
more or less. Apparently, there were transactions entered and posted in the passbooks of the clients
but were not entered in the bank’s book of accounts. Further audit showed that there were various
deposits which were entered in the bank’s computer but were subsequently reversed and marked as
"error in posting".

Pursuant to petitioner’s investigation, it was concluded that the respondent conspired with Lingad in
making fraudulent entries disguised as error corrections in the bank’s computer.

On August 9, 2005, the petitioner filed several criminal complaints for qualified theft against Lingad
and the respondent with the Municipal Trial Court (MTC) of Lubao, Pampanga. Thereafter, citing
serious misconduct tantamount to willful breach of trust as ground, it terminated the respondent’s
employment effective September 1, 2005.

On September 26, 2005, the respondent filed a Complaint3 for illegal dismissal with the Regional
Arbitration Branch of the National Labor Relations Commission (NLRC) in San Fernando City,
Pampanga.

In the said complaint, the respondent, to bolster his claim that there was no valid ground for his
dismissal, averred that the charge against him for qualified theft was dismissed for lack of sufficient
basis to conclude that he conspired with Lingad. The respondent sought an award for separation pay,
and other claims.

For its part, the petitioner insists that the dismissal of the respondent is justified, asserting the February
14, 2006 Audit Report which confirmed the participation of the respondent in the alleged
misappropriations. Likewise, the petitioner asserted that the dismissal of the qualified theft charge
against the respondent is immaterial to the validity of the ground for the latter’s dismissal.

On February 28, 2007, the Labor Arbiter (LA) rendered a decision4 sustaining the respondent’s claim
of illegal dismissal thus ordering the petitioner to reinstate the respondent to his former position

On July 21, 2008, the NLRC rendered a Decision6 affirming the February 28, 2007 Decision of the LA.

The CA Decision (relevant)

On April 24, 2009, the CA rendered the herein assailed decision9 denying the petition for certiorari filed
by the petitioner. However, the CA held that the respondent is entitled to separation pay equivalent to
one-month salary for every year of service in lieu of reinstatement and backwages to be computed
from the time of his illegal dismissal until the finality of the said decision.

The CA agreed with the LA and the NLRC that the petitioner failed to establish by substantial evidence
that there was indeed a valid ground for the respondent’s dismissal. Nevertheless, the CA held that
the petitioner should pay the respondent separation pay since the latter did not pray for reinstatement
before the LA and that the same would be in the best interest of the parties considering the animosity
and antagonism that exist between them. The CA stated the following:

With respect to monetary awards, a finding that an employee has been illegally dismissed ordinarily
entitles him to reinstatement to his former position without loss of seniority rights and to the payment
of backwages.

In this case, however, private respondent did not pray for reinstatement before the Labor Arbiter. This
being the case, the employer should pay him separation pay in lieu [of] reinstatement. This is only just
and practical because reinstatement of private respondent will no longer be in the best interest of both
parties considering the animosity and antagonism that exist between them brought about by the filing
of charges in the criminal as well as in the labor proceedings.

Consequently, private respondent is entitled to separation pay equivalent to one month pay for every
year of service up to the finality of this judgment, as an alternative to reinstatement. With respect to
his backwages, where reinstatement is no longer possible, it shall be computed from the time of the
employee’s illegal termination up to the finality of this decision, without qualification or deduction.

Issue:
WON the payment of separation pay in favor of respondent is proper in lieu of reinstatement since
there is already a strained relationship between him and the petitioner on the ground that, petitioner
had previously filed various criminal charges against him for qualified theft thus effectively rendering
his reinstatement to his former position in the Bank of Lubao impracticable. - YES

Held:

The law on reinstatement is provided for under Article 279 of the Labor Code of the Philippines:

Article 279. Security of Tenure. - In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this Title. An employee who
is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights
and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or
their monetary equivalent computed from the time his compensation was withheld from him up to the
time of his actual reinstatement. (emphasis supplied)

Under the law and prevailing jurisprudence, an illegally dismissed employee is entitled to reinstatement
as a matter of right. However, if reinstatement would only exacerbate the tension and strained relations
between the parties, or where the relationship between the employer and the employee has been
unduly strained by reason of their irreconcilable differences, particularly where the illegally dismissed
employee held a managerial or key position in the company, it would be more prudent to order payment
of separation pay instead of reinstatement.17

Under the doctrine of strained relations, the payment of separation pay is considered an acceptable
alternative to reinstatement when the latter option is no longer desirable or viable. On one hand, such
payment liberates the employee from what could be a highly oppressive work environment. On the
other hand, it releases the employer from the grossly unpalatable obligation of maintaining in its
employ a worker it could no longer trust.18

In such cases, it should be proved that the employee concerned occupies a position where he enjoys
the trust and confidence of his employer; and that it is likely that if reinstated, an atmosphere of
antipathy and antagonism may be generated as to adversely affect the efficiency and productivity of
the employee concerned.19

Here, we agree with the CA that the relations between the parties had been already strained thereby
justifying the grant of separation pay in lieu of reinstatement in favor of the respondent.

First, it cannot be gainsaid that the petitioner’s reinstatement to his former position would only serve
to intensify the atmosphere of antipathy and antagonism between the parties. Undoubtedly, the
petitioner’s filing of various criminal complaints against the respondent for qualified theft and the
subsequent filing by the latter of the complaint for illegal dismissal against the latter, taken together
with the pendency of the instant case for more than six years, had caused strained relations between
the parties.

Second, considering that the respondent’s former position as bank encoder involves the handling of
accounts of the depositors of the Bank of Lubao, it would not be equitable on the part of the petitioner
to be ordered to maintain the former in its employ since it may only inspire vindictiveness on the part
of the respondent.

Third, the refusal of the respondent to be re-admitted to work is in itself indicative of the existence of
strained relations between him and the petitioner. In the case of Lagniton, Sr. v. National Labor
Relations Commission,20 the Court held that the refusal of the dismissed employee to be re-admitted
is constitutive of strained relations:

It appears that relations between the petitioner and the complainants have been so strained that the
complainants are no longer willing to be reinstated. As such reinstatement would only exacerbate the
animosities that have developed between the parties, the public respondents were correct in ordering
instead the grant of separation pay to the dismissed employees in the interest of industrial peace.21

Time and again, this Court has recognized that strained relations between the employer and employee
is an exception to the rule requiring actual reinstatement for illegally dismissed employees for the
practical reason that the already existing antagonism will only fester and deteriorate, and will only
worsen with possible adverse effects on the parties, if we shall compel reinstatement; thus, the use of
a viable substitute that protects the interests of both parties while ensuring that the law is respected
CLAUDIA'S KITCHEN, INC. and ENZO SQUILLANTINI, Petitioners
vs.
MA. REALIZA S. TANGUIN, Respondent

Facts:

Respondent Ma. Realiza S. Tanguin (Tanguin) was employed by petitioner Claudia's Kitchen, Inc.
(Claudia's Kitchen) on June 20, 2001. She performed her functions as a billing supervisor in Manila
Jockey Club's Turf

Club Building in San Lazaro Leisure and Business Park (SLLBP), Carmona, Cavite. Her duties and
responsibilities involved 1) Sorting and preparing suppliers' billing statements; 2) Releasing check
payments to the suppliers after being approved and signed by the management; 3) Giving job
assignment to employees; 4) Training and conducting orientation of new employees and monitoring
their progress; 5) Encoding daily and monthly menu production; 6) Preparing and submitting weekly
and monthly inventory and sales reports to the head office; 7) Handling petty cash funds and
depositing daily and weekly collections; and 8) Programming cash register.

Tanguin averred that on October 26, 2010, she was placed on preventive suspension by Marivic
Lucasan (Lucas an), Human Resources Manager, for allegedly forcing her co-employees to buy silver
jewelry from her during office hours and inside the company premises. On the same date, she was
directed by Lucasan to submit her written explanation on the matter. Tanguin admitted that she was
selling silver jewelry, but she denied that she did so during office hours. On October 30, 2010, she
was barred by a security guard from entering the company premises. She was informed by her co-
employees, namely Khena Nama, Jordan Lopez and Rose Marie Esquejo that they were forced to
write letters against her, or else they would be terminated from their work.

For their part, Claudia's Kitchen and Enzo Squillantini, its President, (petitioners) countered that in
October 2010, they received reports fromsome employees that Tanguin was allegedly forcing some
of them to buy silver jewelry from her during office hours and inside the company premises, which the
latter admitted. In order to conduct a thorough investigation, she was placed under preventive
suspension on October 26, 2010. On October 27, 2010, the petitioners sent Tanguin a letter requiring
her to submit a written explanation as to why she should not be charged for conducting business within
the company premises and during office hours. During her suspension, the petitioners discovered her
habitual tardiness and gross negligence in the computation of the total number of hours worked by her
co-employees. Subsequently, they sent letters to her, to wit:

1. First Notice - sent on November 17, 2010 requiring Tanguin to report to the Head Office on
November 19, 2010 at 10:00 o'clock in the morning to explain her alleged infractions; 5

2. Second Notice - sent on November 24, 2010 requiring Tanguin to explain the charges against
her;6

3. Third Notice - sent on November 25, 2010 requiring Tanguin to report to the Head Office and to
explain the charges against her; 7

4. Letter- sent on December 1, 2010 reminding Tanguin thatshe was still an employee of
Claudia's Kitchen anddirecting her to report back to work;8 and

5. Final Letter - sent on December 2, 2010 requiring Tanguin to report for work on December 3,
2010 at 10:00 a.m.9
Tanguin, however, failed to act on these notices.

Subsequently, Tanguin filed an illegal dismissal case before the LA, which ruled in her favor and
awarded backwages

Unsatisfied, she appealed before the NLRC, which ruled that Tanguin did not abandon her work
when she failed to report for work despite notice. It stated that the filing of the complaint for illegal
dismissal negated the claim of abandonment. The NLRC concluded that there was neither dismissal
nor abandonment. Thus, she should be reinstated to her former position, but without backwages

On appeal before the CA, the court modified the NLRC ruling. It wrote that reinstatement was not
proper because such remedy was applicable only to illegally dismissed employees. It added that the
petitioners did not dismiss her from employment as evidenced by several notices sent to her
requiring her to report back to work and to explain the charges against her.

The CA, however, applied the doctrine of strained relations and ordered the payment of separation
pay to Tanguin instead of compelling the petitioners to accept her in their employ. It opined that she
was employed as a billing supervisor and such a sensitive position required no less than the trust and
confidence of her employer as she was routinely charged with the care and custody of the funds and
property of her employer; and that as a necessary consequence of the judicial controversy, an
atmosphere of antipathy and antagonism may be generated as to adversely affect her efficiency and
productivity if she would be reinstated

Issue:

WHETHER SEPARATION PAY IN LIEU OF REINSTATEMENT MAY BE AWARDED TO AN

EMPLOYEE WHO WAS NOT DISMISSED FROM EMPLOYMENT. - NO

Held:

The grant of separation pay in lieu of reinstatement has no legal basis

Separationis pay warranted when the cause for termination is not attributable to the employee's fault,
such as those provided in Articles 29827 and 29928 of the Labor Code, as well as in cases of illegal
dismissal where reinstatement is no longer feasible. 29 On the other hand, an employee dismissed for
any of the just causes enumerated under Article 29730 of the same Code, being causes attributable to
the employee's fault, is not, as a general rule, entitled to separation pay. The non-grant of such right
to separation is pay premised on the reason that an erring employee should not benefit from their
wrongful acts. 31 Under Section 7,32 Rule I, Book VI of the Omnibus Rules Implementing the Labor
Code, such dismissed employee is nonetheless entitled to whatever rights, benefits, and privileges he
may have under the applicable individual or collective agreement with the employer or voluntary
employer policy or practice.

As an exception, case law allows the grant of separation pay or financial assistance to a legally-
dismissed employee as a measure of social justice or on grounds of equity. In Philippine Long Distance
Telephone Co. v. NLRC (PLDT), 33 the Court allowed the grant when the employee wasvalidly
dismissed for causes other than serious misconduct or those reflecting on his moral character.The
payment of separation pay and reinstatement are exclusive remedies.34 The payment of separation
pay replaces the legal consequences of reinstatement to an employee who was illegally dismissed.35
To award separation pay in lieu of reinstatement to an employee who was never dismissed by his
employer would only give imprimatur to the unacceptable act of an employee who is facing charges
related to his employment, but instead of addressing the complaint against him, he opted to file an
illegal dismissal case against his employer.

In sum, separation pay is only awarded to a dismissed employee in the following instances: 1) in case
of closure of establishment under Article 298 [formerly Article 283] of the Labor Code; 2) in case of
termination due to disease or sickness under Article 299 [formerly Article 284] of the Labor Code; 3)
as a measure of social justice in those instances where the employee is validly dismissed for causes
other than serious misconduct or those reflecting on his moral character;36 4) where the dismissed
employee's position is no longer available;37 5) when the continued relationship between the employer
and the employee is no longer viable due to the strained relations between them;38 or 6) when the
dismissed employee opted not to be reinstated, or the payment of separation benefits would be for the
best interest of the parties involved. 39 In all of these cases, the grant of separation pay presupposes
that the employee to whom it was given was dismissed from employment, whether legally or illegally.
In fine, as a general rule, separation pay in lieu of reinstatement could not be awarded to an employee
whose employment was not terminated by his employer.

In Dee Jay's Inn and Cafe v. Raneses, 40 the Court wrote that in "a case where the employee was
neither found to have been dismissed nor to have abandoned his/her work, the general course of
action is for the Court to dismiss the complaint, direct the employee to return to work, and order
the employer to accept the employee."

There were cases, however, wherein the Court awarded separation pay in lieu of reinstatement to the
employee even after a finding that there was neither dismissal nor abandonment. In Nightowl
Watchman & Security Agency, Inc. v. Lumahan (Nightowl)41 the Court awarded separation pay in view
of the findings of the NLRC that respondent stopped reporting for work for more than ten (10) years
and never returned, based on the documentary evidence of petitioner.

The circumstances in this case, however, does not warrant an application of the exception. Thus, the
general rule that no separation pay may be awarded to an employee who was not dismissed obtains
in this case. In this regard, it is only proper for Tanguin to report back to work and for the petitioners
to accept her, without prejudice to the on-going investigation against her.

No strained relations between the parties

Finally, the doctrine of strained relations, upon which the CA relied on to support its pay award of
separation to Tanguin, has also no application in this case. 1âwphi1

Under the doctrine of strained relations, the payment of separation pay is considered an acceptable
alternative to reinstatement when the latter option is no longer desirable or viable. On one hand, such
payment liberates the employee from what could be a highly oppressive work environment. On the
other hand, it releases the employer from the grossly unpalatable obligation of maintaining in its
employ a worker it could no longer trust.42

Strained relations must be demonstrated as a fact. 43 The doctrine of strained relations should not be
used recklessly or applied loosely nor be based on impression alone.44

The CA, in declaring that the relations of the parties are so strained such that reinstatement is no
longer feasible, merely stated that it would not be equitable for the petitioners to be ordered to maintain
Tanguin in their employ for it may only inspire vindictiveness on the part of the latter and that the filing
of the illegal dismissal case created an atmosphere of antipathy and antagonism between the parties.45
That Tanguin would be spiteful towards the petitioners, however, is a mere presumption without any
factual basis. Further, the filing of an illegal dismissal case alone is not sufficient reason to engender
a conclusion that the relationship between employer and employee is already strained. The doctrine
on strained relations cannot be applied indiscriminately since every labor dispute almost invariably
results in strained relations; otherwise, reinstatement can never be possible simply because some
hostility is engendered between the parties as a result of their disagreement.46 Finally, it must be noted
that Tanguin herself is asking for her reinstatement, the same being one of the reliefs she prayed for
in her Appeal47 before the NLRC and even in her Comment48 to the petition for review filed by the
petitioners.

To recapitulate, there was neither dismissal nor abandonment. At the time Tanguin initiated the illegal
dismissal case, the complaint had no basis. The status quo ante was that she was being asked to
explain the accusation against her. Instead of complying, she opted to file a complaint for illegal
dismissal. It was premature, if not pre-emptive, which the Court cannot tolerate or accommodate. At
this time, her plea for reinstatement, backwages and/or separation pay cannot be granted. Respondent
should return to work and answer the complaints against her and the petitioners should accept her,
without prejudice to the result of the investigation against her.

WHEREFORE, the petition is GRANTED. Respondent Ma. RealizaS. Tanguin is hereby ordered to
RETURN TO WORK within fifteen days from the receipt of this decision. Petitioners Claudia's Kitchen,
Inc. and Enzo Squillantini are likewise ordered to ACCEPT respondent Ma. Realiza S. Tanguin,
without prejudice to the result of the investigation against her.