SOCIAL JUSTICE CASES
11 Dismayed by his frequent transfer to different branches,
February 10, 2016
G.R. No. 214230
SECURITY BANK SAVINGS CORPORATION (formerly PREMIERE
DEVELOPMENT BANK)/HERMINIO M. FAMATIGAN, JR., Petitioners,
vs.
CHARLES M. SINGSON, Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1  is the Decision2 dated May 21,
2014 of the Court of Appeals (CA) in CA-G.R. SP No. 121053, which affirmed the
Decision3 dated April 25, 2011 and the Resolution4 dated June 17, 2011 of the
National Labor Relations Commission (NLRC) in NLRC LAC Case No. 08-
001972-10, sustaining the award of separation pay by way of financial assistance
to respondent Charles M. Singson (respondent) despite having been dismissed
for just cause.
The Facts
On November 25, 1985, respondent was initially employed by petitioner Premiere
Development Bank (now Security Bank Savings Corporation [SBSC]) as
messenger until his promotion as loans processor at its Sangandaan Branch.
Thereafter, he was appointed as Acting Branch Accountant and, in June 2007, as
Acting Branch Manager. On March 26, 2008, he was assigned to its Quezon
Avenue Branch under the supervision of Branch Manager Corazon Pinero
(Pinero) and held the position of Customer Service Operations Head (CSOH)
tasked with the safekeeping of its checkbooks and other bank forms.5
On July 22, 2008, respondent received a show-cause memorandum6 from Ms.
Ruby O. Go, head of West Regional Operations, charging him of violating the
bank's Code of Conduct when he mishandled various checkbooks under his
custody. The matter was referred to SBSC's Investigation Committee which
discovered, among others, that as of July 11, 2008, forty-one (41) pre-encoded
checkbooks of the Quezon Avenue Branch were missing.7
At the scheduled conference before the Investigating Committee, respondent
readily admitted having allowed the Branch Manager (i.e., Pinero) to bring out of
the bank's premises the missing checkbooks and other bank forms on the
justification that the latter was a senior officer with lengthy tenure and good
reputation. He claimed that it was part of Pinero's marketing strategy to procure
more clients for the bank and that he did not receive any consideration for
consenting to such practice. He added that the reported missing checkbooks had
been returned by Pinero to his custody after the inventory. 8
Pending investigation, respondent was transferred to SBSC's Pedro Gil Branch.
On September 30, 2008, he was again issued a memorandum9 directing him to
explain his inaccurate reporting of some Returned Checks and Other Cash Items
(RCOCI) which amounted to P46,279.33. The said uncovered amount was
treated as an account receivable for his account. 10 A month thereafter,
respondent was again transferred and reassigned to another branch in
Sampaloc, Manila.
respondent tendered his resignation12 on November 10, 2008, effective thirty (30)
days from submission. However, SBSC rejected the same in view of its decision
to terminate his employment on November 11, 2008 on the ground of habitual
neglect of duties. 13
Consequently, respondent instituted a complaint for illegal dismissal with prayer
for backwages, damages, and attorney's fees against SBSC and its President,
Herminio M. Famatigan, Jr. (petitioners), before the NLRC, docketed as NLRC-
NCR Case No. 10-14683-09.14
For their part,15 petitioners maintained that respondent was validly dismissed for
cause on the ground of gross negligence in the performance of his duties when
he repeatedly allowed Pinero to bring outside the bank premises its pre-encoded
checks and accountable forms in flagrant violation of the bank's policies and
procedures, and in failing to call Pinero's attention on the matter which was
tantamount to complicity and consent to the commission of said irregularity.16
The LA Ruling
In a Decision17 dated July 26, 2010, the Labor Arbiter (LA) dismissed the
complaint and accordingly, declared respondent to have been terminated from
employment for a valid cause. The LA found that respondent not only committed
a violation of SBSC's Code of Conduct but also gross and habitual neglect of
duties when he repeatedly allowed Pinero to bring outside the bank premises the
checkbooks and bank forms despite knowledge of the bank's prohibition on the
matter. According to the LA, the fact that SBSC suffered no actual loss or
damage did not in any way affect the validity of his termination. This
notwithstanding, the LA awarded respondent separation pay by way of financial
assistance in the amount of P218,500.00.
Aggrieved, petitioners appealed 18 to the NLRC, docketed as NLRC NCR Case
No. 10-14683-09, assailing the grant of financial assistance to respondent
despite a finding that he was validly dismissed.
The NLRC Ruling
19
In a Decision  dated April 25, 2011, the NLRC affirmed the LA decision, ruling
that the grant of separation pay was justified on equitable grounds such as
respondent's length of service, and that the cause of his dismissal was not due to
gross misconduct or that reflecting on his moral character but rather, a weakness
of disposition and grievous error in judgment. 20 It likewise observed that
respondent never repeated the act complained of when he was transferred to
other branches. Thus, it found the award of separation pay of one-half (Yi) month
pay for every year of service to be reasonable.
Petitioners moved for reconsideration21 which was likewise denied in a
Resolution22 dated June 17, 2011, prompting them to elevate the matter to the
CA on certiorari, docketed as CA-G.R. SP No. 121053.23
The CA Ruling
24
In a Decision  dated May 21, 2014, the CA denied the petition and sustained the
award of separation pay.
The CA pointed out that separation pay may be allowed as a measure of social
justice where an employee was validly dismissed for causes other than serious
1
misconduct or those reflecting on his moral character. It held that since
respondent's infractions involved violations of company policy and habitual
neglect of duties and not serious misconduct, and that his dismissal from work
was not reflective of his moral character, the NLRC committed no grave abuse of
discretion in sustaining the award of separation pay by way of financial
assistance. It further concluded that respondent did not commit a dishonest act
since he readily admitted to the petitioners that he allowed the Branch Manager
to bring out the subject checkbooks. Moreover, it ruled that while respondent
acquiesced to the latter's marketing strategy that was contrary to the bank's rules
and regulations, there was no showing that his conduct was perpetrated with self-
interest or for an unlawful purpose.
Hence, this petition.
The Issue Before the Court
The essential issue for the Court's resolution is whether or not the CA erred in
upholding the award of separation pay as financial assistance to respondent
despite having been validly dismissed.
The Court's Ruling
The petition is meritorious.
Separation pay is warranted when the cause for termination is not attributable to
the employee's fault, such as those provided in Articles 29825 and 29926 of the
Labor Code, as well as in cases of illegal dismissal where reinstatement is no
longer feasible.27 On the other hand, an employee dismissed for any of the just
causes enumerated under Article 29728 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 pay is premised on the reason that
an erring employee should not benefit from their wrongful acts.29 Under Section
7,30 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 instructs that in certain circumstances, the grant of
separation pay or financial assistance to a legally dismissed employee has been
allowed as a measure of social justice or on grounds of equity. In Philippine Long
Distance Telephone Co. v. NLRC (PLDT),31 the Court laid down the parameters
in awarding separation pay to dismissed employees based on social justice:
There should be no question that where it comes to such valid but not iniquitous
causes as failure to comply with work standards, the grant of separation pay to
the dismissed employee may be both just and compassionate, particularly if he
has worked for some time with the company. x x x It is not the employee's fault if
he does not have the necessary aptitude for his work but on the other hand the
company cannot be required to maintain him just the same at the expense of the
efficiency of its operations. He too may be validly replaced. Under these and
similar circumstances, however, the award to the employee of separation pay
would be sustainable under the social justice policy even if the separation is for
cause.
But where the cause of the separation is more serious than mere inefficiency, the
generosity of the law must be more discerning.1avvphi1 There is no doubt it is
compassionate to give separation pay to a salesman if he is dismissed for his
inability to fill his quota but surely he does not deserve such generosity if his
offense is misappropriation of the receipts of his sales. This is no longer mere
incompetence but clear dishonesty. x x x.
We hold that henceforth separation pay shall be allowed as a measure of
social justice only in those instances where the employee is validly
dismissed for causes other than serious misconduct or those reflecting on
his moral character. Where the reason for the valid dismissal is, for example,
habitual intoxication or an offense involving moral turpitude, like theft or illicit
sexual relations with a fellow worker, the employer may not be required to give
the dismissed employee separation pay, or financial assistance, or whatever
other name it is called, on the ground of social justice.
A contrary rule would, as the petitioner correctly argues, have the effect, of
rewarding rather than punishing the erring employee for his offense. And we do
not agree that the punishment is his dismissal only and that the separation pay
has nothing to do with the wrong he has committed. Of course it has. Indeed, if
the employee who steals from the company is granted separation pay even as he
is validly dismissed, it is not unlikely that he will commit a similar offense in his
next employment because he thinks he can expect a little leniency if he is again
found out. This kind of misplaced compassion is not going to do labor in general
any good as it will encourage the infiltration of its ranks by those who do not
deserve the protection and concern of the Constitution. 32 (Emphasis supplied)
Thus, in the PLDT  case, the Court required that the grant of separation pay as
financial assistance given in light of social justice be allowed only when the
dismissal: (a) was not for serious misconduct; and (b)  does not reflect on the
moral character of the employee or would involve moral turpitude.
However, in the later case of Toyota Motor Philippines Corporation Workers
Association v. NLRC (Toyota),33 the Court further excluded from the grant of
separation pay based on social justice the other instances listed under Article
282 (now 296) of the Labor Code, namely, willful disobedience, gross and
habitual neglect of duty, fraud or willful breach of trust, and commission of a
crime against the employer or his family. But with respect to analogous cases for
termination like inefficiency, drug use, and others, the social justice exception
could be made to apply depending on certain considerations, such as the length
of service of the employee, the amount involved, whether the act is the first
offense, the performance of the employee, and the like. 34
Thus, in Central Philippines Bandag Retreaders, Inc. v.
Diasnes,35 citing Toyota, the Court set aside the award of separation pay as
financial assistance to the dismissed employee in view of the gross and habitual
neglect of his duties, pointing out that the constitutional policy to provide full
protection to labor is not meant to be an instrument to oppress the employers:
To reiterate our ruling in Toyota,  labor adjudicatory officials and the CA must
demur the award of separation pay based on social justice when an employee's
dismissal is based on serious misconduct or willful disobedience; gross and
habitual neglect of duty; fraud or willful breach of trust; or commission of a crime
against the person of the employer or his immediate family - grounds under
Article 282 of the Labor Code that sanction dismissals of employees. They must
2
be most judicious and circumspect in awarding separation pay or financial
assistance as the constitutional policy to provide full protection to labor is not
meant to be an instrument to oppress the employers. The commitment of the
Court to the cause of labor should not embarrass us from sustaining the
employers when they are right, as here. In fine, we should be more cautious in
awarding financial assistance to the undeserving and those who are unworthy of
the liberality of the law.36
Guided by the foregoing, the Court finds the CA to have erred in awarding
separation pay.
To reiterate, the grant of separation pay to a dismissed employee is primarily
determined by the cause of the dismissal. In the case at bar, respondent's
established act of repeatedly allowing Branch Manager Pinero to bring the
checkbooks and bank forms outside of the bank's premises in violation of the
company's rules and regulations had already been declared by the LA to be
gross and habitual neglect of duty under Article 282 of the Labor Code, which
finding was not contested on appeal by respondent. It was petitioners who
interposed an appeal solely with respect to the award of separation pay as
financial assistance. As they aptly pointed out, the infractions, while not clearly
indicative of any wrongful intent, is, nonetheless, serious in nature when one
considers the employee's functions, rendering it inequitable to award separation
pay based on social justice. As the records show, respondent was the custodian
of accountable bank forms in his assigned branch and as such, was mandated to
strictly comply with the monitoring procedure and disposition thereof as a security
measure to avoid the attendant high risk to the bank. Indeed, it is true that the
failure to observe the processes and risk preventive measures and worse, to take
action and address its violation, may subject the bank to regulatory sanction. It
bears stressing that the banking industry is imbued with public interest. Banks
are required to possess not only ordinary diligence in the conduct of its business
but extraordinary diligence in the care of its accounts and the interests of its
stakeholders. The banking business is highly sensitive with a fiduciary duty
towards its client and the public in general, such that central measures must be
strictly observed. 37 It is undisputed that respondent failed to perform his duties
diligently, and therefore, not only violated established company policy but also
put the bank's credibility and business at risk. The excuse that his Branch
Manager, Pinero, merely prompted him towards such ineptitude is of no moment.
He readily admitted that he violated established company policy against bringing
out checkbooks and bank forms, 38 which means that he was well aware of the
fact that the same was prohibited. Nevertheless, he still chose to, regardless of
his superior's influence, disobey the same not only once, but on numerous
occasions. All throughout, there is no showing that he questioned the acts of
Branch Manager Pinero; neither did he take it upon himself to report said
irregularities to a higher authority. Hence, under these circumstances, the award
of separation pay based on social justice would be improper.
A similar ruling was reached in the case of Philippine National Bank v.
Padao39 where the Court disallowed the payment of separation pay as financial
assistance to an employee, i.e.,  a credit investigator in a bank, who has
repeatedly failed to perform his duties which amounted to gross and habitual
neglect of duties under Article 282 (now 296) of the Labor Code:
The role that a credit investigator plays in the conduct of a bank's business
cannot be overestimated. The amount of loans to be extended by a bank
depends upon the report of the credit investigator on the collateral being offered.
If a loan is not fairly secured, the bank is at the mercy of the borrower who may
just opt to have the collateral foreclosed. If the scheme is repeated a
hundredfold, it may lead to the collapse of the bank.
xxxx
Padao's repeated failure to discharge his duties as a credit investigator of the
bank amounted to gross and habitual neglect of duties under Article 282 (b) of
the Labor Code. He not only failed to perform what he was employed to do, but
also did so repetitively and habitually, causing millions of pesos in damage to
PNB. Thus, PNB acted within the bounds of the law by meting out the penalty of
dismissal, which it deemed appropriate given the circumstances.
xxxx
However, Padao is not entitled to financial assistance. In Toyota Motor Phils.
Corp. Workers Association v. NLRC, the Court reaffirmed the general rule that
separation pay shall be allowed as a measure of social justice only in those
instances where the employee is validly dismissed for causes other than
serious misconduct, willful disobedience, gross and habitual neglect of
duty, fraud or willful breach of trust, commission of a crime against the
employer or his family, or those reflecting on his moral character. These
five grounds are just causes for dismissal as provided in Article 282 of the Labor
Code.40
Notably, respondent's long years of service and clean employment record will not
justify the award of separation pay in view of the gravity of the foregoing
infractions.41 Length of service is not a bargaining chip that can simply be stacked
against the employer. 42 As ruled in Central Pangasinan Electric Cooperative,
Inc. v. NLRC:43
Although long years of service might generally be considered for the award of
separation benefits or some form of financial assistance to mitigate the effects of
termination, this case is not the appropriate instance for generosity under the
Labor Code nor under our prior decisions. The fact that private respondent
served petitioner for more than twenty years with no negative record prior to his
dismissal, in our view of this case, does not call for such award of benefits, since
his violation reflects a regrettable lack of loyalty and worse, betrayal of the
company. If an employee's length of service is to be regarded as a justification
for moderating the penalty of dismissal, such gesture will actually become a prize
for disloyalty, distorting the meaning of social justice and undermining the efforts
of labor to cleanse its ranks ofundesirables.44
All told, the Court finds that the award of separation pay to respondent as a
measure of social justice is riot warranted in this case. A contrary ruling would
effectively reward respondent for his negligent acts instead of punishing him for
his offense, in observation of the principle of equity.
WHEREFORE, the petition is GRANTED. The Decision dated May 21, 2014 of
the Court of Appeals in CA-G.R. SP No. 121053 is hereby REVERSED and SET
ASIDE deleting the award of separation pay in favor of Charles M. Singson.
SO ORDERED.
3
 G.R. No. 190187, September 28, 2016
THE PHILIPPINE GEOTHERMAL, INC. EMPLOYEES
UNION, Petitioner, v. UNOCAL PHILIPPINES, INC. (NOW KNOWN AS
CHEVRON GEOTHERMAL PHILIPPINES HOLDINGS, INC.), Respondent.
DECISION
LEONEN, J.:
The merger of a corporation with another does not operate to dismiss the
employees of the corporation absorbed by the surviving corporation. This is in
keeping with the nature and effects of a merger as provided under law and the
constitutional policy protecting the rights of labor. The employment of the
absorbed employees subsists. Necessarily, these absorbed employees are not
entitled to separation pay on account of such merger in the absence of any other
ground for its award.
This resolves a Petition for Review on Certiorari1 filed by Philippine Geothermal,
Inc. Employees Union (Union) assailing the Decision2 dated July 23, 2009 and
the Resolution3 dated November 9, 2009 of the Court of Appeals Eighth Division
in Unocal Philippines, Inc. (now known as Chevron Geothermal Philippines
Holdings, inc.) v. The Philippine Geothermal, Inc. Employees Union. The assailed
Decision granted Unocal Philippines, Inc.'s (Unocal Philippines) appeal and
reversed the Secretary of Labor's award of separation benefits to the Union. The
award was granted on the premise that the merger of Unocal Philippines' parent
corporation with another corporation impliedly terminated the employment of the
Union's members. The assailed Resolution denied the Union's Motion for
Reconsideration.
Philippine Geothermal, Inc. Employees Union is a legitimate labor union that
stands as the bargaining agent of the rank-and-file employees of Unocal
Philippines.4chanrobleslaw
Unocal Philippines, formerly known as Philippine Geothermal, Inc., is a foreign
corporation incorporated under the laws of the State of California, United States
of America, licensed to do business in the Philippines for the "exploration and
development of geothermal resources as alternative sources of energy."5 It is a
wholly owned subsidiary of Union Oil Company of California (Unocal
California),6 which, in turn, is a wholly owned subsidiary of Union Oil Corporation
(Unocal Corporation).7 Unocal Philippines operates two (2) geothermal steam
fields in Tiwi, Albay and Makiling, Banahaw, Laguna, owned by the National
Power Corporation.8chanrobleslaw
On April 4, 2005, Unocal Corporation executed an Agreement and Plan of
Merger (Merger Agreement) with Chevron Texaco Corporation (Chevron) and
Blue Merger Sub, Inc. (Blue Merger).9 Blue Merger is a wholly owned subsidiary
of Chevron.10 Under the Merger Agreement, Unocal Corporation merged with
Blue Merger, and Blue Merger became the surviving corporation.11 Chevron then
became the parent corporation of the merged corporations:12 After the merger,
Blue Merger, as the surviving corporation, changed its name to Unocal
Corporation.13chanrobleslaw
On January 31, 2006, Unocal Philippines executed a Collective Bargaining
Agreement with the Union.14chanrobleslaw
However, on October 20, 2006, the Union wrote Unocal Philippines asking for the
separation benefits provided for under the Collective Bargaining Agreement.
According to the Union, the Merger Agreement of Unocal Corporation, Blue
Merger, and Chevron resulted in the closure and cessation of operations of
Unocal Philippines and the implied dismissal of its employees.15chanrobleslaw
Unocal Philippines refused the Union's request and asserted that the employee-
members were not terminated and that the merger did not result in its closure or
the cessation of its operations.16chanrobleslaw
As Unocal Philippines and the Union were unable to agree, they decided to
submit the matter to the Department of Labor and Employment's Administrative
Intervention for Dispute Avoidance Program.17 However, they were unable to
arrive at "a mutually acceptable agreement."18chanrobleslaw
On November 24, 2006, the Union claimed that Unocal Philippines was guilty of
unfair labor practice and filed a Notice of Strike.19 Later, the Union withdrew its
Notice of Strike.20chanrobleslaw
On February 5, 2007, the parties agreed to submit their dispute for voluntary
arbitration before the Department of Labor and Employment, with the Secretary
of Labor and Employment as Voluntary Arbitrator.21 The case, entitled In Re:
Labor Dispute at Philippines, Inc./Chevron, was docketed as OS-VA-2007-
04.22chanrobleslaw
After the parties submitted their respective position papers, the Secretary of
Labor rendered the Decision23 on January 15, 2008 ruling that the Union's
members were impliedly terminated from employment as a result of the Merger
Agreement. The Secretary of Labor found that the merger resulted in new
contracts and a new employer for the Union's members. The new contracts
allegedly required the employees' consent; otherwise, there was no employment
contract to speak of.24 Thus, the Secretary of Labor awarded the Union
separation pay under the Collective Bargaining Agreement.25cralawred The
dispositive portion of the Decision reads:ChanRoblesVirtualawlibrary
WHEREFORE, this Office rules that Unocal and Chevron merged into one
corporate entity and the employees were impliedly terminated from employment.
Accordingly, they are entitled to the separation benefits provided under ARTICLE
XII, SECTION 2 and ANNEX "B" of the collective bargaining [agreement]
between UNOCAL PHILIPPINES, INC. and the PHILIPPINE GEOTHERMAL,
INC. EMPLOYEES UNION.
Pursuant to Section 7, Rule XIX of Department Order No. 40-03, series of 2003,
this Decision shall be final and executory after ten (10) calendar days from
receipt hereof and it shall not be subject of a motion for reconsideration.
4
 before the Secretary of Labor, it claimed that it entered into a merger and not a
SO ORDERED.26 (Emphasis in the original) sale, but later, in its appeal before the Court of Appeals, argued that it was not a
party to the merger.43 Petitioner asserts that the Court of Appeals erred in
allowing respondent to change its theory of the case on appeal and in deciding
Unocal Philippines filed before the Court of Appeals a Petition for
the case on the basis of this changed theory.44chanrobleslaw
Review27 questioning the Secretary of Labor's Decision. Unocal Philippines
claimed that the Union was not entitled to separation benefits given that Unocal
Petitioner further claims that the Court of Appeals erred in reversing the Decision
Philippines was not a party to the merger,28 that it never closed nor ceased its
of the Secretary of Labor, who properly ruled that petitioner's members are
business, and that it did not terminate its employees after the merger.29 It
entitled to separation pay.45 It claims that the merger resulted in (a) "the
asserted that its operations continued in the same manner, and with the same
severance of the juridical tie that existed between the employees and its original
manpower complement.30 Likewise, the employees kept their tenure intact and
employer, Unocal Corporation,"46 and (b) the implied termination of the
experienced no changes in their salaries and benefits.31chanrobleslaw
employment of the Union's members, who had the right to waive their continued
employment with the absorbing corporation.47 Petitioner insists that the the
In the Decision32 dated July 23, 2009, the Court of Appeals granted the appeal of
"cessation of operations" contemplated in the Collective Bargaining Agreement
Unocal Philippines and reversed the Decision of the Secretary of Labor.33 It held
and the Memorandum of Agreement must be liberally interpreted to include
that Unocal Philippines has a separate and distinct juridical personality from its
mergers,48 and that doubts must be resolved in favor of labor.49chanrobleslaw
parent company, Unocal Corporation, which was the party that entered into the
Merger Agreement.34 The Court of Appeals ruled that Unocal Philippines
In the Resolution50 dated January 27, 2010, this Court directed respondent to
remained undissolved and its employees were unaffected by the merger.35 It
comment on the Petition.
found that this was evidenced by the Union's assumption of its role as the duly
recognized bargaining representative of all rank-and-file employees a few months
Respondent filed its Comment51 on March 26, 2010. It argues that it did not
after the merger.36chanrobleslaw
change its theory on appeal. It insists that it has been consistent in arguing
before the Secretary of Labor and the Court of Appeals that it was never a party
Moreover, the Court of Appeals found that although Unocal Corporation became
to the merger between Unocal Corporation and Blue Merger as it has always
a part of Chevron, Unocal Philippines still remained as a wholly owned subsidiary
stated that it was Unocal Corporation who entered into the Merger
of Unocal California after the merger.37 It ruled that in any case, the Collective
Agreement.52 Respondent argues that even assuming that it did change its theory
Bargaining Agreement only provided for the payment of separation pay if a
on appeal, it may do so as an exception to the rule since "a party may change
reduction in workforce results from redundancy, retrenchment or installation of
[its] legal theory when its factual bases would not require the presentation of
labor-saving devices, or closure and cessation of operations, all of which did not
further evidence by the adverse party in order to meet the issue raised in the new
occur in this case.38chanrobleslaw
theory."53 It posits that the alleged new theory would still be based on the
evidence presented before the Secretary of Labor, hence, petitioner was.not
The Court of Appeals also pointed out that the Union's members merely wanted
placed at a disadvantage.54chanrobleslaw
to discontinue their employment with Unocal Philippines, but there was nothing in
the Labor Code nor in the parties' Collective Bargaining Agreement that would
Respondent further argues that in any case, petitioner's members still did not
sanction the payment of separation pay to those who no longer wanted to work
lose their employment as to warrant the award of separation pay.55 The
for Unocal Philippines as a result of the merger.39 The dispositive portion of the
Memorandum of Agreement, the Collective Bargaining Agreement, and the
Decision reads:ChanRoblesVirtualawlibrary
contemporaenous acts of the parties show that respondent shall pay separation
WHEREFORE, premises considered, the Decision dated 15 January 2008, of the pay only in case the employees actually lose their jobs due to redundancy,
Department of Labor and Employment (DOLE) in OS-VA-2007-04 is retrenchment or installation of labor-saving devices, or closure and cessation of
hereby REVERSED and SET ASIDE. operation.56 As these circumstances did not occur, respondent cannot grant
petitioner's members separation pay.
SO ORDERED.40 (Emphasis in the original)
On November 9, 2009, the Court of Appeals denied the Union's Motion for Petitioner filed its Reply57 on July 6, 2010. It insists that respondent never
Reconsideration.41chanrobleslaw claimed before the Secretary of Labor that it was not covered by the merger.58 It
maintains that respondent only insisted on this argument when it obtained the
Hence, this Petition42 was filed. unfavorable decision from the Secretary of Labor.59 Moreover, the Secretary of
Labor was correct in ruling that, indeed, there was a cessation of operations of
Petitioner Philippine Geothermal, Inc. Employees Union claims that respondent respondent when it merged with Chevron.60chanrobleslaw
Unocal Philippines, Inc. changed its theory of the case when, in the proceedings

5
We resolve the following issues:
chanRoblesvirtualLawlibraryFirst, whether respondent changed the theory of its
case on appeal;
Second, whether the Merger Agreement executed by Unocal Corporation, Blue
Merger, and Chevron resulted in the termination of the employment of petitioner's
members; and cralawlawlibrary
Lastly, whether petitioner's members are entitled to separation benefits.
As regards the first issue, we rule that respondent did, indeed, change the theory
of its case on appeal.
In its Petition before the Court of Appeals, respondent asserted that it was not a
party to the merger as it was a subsidiary of Unocal California and, thus, had a
separate and distinct personality from Unocal Corporation.
However, the following statement can be found in respondent's Position Paper in
the proceedings before the Secretary of Labor:ChanRoblesVirtualawlibrary
3. . . . Following the merger, Blue Merger Sub Inc. which as above stated is a
wholly owned subsidiary of Chevron Corporation changed its name to Unocal
Corporation retaining Unocal Philippines, Inc. as its Philippine Branch to continue
to operate the aforenamed geothermal plants as, in fact[.]61 (Emphasis supplied)
Respondent alleges that it is a branch of Unocal Coiporation. Claiming that it is a
branch is inconsistent with its allegation (on appeal) that it is a subsidiary of
another corporation. A branch and a subsidiary differ in its corporate existence: a
branch is not a legally independent unit, while a subsidiary has a separate and
distinct personality from its parent corporation.
In Philippine Deposit Insurance Corp. v. Citibank:62
The Court begins by examining the manner by which a foreign corporation can
establish its presence in the Philippines. It may choose to incorporate its own
subsidiary as a domestic corporation, in which case such subsidiary would have
its own separate and independent legal personality to conduct business in the
country. In the alternative, it may create a branch in the Philippines, which would
not be a legally independent unit, and simply obtain a license to do business in
the Philippines.63 (Emphasis supplied, citations omitted)
Respondent likewise made the following assertions in its Position Paper in the
proceedings before the Secretary of Labor:ChanRoblesVirtualawlibrary
Based on the facts of this case, the Honorable Secretary of Labor would certainly
appreciate that the business transaction entered into by respondent employer
was in law and in fact, a merger. Hence, there is no basis to the union's claim.
....
. . . In the present case, it is clear that the surviving corporation, i.e. Unocal
Philippines Inc. has continued the business and operations of the absorbed
corporation in an unchanged manner, and using the same employees with their
tenure intact and under the same terms and conditions of
employment.64 (Emphasis supplied)
These statements reveal that not only did respondent fail to assert that it was not
a party to the Merger Agreement, but it also referred to itself as the party who
entered into the transaction and became the surviving corporation in the merger.
Thus, the claim that respondent is not a party to the merger is a new allegation
raised for the first time on appeal before the Court of Appeals.
Raising a factual question for the first time on appeal is not allowed. In Tan v.
Commission on Elections:65
The aforementioned issue is now raised only for the first time on appeal before
this Court. Settled is the rule that issues not raised in the proceedings below
(COMELEC en banc) cannot be raised for the first time on appeal. Fairness and
due process dictate that evidence and issues not presented below cannot be
taken up for the first time on appeal.
Thus, in Matugas v. Commission on Elections, we reiterated this rule,
saying:ChanRoblesVirtualawlibrary
The rule in appellate procedure is that a factual question may not be raised for
the first time on appeal, and documents forming no part of the proofs before the
appellate court will not be considered in disposing of the issues of" an action.
This is true whether the decision elevated for review originated from a regular
court or an administrative agency or quasi-judicial body, and whether it was
rendered in a civil case, a special proceeding, or a criminal case. Piecemeal
presentation of evidence is simply not in accord with orderly justice.
Moreover, in Vda. De Gualberto v. Go, we also held:ChanRoblesVirtualawlibrary
In Labor Congress of the Philippines v. NLRC, we have made it clear that "to
allow fresh issues on appeal is violative of the rudiments of fair play, justice and
due process." Likewise, in Orosa v. Court of Appeals, the Court disallowed it
because "it would be offensive to the basic rule of fair play, justice and due
process if it considered [the] issue[s] raised for the first time on appeal." We
cannot take an opposite stance in the present case.66 (Citations omitted)
Respondent did state that Unocal Corporation was the party to the Merger
Agreement with Blue Merger and Chevron. Nonetheless, it did not use this
allegation to argue that it had a separate and distinct personality from Unocal
Corporation and is, thus, not a party to the Merger Agreement. Respondent only
raised this argument in its appeal before the Court of Appeals.
Respondent's contention that it falls within the exception to the rule likewise does
not lie. Respondent cites Quasha Ancheta Pena and Nolasco Law Office v. LCN
Construction Corp.67 and claims that it falls within the exception since it did not
present any additional evidence on the matter:ChanRoblesVirtualawlibrary
In the interest of justice and within the sound discretion of the appellate court, a
party may change his legal theory on appeal, only when the factual bases thereof
would not require presentation of any further evidence by the adverse party in
6
order to enable it to properly meet the issue raised in the new
theory.68chanroblesvirtuallawlibrary
However, this paragraph states that it is the adverse party that should no longer
be required to present additional evidence to contest the new claim, and not the
party presenting the new theory on appeal. Thus, it does not matter that
respondent no longer presented additional evidence to support its new claim. The
petitioner, as the adverse party, should not have to present further evidence on
the matter before the new issue may be considered. However, the issue of
whether respondent is a party to the Merger Agreement may be proven otherwise
by petitioner, through the presentation of evidence that respondent is merely a
branch and not a subsidiary of Unocal Corporation. Thus, respondent's new
allegation does not fall under the exception to the rule.
Petitioner was denied the opportunity to present evidence to disprove
respondent's new claim. Therefore, the Court of Appeals erred in taking into
consideration this argument.
As to the remaining issues, we rule in favor of respondent and dismiss the
Petition.
Both the Secretary of Labor and the Court of Appeals found that what was
entered into by Unocal Corporation, Blue Merger, and Chevron is a merger. The
primary issue is what the effects of this merger on respondent's employees are.
We find that, whether or not respondent is a party to the Merger Agreement,
there is no implied dismissal of its employees as a consequence of the merger.
A merger is a consolidation of two or more corporations, which results in one or
more corporations being absorbed into one surviving corporation.69 The separate
existence of the absorbed corporation ceases, and the surviving corporation
"retains its identity and takes over the rights, privileges, franchises, properties,
claims, liabilities and obligations of the absorbed corporation(s)."70chanrobleslaw
If respondent is a subsidiary of Unocal California, which, in turn, is a subsidiary of
Unocal Corporation, then the merger of Unocal Corporation with Blue Merger and
Chevron does not affect respondent or any of its employees. Respondent has a
separate and distinct personality from its parent corporation.
Nonetheless, if respondent is indeed a party to the merger, the merger still does
not result in the dismissal of its employees.
The effects of a merger are provided under Section 80 of the Corporation
Code:ChanRoblesVirtualawlibrary
SEC. 80. Effects of merger or consolidation. — The merger or consolidation, as
provided in the preceding sections shall have the following effects:
chanRoblesvirtualLawlibrary
1. The constituent corporations shall become a single corporation which, in case
of merger, shall be the surviving corporation designated in the plan of merger;
and, in case of consolidation, shall be the consolidated corporation designated in
the plan of consolidation;
2. The separate existence of the constituent corporations shall cease, except that
of the surviving or the consolidated corporation;
3. The surviving or the consolidated corporation shall possess all the rights,
privileges, immunities and powers and shall be subject to all the duties and
liabilities of a corporation organized under this Code;
4. The surviving or the consolidated corporation shall thereupon and thereafter
possess all the rights, privileges, immunities and franchises of each of the
constituent corporations; and all property, real or personal, and all receivables
due on whatever account, including subscriptions to shares and other choses in
action, and all and every other interest of, or belonging to, or due to each
constituent corporation, shall be taken and deemed to be transferred to and
vested in such surviving or consolidated corporation without further act or deed;
and
5. The surviving or the consolidated corporation shall be responsible and liable
for all the liabilities and obligations of each of the constituent corporations in the
same manner as if such surviving or consolidated corporation had itself incurred
such liabilities or obligations; and any claim, action or proceeding pending by or
against any of such constituent corporations may be prosecuted by or against
the surviving or consolidated corporation, as the case may be. Neither the rights
of creditors nor any lien upon the property of any of such constituent corporations
shall be impaired by such merger or consolidation. (Emphasis supplied)
Although this provision does not explicitly state the merger's effect on the
employees of the absorbed corporation, Bank of the Philippine Islands v. BPI
Employees Union-Davao Chapter-Federation of Unions in BPI Unibank71 has
ruled that the surviving corporation automatically assumes the employment
contracts of the absorbed corporation, such that the absorbed corporation's
employees become part of the manpower complement of the surviving
corporation, thus:ChanRoblesVirtualawlibrary
Taking a second look on this point, we have come to agree with Justice Brion's
view that it is more in keeping with the dictates of social justice and the State
policy of according full protection to labor to deem employment contracts as
automatically assumed by the surviving corporation in a merger, even in the
absence of an express stipulation in the articles of merger or the merger plan. In
his dissenting opinion, Justice Brion reasoned that:ChanRoblesVirtualawlibrary
To my mind, due consideration of Section 80 of the Corporation Code, the
constitutionally declared policies on work, labor and employment, and the specific
FEBTC-BPI situation — i.e., a merger with complete "body and soul" transfer of
all that FEBTC embodied and possessed and where both participating banks
were willing (albeit by deed, not by their written agreement) to provide for the
affected human resources by recognizing continuity of employment — should
7
point this Court to a declaration that in a complete merger situation where there is
total takeover by one corporation over another and there is silence in the merger
agreement on what the fate of the human resource complement shall be, the
latter should not be left in legal limbo and should be properly provided for, by
compelling the surviving entity to absorb these employees. This is what Section
80 of the Corporation Code commands, as the surviving corporation has the legal
obligation to assume all the obligations and liabilities of the merged constituent
corporation.
Not to be forgotten is that the affected employees managed, operated and
worked on the transferred assets and properties as their means of livelihood;
they constituted a basic component of their corporation during its existence. In a
merger and consolidation situation, they cannot be treated without consideration
of the applicable constitutional declarations and directives, or, worse, be simply
disregarded. If they are so treated, it is up to this Court to read and interpret the
law so that they are treated in accordance with the legal requirements of mergers
and consolidation, read in light of the social justice, economic and social
provisions of our Constitution. Hence, there is a need for the surviving
corporation to take responsibility for the affected employees and to absorb them
into its workforce where no appropriate provision for the merged corporation's
human resources component is made in the Merger Plan.72 (Emphasis supplied,
citations omitted)
The rationale for this ruling is anchored on the nature and effects of a merger as
provided under Section 80 of the Corporation Code, as well as the policies on
work and labor enshrined in the Constitution.73chanrobleslaw
To reiterate, Section 80 of the Corporation Code provides that the surviving
corporation shall possess all the rights, privileges, properties, and receivables
due of the absorbed corporation. Moreover, all interests of, belonging to, or due
to the absorbed corporation "shall be taken and deemed to be transferred to and
vested in such surviving or consolidated corporation without further act or
deed."74 The surviving corporation likewise acquires all the liabilities and
obligations of the absorbed corporation as if it had itself incurred these liabilities
or obligations.75chanrobleslaw
This acquisition of all assets, interests, and liabilities of the absorbed corporation
necessarily includes the rights and obligations of the absorbed corporation under
its employment contracts. Consequently, the surviving corporation becomes
bound by the employment contracts entered into by the absorbed corporation.
These employment contracts are not terminated. They subsist unless their
termination is allowed by law.
This interpretation is consistent with the consitutional provisions and policies on
work and labor, which provides:
ARTICLE II
State Policies
SECTION 18. The State affirms labor as a primary social economic force. It shall
protect the rights of workers and promote their welfare.
ARTICLE XIII
Labor
SECTION 3. The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of
employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective
bargaining and negotiations, and peaceful concerted activities, including the right
to strike in accordance with law. They shall be entitled to security of tenure,
humane conditions of work, and a living wage. They shall also participate in
policy and decision-making processes affecting their rights and benefits as may
be provided by law.
The State shall promote the principle of shared responsibility between workers
and employers and the preferential use of voluntary modes in settling disputes,
including conciliation, and shall enforce their mutual compliance therewith to
foster industrial peace.
The State shall regulate the relations between workers and employers,
recognizing the right of labor to its just share in the fruits of production and the
right of enterprises to reasonable returns on investments, and to expansion and
growth.
These constitutional provisions ensure that workers' rights are protected as they
are imbued with public interest. They likewise prevent an interpretation of any
law, rule, or agreement, which may violate worker's rights acquired during their
employment.
Associate Justice Arturo D. Brion's Dissenting Opinion in Bank of the Philippine
Islands v. BPI Employees Union-Davao Chapter-Federation of Unions in BPI
Unibank76 was similarly premised on the constitutional protection afforded to
labor and the public interest carried by employment
contracts:ChanRoblesVirtualawlibrary
An employment contract or contract of service essentially has value because it
embodies work — the means of adding value to basic raw materials and the
processes for producing goods, materials and services that become the lifeblood
of corporations and, ultimately, of the nation. Viewed from this perspective, the
employment contract or contract of service is not an ordinary agreement that can
be viewed in strictly contractual sense. It embodies work and production and
carries with it a very significant element of public interest; thus, the Constitution,
no less, accords full recognition and protection to workers and their contribution
to production.
8

....
These constitutional statements and directives, aside from telling us to consider
work, labor and employment beyond purely contractual terms, also provide us
directions on how our considerations should be made, i.e., with an eye on the
interests they represent — the individual, the corporate, and more importantly,
the national.77chanroblesvirtuallawlibrary
Associate Justice Brion likewise discussed the nature of a merger agreement vis-
a-vis the employment contracts:ChanRoblesVirtualawlibrary
This recognition is not to objectify the workers as assets and liabilities, but to
recognize — using the spirit of the law and constitutional standards — their
necessary involvement and need to be provided for in a merger situation. Neither
does this step, directly impacting on the employees' individual employment
contracts, detract from the in personam character of these contracts. For in a
merger situation, no change of employer is involved; the change is in the internal
personality of the employer rather than through the introduction of a new
employer which would have novated the contract. This conclusion proceeds from
the nature of a merger as a corporate development regulated by law and the
merger's implementation through the parties' merger agreement.
....
In the BPI-FEBTC situation, these employment contracts are part of the
obligations that the merging parties have to account and make provisions for
under the Constitution and the Corporation Code; in the absence of any clear
agreement, these employment contracts subsist, subject to the right of the
employees to reject them as they cannot be compelled to render service but can
only be made to answer in damages if the rejection constitutes a breach. In other
words, in mergers and consolidations, these contracts should be held to be
continuing, unless rejected by the employees themselves or declared by the
merging parties to be subject to the authorized causes for termination of
employment under Sections 282 and 283 of the Labor Code. In this sense, the
merging parties' control and business decision on how employees shall be
affected, in the same manner that the affected employees' decision on whether
to abide by the merger or to opt out, remain unsullied.78 (Emphasis in the original)
Senior Associate Justice Antonio T. Carpio's Dissenting Opinion79 likewise
discusses the constitutional and legal right to security of tenure as basis for ruling
that the employment contracts of the absorbed corporation subsist in case of a
merger:
Upon merger, BPI, as the surviving entity, absorbs FEBTC and continues the
combined business of the two banks. BPI assumes the legal personality of
FEBTC, and automatically acquires FEBTC s rights, privileges and powers, as
well as its liabilities and obligations.
....
Among the obligations and liabilities of FEBTC is to continue the employment of
FEBTC employees. These employees have already acquired certain employment
status, tenure, salary and benefits. They are regular employees of FEBTC. Since
after the merger, BPI has continued the business of FEBTC, FEBTC's obligation
to these employees is assumed by BPI, and BPI becomes duty-bound to
continue the employment of these FEBTC employees.
Under Article 279 of the Labor Code, regular employees acquire security of
tenure, and hence, may not be terminated by the employer except upon legal
grounds. . . . Without any of these legal grounds, the employer cannot validly
terminate the employment of regular employees; otherwise, the employees' right
to security of tenure would be violated.
The merger of two corporations does not authorize the surviving corporation to
terminate the employees of the absorbed corporation in the absence of just or
authorized causes as provided in Articles 282 and 283 of the Labor Code. . . .
Once an employee becomes permanent, he is protected by the security of tenure
clause in the Constitution, and he can be terminated only for just or authorized
causes as provided by law.80chanroblesvirtuallawlibrary
These theories were dissents to the Decision in Bank of the Philippine Islands.
However, in the Resolution resolving the Motion for Reconsideration in that case,
this Court found it necessary to interpret Section 80 of the Corporation Code and
the constitutional provisions on labor as to strengthen the "judicial protection of
the right to security of tenure of employees affected by a merger and [avoid]
confusion regarding the status of various-benefits."81 Thus, this Court ruled that
the surviving corporation automatically assumes the employment contracts of the
absorbed corporation. The absorbed corporation's employees are not impliedly
dismissed, but become part of the manpower complement of the surviving
corporation.82chanrobleslaw
The merger of Unocal Corporation with Blue Merger and Chevron does not result
in an implied termination of the employment of petitioner's members. Assuming
respondent is a party to the merger, its employment contracts are deemed to
subsist and continue by "the combined operation of the Corporation Code and
the Labor Code under the backdrop of the labor and social justice provisions of
the Constitution."83chanrobleslaw
Petitioner insists that this is contrary to its freedom to contract, considering its
members did not enter into employment contracts with the surviving corporation.
However, petitioner is not precluded from leaving the surviving corporation.
Although the absorbed employees are retained as employees of the merged
corporation, the employer retains the right to terminate their employment for a
just or authorized cause. Likewise, the employees are not precluded from
severing their employment through resignation or retirement. The freedom to
contract and the prohibition against involuntary servitude is still, thus, preserved
in this sense.84 This is the manner by which the consent of the employees is
considered by the law.
Hence, assuming respondent is a party to the merger, the merger still does not
operate to effect a termination of the employment of respondent's employees.
9
Should they be unhappy with the surviving corporation, the employees may retire
or resign from employment.
Given these considerations, we rule that petitioner is not entitled to the
separation benefits it claims from respondent.
Separation benefits are not granted to petitioner by law in case of voluntary
resignation,85 or by any contract it entered into with respondent.
The Collective Bargaining Agreement86 between petitioner and respondent
provides:ChanRoblesVirtualawlibrary
Article XII
RESPONSIBILITIES OF THE PARTIES AND INDUSTRIAL PEACE
....
Section 2. ADDITIONAL RESPONSIBILITIES
....
In the event of closure, cessation of operations, retrenchment, redundancy or
installation of labor saving devices, the COMPANY will pay just and fair
compensation for those who will be separated from the COMPANY. The
separation benefit is covered under a MEMORANDUM OF AGREEMENT as
agreed upon by both parties and shall serve as a part of this agreement (Annex
B).87chanroblesvirtuallawlibrary
Likewise, the Memorandum of Agreement88 dated November 1, 2005 betweeen
petitioner and respondent states:
WITHESSETH: That
WHEREAS, the COMPANY and the UNION recognize the possibility that
UNOCAL PHILIPPINES, INC. may undergo at its discretion reduction in
workforce as a result of redundancy, retrenchment or installation of labor saving
devices, or closure and cessation of operations.
WHEREAS, the COMPANY and the UNION agree that should any of the above-
cited conditions occur that may directly affect the tenure of existing employees,
the rights of the employees should be respected and that the COMPANY will pay
just and fair compensation for those who will be separated from the COMPANY;
In view of the foregoing and in consideration of industrial peace and this
covenant, the parties hereby agree as follows:
chanRoblesvirtualLawlibrary. . . .
2. The COMPANY will provide the following separation benefits for all regular and
probationary employees in the event that they lose their jobs as a result of the
conditions cited above;  
a. Separation Pay: 2.5 months multiplied by the current monthly
base pay plus monthly equivalent of the 13th month and
14th month pay multiplied by the number of years service.89
Merger is not one of the circumstances where the employees may claim
separation pay. The only instances where separation pay may be awarded to
petitioner are: (a) reduction in workforce as a result of redundancy; (b)
retrenchment or installation of labor-saving devices; or (c) closure and cessation
of operations.
Redundancy has been defined by this Court as follows:
[W]e believe that redundancy, for purposes of our Labor Code, exists where the
services of an employee are in excess of what is reasonably demanded by the
actual requirements of the enterprise. Succinctly put, a position is redundant
where it is superfluous, and superfluity of a position or positions may be the
outcome of a number of factors, such as overhiring of workers, decreased
volume of business, or dropping of a particular product line or service activity
previously manufactured or undertaken by the enterprise. The employer has no
legal obligation to keep in its payroll more employees than are necessary for the
operation of its business.90 (Citations omitted)
Retrenchment, on the other hand, is the reduction of personnel to save on costs
on salaries and wages due to a considerable decline in the volume of
business.91chanrobleslaw
Cessation and closure of business contemplates the stopping of business
operations of the employer whether on the employer's prerogative or on account
of severe business losses.92chanrobleslaw
None of these instances are present here. The terms do not provide that a
merger is one of the instances where petitioner may claim separation benefits for
its members. Neither can these circumstances be interpreted as to contemplate a
merger with another corporation. In any case, if title parties intended that
petitioner ought to be granted separation pay in case of a merger, it should have
been explicitly provided for in the contract. Absent this express intention,
petitioner cannot claim separation pay.
On the contention that petitioner must be awarded the separation pay in the
interest of social justice, this Court has held that this award is granted only under
the following exceptional cases: (1) the dismissal of the employee was not for
serious misconduct; and (2) it did not reflect on the moral character of the
employee.93chanrobleslaw
In this case, there is no dismissal of the employees on account of the merger.
Petitioner does not deny that respondent actually continued its normal course of
operations after the merger, and that its members, as employees, resumed their
work with their tenure, salaries, wages, and other benefits intact. Petitioner was
even able to execute with respondent, after the merger, the Collective Bargaining
10
Agreement from which it anchors its claims.
Given these circumstances, petitioner is not entitled to separation pay. Although
the policy of the state is to rule in favor of labor in light of the social justice
provisions under the Constitution, this Court cannot unduly trample upon the
rights of management, which are likewise entitled to respect in the interest of fair
play.
WHEREFORE, the Decision dated July 23, 2009 and the Resolution dated
November 9, 2009 of the Court of Appeals in CA-G.R. SP No. 102184
are AFFIRMED. The Petition for Review is DENIED considering that no
reversible error was committed by the Court of Appeals.
SO ORDERED.
G.R. No. 195614, January 10, 2018
DIGITAL TELECOMMUNICATIONS PHILS., INC./JOHN GOKONGWEI,
JR., Petitioner, v. NEILSON M. AYAPANA, Respondent.
DECISION
MARTIRES, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the 7 October 2010 Decision1 and 4 February 2011
Resolution2 rendered by the Court of Appeals (CA) in CA-G.R. SP No. 112160.
The CA affirmed with modification the 29 June 2009 Decision3 and 28 October
2009 Resolution4 of the National Labor Relations Commission (NLRC) in NLRC
LAC Case No. 05-001831-08, which declared Neilson M. Ayapana (respondent)
to have been illegally dismissed.
THE FACTS
Digital Telecommunications Philippines, Inc. (petitioner or the company) hired
respondent as Key Accounts Manager for its telecommunication products and
services m the areas of Quezon, Marinduque, and Laguna provinces, with a
monthly basic pay of P13,100.00. Respondent was tasked, among others, to
offer and sell DIGITEL's foreign exchange (FEX) line to prospective customers.
On 6 September 2006, respondent successfully offered two (2) FEX lines for
Atimonan, Quezon, to Estela Lim (Lim), the owner of Star Lala Group of
Companies (Star Lala). He received from Lim the total amount of P7,000.00 (the
subject amount) for the two lines, for which he issued two (2) official receipts.
Respondent, however, did not remit the subject amount to petitioner on the same
date.
On 7 September 2006, petitioner's sales team, which included respondent, held a
meeting during which respondent learned, from his immediate superior, that there
was no available FEX line in Atimonan, Quezon; and that it was not possible to
have a FEX line in the area due to technical constraints. On the same day,
respondent retrieved from Lim the two (2) official receipts issued to the latter and
replaced them with an acknowledgment receipt.
On 23 November 2006, Teresita Cielo (Cielo), secretary of Lim, went to
petitioner's business office to pay bills and to ask for the refund of the subject
amount. Upon verification by Myra Santiago (Santiago), petitioner's customer
representative, she found that there was no existing application for the said
service under the name of Star Lala Group of Companies.
When Santiago found that respondent was the sales person handling Lim's
transaction, she informed respondent of Cielo's request for refund on that same
day; but it was only on 28 November 2006, or five (5) days from said notice, that
respondent was able to make the refund.
On 29 November 2006, petitioner issued a Notice to Explain5 to respondent,
asking him to explain: why he offered an inexistent FEX line; why he withdrew the
official receipts issued to Lim and replaced them with an acknowledgment
receipt; why he did not immediately remit the proceeds of the transaction to
petitioner's business center; and why he retained the subject amount for 84 days.
On 30 November 2006, respondent submitted a written response.6 He explained
that he was not aware of the unavailability of the Atimonan line at the time he
offered it to Lim; that he retrieved the official receipts to avoid explaining the late
remittance to the treasury department because, at the time, Lim was still
undecided whether to take up respondent's alternative offer of subscribing to a
FEX line in Lucena until such time that an Atimonan line could become available;
that he issued the acknowledgment receipt as proof that the subject amount is in
his possession; that prior to 23 November 2006, he made several attempts to
obtain Cielo's advice as to the return of the subject amount, to no avail; and that
after being informed of Cielo's request on 23 November 2006, he went to Star
Lala's office, which was closed, and thereafter tried to obtain Cielo's address in
order to return the money, to no avail. According to respondent, he handed the
subject amount to Santiago after she informed him that Cielo would retrieve the
money from her.
On 4 December 2006, petitioner sent a Notice of Offense7 to respondent,
scheduling his administrative hearing and requesting his presence there.
On 19 January 2007, petitioner issued a Notice of Dismissal8 finding respondent
guilty of "breach by the employee of the trust and confidence reposed in him by
management or by a company representative" under petitioner's disciplinary
rules, which merited dismissal for the first offense.
Aggrieved, respondent filed a complaint for illegal dismissal. The Labor Arbiter
dismissed the complaint, ruling that substantial evidence exists that respondent
was involved in an event that justified petitioner's loss of trust and confidence in
him, and therefore, he was validly dismissed from employment.9 Respondent
then appealed to the NLRC.
The NLRC Ruling
The NLRC reversed and set aside the decision of the Labor Arbiter. It ruled that
respondent was merely guilty of imprudence and not of bad faith or malice. The
NLRC found that dismissal was too harsh a penalty, especially since respondent
appeared to have a clean record except for the Notice of Final Warning10 issued
to him by petitioner on 17 October 2005. The NLRC also considered in
respondent's favor the certificates of commendation issued to him for being the
most outstanding account manager in 2001 and 2002, as well as the service
award he received in 2006. Consequently, it ordered the petitioner to pay
11
respondent separation pay in the amount of P78,600.00 computed at one-month
pay for every year of service, viz:
WHEREFORE, the appeal filed by complainant is GRANTED IN PART. The
Decision of Labor Arbiter Melchisedek A. Guan dated March 6, 2008 is
REVERSED and SET ASIDE, and a NEW ONE rendered finding dismissal a
harsh penalty and ordering respondents to pay complainant separation pay in the
sum of P78,600.00 as computed above.
SO ORDERED.11
Respondent thereafter filed a motion for reconsideration, which was denied by
the NLRC. Unsatisfied with the decision, respondent appealed to the CA.
The CA Ruling
The CA affirmed the NLRC ruling with modification that petitioner was further
ordered to pay full back wages inclusive of allowances and other benefits or their
monetary equivalent, viz:
WHEREFORE, premises considered, the Decision dated June 29, 2009 of the
National Labor Relations Commission (NLRC) in NLRC LAC Case No. 05-
001831-08 is AFFIRMED with MODIFICATION that private respondent DIGITEL
is ordered to pay petitioner separation pay and full back wages inclusive of
allowances and other benefits or their monetary equivalent from January 19,
2007 up to the finality of this Decision.
SO ORDERED.12
The CA held that respondent's dismissal was not valid because neglect of duty,
as a just cause for dismissal, must not only be gross but also habitual. An
isolated act of negligence cannot be ground for dismissal, and respondent was
found negligent in only one instance.
Aggrieved, petitioner filed a motion for reconsideration, which was denied by the
CA. Hence, this petition.
ISSUES
Petitioner raises the following issues:
I.
THE COURT OF APPEALS ERRED IN AFFIRMING THE NLRC'S FINDING
THAT NO JUST CAUSE EXISTS TO WARRANT RESPONDENT AYAPANA'S
DISMISSAL DESPITE THE LAW AND EVIDENCE TO THE CONTRARY.
II.
THE COURT OF APPEALS ERRED IN AWARDING BACK WAGES AND
SEPARATION PAY TO RESPONDENT AYAPANA DESPITE LACK OF LEGAL
BASIS.
Simply put, this Court is tasked to consider whether the CA correctly held that
respondent's dismissal was invalid and that he is entitled to full back wages and
separation pay.
DISCUSSION
Incipiently, this Court addresses respondent's contention that petitioner can no
longer raise the issue on the validity of his dismissal since it has failed to file a
motion for reconsideration from the NLRC's decision, thus, it is bound by the
NLRC's finding on this issue.
Respondent errs. It is settled that the entire case becomes open to review, and
the Court can review matters not specifically raised or assigned as error by the
parties, if their consideration is necessary in arriving at a just resolution of the
case.13
The issue of whether respondent was validly dismissed, though ruled upon by the
NLRC without an appeal from petitioner, is pivotal in determining respondent's
entitlement to back wages and separation pay, which was raised by respondent
in his appeal to the CA. It is clearly necessary to arriving at a just disposition of
the controversy. Thus, it was proper for the CA to pass upon said issue, and for
petitioner to interpose an appeal therefrom.
Now to the primary issue at bar: was respondent validly dismissed? The Court
rules in the affirmative.
Respondent held a position of trust and confidence and committed an act
that justified petitioner's loss of trust and confidence.
A perusal of the notice of dismissal issued by petitioner to respondent shows that
the ground relied upon by the former was the latter's breach of the trust and
confidence reposed in him by the company, contrary to the ruling of the CA,
which based its decision on gross and habitual neglect, a separate ground under
Article 29714 of the Labor Code.
The willful breach by the employee of the trust reposed in him by his employer or
the latter's duly authorized representative is a just cause for dismissal. However,
the validity of a dismissal based on this ground is premised upon the concurrence
of these conditions: (1) the employee concerned must be holding a position of
trust and confidence; and (2) there must be a willful act that would justify the loss
of trust and confidence.15
The first requisite is certainly present. In a number of cases, this Court has held
that rank-and-file employees who are routinely charged with the care and custody
of the employer's money or property are classified as occupying positions of trust
and confidence.16 In Philippine Plaza Holdings, Inc. v. Episcope,17 the Court held
that a service attendant tasked to attend to dining guests, handle their bills, and
receive their payments for transmittal to the cashier is an employee occupying a
position of trust and confidence and is thus expected to act with utmost honesty
and fidelity.18
It is not disputed that respondent was tasked to solicit subscribers for petitioner's
FEX line and, in the course thereof, collect money for subscriptions and issue
official receipts therefor, as was the case in the transaction subject of this
controversy. Being involved in the handling of the company's funds, respondent
undeniably occupies a position of trust and confidence.
The records likewise reveal that the second requisite is present. It must be
emphasized that a finding that an employer's trust and confidence has been
breached by the employee must be supported by substantial evidence,19 or such
amount of relevant evidence which a reasonable mind might accept as adequate
to justify a conclusion. It must not be based on the employer's whims or caprices
12
or suspicions; otherwise, the employee would eternally remain at the mercy of
the employer.20
The totality of the circumstances in the case at bar supports a conclusion that
respondent's dismissal was based on substantial evidence that he had willfully
breached the trust reposed upon him by petitioner, and that petitioner was not
actuated by mere whim or capriciousness.
It is uncontroverted that respondent took part in a series of irregularities relative
to his transaction with Lim, to wit:
First, he offered an inexistent FEX line to Lim, for which he received a
subscription payment of P7,000.00. Even granting he did not know that the
Atimonan line was unavailable at the time he offered the same to Lim, he was
remiss in not ascertaining its availability before he concluded his transaction with
Lim and received from her the subscription payment. As an employee admittedly
tasked with soliciting subscribers for the Company's FEX line, it was an integral
part of his functions to ensure that the lines he offered to potential subscribers
were valid and subsisting.
Second, it is not disputed that respondent was required and expected to
immediately remit the proceeds acquired in the course of his sales transactions;
which he failed to do in Lim's case, without sufficient explanation for such lapse.
Third, respondent readily admits that when he came to know of the Atimonan
line's unavailability, he did not immediately effect a refund nor inform
management of his decision to retain the money supposedly pending Lim's
decision to acquire another line. Instead, he retrieved the official receipts from
Lim and issued an acknowledgment receipt.
Respondent contends that he could not be imputed with any reckless, willful, or
deliberate act of breaching petitioner's trust and confidence because he was of
the honest belief that the Atimonan line was existent when he offered it to Lim;
that he retained the money pursuant to an oral agreement between him and Lim,
wherein he gave her time to contemplate the option of obtaining a refund or
availing of another FEX line pending the availability of the Atimonan line; and that
he issued the acknowledgment receipt as evidence that the sum collected was in
his possession.
Respondent's arguments are misplaced. Even if this Court were to concede that
he was merely negligent in offering an FEX line whose existence he did not
ascertain first, his acts subsequent to being aware of the Atimonan line's
unavailability indubitably manifests willfulness and deliberateness. In his
response to petitioner's notice to explain, respondent admitted he came to know
of the Atimonan line's unavailability during their team's 7 September 2006
meeting when he was informed by his superior, Rene Rico (Rico). When
respondent inquired from Rico if it was possible that the Atimonan line would be
available in the near future, the latter answered in the negative.21 It therefore
reeked of underhandedness that petitioner still gave Lim the option to avail of a
different FEX line until such time that the Atimonan line would become available,
when he already knew at the time that the Company was not even contemplating
such service. There is also no showing that he disclosed the full extent of Rico's
response to Lim.
Respondent's act of retrieving and cancelling the official receipts without
petitioner's knowledge or conformity was also highly irregular and prejudicial to
the company, as its cancellation has tax and reportorial implications that may
result in liability.
Moreover, respondent admitted that the reason he cancelled the official receipts
was to conceal from the treasury department the fact of late
remittance.22 Notably, petitioner also failed to explain why he did not at least
inform management about his oral agreement with Lim, considering that the
company could incur liability arising from his continued retention of the
subscription money. Lim's consent to such retention is immaterial, because the
duty to remit the proceeds or at least disclose any action relative to funds
acquired for the availment of the company's services was mandatory to the
company.
Third, respondent retained the subject amount from 6 September 2006 to 28
November 2006, offering no sufficient explanation for this prolonged period of
retention, other than to insist that he was allowed to do so by Lim. However, as
discussed earlier, this does not explain why respondent would withhold from the
company information regarding company funds or a potentially contentious
transaction, if he had truly acted in good faith. As borne by the records, it was
only on 23 November 2006 that the petitioner, through its customer
representative Santiago, became aware of such retention. Moreover, while
respondent claims that he issued an acknowledgment receipt as proof that he
possessed the money and would return it as soon as Lim signified her desire for
a refund, it is curious that he was only able to return the subject amount on 28
November 2006, or five (5) days after being told by Santiago to refund it on 23
November 2006.
All the above circumstances militated against respondent's claim of good faith
and clearly established an act that justified the Company's loss of trust and
confidence in him. In Bristol Myers Squibb (Phils.), Inc. v. Baban,23 the Court held
that "as a general rule, employers are allowed a wider latitude of discretion in
terminating the services of employees who perform functions by which their
nature require the employer's full trust and confidence. Mere existence of basis
for believing that the employee has breached the trust and confidence of the
employer is sufficient and does not require proof beyond reasonable doubt."24
Furthermore, no bad faith or ill will could be imputed to the company in
dismissing respondent because the latter was apprised of the charges against
him and was given an opportunity to submit a written explanation, which he
complied with. A hearing was also conducted.
It must be remembered that the discipline, dismissal, and recall of employees are
management prerogatives, limited only by those imposed by labor laws and
dictated by the principles of equity and social justice.25 This Court finds that
petitioner exercised its management prerogatives consistent with these
principles.
Even with a finding that respondent was validly dismissed, separation pay
may be granted as a measure of social justice.
Generally, an employee dismissed for any of the just causes under Article 297 is
not entitled to separation pay. By way of exception, the Court has allowed the
13
grant of separation pay based on equity and as a measure of social justice, as JENNIFER C. LAGAHIT, Petitioner,
long as the dismissal was for causes other than serious conduct or those vs.
manifesting moral depravity.26 PACIFIC CONCORD CONTAINER LINES/MONETTE CUENCA (BRANCH
This Court is mindful of the new rule it established in Toyota v. NLRC,27 where MANAGER), Respondents.
the Court held that "in addition to serious misconduct, in dismissals based on DECISION
other grounds under Art. 28228 like willful disobedience, gross and habitual BERSAMIN, J.:
neglect of duty, fraud or willful breach of trust, and commission of a crime against
We resolve the appeal of petitioner Jennifer Lagahit from the decision
the employer or his family, separation pay should not be conceded to the
promulgated on May 10, 2006,1 whereby the Court of Appeals (CA) disposed in
dismissed employee."29 However, the Court also recognizes that some cases
CA-G.R. SP No. 00991 entitled Pacific Concord Container Lines and Monette
merit a relaxation of this rule, taking into consideration their peculiar
Cuenca v. National Labor Relations Commission, Fourth Division, and Jennifer
circumstances.
Lagahit,  as follows:
Here, while it is clear that respondent's act constitutes a willful breach of trust and
WHEREFORE, in view of the foregoing, the petition is hereby GRANTED and the
confidence that justified his dismissal, it also appears that he was primarily
assailed Decision dated December 15, 2004 promulgated by the National Labor
actuated by zealousness in acquiring and retaining subscribers rather than any
Relations Commission, Fourth Division, Cebu City, in NLRC Case No. V-000529-
intent to misappropriate company funds; as he admitted in his response to the
2003/RAB Case No. VII-11-2271-2002, as well as the Resolution dated May 25,
notice to explain that offering an alternative FEX line to Lim was part of his
2005 are hereby REVERSED and SET ASIDE. Petitioner is ORDERED to pay
strategy to ensure her subscription.
private respondent the amount of P25,000.00 as nominal damages. Further, the
The lack of moral depravity on respondent's part is also shown by the following preliminary injunction issued by this Court is likewise made permanent.
circumstances: (1) he was the recipient of certificates of commendation30 from
No pronouncement as to costs.
petitioner in the years 2001 and 2002, for being an outstanding account
manager, as well as of a service award in 2006 for continuous service to the SO ORDERED.2
company; (2) he was granted promotional increases31 in 2002, 2004, and 2005, Antecedents
as well as a merit increase32 in 2003; (3) he has served the company from 16 In February 2000, respondent Pacific Concord Container Lines (Pacific Concord),
February 2001 to 19 January 2007 with only one other known infraction a domestic corporation engaged in cargo forwarding,3 hired the petitioner as an
embodied in a notice of final warning that petitioner failed to expound on; and (4) Account Executive/Marketing Assistant.4 In January 2002, Pacific Concord
based on Cielo's Salaysay,33 Lim did allow respondent to retain the subject promoted her as a sales manager with the monthly salary rate of P25,000.00,
amount for a time, even though, as discussed earlier, this is immaterial to and provided her with a brand new Toyota Altis plus gasoline allowance.5 On
determining whether his act justified his dismissal, since he had an independent November 8, 2002, she reported for work at 9:00 a.m. and left the company
duty to disclose material agreements or transactions to petitioner. premises at around 10:30 a.m. to make client calls. At 1:14 p.m. of that day, she
To be sure, his zealousness was manifested through acts that showed an received the following text message from respondent Monette Cuenca, to wit:
inordinate lapse of judgment warranting his dismissal in accordance with TODAY U R OFFICIALY NT CONNECTED WITH US.
management prerogative, but this Court considers in his favor the above
circumstances in granting him separation pay in the amount of one (1) month pay Sender: MONETTE
for every year of service.34 +639173215330
WHEREFORE, premises considered, the petition is GRANTED. The assailed 7 Sent: 8-Nov-2002
October 2010 Decision and 4 February 2011 Resolution of the Court of Appeals 13:14:016
in CA-G.R. SP No. 112160, are REVERSED and SET ASIDE. The Decision of
Cuenca also sent a text message to Roy Lagahit, the petitioner’s husband, as
the Labor Arbiter dismissing respondent Neilson M. Ayapana's complaint for
follows:
illegal dismissal and other monetary claims
is REINSTATED with MODIFICATION that respondent should be paid separation IBALIK KARON DAYON ANG AUTO OG PALIHUG LANG
pay equivalent to one month of his latest salary for every year of service. KO OG KUHA SA NYONG BUTANG OG DI NAKO MO
SO ORDERED. STORYA NI JENIFER. IL WAIT7
Sender: MONETTE
+639173215330
G.R. No. 177680 Sent: 8-Nov-2002
12:50:548

14
The petitioner immediately tried to contact Cuenca, but the latter refused to take
her calls. On the same day, the petitioner learned from clients and friends that
the respondents had disseminated notices, flyers and memos informing all clients
of Pacific Concord that she was no longer connected with the company as of
November 8, 2002.9 Pacific Concord also caused the publication of the notice to
the public in the Sunstar Daily  issue of December 15, 2002.10
On November 13, 2002, the petitioner sent a letter to Pacific Concord,11 which
reads as follows:
November 13, 2002
Branch Manager
PACIFIC CONCORD CONTAINER LINES, INC.
N&N Building A.C. Cortes Mandaue City
Attention: Monette Cuenca
Madam,
In connection with your text message and flyers advising me that you have
terminated my employment, please arrange and expedite settlement of all
benefits due to me under the law.
In as much as the facts of my termination has not been formally detailed to me, I
believe I was deprived of the due process that would have given me the chance
to formally present my side. It startled me at first but I have accepted my fate.
However, we both have names and reputations to protect. Factual incidents
made as basis of my termination can help us mutually clear our names.12
Thank you,
(Sgd)
JENNIFER LAGAHIT
Cuenca replied to the letter on November 25, 2002,13 advising the petitioner
thusly:
25 November 2002
TO : MS. JENNIFER C. LAGAHIT
FM : PACIFIC CONCORD CONTAINER LINES, INC. CEBU BRANCH
RE : UNCOLLECTED ACCOUNTS
Herewith is the list of your uncollected accounts as of November 22, 2002.
Kindly take note that you have personally guaranteed the above accounts.
Moreover, you have reported it as your income and you have already availed the
commission due for the above shipments.
We are therefore holding the release of the monies due to you until we can
collect the above accounts.
xxxx
(Sgd)
MONETTE G. CUENCA
Branch Manager
On November 26, 2002, the petitioner filed her complaint for constructive
dismissal in the Regional Arbitration Branch of the National Labor Relations
Commission (NLRC) in Cebu City.14
In their position paper,15 the respondents denied having terminated the petitioner
despite the fact that there were valid grounds to do so. They insisted that the
petitioner had betrayed the trust and confidence reposed in her when she: (a)
used the company-issued vehicle for her own personal interest; (b) failed to
achieve her sales quota, and to enhance and develop the Sales Department; (c)
enticed her marketing assistant, Jo Ann Otrera, to resign and join her in
transferring to another forwarding company; (d) applied for other employment
during office hours and using company resources; (e) solicited and offered the
services of Seajet International, Inc. during her employment with Pacific Concord;
(f) received a personal commission from Wesport Line, Inc. for container
shipments; and (g) illegally manipulated and diverted several containers to Seajet
International.16
The respondents claimed that Pacific Concord even issued at one time a
memorandum to the petitioner17 to cite her insubordination in refusing to
participate in the company’s teambuilding activity; that in the two meetings held
on September 27, 200218 and October 9, 2002,19 she was afforded the chance to
explain her side on the reports that she was looking for other employment, but
she dismissed the reports as mere speculations and assured them of her loyalty;
that although valid grounds to terminate the petitioner already existed, they did
not dismiss her; and that she voluntarily resigned on November 13, 2002 after
probably sensing that the management had gotten wind of her anomalous
transactions.20 They submitted affidavits to support their allegations.21
Ruling of the Labor Arbiter
Labor Arbiter Julie C. Rendoque rendered a decision on June 9, 2003, declaring
that the respondents were not able to prove that the petitioner had committed
acts constituting betrayal of trust; that they had not informed her prior to her
dismissal of the offenses she had supposedly committed;22 and that owing to the
illegality of the dismissal, they were liable for backwages and separation pay, to
wit:
WHEREFORE, VIEWED FROM THE FOREGOING, judgment is hereby
rendered declaring herein respondents GUILTY of ILLEGALLY DISMISSING
complainant from her employment. Consequently, respondents PACIFIC
CONCORD CONTAINER LINES/MONEETTE [sic] CUENCA are hereby ordered
to pay, jointly and severally, complainant JENNIFER C. LAGAHIT with the
following:
a. Separation Pay P 25,000.00
b. Backwages P175,000.00
TOTAL=============== P200,000.00
VVVVVVVVV
within ten (10) days from receipt hereof, through the Cashier of this
Arbitration Branch.
15
 Other claims are DISMISSED for lack of merit.1âwphi1
SO ORDERED.23
Ruling of the NLRC
On appeal, the NLRC affirmed the ruling of the Labor Arbiter with
modification, viz.:
WHEREFORE, the Decision dated June 9, 2002 of the Labor Arbiter
is MODIFIED by AFFIRMING his finding that the respondents are guilty of
illegally dismissing the complainant from her employment, but MODIFYING his
award for separation pay computed at one (1) month salary for every year of
service, a fraction of at least six (6) months being considered one (1) year from
the complainant’s first day of employment in February 2000 UNTIL THE
FINALITY OF THIS DECISION; and backwages starting November 8, 2002
UNTIL THE FINALITY OF THIS DECISION.
The appeal of the respondents is dismissed for lack of merit.
xxxx
SO ORDERED. 24
The NLRC found that the respondents did not observe due process in terminating
the services of the petitioner; and rejected their claim that she had resigned on
November 13, 2002.25
The respondents filed their motion for reconsideration,26 but the NLRC denied
their motion on May 25, 2005.27
Decision of the CA
On May 10, 2006, the CA promulgated its decision granting the respondents’
petition for certiorari, and annulling the decision of the NLRC. It pronounced that
there were sufficient justifications to terminate the petitioner’s services for
disloyalty and willful breach of trust, viz.:
In the present case, it is clear that Lagahit deliberately committed successive
acts which translated to blatant disloyalty and willful breach of the trust reposed
upon her by Pacific, and acts which, in the final reckoning are obviously
detrimental to the material interest of the company under which she is employed.
From January 2002, Lagahit was found to have committed a series of willful acts
which may reasonably and expectedly arouse Pacific’s distrust and a consequent
finding of Lagahit’s unfitness to continue her employment, thus: (a) Lagahit has
been persistent in applying for employment in other competing cargoforwarding
companies; (b) Lagahit even enticed her Marketing Assistant to join her quest to
find anoher job outside Pacific and at a competing company at that; (c) Lagahit
rendered actual services at competing companies for a fee and commission while
she was still under the employee of Pacific and was regularly receiving salary
therefrom; and (d) Lagahit brought and referred prospective shipping clients to
other cargoforwarding corporations. Verily, the commission of the foregoing acts
vividly demonstrated, not only, Lagahit’s disloyalty and unfaithfulness to her
employer, but likewise her blatant ingratitude to the company from which she
derives her regular source of livelihood, considering that, incidentally, the
performance of these disloyal and inimical acts commenced when Lagahit was
just newly promoted to the higher post of Sales Manager at Pacific.
xxxx
Lagahit is not an ordinary rank-and-file employee of Pacific, but contrarily, is by
far an employee authorized to formulate significant company plans and policies,
and whose designation and basic functions, on its face, betrays the fact that too
much trust and confidence was indeed reposed upon her. As borne by the
records, Lagahit occupies the responsible post of Sales Manager, and as such
her basic functions, inter alia, consists [sic] of the following: (1) formulation of
strategic action and marketing plans to make the Pacific Sales Department
successful, (2) implementation of marketing strategies to help Pacific Sales team
achieve its periodic target, (3) direct transaction with various shipping clients, and
(4) in having a free hand in dealing with various shipping lines. Quite significantly,
Lagahit was given sensitive and responsible functions that goes deep into the
financial success, or otherwise ruin, of Pacific, which is more than a clear
testament to the fact her position is accorded with trust and confidence.
Such being the case, Lagahit owes it to herself and to Pacific to work religiously
and with undivided time and attention to promote the latter’s business interests.
Unfortunately, such was not the case. As it turned out, Lagahit made a consistent
attempt to seek employment at other cargo forwarding companies that directly
compete with the business of Pacific, obviously, constituting a willful breach of
trust consequentially resulting to Pacific’s loss of confidence in Lagahit’s loyalty
and efficacy. Worse, Lagahit conducted her job applications during office hours
when she should have been rendering her services for Pacific. Furthermore, the
height of her disloyalty exhibited its face when Lagahit begun to actually render
services and refer prospective shipping clients to other competing cargo-
forwarding companies for a fee and commission, at the same time employed with
Pacific and receiving regular salary therefrom.28
Nonetheless, the CA held that despite the existence of a valid cause to terminate
her employment Pacific Concord was liable for nominal damages of P25,000.00
for denying the petitioner’s right to due process.29
The CA denied the petitioner’s motion for reconsideration on March 30,
2007.30 Hence, this appeal.
Issues
The petitioner imputes the following errors to the CA, namely:
I
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN
GIVING UNDUE WEIGHT AND CREDENCE TO THE RESPONDENTS’ LATEST
DEFENSE, THEREBY DISTURBING THE FINDINGS OF FACT OF THE LABOR
ARBITER AND NLRC WHO SHARE THE SAME FINDINGS;
II
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN
FINDING MS. LAGAHIT TO HAVE BEEN VALIDLY DISMISSED ON THE
GROUND OF LOSS OF TRUST AND CONFIDENCE;
III
PETITIONER IS ENTITLED TO HER CLAIMS FOR SEPARATION PAY AND
BACKWAGES31
16
The petitioner argues that the CA erroneously concluded that she had been
dismissed considering that the respondents had initially denied her having
dismissed her, and claimed instead that she had voluntarily resigned; that the
Labor Arbiter and the NLRC had correctly concluded that she had not resigned,
but had been illegally terminated without substantive and procedural due
process;32 and that the evidence adduced against her that the CA relied upon to
sufficiently establish her breach of trust were speculative and hearsay.33
In contrast, the respondents aver that:(a) the petitioner occupied a position of
trust and confidence that she breached by working for, serving, and soliciting
clients in behalf of competing cargo-forwarding companies using the
respondents’ resources;34 (b) she had not explained her meetings, job
applications and moonlighting with competing companies;35 (c) the sworn
statements narrating her breach of trust and disloyalty to the company submitted
by the respondents substantially justified her dismissal on the ground of loss of
trust and confidence;36 and (d) her resignation letter confirmed that she no longer
desired to work for the company considering that she succeeded in landing a job
with Seajet Lines in just three days after her resignation.37
Did the petitioner resign as sales manager of Pacific Concord? Did Pacific
Concord have sufficient grounds to terminate her for breach of trust and
confidence under Article 28238 of the Labor Code?
Ruling of the Court
We find merit in the appeal.
I her dismissal was, therefore, illegal
Lagahit did not resign from her employment
On the first issue, we find in favor of the petitioner.
In cases of unlawful dismissal, the employer bears the burden of proving that the
termination was for a valid or authorized cause, but before the employer is
expected to discharge its burden of proving that the dismissal was legal, the
employee must first establish by substantial evidence the fact of her dismissal
from employment.39 In this case, the petitioner proved the overt acts committed
by the respondents in abruptly terminating her employment through the text
messages sent by Cuenca to the petitioner and her husband, as well as the
notices distributed to the clients and published in the Sun Star. It is notable that
the respondents did not deny or controvert her evidence on the matter. Thereby,
she showed Pacific Concord’s resolve to terminate her employment effective
November 8, 2002.
On the other hand, the respondents’ insistence that the petitioner had resigned
was bereft of factual support. As a rule, the employer who interposes the
resignation of the employee as a defense should prove that the employee
voluntarily resigned.40 A valid resignation is the voluntary act of an employee who
finds herself in a situation where she believes that personal reasons cannot be
sacrificed in favor of the exigency of the service and that she has no other choice
but to disassociate herself from employment.41 The resignation must be
unconditional and with a clear intention to relinquish the position.42 Consequently,
the circumstances surrounding the alleged resignation must be consistent with
the employee’s intent to give up the employment.43 In this connection, the acts of
the employee before and after the resignation are considered to determine
whether or not she intended, in fact, to relinquish the employment.44
The facts and circumstances before and after the petitioner’s severance from her
employment on November 8, 2002 did not show her resolute intention to
relinquish her job. Indeed, it would be unfounded to infer the intention to
relinquish from her November 13, 2002 letter, which, to us, was not a resignation
letter due to the absence therefrom of anything evincing her desire to sever the
employer-employee relationship. The letter instead presented her as a
defenseless employee unjustly terminated for unknown reasons who had been
made the subject of notices and flyers informing the public of her unexpected
termination. It also depicted her as an employee meekly accepting her
unexpected fate and requesting the payment of her backwages and accrued
benefits just to be done with the employer.
For sure, to conclude that the petitioner resigned because of her letter of
November 13, 2002 is absurd in light of the respondents having insisted that she
had been terminated from her employment earlier on November 8, 2002. In that
regard, every resignation presupposes the existence of the employer-employee
relationship; hence, there can be no valid resignation after the fact of termination
of the employment simply because the employee had no employer-employee
relationship to relinquish.
II
Lagahit did not breach her employer’s trust;
Having settled the issue of the dismissal in the petitioner’s favor, we next resolve
whether or not the CA correctly ruled the petitioner’s dismissal as justified on the
ground of breach of trust and confidence.
The petitioner assails the CA for upholding her termination based on speculations
and hearsay, and for entirely disregarding the factual findings in her favor of the
LA and the NLRC.45 In contrast, the respondents maintain that the allegation of
disloyalty against her was substantiated by the affidavits they had submitted that
the CA relied on to sustain the validity of her dismissal.46
We agree with the petitioner.
To justify the dismissal of an employee, the employer must, as a rule, prove that
the dismissal was for a just cause, and that the employee was afforded due
process prior to dismissal. As a complementary principle, the employer has the
onus of proving the validity of the dismissal with clear, accurate, consistent, and
convincing evidence.47 The employer’s case succeeds or fails on the strength of
its evidence, not on the weakness of that adduced by the employee, in keeping
with the principle that the scales of justice should be tilted in favor of the latter in
case of doubt in the evidence presented by them.48
In its decision, the CA recognized the wide latitude of discretion given to the
management in terminating managers for breach of trust and confidence. It
declared Pacific Concord to have justifiably resorted to terminating the
petitioner’s employment as a measure of self-preservation in view of her
repeated acts of disloyalty that were prejudicial to its interest.49
The CA was thereby gravely mistaken.
17
Article 282(c)50 of the Labor Code  authorizes an employer to dismiss an
employee for committing fraud, or for willful breach of the trust reposed by the
employer. However, loss of confidence is never intended to provide the employer
with a blank check for terminating its employee.51 For this to be a valid ground for
the termination of the employee, the employer must establish that: (1) the
employee must be holding a position of trust and confidence; and (2) the act
complained against would justify the loss of trust and confidence.52
There are two classes of employees vested with trust and confidence. To the first
class belong the managerial employees or those vested with the powers or
prerogatives to lay down management policies and to hire, transfer, suspend, lay-
off, recall, discharge, assign or discipline employees or effectively recommend
such managerial actions. The second class includes those who in the normal and
routine exercise of their functions regularly handle significant amounts of money
or property. Cashiers, auditors, and property custodians are some of the
employees in the second class.53
The petitioner discharged the following duties and responsibilities as sales
manager, to wit:
SALES MANAGER
Job Description
- Promotes services being offered by the company
- Must generate new accounts for the company
- Responsible for motivating the Sales Team to hit their respective QUOTA and
TARGET
- Responsible for the Strategic Planning and Action Plan for the Sales
Department
- Should submit Production Report on a weekly basis for the Sales Department
specifying each sales contribution for the week
- Responsible in inspiring and developing confidence of the Sales Team
- Responsible in promoting, formulating, implementing market strategy that will
help achieve the target of the Sales Department
- Coordinates regularly with the Sales people on their day to day activities
regarding rates and operational matters
- Keeps track all sales transactions, assist the sales people in their problem
regarding rates and operational matters
- Gathers and provides sales leads, replied to agents’ inquiries regarding sales
matters
- Transacts rates and other related cargo needs with the shipping lines
- Promotes and maintains good relations with clients
- Prepares quotation to the clients for intended shipments
- Performs other tasks, duties and responsibilities as may be assigned from time
to time
- Reports directly to the Branch Manager54
Her position as sales manager did not immediately make the petitioner a
managerial employee. The actual work that she performed, not her job title,
determined whether she was a managerial employee vested with trust and
confidence.55 Her employment as sales manager was directly related with the
sales of cargo forwarding services of Pacific Concord, and had nothing to do with
the implementation of the management’s rules and policies. As such, the position
of sales manager came under the second class of employees vested with trust
and confidence. Therein was the flaw in the CA’s assailed decision. Although the
mere existence of the basis for believing that the managerial employee breached
the trust reposed by the employer would normally suffice to justify a
dismissal,56 we should desist from applying this norm against the petitioner who
was not a managerial employee.
At any rate, the employer must present clear and convincing proof of an actual
breach of duty committed by the employee by establishing the facts and incidents
upon which the loss of confidence in the employee may fairly be made to
rest.57 The required amount of evidence for doing so is substantial proof. With
these guidelines in mind, we cannot hold that the evidence submitted by the
respondents (consisting of the three affidavits) sufficiently established the
disloyalty of the petitioner. The affidavits did not show how she had betrayed her
employer’s trust. Specifically, the affidavit of Russell B. Noel58 only stated that
she and her husband Roy had met over lunch with Garcia Imports and a certain
Wilbur of Sea-Jet International Forwarder in the first week of November 2002. To
conclude that such lunch caused Pacific Concord to lose its trust in the petitioner
would be arbitrary. Similarly, the affidavit of Mark Anthony G. Lim59 was
inconclusive. Therein affiant Lim deposed:
1. That I was present when Ms. Vivian Veloso, former Branch Manager of
Westport Line Inc., disclosed to Ms. Monette Cuenca and Ms. Mitzie Ibona on
November 11, 2002 at the office of Admiral Overseas Shipping Corp., where she
is presently employed with, that Ms. Jennifer C. Lagahit received a personal
commission or rebate for the full container shipments moved via Westport Line
Inc. in the amount of USD 50.00 per container.60
The foregoing statement was bereft of the particulars about how the petitioner
had entered into the transaction, as well as about the prejudice that Pacific
Concord had suffered from her receipt of the commission. Also, that this
information was made known to Cuenca three days after she had already
terminated the petitioner belied the relevance of the information to the
termination.
In her affidavit,61 Jo Ann Otrera declared that the petitioner had called other
forwarding companies to inquire about any vacant positions, and that the
petitioner had enticed her to transfer to another company. However, such
declarations did not provide the sufficient basis to warrant the respondents’ loss
of confidence in the petitioner. We stress that although her supposedly frantic
search for gainful employment opportunities elsewhere should be considered as
inappropriate for being made during office hours, the same did not constitute
willful breach of trust and confidence of the employer. The loss of trust and
confidence contemplated under Article 282(c) of the Labor Code  is not ordinary
but willful breach of trust. Verily, the breach of trust is willful if it is intentional,
knowing, deliberate and without justifiable excuse, as distinguished from an act
done carelessly, thoughtlessly, heedlessly or inadvertently.62 Most importantly,
18
the cause of the loss of trust must be work-related as to expose the employee as
unfit to continue working for the employer.63
Considering that the petitioner’s duties related to the sales of forwarding services
offered by Pacific Concord, her calling other forwarding companies to inquire for
vacant positions did not breach the trust reposed in her as sales manager. Such
act, being at worst a simple act of indiscretion, did not constitute the betrayal of
trust that merited the extreme penalty of dismissal from employment. We remind
that dismissal is a penalty of last resort, to be meted only after having
appreciated and evaluated all the relevant circumstances with the goal of
ensuring that the ground for dismissal was not only serious but true.64
WHEREFORE, the Court GRANTS the petition for review
on certiorari; REVERSES and SETS ASIDE the decision promulgated on May
10, 2006 by the Court of Appeals; REINSTATES the decision of the National
Labor Relations Commission rendered on December 15, 2004 subject to
the MODIFICATION that the total monetary awards shall earn interest at the rate
of 6% per annum  from the finality of this decision until full satisfaction;
and ORDERS the respondents to pay the costs of suit.
SO ORDERED.
G.R. No. 222219, October 03, 2018
REYNALDO S. GERALDO, Petitioner, v. THE BILL SENDER
CORPORATION/MS. LOURDES NER CANDO, Respondents.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules
of Court seeking to reverse and set aside the Decision1 dated August 7, 2014
and the Resolution2 dated September 28, 2015 of the Court of Appeals (CA) in
CA-G.R. SP No. 131235.
The antecedent facts are as follows:
On June 20, 1997, respondent The Bill Sender Corporation, engaged in the
business of delivering bills and other mail matters for and in behalf of their
customers, employed petitioner Reynaldo S. Geraldo as a delivery/messenger
man to deliver the bills of its client, the Philippine Long Distance Telephone
Company (PLDT). He was paid on a "per-piece basis," the amount of his salary
depending on the number of bills he delivered. On February 6, 2012, Geraldo
filed a complaint for illegal dismissal alleging that on August 7, 2011, the
company's operations manager, Mr. Nicolas Constantino, suddenly informed him
that his employment was being terminated because he failed to deliver certain
bills. He explained that he was not the messenger assigned to deliver the said
bills but the manager refused to reconsider and proceeded with his termination.
Thus, he claims that his dismissal was illegal for being done without the required
due process under the law and that the company and its president, respondent
Lourdes Ner Cando, be held liable for his monetary claims.3
For its part, the company countered that Geraldo was not a full time employee
but only a piece-rate worker as he reported to work only as he pleased and that it
was a usual practice for messengers to transfer from one company to another to
similarly deliver bills and mail matters. As such, he would only be given bills to
deliver if he reports to work, otherwise, the bills would be assigned to other
messengers. Moreover, contrary to Geraldo's claims, the company asserts that
he was not illegally dismissed for he was the one who abandoned his job when
he no longer reported for work. Thus, the burden was on him to substantiate his
claims for illegal dismissal.4
On November 29, 2012, the Labor Arbiter (LA) held that contrary to the
company's assertion, the burden of proving that the dismissal of an employee is
for just cause rests on the employer, without distinction whether the employer
admits or does not admit the dismissal, pursuant to Article 277(b) of the Labor
Code. It also ruled that Geraldo is considered as a regular employee of the
company because he was doing work that is usually necessary and desirable to
the trade or business thereof. Moreover, even if the performance of his job is not
continuous or is merely intermittent, since he has been performing the same for
more than a year, the law deems the repeated and continuing need thereof as
sufficient evidence of the necessity, if not indispensability, of his work to the
company's business. In addition, the LA found that the company failed to
substantiate its contention that Geraldo was employed with another company and
that he abandoned his job. But even if it was true that he abandoned his job, it
was incumbent on the company to send him a notice ordering him to report to
work and to explain his absences as mandated by Sections 2 and 5, Book V,
Rule XIV of the Labor Code. Finding that Geraldo was illegally dismissed, the LA
ordered the company to pay him separation pay, service incentive leave pay, and
attorney's fees in the aggregate amount of P352,214.13.5
In a Decision6 dated May 9, 2013, the National Labor Relations Commission
(NLRC) affirmed the LA ruling with clarification that the computation of
backwages must be from the time of his dismissal up to the finality of the NLRC
Decision. According to the NLRC, the company failed to discharge the burden of
proving a deliberate and unjustified refusal of Geraldo to resume his employment
without any intention of returning as well as to observe the twin-notice
requirement to insure that due process has been accorded to him. Moreover,
said commission also rejected the company's claim that Geraldo abandoned his
job since he filed his complaint only after seven (7) months from the alleged
dismissal for the lapse of time between the dismissal of an employee for
abandonment and the filing of the complaint is not a material indicium of
abandonment.7
On August 7, 2014, however, the CA set aside the NLRC Decision. According to
the appellate court, since Geraldo was paid on a per piece basis, he was hired on
a per-result basis, and as such, he was not an employee of the company. The
absence of an employer-employee relationship was further highlighted by the fact
that messengers would habitually transfer from one messengerial company to
another depending on the availability of mail matters. Thus, since Geraldo was
not an employee of the company, there was no basis in awarding separation pay,
backwages, 13th month pay, service incentive leave pay, and attorney's
fees.8 Thereafter, in a Resolution dated September 28, 2015, the CA further
19
denied Geraldo's Motion for Reconsideration.
Aggrieved, Geraldo filed the instant petition on November 26, 2015 invoking the
following arguments:
I.
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
WHEN IT DISMISSED THE COMPLAINT ON THE GROUND THAT
PETITIONER BEING A PIECE-RATE EMPLOYEE IS NOT AN EMPLOYEE OF
RESPONDENT AND NOT ENTITLED TO SECURITY OF TENURE ON THE
BASIS OF THE ALLEGATIONS THAT PETITIONER WAS PAID ON A PER
PIECE BASIS.
II.
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
WHEN IT DISMISSED THE COMPLAINT AND SET ASIDE THE MONETARY
AWARD FOR BACKWAGES, SEPARATION PAY, SERVICE INCENTIVE
LEAVE, 13TH MONTH PAY AND ATTORNEY'S FEES WITHOUTH BASES IN
FACT AND IN LAW.
IIII.
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
WHEN IT RULED THAT THE OFFICERS OF RESPONDENT CORPORATION
ARE NOT LIABLE FOR THE MONETARY CLAIMS OF PETITIONER.
In his petition, Geraldo posits that the existence of an employer-employee
relationship cannot be denied and as a regular employee, he is entitled to a
security of tenure. According to him, his being a piece-rate employee is just a
manner of payment of his compensation and not the basis of his regularity of
work. The regular nature of his work, moreover, is shown by the fact that the
same is usually necessary and desirable to the nature of the company's
business, which is the delivery of bills and other mail matters for and in behalf of
its customers. Geraldo further claims that since he was illegally dismissed, for his
employment was terminated without due process of law, he is entitled to his
monetary claims as correctly awarded by the LA, and that Cando, as President of
the company, should be held solidarily liable therefor. The mere fact that he was
illegally dismissed, underpaid and deprived of his 13th month pay and service
incentive leave pay constitutes bad faith on Cando's part as president of said
company. As such, she cannot escape personal liability.9
The petition is partially meritorious.
The issue of whether Geraldo was, indeed, illegally dismissed depends upon the
nature of his relationship with the company. Article 280 of the Labor Code
describes a regular employee as one who is either (1) engaged to perform
activities which are necessary or desirable in the usual business or trade of the
employer; and (2) those casual employees who have rendered at least one year
of service, whether continuous or broken, with respect to the activity in which he
is employed.
In Integrated Contractor and Plumbing Works, Inc. v. National Labor Relations
Commission,10 we held that the test to determine whether employment is regular
or not is the reasonable connection between the particular activity performed by
the employee in relation to the usual business or trade of the employer. If the
employee has been performing the job for at least one year, even if the
performance is not continuous or merely intermittent, the law deems the repeated
and continuing need for its performance as sufficient evidence of the necessity, if
not indispensability, of that activity to the business.
In the instant case, it is undisputed that the company was engaged in the
business of delivering bills and other mail matters for and in behalf of their
customers, and that Geraldo was engaged as a delivery/messenger man tasked
to deliver bills of the company's clients. Clearly, the company cannot deny the
fact that Geraldo was performing activities necessary or desirable in its usual
business or trade for without his services, its fundamental purpose of delivering
bills cannot be accomplished. On this basis alone, the law deems Geraldo as a
regular employee of the company. But even considering that he is not a full time
employee as the company insists, the law still deems his employment as regular
due to the fact that he had been performing the activities for more than one year.
In fact, counting the number of years from the time he was engaged by the
company on June 20, 1997 up to the time his services were terminated on
August 7, 2011 reveals that he has been delivering mail matters for the company
for more than fourteen (14) years. Without question, this amount of time that is
well beyond a decade sufficiently discharges the requirement of the law. While
length of time may not be the controlling test to determine if an employee is
indeed a regular employee, it is vital in establishing if he was hired to perform
tasks which are necessary and indispensable to the usual business or trade of
the employer.11
The Court, moreover, cannot subscribe to the company's contention that Geraldo
is not a regular employee but merely a piece-rate worker since his salary
depends on the number of bills he is able to deliver. In Hacienda Leddy/Ricardo
Gamboa, Jr. v. Villegas,12 We held that the payment on a piece-rate basis does
not negate regular employment. The term "wage" is broadly defined in Article 97
of the Labor Code as remuneration or earnings, capable of being expressed in
terms of money whether fixed or ascertained on a time, task, piece or
commission basis. Payment by the piece is just a method of compensation and
does not define the essence of the relations. Thus, the fact that Geraldo is paid
on the basis of his productivity does not render his employment as contractual. It
must be remembered that notwithstanding any agreements to the contrary, what
determines whether a certain employment is regular is not the will and word of
the employer, to which the desperate worker often accedes, much less the
procedure of hiring the employee or the manner of paying his salary. It is the
nature of the activities performed in relation to the particular business or trades
considering all circumstances, and in some cases the length of time of its
performance and its continued existence.13
20
Having established that Geraldo was a regular employee of the company, it
becomes incumbent upon the latter to show that he was dismissed in accordance
with the requirements of the law for the rule is long and well settled that, in illegal
dismissal cases like the one at bench, the burden of proof is upon the employer
to prove that the employee's termination from service is for a just and valid
cause.14 Here, the company claims that Geraldo was not illegally dismissed for
he was the one who abandoned his job when he no longer reported for work. The
Court, however, finds that apart from this self-serving allegation, the company
failed to adduce proof of overt acts on the part of Geraldo showing his intention to
abandon his work. Time and again, the Court has held that to justify a finding of
abandonment of work, there must be proof of a deliberate and unjustified refusal
on the part of an employee to resume his employment. The burden of proof is on
the employer to show an unequivocal intent on the part of the employee to
discontinue employment. Mere absence is not sufficient. It must be accompanied
by manifest acts unerringly pointing to the fact that the employee simply does not
want to work anymore. Hence, it bears emphasis that the fact that Geraldo filed
the instant illegal dismissal complaint negates any intention on his part to sever
his employment with the company. The records reveal that he even sought
permission to return to work but was rejected by the company. Contrary to the
company's assertion, moreover, the mere lapse of seven (7) months from
Geraldo's alleged dismissal to the filing of his complaint is not a material
indication of abandonment, considering that the complaint was filed within a
reasonable period during the three (3)-year period provided under Article 291 of
the Labor Code.15
capacity because a corporation, by legal fiction, has a personality separate and
distinct from its officers, stockholders, and members. To pierce this fictional veil,
it must be shown that the corporate personality was used to perpetuate fraud or
an illegal act, or to evade an existing obligation, or to confuse a legitimate issue.
In illegal dismissal cases, corporate officers may be held solidarily liable with the
corporation if the termination was done with malice or bad faith.17 To hold a
director or officer personally liable for corporate obligations, two requisites must
concur, to wit: (1) the complaint must allege that the director or officer assented
to the patently unlawful acts of the corporation, or that the director or officer was
guilty of gross negligence or bad faith; and (2) there must be proof that the
director or officer acted in bad faith.18 In the instant case, however, there is no
showing that Cando, as President of the company, was guilty of malice or bad
faith in terminating the employment of Geraldo. Thus, she should not be held
personally liable for his monetary claims.
WHEREFORE, premises considered, the instant petition is PARTIALLY
GRANTED. The assailed Decision dated August 7, 2014 and Resolution dated
September 28, 2015 of the Court of Appeals in CA-G.R. SP No. 131235
are REVERSED and SET ASIDE. The Decision dated May 9, 2013 of the
National Labor Relations Commission is REINSTATED with
the MODIFICATION that Lourdes Ner Cando is absolved of any personal liability
as regards the money claims awarded to petitioner.
SO ORDERED.

Apart from the absence of just and valid cause in the termination of Geraldo's
employment, the Court rules that his dismissal was also done without the
observance of due process required by law. It has long been settled in labor law
that in terminating the services of an employee, the employer must first furnish
the employee with two (2) written notices: (a) notice which apprises the employee
of the particular acts or omissions for which his/her dismissal is sought; and (b)
subsequent notice which informs the employee of the employer's decision to
dismiss him/her.16 The company in the present case, however, failed to show its
compliance with the twin notice rule. In fact, in its Comment, it even expressly
admitted its failure to serve Geraldo with any written notice, merely insisting that
its oral notice should be considered substantial compliance with the law.

In view of the foregoing premises, therefore, the Court is convinced that Geraldo,
a regular employee entitled to security of tenure, was illegally dismissed from his
employment due to the failure of the company to comply with the substantial and
procedural requirements of the law. Thus, We sustain the award of the LA and
the NLRC of separation pay, in lieu of reinstatement, attorney's fees, as well as
Geraldo's monetary claims of 13th month pay and service incentive leave pay in
view of the failure of the company to adduce evidence to show that Geraldo has
been paid said benefits.

It must be noted, however, that respondent Cando cannot be held personally and
solidarity liable with the company for the monetary claims of Geraldo. As a
general rule, a corporate officer cannot be held liable for acts done in his official

21
DUE PROCESS CASES
[G.R. No. 117040. January 27, 2000.]
RUBEN SERRANO, Petitioner, v. NATIONAL LABOR RELATIONS
COMMISSION and ISETANN DEPARTMENT STORE, Respondents.
DECISION
MENDOZA, J.:
This is a petition seeking review of the resolutions, dated March 30, 1994 and
August 26, 1994, of the National Labor Relations Commission (NLRC) which
reversed the decision of the Labor Arbiter and dismissed petitioner Ruben
Serrano’s complaint for illegal dismissal and denied his motion for
reconsideration. The facts are as follows:chanrobles virtua| |aw |ibrary
Petitioner was hired by private respondent Isetann Department Store as a
security checker to apprehend shoplifters and prevent pilferage of merchandise.
1 Initially hired on October 4, 1984 on contractual basis, petitioner eventually
became a regular employee on April 4, 1985. In 1988, he became head of the
Security Checkers Section of private Respondent. 2
Sometime in 1991, as a cost-cutting measure, private respondent decided to
phase out its entire security section and engage the services of an independent
security agency. For this reason, it wrote petitioner the following memorandum: 3
October 11, 1991
MR. RUBEN SERRANO
PRESENT
Dear Mr. Serrano,
In view of the retrenchment program of the company, we hereby reiterate our
verbal notice to you of your termination as Security Section Head effective
October 11, 1991.
Please secure your clearance from this office.
Very truly yours,
[Sgd.] TERESITA A. VILLANUEVA
Human Resources Division Manager
The loss of his employment prompted petitioner to file a complaint on December
3, 1991 for illegal dismissal, illegal layoff, unfair labor practice, underpayment of
wages, and nonpayment of salary and overtime pay. 4
The parties were required to submit their position papers, on the basis of which
the Labor Arbiter defined the issues as follows: 5
Whether or not there is a valid ground for the dismissal of the complainant.
Whether or not complainant is entitled to his monetary claims for underpayment
of wages, nonpayment of salaries, 13th month pay for 1991 and overtime pay.
Whether or not Respondent is guilty of unfair labor practice.
Thereafter, the case was heard. On April 30, 1993, the Labor Arbiter rendered a
decision finding petitioner to have been illegally dismissed. He ruled that private
respondent failed to establish that it had retrenched its security section to prevent
or minimize losses to its business; that private respondent failed to accord due
process to petitioner; that private respondent failed to use reasonable standards
in selecting employees whose employment would be terminated; that private
respondent had not shown that petitioner and other employees in the security
section were so inefficient so as to justify their replacement by a security agency,
or that "cost-saving devices [such as] secret video cameras (to monitor and
prevent shoplifting) and secret code tags on the merchandise” could not have
been employed; instead, the day after petitioner’s dismissal, private respondent
employed a safety and security supervisor with duties and functions similar to
those of petitioner.chanrobles.com : virtualaw library
Accordingly, the Labor Arbiter ordered: 6
WHEREFORE, above premises considered, judgment is hereby
decreed:chanrob1es virtual 1aw library
(a) Finding the dismissal of the complainant to be illegal and concomitantly,
Respondent is ordered to pay complainant full backwages without qualification or
deduction in the amount of P74,740.00 from the time of his dismissal until
reinstatement (computed till promulgation only) based on his monthly salary of
P4,040.00/month at the time of his termination but limited to (3) three years;
(b) Ordering the Respondent to immediately reinstate the complainant to his
former position as security section head or to a reasonably equivalent
supervisorial position in charges of security without loss of seniority rights,
privileges and benefits. This order is immediately executory even pending
appeal;
(c) Ordering the Respondent to pay complainant unpaid wages in the amount of
P2,020.73 and proportionate 13th month pay in the amount of P3,198.30;
(d) Ordering the Respondent to pay complainant the amount of P7,995.91,
representing 10% attorney’s fees based on the total judgment award of
P79,959.12.
All other claims of the complainant whether monetary or otherwise is hereby
dismissed for lack of merit.
22

SO ORDERED.
Private respondent appealed to the NLRC which, in its resolution of March 30,
1994, reversed the decision of the Labor Arbiter and ordered petitioner to be
given separation pay equivalent to one month pay for every year of service,
unpaid salary, and proportionate 13th month pay. Petitioner filed a motion for
reconsideration, but his motion was denied.
The NLRC held that the phase-out of private respondent’s security section and
the hiring of an independent security agency constituted an exercise by private
respondent of" [a] legitimate business decision whose wisdom we do not intend
to inquire into and for which we cannot substitute our judgment" ; that the
distinction made by the Labor Arbiter between "retrenchment" and the
employment of "cost-saving devices” under Art. 283 of the Labor Code was
insignificant because the company official who wrote the dismissal letter
apparently used the term "retrenchment” in its "plain and ordinary sense: to layoff
or remove from one’s job, regardless of the reason therefor”; that the rule of
"reasonable criteria” in the selection of the employees to be retrenched did not
apply because all positions in the security section had been abolished; and that
the appointment of a safety and security supervisor referred to by petitioner to
prove bad faith on private respondent’s part was of no moment because the
position had long been in existence and was separate from petitioner’s position
as head of the Security Checkers Section.
Hence this petition. Petitioner raises the following issue:
IS THE HIRING OF AN INDEPENDENT SECURITY AGENCY BY THE
PRIVATE RESPONDENT TO REPLACE ITS CURRENT SECURITY SECTION
A VALID GROUND FOR THE DISMISSAL OF THE EMPLOYEES CLASSED
UNDER THE LATTER? 7
Petitioner contends that abolition of private respondent’s Security Checkers
Section and the employment of an independent security agency do not fall under
any of the authorized causes for dismissal under Art. 283 of the Labor Code.
Petitioner Laid Off for Cause
Petitioner’s contention has no merit. Art. 283 provides:
Closure of establishment and reduction of personnel. — The employer may also
terminate the employment of any employee due to the installation of labor-saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation
of operations of the establishment or undertaking unless the closing is for the
purpose of circumventing the provisions of this Title, by serving a written notice
on the workers and the Department of Labor and Employment at least one (1)
month before the intended date thereof. In case of termination due to the
installation of labor-saving devices or redundancy, the worker affected thereby
shall be entitled to a separation pay equivalent to at least one (1) month pay or to
at least one (1) month pay for every year of service, whichever is higher. In case
of retrenchment to prevent losses and in cases of closure or cessation of
operations of establishment or undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent to at least one (1)
month pay or at least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be considered as
one (1) whole year.chanroblesvirtual|awlibrary
In De Ocampo v. National Labor Relations Commission, 8 this Court upheld the
termination of employment of three mechanics in a transportation company and
their replacement by a company rendering maintenance and repair services. It
held:chanrob1es virtual 1aw library
In contracting the services of Gemac Machineries, as part of the company’s cost-
saving program, the services rendered by the mechanics became redundant and
superfluous, and therefore properly terminable. The company merely exercised
its business judgment or management prerogative. And in the absence of any
proof that the management abused its discretion or acted in a malicious or
arbitrary manner, the court will not interfere with the exercise of such prerogative.
9
In Asian Alcohol Corporation v. National Labor Relations Commission, 10 the
Court likewise upheld the termination of employment of water pump tenders and
their replacement by independent contractors. It ruled that an employer’s good
faith in implementing a redundancy program is not necessarily put in doubt by the
availment of the services of an independent contractor to replace the services of
the terminated employees to promote economy and efficiency.
Indeed, as we pointed out in another case, the" [management of a company]
cannot be denied the faculty of promoting efficiency and attaining economy by a
study of what units are essential for its operation. To it belongs the ultimate
determination of whether services should be performed by its personnel or
contracted to outside agencies . . . [While there] should be mutual consultation,
eventually deference is to be paid to what management decides." 11
Consequently, absent proof that management acted in a malicious or arbitrary
manner, the Court will not interfere with the exercise of judgment by an employer.
12
In the case at bar, we have only the bare assertion of petitioner that, in abolishing
the security section, private respondent’s real purpose was to avoid payment to
the security checkers of the wage increases provided in the collective bargaining
agreement approved in 1990. 13 Such an assertion is not a sufficient basis for
concluding that the termination of petitioner’s employment was not a bona fide
decision of management to obtain reasonable return from its investment, which is
a right guaranteed to employers under the Constitution. 14 Indeed, that the
phase-out of the security section constituted a "legitimate business decision” is a
factual finding of an administrative agency which must be accorded respect and
even finality by this Court since nothing can be found in the record which fairly
detracts from such finding. 15
23
Accordingly, we hold that the termination of petitioner’s services was for an
authorized cause, i.e., redundancy. Hence, pursuant to Art. 283 of the Labor
Code, petitioner should be given separation pay at the rate of one month pay for
every year of service.
Sanctions for Violations of the Notice Requirement
re-examined. It will be highly prejudicial to the interests of the employer to impose
on him the services of an employee who has been shown to be guilty of the
charges that warranted his dismissal from employment. Indeed, it will demoralize
the rank and file if the undeserving, if not undesirable, remains in the service.
x           x           x

Art. 283 also provides that to terminate the employment of an employee for any
However, the petitioner must nevertheless be held to account for failure to extend
of the authorized causes the employer must serve "a written notice on the
to private respondent his right to an investigation before causing his dismissal.
workers and the Department of Labor and Employment at least one (1) month
The rule is explicit as above discussed. The dismissal of an employee must be
before the intended date thereof.” In the case at bar, petitioner was given a notice
for just or authorized cause and after due process. Petitioner committed an
of termination on October 11, 1991. On the same day, his services were
infraction of the second requirement. Thus; it must be imposed a sanction for its
terminated. He was thus denied his right to be given written notice before the
failure to give a formal notice and conduct an investigation as required by law
termination of his employment, and the question is the appropriate sanction for
before dismissing petitioner from employment. Considering the circumstances of
the violation of petitioner’s right.
this case petitioner must indemnify the private respondent the amount of
P1,000.00. The measure of this award depends on the facts of each case and
To be sure, this is not the first time this question has arisen. In Sebuguero v.
the gravity of the omission committed by the employer.chanrobles
NLRC, 16 workers in a garment factory were temporarily laid off due to the
virtuallawlibrary:red
cancellation of orders and a garment embargo. The Labor Arbiter found that the
workers had been illegally dismissed and ordered the company to pay separation
The fines imposed for violations of the notice requirement have varied from
pay and backwages. The NLRC, on the other hand, found that this was a case of
P1,000.00 22 to P2,000.00 23 to P5,000.00 24 to P10,000.00.25cralaw:red
retrenchment due to business losses and ordered the payment of separation pay
without backwages. This Court sustained the NLRC’s finding. However, as the
Need for Reexamining the Wenphil Doctrine
company did not comply with the 30-day written notice in Art. 283 of the Labor
Code, the Court ordered the employer to pay the workers P2,000.00 each as
Today, we once again consider the question of appropriate sanctions for
indemnity.
violations of the notice requirement in light of our experience during the last
decade or so with the Wenphil doctrine. The number of cases involving
The decision followed the ruling in several cases involving dismissals which,
dismissals without the requisite notice to the employee, although effected for just
although based on any of the just causes under Art. 282, 17 were effected
or authorized causes, suggests that the imposition of fine for violation of the
without notice and hearing to the employee as required by the implementing
notice requirement has not been effective in deterring violations of the notice
rules. 18 As this Court said: "It is now settled that where the dismissal of one
requirement. Justice Panganiban finds the monetary sanctions "too insignificant,
employee is in fact for a just and valid cause and is so proven to be but he is not
too niggardly, and sometimes even too late.” On the other hand, Justice Puno
accorded his right to due process, i.e., he was not furnished the twin
says there has in effect been fostered a policy of "dismiss now, pay later” which
requirements of notice and opportunity to be heard, the dismissal shall be upheld
moneyed employers find more convenient to comply with than the requirement to
but the employer must be sanctioned for non-compliance with the requirements
serve a 30-day written notice (in the case of termination of employment for an
of, or for failure to observe, due process." 19
authorized cause under Arts. 283-284) or to give notice and hearing (in the case
of dismissals for just causes under Art. 282).
The rule reversed a long standing policy theretofore followed that even though
the dismissal is based on a just cause or the termination of employment is for an
For this reason, they regard any dismissal or layoff without the requisite notice to
authorized cause, the dismissal or termination is illegal if effected without notice
be null and void even though there are just or authorized causes for such
to the employee. The shift in doctrine took place in 1989 in Wenphil Corp. v.
dismissal or layoff. Consequently, in their view, the employee concerned should
NLRC. 20 In announcing the change, this Court said: 21
be reinstated and paid backwages.
The Court holds that the policy of ordering the reinstatement to the service of an
Validity of Petitioner’s Layoff Not Affected by Lack of Notice
employee without loss of seniority and the payment of his wages during the
period of his separation until his actual reinstatement but not exceeding three (3)
We agree with our esteemed colleagues, Justices Puno and Panganiban, that we
years without qualification or deduction, when it appears he was not afforded due
should rethink the sanction of fine for an employer’s disregard of the notice
process, although his dismissal was found to be for just and authorized cause in
requirement. We do not agree, however, that disregard of this requirement by an
an appropriate proceeding in the Ministry of Labor and Employment, should be

24
employer renders the dismissal or termination of employment null and void. Such
a stance is actually a reversion to the discredited pre-Wenphil rule of ordering an
employee to be reinstated and paid backwages when it is shown that he has not
been given notice and hearing although his dismissal or layoff is later found to be
for a just or authorized cause. Such rule was abandoned in Wenphil because it is
really unjust to require an employer to keep in his service one who is guilty, for
example, of an attempt on the life of the employer or the latter’s family, or when
the employer is precisely retrenching in order to prevent losses.
The need is for a rule which, while recognizing the employee’s right to notice
before he is dismissed or laid off, at the same time acknowledges the right of the
employer to dismiss for any of the just causes enumerated in Art. 282 or to
terminate employment for any of the authorized causes mentioned in Arts. 283-
284. If the Wenphil rule imposing a fine on an employer who is found to have
dismissed an employee for cause without prior notice is deemed ineffective in
deterring employer violations of the notice requirement, the remedy is not to
declare the dismissal void if there are just or valid grounds for such dismissal or if
the termination is for an authorized cause. That would be to uphold the right of
the employee but deny the right of the employer to dismiss for cause. Rather, the
remedy is to order the payment to the employee of full backwages from the time
of his dismissal until the court finds that the dismissal was for a just cause. But,
otherwise, his dismissal must be upheld and he should not be reinstated. This is
because his dismissal is ineffectual.
For the same reason, if an employee is laid off for any of the causes in Arts. 283-
284, i.e., installation of a labor-saving device, but the employer did not give him
and the DOLE a 30-day written notice of termination in advance, then the
termination of his employment should be considered ineffectual and he should be
paid backwages. However, the termination of his employment should not be
considered void but he should simply be paid separation pay as provided in Art.
283 in addition to backwages.
Justice Puno argues that an employer’s failure to comply with the notice
requirement constitutes a denial of the employee’s right to due process.
Prescinding from this premise, he quotes the statement of Chief Justice
Concepcion in Vda. de Cuaycong v. Vda. de Sengbengco 26 that "acts of
Congress, as well as of the Executive, can deny due process only under the pain
of nullity, and judicial proceedings suffering from the same flaw are subject to the
same sanction, any statutory provision to the contrary notwithstanding.” Justice
Puno concludes that the dismissal of an employee without notice and hearing,
even if for a just cause, as provided in Art. 282, or for an authorized cause, as
provided in Arts. 283-284, is a nullity. Hence, even if just or authorized causes
exist, the employee should be reinstated with full back pay. On the other hand,
Justice Panganiban quotes from the statement in People v. Bocar 27 that"
[w]here the denial of the fundamental right of due process is apparent, a decision
rendered in disregard of that right is void for lack of jurisdiction."cralaw virtua1aw
library
Violation of Notice Requirement Not a Denial of Due Process
The cases cited by both Justices Puno and Panganiban refer, however, to the
denial of due process by the State, which is not the case here. There are three
reasons why, on the other hand, violation by the employer of the notice
requirement cannot be considered a denial of due process resulting in the nullity
of the employee’s dismissal or layoff.
The first is that the Due Process Clause of the Constitution is a limitation on
governmental powers. It does not apply to the exercise of private power, such as
the termination of employment under the Labor Code. This is plain from the text
of Art. III, §1 of the Constitution, viz.: "No person shall be deprived of life, liberty,
or property without due process of law. . . .” The reason is simple: Only the State
has authority to take the life, liberty, or property of the individual. The purpose of
the Due Process Clause is to ensure that the exercise of this power is consistent
with what are considered civilized methods.
The second reason is that notice and hearing are required under the Due
Process Clause before the power of organized society are brought to bear upon
the individual. This is obviously not the case of termination of employment under
Art. 283. Here the employee is not faced with an aspect of the adversary system.
The purpose for requiring a 30-day written notice before an employee is laid off is
not to afford him an opportunity to be heard on any charge against him, for there
is none.The purpose rather is to give him time to prepare for the eventual loss of
his job and the DOLE an opportunity to determine whether economic causes do
exist justifying the termination of his employment.chanrobles virtuallawlibrary
Even in cases of dismissal under Art. 282, the purpose for the requirement of
notice and hearing is not to comply with Due Process Clause of the Constitution.
The time for notice and hearing is at the trial stage. Then that is the time we
speak of notice and hearing as the essence of procedural due process. Thus,
compliance by the employer with the notice requirement before he dismisses an
employee does not foreclose the right of the latter to question the legality of his
dismissal. As Art. 277 (b) provides, "Any decision taken by the employer shall be
without prejudice to the right of the worker to contest the validity or legality of his
dismissal by filing a complaint with the regional branch of the National Labor
Relations Commission."cralaw virtua1aw library
Indeed, to contend that the notice requirement in the Labor Code is an aspect of
due process is to overlook the fact that Art. 283 had its origin in Art. 302 of the
Spanish Code of Commerce of 1882 which gave either party to the employer-
employee relationship the right to terminate their relationship by giving notice to
the other one month in advance. In lieu of notice, an employee could be laid off
by paying him a mesada equivalent to his salary for one month. 28 This provision
was repealed by Art. 2270 of the Civil Code, which took effect on August 30,
1950. But on June 12, 1954, R.A. No. 1052, otherwise known as the Termination
Pay Law, was enacted reviving the mesada. On June 21, 1957, the law was
amended by R.A. No. 1787 providing for the giving of advance notice or the
payment of compensation at the rate of one-half month for every year of service.
29
25

The Termination Pay Law was held not to be a substantive law but a regulatory
measure, the purpose of which was to give the employer the opportunity to find a
replacement or substitute, and the employee the equal opportunity to look for
another job or source of employment. Where the termination of employment was
for a just cause, no notice was required to be given to the employee. 30 It was
only on September 4, 1981 that notice was required to be given even where the
dismissal or termination of an employee was for cause. This was made in the
rules issued by the then Minister of Labor and Employment to implement B.P.
Blg. 130 which amended the Labor Code. And it was still much later when the
notice requirement was embodied in the law with the amendment of Art. 277(b)
by R.A. No. 6715 on March 2, 1989. It cannot be that the former regime denied
due process to the employee. Otherwise, there should now likewise be a rule
that, in case an employee leaves his job without cause and without prior notice to
his employer, his act should be void instead of simply making him liable for
damages.
The third reason why the notice requirement under Art. 283 can not be
considered a requirement of the Due Process Clause is that the employer cannot
really be expected to be entirely an impartial judge of his own cause. This is also
the case in termination of employment for a just cause under Art. 282 (i.e.,
serious misconduct or willful disobedience by the employee of the lawful orders
of the employer, gross and habitual neglect of duties, fraud or willful breach of
trust of the employer, commission of crime against the employer or the latter’s
immediate family or duly authorized representatives, or other analogous cases).
Justice Puno disputes this. He says that "statistics in the DOLE will prove that
many cases have been won by employees before the grievance committees
manned by impartial judges of the company.” The grievance machinery is,
however, different because it is established by agreement of the employer and
the employees and composed of representatives from both sides. That is why, in
Batangas Laguna Tayabas Bus Co. v. Court of Appeals, 31 which Justice Puno
cites, it was held that "Since the right of [an employee] to his labor is in itself a
property and that the labor agreement between him and [his employer] is the law
between the parties, his summary and arbitrary dismissal amounted to
deprivation of his property without due process of law.” But here we are dealing
with dismissals and layoffs by employers alone, without the intervention of any
grievance machinery. Accordingly in Montemayor v. Araneta University
Foundation, 32 although a professor was dismissed without a hearing by his
university, his dismissal for having made homosexual advances on a student was
sustained, it appearing that in the NLRC, the employee was fully heard in his
defense.
Lack of Notice Only Makes Termination Ineffectual
Not all notice requirements are requirements of due process. Some are simply
part of a procedure to be followed before a right granted to a party can be
exercised. Others are simply an application of the Justinian precept, embodied in
the Civil Code, 33 to act with justice, give everyone his due, and observe honesty
and good faith toward one’s fellowmen. Such is the notice requirement in Arts.
282-283. The consequence of the failure either of the employer or the employee
to live up to this precept is to make him liable in damages, not to render his act
(dismissal or resignation, as the case may be) void. The measure of damages is
the amount of wages the employee should have received were it not for the
termination of his employment without prior notice. If warranted, nominal and
moral damages may also be awarded. ELC
We hold, therefore, that, with respect to Art. 283 of the Labor Code, the
employer’s failure to comply with the notice requirement does not constitute a
denial of due process but a mere failure to observe a procedure for the
termination of employment which makes the termination of employment merely
ineffectual. It is similar to the failure to observe the provisions of Art. 1592, in
relation to Art. 1191, of the Civil Code 34 in rescinding a contract for the sale of
immovable property. Under these provisions, while the power of a party to
rescind a contract is implied in reciprocal obligations, nonetheless, in cases
involving the sale of immovable property, the vendor cannot exercise this power
even though the vendee defaults in the payment of the price, except by bringing
an action in court or giving notice of rescission by means of a notarial demand.
35 Consequently, a notice of rescission given in the letter of an attorney has no
legal effect, and the vendee can make payment even after the due date since no
valid notice of rescission has been given. 36
Indeed, under the Labor Code, only the absence of a just cause for the
termination of employment can make the dismissal of an employee illegal. This is
clear from Art. 279 which provides:
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. 37
Thus, only if the termination of employment is not for any of the causes provided
by law is it illegal and, therefore, the employee should be reinstated and paid
backwages. To contend, as Justices Puno and Panganiban do, that even if the
termination is for a just or authorized cause the employee concerned should be
reinstated and paid backwages would be to amend Art. 279 by adding another
ground for considering a dismissal illegal. What is more, it would ignore the fact
that under Art. 285, if it is the employee who fails to give a written notice to the
employer that he is leaving the service of the latter, at least one month in
advance, his failure to comply with the legal requirement does not result in
making his resignation void but only in making him liable for damages. 38 This
disparity in legal treatment, which would result from the adoption of the theory of
the minority cannot simply be explained by invoking President Ramon
Magsaysay’s motto that "he who has less in life should have more in law." That
would be a misapplication of this noble phrase originally from Professor Thomas
26
Reed Powell of the Harvard Law School.
Justice Panganiban cites Pepsi Cola Bottling Co. v. NLRC, 39 in support of his
view that an illegal dismissal results not only from want of legal cause but also
from the failure to observe "due process." The Pepsi-Cola case actually involved
a dismissal for an alleged loss of trust and confidence which, as found by the
Court, was not proven. The dismissal was, therefore, illegal, not because there
was a denial of due process, but because the dismissal was without cause. The
statement that the failure of management to comply with the notice requirement
"taints the dismissal with illegality” was merely a dictum thrown in as additional
grounds for holding the dismissal to be illegal.chanrobles virtual lawlibrary
Given the nature of the violation, therefore, the appropriate sanction for the
failure to give notice is the payment of backwages for the period when the
employee is considered not to have been effectively dismissed or his
employment terminated. The sanction is not the payment alone of nominal
damages as Justice Vitug contends.
Unjust Results of Considering Dismissals/ Layoffs Without Prior Notice As Illegal
The refusal to look beyond the validity of the initial action taken by the employer
to terminate employment either for an authorized or just cause can result in an
injustice to the employer. For not giving notice and hearing before dismissing an
employee, who is otherwise guilty of, say, theft, or even of an attempt against the
life of the employer, an employer will be forced to keep in his employ such guilty
employee. This is unjust.
It is true the Constitution regards labor as "a primary social economic force." 40
But so does it declare that it "recognizes the indispensable role of the private
sector, encourages private enterprise, and provides incentives to needed
investment." 41 The Constitution bids the State to "afford full protection to labor."
42 But it is equally true that "the law, in protecting the rights of the laborer,
authorizes neither oppression nor self-destruction of the employer." 43 And it is
oppression to compel the employer to continue in employment one who is guilty
or to force the employer to remain in operation when it is not economically in his
interest to do so.
In sum, we hold that if in proceedings for reinstatement under Art. 283, it is
shown that the termination of employment was due to an authorized cause, then
the employee concerned should not be ordered reinstated even though there is
failure to comply with the 30-day notice requirement. Instead, he must be granted
separation pay in accordance with Art. 283, to wit:chanrob1es virtual 1aw library
In case of termination due to the installation of labor-saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay
equivalent to at least his one (1) month pay or to at least one month for every
year of service, whichever is higher. In case of retrenchment to prevent losses
and in cases of closures or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher. A fraction of at least six
months shall be considered one (1) whole year.
If the employee’s separation is without cause, instead of being given separation
pay, he should be reinstated. In either case, whether he is reinstated or only
granted separation pay, he should be paid full backwages if he has been laid off
without written notice at least 30 days in advance.
On the other hand, with respect to dismissals for cause under Art. 282, if it is
shown that the employee was dismissed for any of the just causes mentioned in
said Art 282, then, in accordance with that article, he should not be reinstated.
However, he must be paid backwages from the time his employment was
terminated until it is determined that the termination of employment is for a just
cause because the failure to hear him before he is dismissed renders the
termination of his employment without legal effect.
WHEREFORE, the petition is GRANTED and the resolution of the National Labor
Relations Commission is MODIFIED by ordering private respondent Isetann
Department Store, Inc. to pay petitioner separation pay equivalent to one (1)
month pay for every year of service, his unpaid salary, and his proportionate 13th
month pay and, in addition, full backwages from the time his employment was
terminated on October 11, 1991 up to the time the decision herein becomes final.
For this purpose, this case is REMANDED to the Labor Arbiter for computation of
the separation pay, backwages, and other monetary awards to petitioner.
SO ORDERED.
[G.R. NO. 158693 : November 17, 2004]
JENNY M. AGABON and VIRGILIO C. AGABON, Petitioners, v. NATIONAL
LABOR RELATIONS COMMISSION (NLRC), RIVIERA HOME
IMPROVEMENTS, INC. and VICENTE ANGELES, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This Petition for Review seeks to reverse the decision1 of the Court of Appeals
dated January 23, 2003, in CA-G.R. SP No. 63017, modifying the decision of
National Labor Relations Commission (NLRC) in NLRC-NCR Case No. 023442-
00.
Private respondent Riviera Home Improvements, Inc. is engaged in the business
of selling and installing ornamental and construction materials. It employed
petitioners Virgilio Agabon and Jenny Agabon as gypsum board and cornice
installers on January 2, 19922 until February 23, 1999 when they were dismissed
for abandonment of work.
Petitioners then filed a complaint for illegal dismissal and payment of money
claims3 and on December 28, 1999, the Labor Arbiter rendered a decision
declaring the dismissals illegal and ordered private respondent to pay the
monetary claims. The dispositive portion of the decision states:
27
WHEREFORE, premises considered, We find the termination of the
complainants illegal. Accordingly, respondent is hereby ordered to pay them their
backwages up to November 29, 1999 in the sum of:
1. Jenny M. Agabon - P56, 231.93
2. Virgilio C. Agabon - 56, 231.93
and, in lieu of reinstatement to pay them their separation pay of one (1) month for
every year of service from date of hiring up to November 29, 1999.
Respondent is further ordered to pay the complainants their holiday pay and
service incentive leave pay for the years 1996, 1997 and 1998 as well as their
premium pay for holidays and rest days and Virgilio Agabon's 13th month pay
differential amounting to TWO THOUSAND ONE HUNDRED FIFTY (P2,150.00)
Pesos, or the aggregate amount of ONE HUNDRED TWENTY ONE THOUSAND
SIX HUNDRED SEVENTY EIGHT & 93/100 (P121,678.93) Pesos for Jenny
Agabon, and ONE HUNDRED TWENTY THREE THOUSAND EIGHT
HUNDRED TWENTY EIGHT & 93/100 (P123,828.93) Pesos for Virgilio Agabon,
as per attached computation of Julieta C. Nicolas, OIC, Research and
Computation Unit, NCR.
SO ORDERED.4
On appeal, the NLRC reversed the Labor Arbiter because it found that the
petitioners had abandoned their work, and were not entitled to backwages and
separation pay. The other money claims awarded by the Labor Arbiter were also
denied for lack of evidence.5
Upon denial of their motion for reconsideration, petitioners filed a petition
for certiorari with the Court of Appeals.
The Court of Appeals in turn ruled that the dismissal of the petitioners was not
illegal because they had abandoned their employment but ordered the payment
of money claims. The dispositive portion of the decision reads:
WHEREFORE, the decision of the National Labor Relations Commission is
REVERSED only insofar as it dismissed petitioner's money claims. Private
respondents are ordered to pay petitioners holiday pay for four (4) regular
holidays in 1996, 1997, and 1998, as well as their service incentive leave pay for
said years, and to pay the balance of petitioner Virgilio Agabon's 13th month pay
for 1998 in the amount of P2,150.00.
SO ORDERED.6
Hence, this Petition for Review on the sole issue of whether petitioners were
illegally dismissed.7
Petitioners assert that they were dismissed because the private respondent
refused to give them assignments unless they agreed to work on
a "pakyaw" basis when they reported for duty on February 23, 1999. They did not
agree on this arrangement because it would mean losing benefits as Social
Security System (SSS) members. Petitioners also claim that private respondent
did not comply with the twin requirements of notice and hearing.8
Private respondent, on the other hand, maintained that petitioners were not
dismissed but had abandoned their work.9 In fact, private respondent sent two
letters to the last known addresses of the petitioners advising them to report for
work. Private respondent's manager even talked to petitioner Virgilio Agabon by
telephone sometime in June 1999 to tell him about the new assignment at Pacific
Plaza Towers involving 40,000 square meters of cornice installation work.
However, petitioners did not report for work because they had subcontracted to
perform installation work for another company. Petitioners also demanded for an
increase in their wage to P280.00 per day. When this was not granted, petitioners
stopped reporting for work and filed the illegal dismissal case.10
It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are
accorded not only respect but even finality if the findings are supported by
substantial evidence. This is especially so when such findings were affirmed by
the Court of Appeals.11 However, if the factual findings of the NLRC and the
Labor Arbiter are conflicting, as in this case, the reviewing court may delve into
the records and examine for itself the questioned findings.12
Accordingly, the Court of Appeals, after a careful review of the facts, ruled that
petitioners' dismissal was for a just cause. They had abandoned their
employment and were already working for another employer.
To dismiss an employee, the law requires not only the existence of a just and
valid cause but also enjoins the employer to give the employee the opportunity to
be heard and to defend himself.13 Article 282 of the Labor Code enumerates the
just causes for termination by the employer: (a) serious misconduct or willful
disobedience by the employee of the lawful orders of his employer or the latter's
representative in connection with the employee's work; (b) gross and habitual
neglect by the employee of his duties; (c) fraud or willful breach by the employee
of the trust reposed in him by his employer or his duly authorized representative;
(d) commission of a crime or offense by the employee against the person of his
employer or any immediate member of his family or his duly authorized
representative; and (e) other causes analogous to the foregoing.
Abandonment is the deliberate and unjustified refusal of an employee to resume
his employment.14 It is a form of neglect of duty, hence, a just cause for
termination of employment by the employer.15 For a valid finding of
abandonment, these two factors should be present: (1) the failure to report for
work or absence without valid or justifiable reason; and (2) a clear intention to
sever employer-employee relationship, with the second as the more
determinative factor which is manifested by overt acts from which it may be
deduced that the employees has no more intention to work. The intent to
discontinue the employment must be shown by clear proof that it was deliberate
and unjustified.16
In February 1999, petitioners were frequently absent having subcontracted for an
installation work for another company. Subcontracting for another company
clearly showed the intention to sever the employer-employee relationship with
private respondent. This was not the first time they did this. In January 1996, they
did not report for work because they were working for another company. Private
respondent at that time warned petitioners that they would be dismissed if this
happened again. Petitioners disregarded the warning and exhibited a clear
intention to sever their employer-employee relationship. The record of an
employee is a relevant consideration in determining the penalty that should be
meted out to him.17
28
In Sandoval Shipyard v. Clave,18 we held that an employee who deliberately
absented from work without leave or permission from his employer, for the
purpose of looking for a job elsewhere, is considered to have abandoned his job.
We should apply that rule with more reason here where petitioners were absent
because they were already working in another company.
The law imposes many obligations on the employer such as providing just
compensation to workers, observance of the procedural requirements of notice
and hearing in the termination of employment. On the other hand, the law also
recognizes the right of the employer to expect from its workers not only good
performance, adequate work and diligence, but also good conduct19 and loyalty.
The employer may not be compelled to continue to employ such persons whose
continuance in the service will patently be inimical to his interests.20
After establishing that the terminations were for a just and valid cause, we now
determine if the procedures for dismissal were observed.
The procedure for terminating an employee is found in Book VI, Rule I, Section
2(d) of the Omnibus Rules Implementing the Labor Code:
Standards of due process: requirements of notice. - In all cases of termination of
employment, the following standards of due process shall be substantially
observed:
I. For termination of employment based on just causes as defined in Article 282
of the Code:
(a) A written notice served on the employee specifying the ground or grounds for
termination, and giving to said employee reasonable opportunity within which to
explain his side;
(b) A hearing or conference during which the employee concerned, with the
assistance of counsel if the employee so desires, is given opportunity to respond
to the charge, present his evidence or rebut the evidence presented against him;
andcralawlibrary
(c) A written notice of termination served on the employee indicating that upon
due consideration of all the circumstances, grounds have been established to
justify his termination.
In case of termination, the foregoing notices shall be served on the employee's
last known address.
Dismissals based on just causes contemplate acts or omissions attributable to
the employee while dismissals based on authorized causes involve grounds
under the Labor Code which allow the employer to terminate employees. A
termination for an authorized cause requires payment of separation pay. When
the termination of employment is declared illegal, reinstatement and full
backwages are mandated under Article 279. If reinstatement is no longer
possible where the dismissal was unjust, separation pay may be granted.
Procedurally, (1) if the dismissal is based on a just cause under Article 282, the
employer must give the employee two written notices and a hearing or
opportunity to be heard if requested by the employee before terminating the
employment: a notice specifying the grounds for which dismissal is sought a
hearing or an opportunity to be heard and after hearing or opportunity to be
heard, a notice of the decision to dismiss; and (2) if the dismissal is based on
authorized causes under Articles 283 and 284, the employer must give the
employee and the Department of Labor and Employment written notices 30 days
prior to the effectivity of his separation.
From the foregoing rules four possible situations may be derived: (1) the
dismissal is for a just cause under Article 282 of the Labor Code, for an
authorized cause under Article 283, or for health reasons under Article 284, and
due process was observed; (2) the dismissal is without just or authorized cause
but due process was observed; (3) the dismissal is without just or authorized
cause and there was no due process; and (4) the dismissal is for just or
authorized cause but due process was not observed.
In the first situation, the dismissal is undoubtedly valid and the employer will not
suffer any liability.
In the second and third situations where the dismissals are illegal, Article 279
mandates that the employee is entitled to reinstatement without loss of seniority
rights and other privileges and full backwages, inclusive of allowances, and other
benefits or their monetary equivalent computed from the time the compensation
was not paid up to the time of actual reinstatement.
In the fourth situation, the dismissal should be upheld. While the procedural
infirmity cannot be cured, it should not invalidate the dismissal. However, the
employer should be held liable for non-compliance with the procedural
requirements of due process.
The present case squarely falls under the fourth situation. The dismissal should
be upheld because it was established that the petitioners abandoned their jobs to
work for another company. Private respondent, however, did not follow the notice
requirements and instead argued that sending notices to the last known
addresses would have been useless because they did not reside there anymore.
Unfortunately for the private respondent, this is not a valid excuse because the
law mandates the twin notice requirements to the employee's last known
address.21 Thus, it should be held liable for non-compliance with the procedural
requirements of due process.
A review and re-examination of the relevant legal principles is appropriate and
timely to clarify the various rulings on employment termination in the light
of Serrano v. National Labor Relations Commission.22
Prior to 1989, the rule was that a dismissal or termination is illegal if the
employee was not given any notice. In the 1989 case of Wenphil Corp. v.
National Labor Relations Commission,23 we reversed this long-standing rule and
held that the dismissed employee, although not given any notice and hearing,
was not entitled to reinstatement and backwages because the dismissal was for
grave misconduct and insubordination, a just ground for termination under Article
282. The employee had a violent temper and caused trouble during office hours,
defying superiors who tried to pacify him. We concluded that reinstating the
employee and awarding backwages "may encourage him to do even worse and
will render a mockery of the rules of discipline that employees are required to
observe."24 We further held that:
Under the circumstances, the dismissal of the private respondent for just cause
should be maintained. He has no right to return to his former employment.
29
However, the petitioner must nevertheless be held to account for failure to extend
to private respondent his right to an investigation before causing his dismissal.
The rule is explicit as above discussed. The dismissal of an employee must
be for just or authorized cause and after due process. Petitioner committed an
infraction of the second requirement. Thus, it must be imposed a sanction for its
failure to give a formal notice and conduct an investigation as required by law
before dismissing petitioner from employment. Considering the circumstances of
this case petitioner must indemnify the private respondent the amount of
P1,000.00. The measure of this award depends on the facts of each case and
the gravity of the omission committed by the employer.25
The rule thus evolved: where the employer had a valid reason to dismiss an
employee but did not follow the due process requirement, the dismissal may be
upheld but the employer will be penalized to pay an indemnity to the employee.
This became known as the Wenphil or Belated Due Process Rule.
On January 27, 2000, in Serrano, the rule on the extent of the sanction was
changed. We held that the violation by the employer of the notice requirement in
termination for just or authorized causes was not a denial of due process that will
nullify the termination. However, the dismissal is ineffectual and the employer
must pay full backwages from the time of termination until it is judicially declared
that the dismissal was for a just or authorized cause.
The rationale for the re-examination of the Wenphil doctrine in Serrano was the
significant number of cases involving dismissals without requisite notices. We
concluded that the imposition of penalty by way of damages for violation of the
notice requirement was not serving as a deterrent. Hence, we now required
payment of full backwages from the time of dismissal until the time the Court
finds the dismissal was for a just or authorized cause.
Serrano was confronting the practice of employers to "dismiss now and pay later"
by imposing full backwages.
We believe, however, that the ruling in Serrano did not consider the full meaning
of Article 279 of the Labor Code which states:
ART. 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.
This means that the termination is illegal only if it is not for any of the justified or
authorized causes provided by law. Payment of backwages and other benefits,
including reinstatement, is justified only if the employee was unjustly dismissed.
The fact that the Serrano ruling can cause unfairness and injustice which elicited
strong dissent has prompted us to revisit the doctrine.
To be sure, the Due Process Clause in Article III, Section 1 of the Constitution
embodies a system of rights based on moral principles so deeply imbedded in
the traditions and feelings of our people as to be deemed fundamental to a
civilized society as conceived by our entire history. Due process is that which
comports with the deepest notions of what is fair and right and just.26 It is a
constitutional restraint on the legislative as well as on the executive and judicial
powers of the government provided by the Bill of Rights.
Due process under the Labor Code, like Constitutional due process, has two
aspects: substantive, i.e., the valid and authorized causes of employment
termination under the Labor Code; and procedural, i.e., the manner of dismissal.
Procedural due process requirements for dismissal are found in the Implementing
Rules of P.D. 442, as amended, otherwise known as the Labor Code of the
Philippines in Book VI, Rule I, Sec. 2, as amended by Department Order Nos. 9
and 10.27 Breaches of these due process requirements violate the Labor Code.
Therefore statutory due process should be differentiated from failure to comply
with constitutional due process.
Constitutional due process protects the individual from the government and
assures him of his rights in criminal, civil or administrative proceedings;
while statutory due process found in the Labor Code and Implementing Rules
protects employees from being unjustly terminated without just cause after notice
and hearing.
In Sebuguero v. National Labor Relations Commission,28 the dismissal was for a
just and valid cause but the employee was not accorded due process. The
dismissal was upheld by the Court but the employer was sanctioned. The
sanction should be in the nature of indemnification or penalty, and depends on
the facts of each case and the gravity of the omission committed by the
employer.
In Nath v. National Labor Relations Commission,29 it was ruled that even if the
employee was not given due process, the failure did not operate to eradicate the
just causes for dismissal. The dismissal being for just cause, albeit without due
process, did not entitle the employee to reinstatement, backwages, damages and
attorney's fees.
Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc.
v. National Labor Relations Commission,30 which opinion he reiterated
in Serrano, stated:
C. Where there is just cause for dismissal but due process has not been properly
observed by an employer, it would not be right to order either the reinstatement
of the dismissed employee or the payment of backwages to him. In failing,
however, to comply with the procedure prescribed by law in terminating the
services of the employee, the employer must be deemed to have opted or, in any
case, should be made liable, for the payment of separation pay. It might be
pointed out that the notice to be given and the hearing to be conducted generally
constitute the two-part due process requirement of law to be accorded to the
employee by the employer. Nevertheless, peculiar circumstances might obtain in
certain situations where to undertake the above steps would be no more than a
useless formality and where, accordingly, it would not be imprudent to apply
the res ipsa loquitur rule and award, in lieu of separation pay, nominal damages
to the employee. x x x.31
After carefully analyzing the consequences of the divergent doctrines in the law
on employment termination, we believe that in cases involving dismissals for
cause but without observance of the twin requirements of notice and hearing, the
better rule is to abandon the Serrano doctrine and to follow Wenphil by holding
30
that the dismissal was for just cause but imposing sanctions on the employer.
Such sanctions, however, must be stiffer than that imposed in Wenphil. By doing
so, this Court would be able to achieve a fair result by dispensing justice not just
to employees, but to employers as well.
The unfairness of declaring illegal or ineffectual dismissals for valid or authorized
causes but not complying with statutory due process may have far-reaching
consequences.
This would encourage frivolous suits, where even the most notorious violators of
company policy are rewarded by invoking due process. This also creates absurd
situations where there is a just or authorized cause for dismissal but a procedural
infirmity invalidates the termination. Let us take for example a case where the
employee is caught stealing or threatens the lives of his co-employees or has
become a criminal, who has fled and cannot be found, or where serious business
losses demand that operations be ceased in less than a month. Invalidating the
dismissal would not serve public interest. It could also discourage investments
that can generate employment in the local economy.
The constitutional policy to provide full protection to labor is not meant to be a
sword to oppress employers. The commitment of this Court to the cause of labor
does not prevent us from sustaining the employer when it is in the right, as in this
case.32 Certainly, an employer should not be compelled to pay employees for
work not actually performed and in fact abandoned.
The employer should not be compelled to continue employing a person who is
admittedly guilty of misfeasance or malfeasance and whose continued
employment is patently inimical to the employer. The law protecting the rights of
the laborer authorizes neither oppression nor self-destruction of the employer.33
It must be stressed that in the present case, the petitioners committed a grave
offense, i.e., abandonment, which, if the requirements of due process were
complied with, would undoubtedly result in a valid dismissal.
An employee who is clearly guilty of conduct violative of Article 282 should not be
protected by the Social Justice Clause of the Constitution. Social justice, as the
term suggests, should be used only to correct an injustice. As the eminent
Justice Jose P. Laurel observed, social justice must be founded on the
recognition of the necessity of interdependence among diverse units of a society
and of the protection that should be equally and evenly extended to all groups as
a combined force in our social and economic life, consistent with the fundamental
and paramount objective of the state of promoting the health, comfort, and quiet
of all persons, and of bringing about "the greatest good to the greatest number."34
This is not to say that the Court was wrong when it ruled the way it did
in Wenphil, Serrano and related cases. Social justice is not based on rigid
formulas set in stone. It has to allow for changing times and circumstances.
Justice Isagani Cruz strongly asserts the need to apply a balanced approach to
labor-management relations and dispense justice with an even hand in every
case:
We have repeatedly stressed that social justice - or any justice for that matter - is
for the deserving, whether he be a millionaire in his mansion or a pauper in his
hovel. It is true that, in case of reasonable doubt, we are to tilt the balance in
favor of the poor to whom the Constitution fittingly extends its sympathy and
compassion. But never is it justified to give preference to the poor simply
because they are poor, or reject the rich simply because they are rich, for justice
must always be served for the poor and the rich alike, according to the mandate
of the law.35
Justice in every case should only be for the deserving party. It should not be
presumed that every case of illegal dismissal would automatically be decided in
favor of labor, as management has rights that should be fully respected and
enforced by this Court. As interdependent and indispensable partners in nation-
building, labor and management need each other to foster productivity and
economic growth; hence, the need to weigh and balance the rights and welfare of
both the employee and employer.
Where the dismissal is for a just cause, as in the instant case, the lack of
statutory due process should not nullify the dismissal, or render it illegal, or
ineffectual. However, the employer should indemnify the employee for the
violation of his statutory rights, as ruled in Reta v. National Labor Relations
Commission.36 The indemnity to be imposed should be stiffer to discourage the
abhorrent practice of "dismiss now, pay later," which we sought to deter in
the Serrano ruling. The sanction should be in the nature of indemnification or
penalty and should depend on the facts of each case, taking into special
consideration the gravity of the due process violation of the employer.
Under the Civil Code, nominal damages is adjudicated in order that a right of the
plaintiff, which has been violated or invaded by the defendant, may be vindicated
or recognized, and not for the purpose of indemnifying the plaintiff for any loss
suffered by him.37
As enunciated by this Court in Viernes v. National Labor Relations
Commissions,38 an employer is liable to pay indemnity in the form of nominal
damages to an employee who has been dismissed if, in effecting such dismissal,
the employer fails to comply with the requirements of due process. The Court,
after considering the circumstances therein, fixed the indemnity at P2,590.50,
which was equivalent to the employee's one month salary. This indemnity is
intended not to penalize the employer but to vindicate or recognize the
employee's right to statutory due process which was violated by the employer.39
The violation of the petitioners' right to statutory due process by the private
respondent warrants the payment of indemnity in the form of nominal damages.
The amount of such damages is addressed to the sound discretion of the court,
taking into account the relevant circumstances.40 Considering the prevailing
circumstances in the case at bar, we deem it proper to fix it at P30,000.00. We
believe this form of damages would serve to deter employers from future
violations of the statutory due process rights of employees. At the very least, it
provides a vindication or recognition of this fundamental right granted to the latter
under the Labor Code and its Implementing Rules.
Private respondent claims that the Court of Appeals erred in holding that it failed
to pay petitioners' holiday pay, service incentive leave pay and 13th month pay.
We are not persuaded.
We affirm the ruling of the appellate court on petitioners' money claims. Private
respondent is liable for petitioners' holiday pay, service incentive leave pay and
13th month pay without deductions.
31
As a general rule, one who pleads payment has the burden of proving it. Even
where the employee must allege non-payment, the general rule is that the burden
rests on the employer to prove payment, rather than on the employee to prove
non-payment. The reason for the rule is that the pertinent personnel files,
payrolls, records, remittances and other similar documents - which will show that
overtime, differentials, service incentive leave and other claims of workers have
been paid - are not in the possession of the worker but in the custody and
absolute control of the employer.41
In the case at bar, if private respondent indeed paid petitioners' holiday pay and
service incentive leave pay, it could have easily presented documentary proofs of
such monetary benefits to disprove the claims of the petitioners. But it did not,
except with respect to the 13th month pay wherein it presented cash vouchers
showing payments of the benefit in the years disputed.42 Allegations by private
respondent that it does not operate during holidays and that it allows its
employees 10 days leave with pay, other than being self-serving, do not
constitute proof of payment. Consequently, it failed to discharge the onus
probandi thereby making it liable for such claims to the petitioners.
Anent the deduction of SSS loan and the value of the shoes from petitioner
Virgilio Agabon's 13th month pay, we find the same to be unauthorized. The
evident intention of Presidential Decree No. 851 is to grant an additional
income in the form of the 13th month pay to employees not already receiving the
same43 so as "to further protect the level of real wages from the ravages of world-
wide inflation."44 Clearly, as additional income, the 13th month pay is included in
the definition of wage under Article 97(f) of the Labor Code, to wit:
(f) "Wage" paid to any employee shall mean the remuneration or earnings,
however designated, capable of being expressed in terms of money whether
fixed or ascertained on a time, task, piece, or commission basis, or other method
of calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered and includes the fair and reasonable value,
as determined by the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee' "
from which an employer is prohibited under Article 11345 of the same Code from
making any deductions without the employee's knowledge and consent. In the
instant case, private respondent failed to show that the deduction of the SSS loan
and the value of the shoes from petitioner Virgilio Agabon's 13th month pay was
authorized by the latter. The lack of authority to deduct is further bolstered by the
fact that petitioner Virgilio Agabon included the same as one of his money claims
against private respondent.
The Court of Appeals properly reinstated the monetary claims awarded by the
Labor Arbiter ordering the private respondent to pay each of the petitioners
holiday pay for four regular holidays from 1996 to 1998, in the amount of
P6,520.00, service incentive leave pay for the same period in the amount of
P3,255.00 and the balance of Virgilio Agabon's thirteenth month pay for 1998 in
the amount of P2,150.00.
WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of
the Court of Appeals dated January 23, 2003, in CA-G.R. SP No. 63017, finding
that petitioners' Jenny and Virgilio Agabon abandoned their work, and ordering
private respondent to pay each of the petitioners holiday pay for four regular
holidays from 1996 to 1998, in the amount of P6,520.00, service incentive leave
pay for the same period in the amount of P3,255.00 and the balance of Virgilio
Agabon's thirteenth month pay for 1998 in the amount of P2,150.00
is AFFIRMED with the MODIFICATION that private respondent Riviera Home
Improvements, Inc. is further ORDERED to pay each of the petitioners the
amount of P30,000.00 as nominal damages for non-compliance with statutory
due process.
No costs.
SO ORDERED.
[G.R. NO. 151378. March 28, 2005]
JAKA FOOD PROCESSING CORPORATION, Petitioners, v. DARWIN PACOT,
ROBERT PAROHINOG, DAVID BISNAR, MARLON DOMINGO, RHOEL
LESCANO and JONATHAN CAGABCAB, Respondents.
DECISION
GARCIA, J.:
Assailed and sought to be set aside in this appeal by way of a Petition for Review
on Certiorari under rule 45 of the Rules of Court are the following issuances of
the Court of Appeals in CA-G.R. SP. No. 59847, to wit:
1. Decision dated 16 November 2001,1 reversing and setting aside an earlier
decision of the National Labor Relations Commission (NLRC); and
2. Resolution dated 8 January 2002,2 denying petitioner's motion for
reconsideration.
The material facts may be briefly stated, as follows:
Respondents Darwin Pacot, Robert Parohinog, David Bisnar, Marlon Domingo,
Rhoel Lescano and Jonathan Cagabcab were earlier hired by petitioner JAKA
Foods Processing Corporation (JAKA, for short) until the latter terminated their
employment on August 29, 1997 because the corporation was "in dire financial
straits". It is not disputed, however, that the termination was effected without
JAKA complying with the requirement under Article 283 of the Labor Code
regarding the service of a written notice upon the employees and the Department
of Labor and Employment at least one (1) month before the intended date of
termination.
In time, respondents separately filed with the regional Arbitration Branch of the
National Labor Relations Commission (NLRC) complaints for illegal dismissal,
underpayment of wages and nonpayment of service incentive leave and 13th
month pay against JAKA and its HRD Manager, Rosana Castelo.
After due proceedings, the Labor Arbiter rendered a decision3 declaring the
termination illegal and ordering JAKA and its HRD Manager to reinstate
respondents with full backwages, and separation pay if reinstatement is not
possible. More specifically the decision dispositively reads:
WHEREFORE, judgment is hereby rendered declaring as illegal the termination
of complainants and ordering respondents to reinstate them to their positions with
full backwages which as of July 30, 1998 have already amounted to
32
P339,768.00. Respondents are also ordered to pay complainants the amount of
P2,775.00 representing the unpaid service incentive leave pay of Parohinog,
Lescano and Cagabcab an the amount of P19,239.96 as payment for 1997 13th
month pay as alluded in the above computation.
If complainants could not be reinstated, respondents are ordered to pay them
separation pay equivalent to one month salary for very (sic) year of service.
SO ORDERED.
Therefrom, JAKA went on appeal to the NLRC, which, in a decision dated August
30, 1999,4 affirmed in toto that of the Labor Arbiter.
JAKA filed a motion for reconsideration. Acting thereon, the NLRC came out with
another decision dated January 28, 2000,5 this time modifying its earlier decision,
thus:
WHEREFORE, premises considered, the instant motion for reconsideration is
hereby GRANTED and the challenged decision of this Commission [dated] 30
August 1999 and the decision of the Labor Arbiter xxx are hereby modified by
reversing an setting aside the awards of backwages, service incentive leave pay.
Each of the complainants-appellees shall be entitled to a separation pay
equivalent to one month. In addition, respondents-appellants is (sic) ordered to
pay each of the complainants-appellees the sum of P2,000.00 as indemnification
for its failure to observe due process in effecting the retrenchment.
SO ORDERED.
Their motion for reconsideration having been denied by the NLRC in its
resolution of April 28, 2000,6 respondents went to the Court of Appeals via a
petition for certiorari , thereat docketed as CA-G.R. SP No. 59847.
As stated at the outset hereof, the Court of Appeals, in a decision dated
November 16, 2000, applying the doctrine laid down by this Court in Serrano v.
NLRC,7 reversed and set aside the NLRC's decision of January 28, 2000, thus:
WHEREFORE, the decision dated January 28, 2000 of the National Labor
Relations Commission is REVERSED and SET ASIDE and another one entered
ordering respondent JAKA Foods Processing Corporation to pay petitioners
separation pay equivalent to one (1) month salary, the proportionate 13th month
pay and, in addition, full backwages from the time their employment was
terminated on August 29, 1997 up to the time the Decision herein becomes final.
SO ORDERED.
This time, JAKA moved for a reconsideration but its motion was denied by the
appellate court in its resolution of January 8, 2002.
Hence, JAKA's present recourse, submitting, for our consideration, the following
issues:
"I. WHETHER OR NOT THE COURT OF APPEALS CORRECTLY AWARDED
'FULL BACKWAGES' TO RESPONDENTS.
II. WHETHER OR NOT THE ASSAILED DECISION CORRECTLY AWARDED
SEPARATION PAY TO RESPONDENTS".
As we see it, there is only one question that requires resolution, i.e. what are the
legal implications of a situation where an employee is dismissed for cause but
such dismissal was effected without the employer's compliance with the notice
requirement under the Labor Code.
This, certainly, is not a case of first impression. In the very recent case
of Agabon v. NLRC,8 we had the opportunity to resolve a similar question.
Therein, we found that the employees committed a grave
offense, i.e., abandonment, which is a form of a neglect of duty which, in turn, is
one of the just causes enumerated under Article 282 of the Labor Code. In said
case, we upheld the validity of the dismissal despite non-compliance with the
notice requirement of the Labor Code. However, we required the employer to pay
the dismissed employees the amount of P30,000.00, representing nominal
damages for non-compliance with statutory due process, thus:
"Where the dismissal is for a just cause, as in the instant case, the lack of
statutory due process should not nullify the dismissal, or render it illegal, or
ineffectual. However, the employer should indemnify the employee for the
violation of his statutory rights, as ruled in Reta v. National Labor Relations
Commission. The indemnity to be imposed should be stiffer to discourage the
abhorrent practice of 'dismiss now, pay later,' which we sought to deter in
the Serrano ruling. The sanction should be in the nature of indemnification or
penalty and should depend on the facts of each case, taking into special
consideration the gravity of the due process violation of the employer.
xxx
The violation of petitioners' right to statutory due process by the private
respondent warrants the payment of indemnity in the form of nominal damages.
The amount of such damages is addressed to the sound discretion of the court,
taking into account the relevant circumstances. Considering the prevailing
circumstances in the case at bar, we deem it proper to fix it at
P30,000.00. We believe this form of damages would serve to deter employers
from future violations of the statutory due process rights of employees. At the
very least, it provides a vindication or recognition of this fundamental right
granted to the latter under the Labor Code and its Implementing Rules,"
(Emphasis supplied).
The difference between Agabon and the instant case is that in the former, the
dismissal was based on a just cause under Article 282 of the Labor Code while in
the present case, respondents were dismissed due to retrenchment, which is one
of the authorized causes under Article 283 of the same Code.
At this point, we note that there are divergent implications of a dismissal for just
cause under Article 282, on one hand, and a dismissal for authorized cause
under Article 283, on the other.
A dismissal for just cause under Article 282 implies that the employee
concerned has committed, or is guilty of, some violation against the
employer, i.e. the employee has committed some serious misconduct, is guilty of
some fraud against the employer, or, as in Agabon, he has neglected his duties.
Thus, it can be said that the employee himself initiated the dismissal process.
On another breath, a dismissal for an authorized cause under Article 283 does
not necessarily imply delinquency or culpability on the part of the employee.
Instead, the dismissal process is initiated by the employer's exercise of his
management prerogative, i.e. when the employer opts to install labor saving
33
devices, when he decides to cease business operations or when, as in this case,
he undertakes to implement a retrenchment program.
The clear-cut distinction between a dismissal for just cause under Article 282 and
a dismissal for authorized cause under Article 283 is further reinforced by the fact
that in the first, payment of separation pay, as a rule, is not required, while in the
second, the law requires payment of separation pay.9
For these reasons, there ought to be a difference in treatment when the ground
for dismissal is one of the just causes under Article 282, and when based on one
of the authorized causes under Article 283.
Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause
under Article 282 but the employer failed to comply with the notice requirement,
the sanction to be imposed upon him should be tempered because the dismissal
process was, in effect, initiated by an act imputable to the employee; and (2) if
the dismissal is based on an authorized cause under Article 283 but the employer
failed to comply with the notice requirement, the sanction should
be stiffer because the dismissal process was initiated by the employer's exercise
of his management prerogative.
The records before us reveal that, indeed, JAKA was suffering from serious
business losses at the time it terminated respondents' employment. As aptly
found by the NLRC:
"A careful study of the evidence presented by the respondent-appellant
corporation shows that the audited Financial Statement of the corporation for the
periods 1996, 1997 and 1998 were submitted by the respondent-appellant
corporation, The Statement of Income and Deficit found in the Audited Financial
Statement of the respondent-appellant corporation clearly shows the following in
1996, the deficit of the respondent-appellant corporation was P188,218,419.00 or
94.11% of the stockholder's [sic] equity which amounts to P200,000,000.00. In
1997 when the retrenchment program of respondent-appellant corporation was
undertaken, the deficit ballooned to P247,222,569.00 or 123.61% of the
stockholders' equity, thus a capital deficiency or impairment of equity ensued. In
1998, the deficit grew to P355,794,897.00 or 177% of the stockholders' equity.
From 1996 to 1997, the deficit grew by more that (sic) 31% while in 1998 the
deficit grew by more than 47%.
The Statement of Income and Deficit of the respondent-appellant corporation to
prove its alleged losses was prepared by an independent auditor, SGV & Co. It
convincingly showed that the respondent-appellant corporation was in dire
financial straits, which the complainants-appellees failed to dispute. The losses
incurred by the respondent-appellant corporation are clearly substantial and
sufficiently proven with clear and satisfactory evidence. Losses incurred were
adequately shown with respondent-appellant's audited financial statement.
Having established the loss incurred by the respondent-appellant corporation, it
necessarily necessarily (sic) follows that the ground in support of retrenchment
existed at the time the complainants-appellees were terminated. We cannot
therefore sustain the findings of the Labor Arbiter that the alleged losses of the
respondent-appellant was [sic] not well substantiated by substantial proofs. It is
therefore logical for the corporation to implement a retrenchment program to
prevent further losses."10
Noteworthy it is, moreover, to state that herein respondents did not assail the
foregoing finding of the NLRC which, incidentally, was also affirmed by the Court
of Appeals.
It is, therefore, established that there was ground for respondents'
dismissal, i.e., retrenchment, which is one of the authorized causes enumerated
under Article 283 of the Labor Code. Likewise, it is established that JAKA failed
to comply with the notice requirement under the same Article. Considering the
factual circumstances in the instant case and the above ratiocination, we,
therefore, deem it proper to fix the indemnity at P50,000.00.
We likewise find the Court of Appeals to have been in error when it ordered JAKA
to pay respondents separation pay equivalent to one (1) month salary for every
year of service. This is because in Reahs Corporation v. NLRC,11 we made the
following declaration:
"The rule, therefore, is that in all cases of business closure or cessation of
operation or undertaking of the employer, the affected employee is entitled to
separation pay. This is consistent with the state policy of treating labor as a
primary social economic force, affording full protection to its rights as well as its
welfare. The exception is when the closure of business or cessation of
operations is due to serious business losses or financial reverses; duly
proved, in which case, the right of affected employees to separation pay is
lost for obvious reasons. xxx". (Emphasis supplied)ςrαlαωlιbrαrÿ
WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed
decision and resolution of the Court of Appeals respectively dated November 16,
2001 and January 8, 2002 are hereby SET ASIDE and a new one entered
upholding the legality of the dismissal but ordering petitioner to pay each of the
respondents the amount of P50,000.00, representing nominal damages for non-
compliance with statutory due process.
SO ORDERED.
G.R. No. 209921, January 13, 2016
EMMA H. QUIRO-QUIRO, Petitioner, v. BALAGTAS CREDIT COOPERATIVE &
COMMUNITY DEVELOPMENT, INC., Respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari challenging the 5 June 2013
Decision1 and 11 November 2013 Resolution2 of the Court of Appeals in CA G.R.
SP No. 124625. The Court of Appeals reversed the decision3 of the National
Labor Relations Commission (NLRC) and reinstated the decision of the Labor
Arbiter finding Emma H. Quiro-quiro's (petitioner) dismissal legal, with the
modification that petitioner is awarded nominal damages for Balagtas Credit
Cooperative & Community Development, Inc.'s (respondent) non-compliance
with due process requirements.
The Facts
34
The facts, as summarized by the Court of Appeals, are as
follows:chanRoblesvirtualLawlibrary
Petitioner Balagtas Credit Cooperative and Community Development, Inc.
("petitioner'VBCCCDI") initially hired respondent Emma H. Quiro-quiro
("respondent/Quiro-quiro) as accountant/bookkeeper in 1989.
However, sometime in April 2010, BCCCDI terminated the employment of Quiro-
quiro, who then held the concurrent posts of General Manager and Accountant,
on the grounds of "gross negligence/violation of company rules" and "gross
dishonesty," committed as follows:chanRoblesvirtualLawlibrary
GROSS NEGLIGENCE/VIOLATION OF COMPANY RULES.
Over withdrawal of Time Deposit (TD) placement of Josie Subido;
Loss of borrower's title for security in the payment of loan obligations of Rolando
Roque;
Over computation of interest on TD placements;
Unfair filing of delinquent accounts;
JV number duplication;
Backlog of schedules and recording/postings.
GROSS DISHONESTY
Concealment of the irregularity regarding the over withdrawal in the TD
placement of MS. JOSIE SUBIDO that happened way back 18 July 2007. Were it
not for the hiring of an OJT who discovered the said report of MS. DENIZA
FUENTES the matter would not have been addressed and resolved by requiring
the party concerned to issue check/s in payment of the same; and,
Non-disclosure of the true financial condition of the cooperative.
These charges are allegedly contained in a Resolution of BCCCDFs Board of
Directors dated April 20, 2010.
Disputing those charges, Quiro-quiro maintained that it was around January 2010
that she was informed by BCCCDI and its officers of an "overwithdrawal of a
certain depositor" that was seen on the records. According to her, the said
overwithdrawal was then "remedied with the full consent and acquiescence of
respondents." The issue was never brought up again, until four months later, in
April 2010, when it was allegedly "resurrected."
Aggrieved, Quiro-quiro filed a complaint for illegal dismissal and damages.
In her position paper before the Labor Arbiter, Quiro-quiro claimed that her
termination was not valid nor justified. She argued that "there was no ground that
existed for her dismissal from employment" and that her dismissal did not satisfy
the requirements of due process, as she was not given "ample opportunity," nor
the "natural sequence of notice of charges, hearing and notice of judgment."
In their position paper, on the other hand, BCCCDI and its officers Fe Adrados
("Adrados") and Arty. Tagumpay B. Ponce ("Atty. Ponce") averred that the
termination of Quiro-quiro's employment based on the charges against her were
"official acts" of the cooperative BCCCDI, as contained in the board Resolution of
April 20, 2010. Then, Atty. Ponce was designated by the said board, as
BCCCDI's counsel, to write and send a "Notice to Explain/Show Cause Memo" to
Quiro-quiro to explain her side and show cause why she should not be
terminated.
BCCCDI alleged that Quiro-quiro responded with her explanation on April 23,
2010. Also, Quiro-quiro allegedly sent a letter of apology dated April 29, 2010
admitting her "shortcomings and wrongdoings" but asking for one last chance
from the board. On April 30, 2010, the board and officers convened with Quiro-
quiro in attendance. There, she explained her side and answered questions from
the board. Thereafter, the board put the matter to a vote and unanimously
decided to terminate Quiro-quiro's services. The proceedings were reduced in
writing through the minutes thereof.
Finally, the decision to terminate Quiro-quiro's employment was communicated to
her through a Notice to Terminate prepared by Atty. Ponce upon the board's
instruction.
As for the causes of the dismissal, BCCCDI essentially argued that the following
infractions of Quiro-quiro were grave enough to merit a legal termination, viz: (1)
the alleged overwithdrawal of P250,000.00 which was deliberately omitted from
being posted or recorded and followed by a "series of withdrawals on a monthly
basis;" (2) the alleged loss of a (certificate of) title; (3) the "over-computation of
interest on time deposit (TD) placement;" (4) the "unfair filing of delinquent
accounts;" and (5) duplication of journal voucher (JV) numbers, and backlog in
the schedule of postings. BCCCDI rejected her explanation of "ignorance" in
failing to post the withdrawal because "before the TD placement was closed, the
same was followed by withdrawals on a monthly basis." To BCCCDI, such was
gross dishonesty and conflict of interest. BCCCDI added that the over-
computation of interest rate and its application to Quiro-quiro's own account was
also gross dishonesty, conflict of interest and resulted in the loss of trust and
confidence by the employer.
In support of the charges against Quiro-quiro, BCCCDI also attached the
affidavits and/or report of three employees Deniza Fuentes, Rex R. Lim and
Susana de la Cruz-Tolentino.
x x x x4cralawlawlibrary
In his 31 January 2011 Decision,5 Labor Arbiter Mariano L. Bactin found that
there was substantial evidence showing that petitioner was lawfully dismissed
and respondent observed due process in terminating her. The dispositive portion
of the Labor Arbiter's decision reads:chanRoblesvirtualLawlibrary
35
WHEREFORE, premises considered, the complaint filed by the complainant,
EMMA H. QUIRO-QUIRO is hereby ordered DISMISSED WITH PREJUDICE for
lack of merit.
The claims for damages and attorney's fees of the complainant are likewise
DISMISSED with prejudice for lack of merit.
SO ORDERED.6cralawlawlibrary
In its 25 November 2011 Decision, the NLRC reversed the decision of the Labor
Arbiter, and ruled as follows:chanRoblesvirtualLawlibrary
WHEREFORE, complainant's appeal is GRANTED and the Decision
promulgated on 31 January 2011 is REVERSED and SET ASIDE. Complainant
is declared to have been illegally dismissed and respondent Balagtas Credit
Cooperative and Community Development, Inc. is ordered to pay complainant
the following:chanRoblesvirtualLawlibrary
(1) backwages computed from her date of dismissal on 1 May 2010 until the
finality of this decision less the amount equivalent to one (1) month salary;
(2) separation pay in lieu of reinstatement equivalent to one month pay for every
year of service computed from January 1989 until the finality of this decision.
The computation of the monetary award as of the date of this decision is attached
as Annex "A" of this Decision.
SO ORDERED.7ChanRoblesVirtualawlibrary
cralawlawlibrary
In its 29 February 2012 Resolution,8 the NLRC denied the motion for
reconsideration.
In its 5 June 2013 Decision, the Court of Appeals reversed the decision of the
NLRC and reinstated the decision of the Labor Arbiter.
Petitioner filed a motion for reconsideration, arguing among others that the case
had already been settled by virtue of an offer from respondent to pay the amount
awarded by the NLRC. Petitioner also maintained that her dismissal was invalid.
In its 11 November 2013 Resolution, the Court of Appeals denied the motion for
reconsideration.
Hence, this petition.
The Court of Appeals' Ruling
In reversing the NLRC and sustaining the Labor Arbiter, the Court of Appeals
found that "there was more than enough substantial evidence presented" to
support a valid dismissal. The Court of Appeals gave credence to the following
evidence showing petitioner had neglected her duties, had been dishonest and
had breached her employer's trust:chanRoblesvirtualLawlibrary
(1) Annex "A" of BCCCDI's Position Paper - which is an enumeration from the
cooperative's By-laws of the duties and responsibilities of the General Manager
and Accountant, both of which positions concurrently were being held by Quiro-
quiro at the time of termination. Among the enumerated duties of the general
manager was to
b) .... "maintain (her) records and accounts in such manner that the true and
correct condition of the business of the cooperative may be ascertained
therefrom at any time. (She) shall render annual and periodic statements and
reports in the form and in the manner prescribed by the Board of Directors, and
preserve the books, documents, correspondence and records of whatever kind
pertaining to the business which may come into (her) possession.
Meanwhile, among the duties of the accountant were
to:chanRoblesvirtualLawlibrary
a) ... "install an adequate and effective accounting system in the cooperative;"
b) ... "render monthly reports to the Board of Directors on the financial condition
and operations of the cooperative....;"
xxx
d) ... "assist the Chair(person) in the preservation of the books of accounts
documents, vouchers, contracts and record of whatever kind pertaining to the
business of the cooperative which may come to (her) possession."
(2) Annexes "B" and "C" of BCCCDI's Position Paper - which are the Resolution
of the Board of Directors and Notice to Explain/Show Cause Memo, respectively,
enumerating the violations committed by Quiro-quiro, which can all be easily
cross-referred with her official duties and responsibilities above. Such violations
are:chanRoblesvirtualLawlibrary
GROSS NEGLIGENCE/VIOLATION OF COMPANY RULES.
Over withdrawal of Time Deposit (TD) placement of Josie Subido;
Loss of borrower's title for security in the payment of loan obligations of Rolando
Roque;
Over computation of interest on TD placements;
Unfair filing of delinquent accounts;
JV number duplication;
Backlog of schedules and recording/postings.
GROSS DISHONESTY
Concealment of the irregularity regarding the over withdrawal in the TD
placement of MS. JOSIE SUBIDO that happened way back 18 July 2007. Were it
not for the hiring of an OJT who discovered the said report of MS.
DENIZA FUENTES the matter would not have been addressed and resolved by
36
requiring the party concerned to issue check/s in payment of the same; and, Non-
disclosure of the true financial condition of the cooperative.
(3) Annexes "D" and "E" of BCCCDI's Position Paper - which are the Explanation
Letter and Apology Letter, respectively, of Quiro-quiro. At first, in the explanation,
she denied responsibility for the losses and assigned blame for some of the
losses on others; in the apology letter, however, she admits wrongdoing but asks
for another chance. The apology letter is reproduced
hereunder:chanRoblesvirtualLawlibrary
29 Abril 2010
Sa lupong patnugutan
BCCCDI
Balagtas, Bulacan
Mahal na lupong patnugutan Purihin ang Panginoon!
Ako po ay humihingi ng paumanhin sa lahat ng aking nagawang mali dito sa
kooperatiba at hindi naman po li[n]gid sa inyo ang mga nangyari sa akin.
Bigyan nyo po ako ng isa pang pagkakataon na mapagpatuloy ko ang aking
trabaho sa coop na ito alang-alang sa aking mga maliliit na anak.
Ipinangangako ko po na pagbubutihin ko na ang aking trabaho, magpopocus at
dodoblihin ko po ang aking effort para maisaayos po ang lahat.
Kung dumating ang pagkakataon na hindi po talaga kayo masiyahan sa trabaho
ay ako na po mismo ang magfifile ng resignation.
Maraming salamat po sa maraming pang-unawa na ibinigay ninyo sa akin.
Sumasainyo,
(Sgd.)
EMMA H. QUIRO-QUIRO
(4) Annexes "F" and "G" of BCCCDI's Position Paper - which are the Minutes of
the board's confrontation with Quiro-quiro and its decision to dismiss her, as well
as the Termination Letter of Atty. Ponce in behalf of BCCCDI.
(5) Annex "I" of BCCCDI's Position Paper - which is the Affidavit of Deniza E.
Fuentes, an employee of BCCCDI, who stated in part,
xxx
5. While I was in the office sometime in November 2009, a student who was on-
the-job training (OJT) stumbled on some files and it was discovered that there
was an over-withdrawal in the amount of TWO HUNDRED FIFTY THOUSAND
PESOS (P250,000.00) from the time deposit (TD) placement of MRS. SUBIDO
dating back from 18 July 2007 and which EMMA as internal accountant failed to
post in the ledger which in the first place was her duty to perform.
6. Equally exasperating was the fact that after a year she allowed MRS. SUBIDO
to make subsequent withdrawals which resulted to (sic) the over-withdrawal in
the said amount. Considering that the subsequent withdrawals by MRS. SUBIDO
were made on a monthly basis, it baffles the mind to think why the alleged
oversight in the posting of the TWO HUNDRED FIFTY THOUSAND PESOS
(P250,000.00). Her feigned ignorance is highly suspect.
7. Moreover, although I was around when the discovery was made, I gave her
opportunity to report the matter to our Chairperson and despite several reminders
she did not budge a bit.
8. Forced by her own omission, I reported the matter to MRS. ABRADOS directly
who in turn requested EMMA to require MRS. SUBIDO to replace or return the
overwithdrawal in the amount of TWO HUNDRED FIFTY THOUSAND PESOS
(P250,000.00). Again, she failed to require MRS. SUBIDO to return the money,
xxx.
(6) Annex "J" of BCCCDPs Position Paper - which is the Affidavit of Rex Revilla
Lim, another employee of BCCCDI, who testified that he delivered an envelope
from Quiro-quiro to the Chairman and back to Quiro-quiro. He could not
categorically state, however, who might be responsible for the loss of one of the
two titles contained in the said envelope.
(7) Annex "K" of BCCCDFs Position Paper - which is a letter from Susana Dela
Cruz-Tolentino of Megasys Computer Center who explained that the confusion in
the data of the members in the computer was the result of the use of one "JV
number" for different transactions.9cralawlawlibrary
The dispositive portion of the Court of Appeals' decision
reads:chanRoblesvirtualLawlibrary
WHEREFORE, considering the foregoing, the petition is GRANTED. The
Decision dated November 25, 2011 and Resolution dated February 29, 2012 of
the respondent National Labor Relations Commission in NLRC LAC No. 04-
000951-11 (NLRC Case No. RAB-III-05-16217-10), are REVERSED and SET
ASIDE. The Decision of the Labor Arbiter Mariano L. Bactin, promulgated on
January 31, 2011, in NLRC Case No. RAB-III-05-16217-10 is REINSTATED with
the MODIFICATION that respondent Emma Quiro-quiro is AWARDED
P30,000.00 in nominal damages.
SO ORDERED.10ChanRoblesVirtualawlibrary
cralawlawlibrary
The Issues
Petitioner raises the following issues: (1) whether respondent's offer to pay the
monetary award of the NLRC constitutes a compromise agreement putting an
37
end to this controversy; and (2) whether petitioner's dismissal was valid and
complied with the due process requirements. We are not convinced. As correctly found by the Court of Appeals, respondent
The Ruling of the Court was able to prove by substantial evidence that petitioner's dismissal is lawful.
Substantial evidence is defined as that amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion.13
We deny the petition.
Respondent presented documents and affidavits establishing petitioner's gross
Payment of NLRC monetary award does not constitute
negligence and her breach of respondent's trust and confidence in her. Based on
a compromise agreement
the records, it was shown that petitioner committed the following infractions: (1)
the over withdrawal of P250,000 on the time deposit placement of a member; (2)
Petitioner argues that respondent's offer to pay the total amount of P452,730.34
concealment and non-posting of the over withdrawal; (3) the series of monthly
representing the monetary award of the NLRC constitutes a compromise
withdrawals after the P250,000 over withdrawal on the same time deposit
agreement that "operates to end litigation and put the case to rest."11
placement; (4) the loss of a certificate of title; (5) the over-computation of interest
rate on a time deposit placement; (6) the "unfair filing of delinquent accounts"; (7)
We disagree. Respondent's offer to pay the sum of P452,730.34 representing the
duplication of journal voucher numbers, and (8) backlog in the schedule of
monetary award of the NLRC is not in the nature of a compromise agreement,
postings.
which effectively puts an end to this controversy. According to respondent, the
underlying reason for the offer of payment was petitioner's motion for the
We agree with the finding of the Court of Appeals that petitioner's "inability to
issuance of the writ of execution, leaving respondent without any recourse but to
stop during her watch an over withdrawal by one member, amounting to
pay. In other words, such payment was in compliance with the writ of execution
P250,000.00,"14 and followed by a series of monthly withdrawals, "constitutes
issued by the NLRC.
gross and habitual neglect of duty that is a just cause for her dismissal."15 The
Court of Appeals further found that "her other infractions such as the loss of a
Section 14, Rule VII of the NLRC Rules of Procedure provides that "the
certificate of title, the granting of a high interest to pre-terminated deposits,
decisions, resolutions or orders of the Commission shall become final and
duplication of JV numbers, and a backlog in her reportings or postings only add
executory after ten (10) calendar days from receipt thereof x x x." Section 1, Rule
to such major infraction and establish a pattern of negligence and inability to fulfill
XI of the same NLRC Rules provides that "a writ of execution may be
her duty."16
issued motu proprio or on motion, upon a decision or order that has become final
and executory." The execution of the final and executory decision or resolution of
Moreover, there is no dispute that petitioner held the sensitive positions of
the NLRC shall proceed despite the pendency of a petition for certiorari, unless it
general manager and accountant, which demand respondent's utmost trust and
is restrained by the proper court.12 Since the Court of Appeals did not issue any
confidence. Her responsibilities as accountant included, among others, the
temporary restraining order or writ of injunction against the NLRC decision, such
handling and processing of the deposits and withdrawals of the members of the
judgment became final and executory after ten calendar days from its receipt by
cooperative; installing an effective accounting system within the cooperative; and
counsel or party. Consequently, petitioner moved for the issuance of the writ of
safekeeping of certificates of title. As general manager, petitioner was in charge
execution. As pointed out by respondent, the issuance of the writ of execution
of supervising and overseeing the daily operations of the cooperative17 and was
and notice of garnishment forced respondent to pay the monetary award of the
tasked to prepare periodic reports on the financial condition of the cooperative.
NLRC to avoid its bank account being frozen and to prevent the cessation of its
operations.
In Coca-Cola Export Corporation v. Gacayan,18 involving a Senior Financial
Accountant of petitioner company, the Court upheld the employee's dismissal for
Clearly, there is no intent on the part of respondent to enter into a compromise
loss of trust and confidence, thus:chanRoblesvirtualLawlibrary
agreement to put an end to this dispute. Otherwise, respondent could have
simply filed a motion to withdraw its petition before the Court of Appeals, In the instant case, respondent Gacayan was the Senior Financial Accountant of
specifically manifesting the execution by the parties of a compromise agreement. petitioner company. While respondent Gacayan denies that she is handling or
On the contrary, respondent pursued its appeal before the Court of Appeals and has custody of petitioner's funds, a re-examination of the records of this case
vigorously opposed the petition in this Court. reveals that she indeed handled delicate and confidential matters in the financial
analyses and evaluations of the action plans and strategies of petitioner
Petitioner was validly dismissed.
company. Respondent Gacayan was also privy to the strategic and operational
decision-making of petitioner company, a sensitive and delicate position requiring
Petitioner insists that she was illegally dismissed since there is no valid ground to the latter's utmost trust and confidence. As such, she should be considered as
terminate her. Petitioner further claims that her dismissal failed to satisfy the due holding a position of responsibility or of trust and confidence.cralawlawlibrary
process requirements.

38

Clearly, petitioner's act of allowing the over withdrawal of P250,000 on the time
deposit placement of a member and her subsequent inaction and non-
rectification of such misconduct breached respondent's trust and confidence in
her, warranting the penalty of dismissal.
In addition, while respondent painstakingly presented evidence to prove the
legality of petitioner's dismissal, petitioner miserably failed to rebut the charges
against her. As found by the Court of Appeals, petitioner "did not even attach her
own evidence [to her pleadings] or at least refute if not totally contradict the
allegations of [respondent]."19 Petitioner merely denied the allegations against
her. In her apology letter, petitioner pleaded for forgiveness and another chance
from respondent, which in effect constituted an admission of her wrongdoings.
While petitioner's dismissal is lawful, we sustain the award of P30,000 nominal
damages in favor of petitioner for respondent's non-observance of the due
process requirements in dismissing her. We agree with the Court of Appeals,
which in turn upheld the NLRC, that the 48 hours given to petitioner to explain
her side was insufficient time to "consult the union official or lawyer, gather data
and evidence and decide on [her defenses]."20 Petitioner should have been given
at least five calendar days from receipt of the notice to prepare for her defense.
Notwithstanding, the lack of statutory due process does not nullify the dismissal
or render it illegal or ineffectual when the dismissal was for just cause,21 but it will
merit the grant of nominal damages as indemnification.
WHEREFORE, we DENY the petition and AFFIRM the 5 June 2013 Decision
and 11 November 2013 Resolution of the Court of Appeals in CA G.R. SP No.
124625.
SO ORDERED.
G.R. No. 205953, June 06, 2018
DIONELLA A. GOPIO, DOING BUSINESS UNDER THE NAME AND STYLE,
JOB ASIA MANAGEMENT SERVICES, Petitioner, v. SALVADOR B.
BAUTISTA, Respondents.
DECISION
JARDELEZA, J.:
This is a petition for review on certiorari1 seeking the reversal of the August 31,
2012 Decision2 of the Court of Appeals (CA) in CA-G.R. SP No. 116450 which
annulled the Decision3 and Resolution4 issued by the National Labor Relations
Commission (NLRC) and reinstated the Decision5 rendered by the Labor Arbiter,
and the February 22, 2013 CA Resolution6 denying petitioner's motion for
reconsideration of the assailed Decision.
On September 26, 2008, respondent Salvador A. Bautista (Bautista) was hired as
a Project Manager for Shorncliffe (PNG) Limited (Shorncliffe) in Papua New
Guinea through Job Asia Management Services (Job Asia), a single
proprietorship owned by petitioner Dionella A. Gopio (Gopio), which is engaged
in the business of recruitment, processing, and deployment of land-based
manpower for overseas work. Bautista's contract stated that his employment
shall be valid and effective for 31 months with a net monthly salary of
P40,000.00. On October 4, 2008, he arrived at his workplace in Papua New
Guinea.7
On July 6, 2009, or just nine months after his deployment in Papua New Guinea,
Bautista was served a notice of termination effective July 10, 2009 on the alleged
grounds of unsatisfactory performance and failure to meet the standards of the
company. He was paid his salary for the period July 1 to 10, 2009, annual leave
credits, and one-month pay net of taxes. Thereafter, he was repatriated on July
11, 2009.8
On July 27, 2009, Bautista lodged a complaint with the arbitration branch of the
NLRC against Job Asia, Gopio, and Shorncliffe for illegal dismissal and monetary
claims. He claimed that he was terminated without just cause since there had
been no job evaluation conducted prior to Shorncliffe's. decision to dismiss him
from employment. As a result, he is entitled to the payment of his salaries for the
unexpired portion of his contract, or for 22 months. He alleged that while his
contract contained an understated monthly income of P40,000.00, he was
actually being paid the amount of P115,850.00 a month. Other than salaries,
Bautista also claimed unrealized employment benefits, nine days sick leave pay,
four weeks recreation leave pay, moral and exemplary damages, as well as
attorney's fees.9
Job Asia, Gopio, and Shorncliffe, for their part, argued that Bautista's
employment was terminated because he failed to meet Shorncliffe's standards.
To buttress their claim, they submitted in evidence the work performance
evaluation report on Bautista which listed the following observations:
1. He is not capable of performing the duties of a Project Manager.
2. He was unable to control or direct his workforce, equipment and
materials.
3. He is incompetent in the handling of his daily tasks.
4. [He] failed to provide any monthly reports both verbal and
written on the progress of his projects as a company
requirement.
5. He has never submitted any monthly progress claims as a
company requirement.
6. He demonstrated that he was technically incompetent and hides
himself when there is a problem.
7. He was not capable of running project site meetings with the
management and his staff.
8. He is a lazy person, incompetent in his decision making and has
poor communication skills.
9. He was unable to pass his knowledge to young PNG Engineers,
in fact they were teaching him instead.10
39
On January 7, 2010, the Labor Arbiter rendered his Decision finding Bautista to
have been illegally dismissed as the dismissal was not proven to be for a just
cause and Shorncliffe failed to observe due process. The Labor Arbiter held that
the work performance evaluation allegedly showing Bautista's inefficiency and
shortcomings in the performance of his job was made only on August 22, 2009,
or more than one month after Bautista's dismissal. Thus, the findings therein are
mere conclusions of fact, at best self-serving and merits no
consideration.11 Moreover, Shorncliffe failed to observe due process by not giving
Bautista the twin notices required by law. The latter was not notified of the
intention to dismiss him or the acts or omissions complained of. Neither was he
notified of the decision to dismiss him and given an opportunity to answer and
rebut the charges against him in between notices.12
The. Labor Arbiter also rejected the argument that Bautista's employment was
terminated on the basis of Article 4.3 of the employment contract by giving him
one-month salary in lieu of one month's written notice.13 The said provision
states:
4.3 The Employer or Employee may terminate this contract on other grounds.
The Employer should give one month's written notice of his intention to
terminate or in lieu thereof pay the Employee a sum equivalent to one
month's salary. The Employee may likewise terminate this Contract by
giving three months' notice to the Employer.14
The Labor Arbiter held that the stipulation providing for payment of one-month
salary in lieu of serving one month's notice of the employer's intention to
terminate Bautista's employment is contrary to our laws which uphold the sanctity
of workers' security of tenure. It also considered the employment contract as a
contract of adhesion which cannot militate against the rights of Bautista.15 He
thus ordered Job Asia, Gopio, and Shorncliffe to jointly and severally pay
Bautista his salaries for the unexpired portion of his contract of employment in
the amount of P2,548,700.00,16 moral and exemplary damages in the amount of
P300,000.00, and attorney's fees at P254,870.00.17
Undaunted, Job Asia, Gopio, and Shorncliffe filed an appeal with the NLRC. On
May 17, 2010, the NLRC issued its Decision setting aside the Decision of the
Labor Arbiter and dismissing the complaint for illegal dismissal and monetary
claims for lack of merit. Nevertheless, it ordered that Bautista be indemnified
nominal damages in the amount of P40,000.00.18
The NLRC held that the parties were bound by the terms and conditions of the
employment contract that bore the stamp of approval of the Philippine Overseas
Employment Administration (POEA). Consequently, it found that Bautista's
contract was pre-terminated in accordance with Article 4.3 thereof. Contrary to
the Labor Arbiter's finding, the NLRC upheld the reports of Shorncliffe's officers
pertaining to his unsatisfactory performance and incompetence, and thus
declared Bautista's employment to have been terminated for a just cause. It,
however, held that Bautista was not afforded due process, for which he should be
awarded indemnity pegged at the rate of his basic salary for one month as stated
in his employment contract, or P40,000.00. The NLRC found no bad faith or
malice on the part of Job Asia, Gopio, or Shorncliffe that would have been the
basis for an award of moral and exemplary damages and attorney's fees.19
Bautista filed a motion for reconsideration of the NLRC Decision, but it was
denied through a Resolution dated July 30, 2010. Hence, he filed a petition
for certiorari with the CA.
On August 31, 2012, the CA rendered its Decision annulling and setting aside the
NLRC Decision and reinstating that of the Labor Arbiter. It held that Article 4.3 of
the employment contract violates the provisions of the Labor Code on security of
tenure since it gives the employer the option to do away with the notice
requirement as long as he grants one-month salary to the employee in lieu
thereof. The provision deprives the employee of due process and violates his
right to be apprised of the grounds for his termination without giving him an
opportunity to defend himself and refute the charges against him. Moreover, the
term "other grounds" is all-encompassing and makes the employee susceptible
to arbitrary dismissal.20
The CA also held that Job Asia, Gopio, and Shorncliffe failed to substantiate their
claim that Bautista was discharged for just cause. Their claim that the latter was
dismissed for performing below standards was not backed by any proof Further,
Bautista was notified of his termination only four days prior to the intended date
of dismissal without evidence of an assessment of his performance and the
results thereof. Neither was he served a notice of any wrongdoing prior to the
service of the notice of his termination. The CA noted that the declarations of
Anthony B. Ponnampalam and Paul Thompson, officers of Shorncliffe, were
executed on October 31, 2009 and October 1, 2009, respectively, or more than
two months after the termination of Bautista's employment on July 10, 2009.
Further, the evaluation report made by Robert Aup, another Shorncliffe official,
was made only on August 22, 2009, and hence obviously an afterthought. Thus,
there being no sufficient cause to terminate Bautista's employment, his dismissal
is illegal. The CA thus upheld the Labor Arbiter's Decision and additionally
awarded Bautista full reimbursement of his placement fee with interest of
12% per annum.21
Thus, this petition where the Court is called upon to ultimately resolve two issues
that have been beleaguering the parties for more than eight years, to wit: whether
or not Bautista was illegally dismissed from employment, and whether or not he
is entitled to his monetary claims.
We uphold with modification the Decision of the CA.
I.
In 1995, Republic Act (R.A.) No. 8042, otherwise known as an "An Act to Institute
the Policies of Overseas Employment and Establish a Higher Standard of
Protection and Promotion of the Welfare of Migrant Workers, Their Families and
Overseas Filipinos in Distress, and for Other Purposes" was passed. More
popularly known as the Migrant Workers and Overseas Filipinos Act of 1995, this
40
law echoes the provision in the 1987 Constitution22 on protection of labor. Thus,
Section 2(b) thereof under "Declaration of Policies," states:
(b) The State shall afford full protection to labor, local and overseas, organized
and unorganized, and promote full employment and equality of employment
opportunities for all. Towards this end, the State shall provide adequate and
timely social, economic and legal services to Filipino migrant workers.
Moreover, Section 2(c) thereof provides:
(c) x x x The existence of the overseas employment program rests solely on the
assurance that the dignity and fundamental human rights and freedoms of the
Filipino citizens shall not, at any time, be compromised or violated. x x x
Accordingly, regulatory provisions may be read all throughout R.A. No. 8042 that
carry out the policy of the State to protect and promote the rights of Filipino
migrant workers. Employment agreements are verily more than contractual in
nature in the Philippines. The Philippine Constitution and laws guarantee special
protection to workers here and abroad.23 Thus, even if a Filipino is employed
abroad, he or she is entitled to security of tenure, among other constitutional
rights.24
In termination disputes or illegal dismissal cases, it has been established by
Philippine law and jurisprudence that the employer has the burden of proving that
the dismissal is for just and valid causes; and failure to do so would necessarily
mean that the dismissal was not justified and is, therefore, illegal.25 Taking into
account the character of the charges and the penalty meted to an employee, the
employer is bound to adduce clear, accurate, consistent, and convincing
evidence to prove that the dismissal is valid and legal.26 This is consistent with
the principle of security of tenure as guaranteed by the Constitution and
reinforced by Article 292(b)27 of the Labor Code of the Philippines,28 which
provides:
Art. 292. Miscellaneous Provisions x x x
(b) Subject to the constitutional right of workers to security of tenure and their
right to be protected against dismissal except for a just and authorized cause and
without prejudice to the requirement of notice under Article [298] of this Code, the
employer shall furnish the worker whose employment is sought to be terminated
a written notice containing a statement of the causes for termination and shall
afford the latter ample opportunity to be heard and to defend himself with the
assistance of his representative if he so desires in accordance with company
rules and regulations promulgated pursuant to guidelines set by the Department
of Labor and Employment. Any decision taken by the employer shall be without
prejudice to the right of the worker to contest the validity or legality of his
dismissal by filing a complaint with the regional branch of the National Labor
Relations Commission. The burden of proving that the termination was for a valid
or authorized cause shall rest on the employer. x x x29
Here, petitioner argues that there was justifiable cause for the termination of
Bautista's employment since the latter has fallen short of Shorncliffe's
employment and work standards. She cited the report of Shorncliffe's Chief
Executive Officer and Project Team Leader, Robert Aup, which detailed
Bautista's shortcomings, as well as the report of Paul Thompson, Supervising
Engineer of the Project to which Bautista was assigned, which mentioned the
latter's incompetence.30 Maintaining that the rights and obligations among the
Overseas Filipino Worker (OFW), the local recruiter or agent, and the foreign
employer or principal is governed by the employment contract which is the law
among them, petitioner also claims that Bautista's employment was validly
terminated even without notice as he was given the equivalent of one-month
salary in lieu thereof.31
The Court is not convinced.
As observed by the CA, the evaluation report of Robert Aup was made only on
August 22,2009, and the declaration of Paul Thompson was executed only on
October 1, 2009, which dates are beyond the date of termination of Bautista's
employment on July 10, 2009. The CA correctly concluded that these were made
as an afterthought in order to lend credence to the claim that the termination of
Bautista's employment was for a valid reason.32 In Skippers United Pacific, Inc. v.
Maguad,33 we held that the Master's Statement Report presented by therein
petitioners to corroborate their claim that the dismissal of therein respondents
was for just cause, i.e., incompetence, was issued 78 days34 after therein
respondents were repatriated to Manila and two months after the latter instituted
a complaint for illegal dismissal before the NLRC. Such report can no longer be a
fair and accurate assessment of therein respondents' competence as the same
was presented only after the complaint was filed. Its execution was a mere
afterthought in order to justify the dismissal of therein respondents which had
long been effected before the report was made; hence, such report is a self-
serving one.35
The Court thus finds that Bautista's incompetence as the alleged just cause for
his dismissal was not proven by substantial evidence.
II.
In addition, Bautista was not accorded due process. Consequently, the Court is
not convinced that he was legally dismissed.
The due process requirement is not a mere formality that may be dispensed with
at will. Its disregard is a matter of serious concern since it constitutes a safeguard
of the highest order in response to man's innate sense of justice. To meet the
requirements of due process, the employer must furnish the worker sought to be
dismissed with two written notices before termination of employment can be
legally effected, i.e.: (1) a notice which apprises the employee of the particular
acts or omissions for which his dismissal is sought; and (2) the subsequent notice
after due hearing which informs the employee of the employer's decision to
dismiss him.36
Here, Bautista was dismissed under Article 4.3 of the employment contract which
allegedly permits his employer, Shorncliffe, to terminate the contract on
unspecified "other grounds" by giving one month's written notice of its intention to
41
terminate, or in lieu thereof, to pay the employee a sum equivalent to one
month's salary.
Bautista was notified on July 6, 2009 that his services will be terminated effective
on the close of business hours on July 10, 2009, allegedly because his
performance was "unsatisfactory and did not meet the standards of the
Company."37 He was also paid one-month salary in lieu of one month's notice of
the termination of his employment.38 Surely, this cannot be considered
compliance with the two-notice requirement mandated by the Labor Code in
effecting a valid dismissal. The Labor Code requires both notice and hearing;
notice alone will not suffice. The requirement of notice is intended to inform the
employee concerned of the employer's intent to dismiss him and the reason for
the proposed dismissal. On the other hand, the requirement of hearing affords
the employee an opportunity to answer his employer's charges against him and
accordingly defend himself therefrom before dismissal is effected.39 In this case,
Bautista was not given a chance to defend himself. Five days after the notice was
served, he was repatriated. Clearly, he was denied his right to due process.
The CA aptly observed that Article 4.3 deprives the employee of his right to due
process of law as it gives the employer the option to do away with the notice
requirement provided that it grants one-month salary to the employee in lieu
thereof. It denies the employee of the right to be apprised of the grounds for the
termination of his employment without giving him an opportunity to defend
himself and refute the charges against him. Moreover, the term "other grounds" is
all-encompassing. It makes the employee susceptible to arbitrary dismissal. The
employee may be terminated not only for just or authorized causes but also for
anything under the sun that may suit his employer. Thus, the employee is left
unprotected and at the mercy of his employer, subjected to the latter's whims.40
We cannot sustain the validity of Article 4.3 of the employment contract as it
contravenes the constitutionally-protected right of every worker to security of
tenure.41
Bautista's employment was for a fixed period of 31 months.42 Article 4.3 took
back this period from him by rendering it in effect a facultative one at the option of
Shorncliffe, which may shorten that term at any time and for any cause
satisfactory to itself, to a one-month period or even less, by simply paying
Bautista a month's salary. The net effect of Article 4.3 is to render Bautista's
employment basically employment at the pleasure of Shorncliffe. The Court
considers that the provision is intended to prevent any security of tenure from
accruing in favor of Bautista even during the limited period of 31 months.43
To emphasize, overseas workers, regardless of their classification, are entitled to
security of tenure, at least for the period agreed upon in their contracts. This
means that they cannot be dismissed before the end of their contract terms
without due process.44 The law recognizes the right of an employer to dismiss
employees in warranted cases, but it frowns upon the arbitrary and whimsical
exercise of that right when employees are not accorded due process.45 If they
were illegally dismissed, the workers' right to security of tenure is violated.46
The law and jurisprudence guarantee to every employee security of tenure. This
textual and the ensuing jurisprudential commitment to the cause and welfare of
the working class proceed from the social justice principles of the Constitution
that the Court zealously implements out of its concern for those with less in life.
Thus, the Court will not hesitate to strike down as invalid any employer act that
attempts to undermine workers' tenurial security.47
Indeed, while our Civil Code recognizes that parties may stipulate in their
contracts such terms and conditions as they may deem convenient, these terms
and conditions must not be contrary to law, morals, good customs, public order or
policy.48 The employment contract between Shorncliffe and Bautista is governed
by Philippine labor laws. Hence, the stipulations, clauses, and terms and
conditions of the contract must not contravene our labor law provisions.
Time and again, we have he]d that a contract of employment is imbued with
public interest. The parties are not at liberty to insulate themselves and their
relationships from the impact of labor laws and regulations by simply contracting
with each other. Also, while a contract is the law between the parties, the
provisions of positive law that regulate such contracts are deemed included and
shall limit and govern the relations between the parties.49
In sum, there being no showing of any clear, valid, and legal cause for the
termination of Bautista's employment and that he was not afforded due process,
the law considers the matter a case of illegal dismissal for which Bautista is
entitled to indemnity. We uphold the Labor Arbiter's award of indemnity
equivalent to Bautista's salaries for the unexpired term of his employment
contract, and damages.
III.
Section 10 of R.A. No. 8042 provides that in case of termination of overseas
employment without just, valid or authorized cause as defined by law or contract,
the workers shall be entitled to the full reimbursement of his placement fee with
interest of 12% per annum, plus his salaries for the unexpired portion of his
employment contract or for three months for every year of the unexpired term,
whichever is less.
We declared the clause "or for three months for every year of the unexpired term,
whichever is less" unconstitutional in the 2009 case of Serrano v. Gallant
Maritime Services, Inc.,50 and again in the 2014 case of Sameer Overseas
Placement Agency, Inc. v. Cabiles,51 after the provision found its way again in
R.A. No. 1002252 which took effect in 2010. We held that the clause violated
substantive due process and the equal protection clause of the Constitution in
that it generated classifications among workers that do not rest on any real or
substantial distinctions that would justify different treatments in terms of the
computation of money claims resulting from illegal termination.53 Thus, we held
that the proper indemnity in illegal dismissal cases should be the amount
equivalent to the unexpired term of the employment contract. In this case, it is
42
Bautista's monthly salary of P115,850.0054 multiplied by 22 months, the
remaining term of his employment contractor a total amount of P2,548,700.00.
We also upheld the Labor Arbiter's award of moral and exemplary damages to
Bautista on the ground that his dismissal was without just and authorized cause,
in complete disregard of his right to due process of law, and done in bad faith, in
addition to being anti-Filipino and capricious.55 Likewise, we find the award of
attorney's fees proper. It is settled that when an action is instituted for the
recovery of wages, or when employees are forced to litigate and consequently
incur expenses to protect their rights and interests, the grant of attorney's fees is
legally justifiable.56
Petitioner's argument that she should not be held jointly and severally liable with
Shorncliffe for the payment of monetary awards to Bautista as she had no control
over the manner of implementation of the employment contract, she had no hand
whatsoever in Bautista's dismissal, and that her agency was extinguished as
soon as the employee was deployed to and have worked in Shorncliffe's
construction project in Papua New Guinea,57 has no merit.
In the first place, such joint and solidary liability is required prior to the issuance
of a license to petitioner to operate a recruitment agency. Thus, Section 1(f)(3),
Rule II, Part II of the 2002 POEA Rules and Regulations Governing the
Recruitment and Employment of Land-Based Overseas Workers provides:
RULE II
ISSUANCE OF LICENSE
Sec. 1. Requirements for Licensing. Every applicant for license to operate a
private employment agency shall submit a written application together with the
following requirements:
xxxx
f. A verified undertaking stating that the applicant:
xxxx
3) Shall assume joint and solidary liability with the employer for all claims
and liabilities which may arise in connection with the implementation of the
contract, including but not limited to payment of wages, death and disability
compensation and repatriations[.] (Emphasis supplied.)
Furthermore, Section 10 of R.A. No. 8042 provides:
Sec. 10. Money Claims. x x x
The liability of the principal/employer and the recruitment/placement
agency for any and all claims under this section shall be joint and
several. This provision shall be incorporated in the contract for overseas
employment and shall be a condition precedent for its approval. The performance
bond to be filed by the recruitment/placement agency, as provided by law, shall
be answerable for all money claims or damages that may be awarded to the
workers.If the recruitment/placement agency is a juridical being, the corporate
officers and directors and partners as the case may be, shall themselves be
jointly and solidarily liable with the corporation or partnership for the aforesaid
claims and damages. (Emphasis supplied.)
Consistent with the law and the POEA Rules, petitioner's joint and several liability
is incorporated in Bautista's employment contract with Shorncliffe, which states:
Article 1: This Employment Contract is executed and entered into by and
between:
A. EMPLOYER:
SHORNCLIFFE (PNG) LIMITED
(Name of Establishment)
xxxx
Represented in the Philippines:
JOB ASIA MANAGEMENT SERVICES
By: Mr. JAIME M. ARREO
(Managing Consultant)
and persons authorized by Agent Company who will be jointly and
severally responsible to [sic] compliance herewith:
and
B. EMPLOYEE: SALVADOR BUSTILLO BAUTISTA58
(Emphasis supplied.)
xxxx
Petitioner thus cannot evade liability by claiming that she did not have any control
over the foreign employer and had nothing to do with Bautista's dismissal,
because her liability is defined by law and contract.
We have held that the burden devolves not only upon the foreign-based
employer but also on the employment or recruitment agency to adduce evidence
to convincingly show that the worker's employment was validly and legally
terminated. This is because the latter is not only an agent of the former, but is
also solidarity liable with the foreign principal for any claims or liabilities arising
from the dismissal of the worker.59
R.A. No. 8042 is a police power measure intended to regulate the recruitment
and deployment of OFWs. It aims to curb, if not eliminate, the injustices and
abuses suffered by numerous OFWs seeking to work abroad.60 In Sameer, we
explained that the provision on joint and several liability in R.A. No. 8042 is in line
with the state's policy of affording protection to labor and alleviating workers'
plight. It assures overseas workers that their rights will not be frustrated by
difficulties in filing money claims against foreign employers. Hence, in the case of
overseas employment, either the local agency or the foreign employer may be
sued for all claims arising from the foreign employer's labor law violations. This
43
way, the overseas workers are assured that someone-at the very least, the
foreign employer's local agent-may be made to answer for violations that the
foreign employer may have committed. By providing that the liability of the foreign
employer may be "enforced to the full extent" against the local agent, the
overseas worker is assured of immediate and sufficient payment of what is due
them. The local agency that is held to answer for the overseas worker's money
claims, however, is not left without remedy. The law does not preclude it from
going after the foreign employer for reimbursement of whatever payment it has
made to the employee to answer for the money claims against the foreign
employer.61

WHEREFORE, the petition is DENIED. Petitioner is ordered to pay respondent:

1. Reimbursement of respondent's placement fee with interest at the rate of
12% per annum;
2. Two Million Five Hundred Forty-Eight Thousand Seven Hundred Pesos
(P2,548,700.00) representing Bautista's salaries for the unexpired
portion of his contract;
3. Moral damages in the amount of One Hundred Fifty Thousand Pesos
(P150,000.00);
4. Exemplary damages in the amount of One Hundred Fifty Thousand
Pesos (P150,000.00); and
5. Attorney's fees at the rate of 10% of the monetary award exclusive of
damages and reimbursement of placement fee in the amount of Two
Hundred Fifty-Four Thousand Eight Hundred Seventy Pesos
(P254,870.00).
All monetary awards and damages (except reimbursement of placement fee)
shall earn 6% interest from finality of this judgment until fully paid.

SO ORDERED.

44