January 17, 2018

G.R. No. 219435

ALLIED BANKING CORPORATION, now merged with PHILIPPINE NATIONAL BANK, Petitioner

vs.
REYNOLD CALUMPANG, Respondent

DECISION

VELASCO, J.:

The Case

Before the Court is a Petition for Review on Certiorari filed under Rule 45 of the Rules of Court for
the reversal and setting aside of the Decision  dated September 12, 2014 and the Resolution  dated
1 2

June 9, 2015 of the Court of Appeals (CA) - Cebu City in CA-G.R. CEB SP No. 02906, which
affirmed the findings of the National Labor Relations Commission (NLRC) and of the Labor Arbiter,
declaring respondent to have been illegally dismissed by petitioner.

The Facts

Petitioner Allied Banking Corporation  ("Bank") and Race Cleaners, Inc. ("RCI"), a corporation
3

engaged in the business of janitorial and manpower services, had entered into a Service Agreement
whereby the latter provided the former with messengerial, janitorial, communication, and
maintenance services and the personnel therefor. 4

On September 28, 2003, respondent Reynold Calumpang was hired as a janitor by RCI and was
assigned at the Bank's Tanjay City Branch ("the Branch"). He was tasked to perform janitorial work
and messengerial/errand services. His job required him to be out of the Branch at times to nm
errands such as delivering statements and checks for clearing, mailing letters, among others. 5

Petitioner, however, observed that whenever respondent went out on errands, it takes a long time for
him to return to the Branch. It was eventually discovered that during these times, respondent was
also plying his pedicab and ferrying passengers. Petitioner also found out through several clients of
the Branch who informed the Bank Manager, Mr. Oscar Infante, that respondent had been borrowing
money from them. Because of these acts, Mr. Infante informed respondent that his services would
no longer be required at the Branch. 6

Disgruntled, respondent thereafter filed a complaint for illegal dismissal and underpayment of wages
against petitioner before the NLRC,  which was docketed as RAB VII-07-0094-2005-D.
7 8

In his position paper, respondent asserted that the four-fold test of employer-employee relationship
is present between him and the Bank.  First, he averred that he was a regular employee of the Bank
9

assigned as a Janitor of the Branch with a salary of ₱4,200 payable every 15 days each month, and
assigned such other tasks essential and necessary for the Bank's business. 10

He alleged that petitioner engaged his services and exercised direct control and supervision over
him through the Branch Head, Oscar Infante, not only as to the results of his work but also as to the
means and methods by which the same was to be accomplished. According to respondent, Infante
gives the direct orders on the work to be done and accomplished during working days, such as
"m[o]pping, cleaning the comfort room of the [B]ank, arrang[ing] furniture and fixture, bank
documents, throw[ing] garbage/waste disposal, cleaning the windows, tables and teller cage" as well
as directing him to "do messengerial/errand services such as mailing of letters, delivery of bank
statements and deliver[ing] checks for clearing." 11

As regards the payment of salary, respondent claimed that it was the Branch that directly paid his
salaries and wages every "quincina."  As for the power of dismissal, respondent further alleged that
12

it was petitioner Bank, through its Branch Head, who terminated his services. 13

For its part, petitioner alleged that respondent was not its employee, but that of RCI, with which it
had entered into a Service Agreement to provide "messengerial, janitorial, communications and
maintenance services and the personnel therefor."  It claimed that while respondent was required to
14

be out of the Branch at times to accomplish his tasks, it was observed that whenever he went out on
these errands, he would take a long time to return to the Branch. Petitioner eventually discovered
that during these times, respondent was "also plying his pedicab and ferrying passengers." Aside
from this, petitioner averred that several clients of the Branch informed Infante that respondent had
been borrowing money from them "owing to his familiarity with said clients." Upon discovering these
incidents, petitioner "had no choice but to have complainant relieved and replaced." Accordingly,
Infante informed respondent that his services would no longer be required by the Branch. 15

Petitioner denied the existence of any employer-employee relationship between itself and
respondent. It asserted that respondent was clearly an employee of RCI by virtue of the Service
Agreement which clearly indicated in Article XI thereof that there would be no employer-employee
relationship between RCI's employees and the Bank.  It further averred that RCI is a qualified job
16

contractor because of its capitalization and the fact that it exercised control and supervision over its
employees deployed at the branches of the petitioner in accordance with Rule VIII-A, Sec. 4, pars.
(d) and (e) of the Omnibus Rules Implementing the Labor Code. 17

Furthermore, petitioner argued that it was merely exercising its prerogative under the Service
Agreement to seek the replacement or relief of any personnel assigned by RCI when the Branch
Head informed respondent that his services would no longer be required at the Branch. According to
petitioner, this decision to replace respondent was not equivalent to termination of employment,
especially since it was neither whimsical nor arbitrary.  Thus, petitioner concludes that, in the
18

absence of any employer-employee relationship between the parties, respondent had no cause of
action against petitioner for illegal dismissal, damages and other claims. 19

Ruling of the Labor Arbiter

In its Decision  dated March 28, 2006, the Labor Arbiter ruled in favor of respondent, the dispositive
20

portion of which reads:

WHEREFORE, foregoing considered, complainant is hereby declared to be an employee of

respondent Allied Banking Corporation. It is declared further that complainant has been illegally
dismissed. Respondent Allied Banking Corporation is hereby ordered to reinstate complainant to his
former position without loss of seniority rights or privileges, with full backwages from the time his
salary was withheld until his actual reinstatement, which is tentatively computed in the amount of
₱37,800.00. Should reinstatement be unfeasible for valid reasons, respondent is ordered to pay the
complainant separation pay of one month salary per year of service, a fraction of six months is
considered as one year which is computed in the amount of ₱46,200.

SO ORDERED. 21
The Labor Arbiter held that there was an employer-employee relationship between petitioner and
respondent, based on the following findings: (a) Respondent rendered services to petitioner for
eleven (11) unbroken years; (b) There was no evidence of a Service Agreement between petitioner
and RCI; (c) There was no evidence of a request for replacement of respondent made by petitioner
with RCI; (d) Respondent was directly paid by petitioner and not through RCI; (e) Respondent's work
was directly controlled and supervised by petitioner; (f) It was petitioner who terminated the services
of respondent with no participation of RCI whatsoever; and (g) RCI disowned any employment
relationship with respondent.22

Considering its finding of the existence of an employer-employee relationship between petitioner and
respondent, the Labor Arbiter further ruled that the reason and manner by which respondent was
terminated fell short of the requirements of the law since due process was not observed.
Accordingly, respondent was declared to have been illegally dismissed and ordered to be reinstated
without loss of seniority or privileges, with full backwages.23

Aggrieved, petitioner immediately filed a Notice of Appeal and Memorandum of Appeal with the
NLRC, which was docketed as NLRC Case No. V-000628-2006. 24

Ruling of the National Labor Relations Commission

The NLRC affirmed the decision of the Labor Arbiter in its Decision dated February 16, 2007, to wit:

WHEREFORE, premises considered, the appeal of respondent Allied Banking Corporation is hereby
DISMISSED for lack of merit and the appealed Decision is AFFIRMED.

SO ORDERED. 25

Agreeing with the Labor Arbiter's findings, the NLRC ruled that petitioner exercised all the elements
of an employer-employee relationship through the payment of wages, control and supervision over
complainant's work and the power of dismissal.  The NLRC discredited petitioner's argument that it
26

merely exercised its prerogative to seek for a replacement or relief of any personnel assigned by
RCI absent any evidence that it sought respondent's relief from RCI. 27

Petitioner moved for the reconsideration of the NLRC Decision,  but the same was denied in a
28

Resolution dated May 17, 2007.  Thus, petitioner elevated the matter to the CA in a petition which
29

was docketed as CA-G.R. SP No. 02906. 30

Ruling of the Court of Appeals

In the assailed Decision dated September 12, 2014, the CA denied the petition and upheld the
rulings of the Labor Arbiter and the NLRC. The dispositive portion of the assailed Decision reads:

WHEREFORE, premises considered, the petition is hereby DENIED. The NLRC Decision dated 16
February 2007 and the Resolution dated 17 May 2007, in RAB VII Case No. 07-0094-2005-D, is
AFFIRMED.

The Labor Arbiter is hereby ordered to re-compute the award of backwages and separation pay in
accordance with the above disquisitions.

SO ORDERED. 31
The CA ruled that RCI is a labor-only contractor. It applied the test of independent contractorship
that "whether one claiming to be an independent contractor has contracted to do work according to
his own methods and without being subject to the control of the employer, except only as to the
results of the work" in determining that RCI merely served as an agent of petitioner bank and that
respondent was truly an employee of petitioner. 32

As to the issue of the propriety of respondent's dismissal, the CA affirmed the findings of the Labor
Arbiter and the NLRC that petitioner Bank failed to give respondent ample opportunity to contest the
legality of his dismissal since no notice of termination was given to him. Consequently, the CA
affirmed the award of reinstatement without loss of seniority rights and other privileges, and his full
backwages inclusive of allowances and other benefits or their monetary equivalent, computed from
the time his compensation was withheld up to the time of his actual reinstatement.

Nevertheless, finding that there were strained relations between petitioner bank and respondent, the
CA ordered the award of separation pay in lieu of reinstatement, equivalent to one (1) month salary
for every year of service, with a fraction of a year of at least six (6) months to be considered as one
(1) whole year, to be computed from the date he was hired until the finality of the decision, earning a
legal interest at the rate of six percent (6%) per annum until full satisfaction.

Petitioner filed a Motion for Reconsideration (of the Decision Dated 12 September 2014) with Entry
of Appearance and Motion for Substitution of Party dated October 16, 2014,  but it was denied in the
33

assailed Resolution dated June 9, 2015.

Hence, this petition.

The Petition

Petitioner asserts that the CA erred in declaring RCI as a labor-only contractor. It claims that RCI
carried an independent business as reflected in the Service Agreement that petitioner bank entered
with RCI. Aside from the substantial capitalization of RCI, petitioner bank avers that RCI exercises
control and supervision over its personnel deployed at its branches. Petitioner bank further argues
that even assuming that respondent's work is related to its business, such work is not necessary in
the conduct of the bank's principal business. Finally, petitioner contends that it does not have the
power to dismiss respondent and control his work based on the Service Agreement with RCI.

Nevertheless, petitioner bank defends its right to ask for respondent's replacement under Article IV
of the Service Agreement. Petitioner reiterates that respondent's acts of borrowing money from the
bank's clients and plying/ferrying passengers for a fee during his hour of duty constitute conduct
which is prejudicial to the interest of petitioner. Thus, in accordance with the Service Agreement,
petitioner bank merely exercised its right to change or have respondent replaced instead of imposing
disciplinary measures on him. According to petitioner, this act was erroneously construed by the CA
as an exercise of the power of control over or of dismissal of respondent.

In a Resolution  dated September 28, 2015, We required respondent to comment on the petition
34

within ten (10) days from notice. However, respondent has failed to file any comment thereon to
date. Accordingly, respondent is deemed to have waived his right to comment on the petition and the
Court shall now proceed to rule on its merits.

The Issues

Petitioner raises the following issues:

 1. Whether or not the CA erred in declaring that RCI is a laboronly contractor.

2. Whether or not the CA erred in declaring that there exists an employer-employee

relationship between the Bank and respondent.

3. Whether or not the CA erred in (i) declaring that respondent had been illegally dismissed,
and (ii) granting his monetary claims.

Essentially, the principal issue is whether the CA erred in affirming the NLRC Decision which
declared that RCI is a labor-only contractor, and in ordering the Labor Arbiter to re-compute the
award of backwages and separation pay.

The Court's Ruling

The petition is partly meritorious.

RCI is a labor-only contractor

Article 106 of the Labor Code provides the relations which may arise between an employer, a
contractor, and the contractors' employees, thus:

ART. 106. Contractor or subcontracting. - Whenever an employer enters into a contract with another
person for the performance of the former's work, the employees of the contractor and of the latter's
subcontractor, if any, shall be paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work performed under the contract, in the same
manner and extent that he is liable to employees directly employed by him.

The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the
contracting out of labor to protect the rights of workers established under the Code. In so prohibiting
or restricting, he may make appropriate distinctions between labor-only contracting and job
contracting as well as differentiations within these types of contracting and determine who among
the parties involved shall be considered the employer for purposes of this Code, to prevent any
violation or circumvention of any provision of this Code.

There is labor-only contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such person are performing activities which are
directly related to the principal business of such employer. In such cases, the person or intermediary
shall be considered merely as an agent of the employer who shall be responsible to the workers in
the same manner and extent as if the latter were directly employed by him.

Permissible job contracting or subcontracting has been distinguished from labor-only contracting
such that permissible job contracting or subcontracting refers to an arrangement whereby a principal
agrees to put out or farm out to a contractor or subcontractor the performance or completion of a
specific job, work or service within a definite or predetermined period, regardless of whether such
job, work or service is to be performed or completed within or outside the premises of the principal,
while labor-only contracting, on the other hand, pertains to an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a job, work or service for a
principal.
35

These distinctions were laid out in the Omnibus Rules Implementing the Labor Code thus:

SECTION 8. Job Contracting. - There is job contracting permissible under the Code if the following
conditions are met:

(a) The contractor carries on an independent business and undertakes the contract work on
his own account under his own responsibility according to his own manner and method, free
from the control and direction of his employer or principal in all matters connected with the
performance of the work except as to the results thereof; and

(b) The contractor has substantial capital or investment in the form of tools, equipment,
machineries, work premises, and other materials which are necessary in the conduct of his
business.

SECTION 9. Labor-only contracting. - (a) Any person who undertakes to supply workers to an
employer shall be deemed to be engaged in labor-only contracting where such person:

(1) Does not have substantial capital or investment in the form of tools, equipment, machineries,
work premises and other materials; and

(2) The workers recruited and placed by such person are performing activities which are directly
related to the principal business or operations of the employer in which workers are habitually
employed.

(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as
contractor shall be considered merely as an agent or intermediary of the employer who shall
be responsible to the workers in the same manner and extent as if the latter were directly
employed by him.

(c) For cases not falling under this Rule, the Secretary of Labor and Employment shall
determine through appropriate orders whether or not the contracting out of labor is
permissible in the light of the circumstances of each case and after considering the operating
needs of the employer and the rights of the workers involved. In such case, he may prescribe
conditions and restrictions to insure the protection and welfare of the workers.

As a general rule, a contractor is presumed to be a labor-only contractor, unless such contractor

overcomes the burden of proving that it has the substantial capital, investment, tools and the like. 36

In the present case, petitioner failed to establish that RCI is a legitimate labor contractor as
contemplated under the Labor Code. Except for the bare allegation of petitioner that RCI had
substantial capitalization, it presented no supporting evidence to show the same. Petitioner never
submitted financial statements from RCI. Even the Service Agreement allegedly entered into
between petitioner and RCI, upon which petitioner relied to show that RCI was an independent
contractor, had lapsed in August 2005, as admitted by petitioner in its Position Paper.  Notably,
37

petitioner failed to allege when the Service Agreement was executed, thus, making its claim that
respondent was hired by RCI and assigned to petitioner in 2003 even more ambiguous.
Aside from this, petitioner's claim that RCI exercised control and supervision over respondent is
belied by the fact that petitioner admitted that its own Branch Manager had informed respondent that
his services would no longer be required at the Branch.  This overt act shows that petitioner had
38

direct control over respondent while he was assigned at the Branch. Moreover, the CA is correct in
finding that respondent's work is related to petitioner's business and is characterized as part of or in
pursuit of its banking operations.

An employer-employee relationship exists between petitioner and respondent

A finding that a contractor is a labor-only contractor, as opposed to permissible job contracting, is

equivalent to declaring that there is an employer-employee relationship between the principal and
the employees of the supposed contractor, and the labor-only contractor is considered as a mere
agent of the principal, the real employer. 39

In this case, petitioner bank is the principal employer and RCI is the labor-only contractor.
Accordingly, petitioner and RCI are solidarily liable for the rightful claims of respondent.

Petitioner had valid grounds to dismiss respondent

It is an established principle that the dismissal of an employee is justified where there was a just
cause and the employee was afforded due process prior to dismissal.  The burden of proof to
40

establish these twin requirements is on the employer, who must present clear, accurate, consistent,
and convincing evidence to that effect. 41

The Labor Arbiter haphazardly declared that respondent was illegally dismissed when it ruled that
respondent's misconduct was not established since due process was not observed.  The NLRC also
42

ruled in a similar manner and failed to address the grounds for termination raised by petitioner,
specifically respondent's transgressions.  While the CA addressed the aspect of substantive due
43

process, it simply disregarded the grounds raised by petitioner and concluded that petitioner failed to
discharge the burden of proof that valid or authorized causes under the Labor Code exist. 44

We, however, find that petitioner's basis for terminating respondent rests on valid and legal grounds.
At the very first instance, petitioner had already stressed in its position paper that respondent was
found committing conduct prejudicial to the interests of the Branch when it was discovered that 1)
respondent was plying his pedicab and ferrying passengers during his work hours and 2) he had
been borrowing money from several clients of the Branch.

Nowhere in the records was it shown that respondent denied these imputations against him.  Absent 1âwphi1

any denial on the part of respondent, the Court is constrained to believe that respondent's silence
can be construed as an admission of these accusations against him.

The very nature of the actions imputed against respondent is serious and detrimental to the Bank's
operations and reputation. Thus, petitioner's decision to relieve respondent from his employment is
justified.

Respondent's right to procedural due process was violated

Nevertheless, We agree with the findings of the appellate court that there were procedural lapses in
the dismissal of respondent.
The importance of procedural due process was expounded by this Court in King of Kings Transport,
Inc. v. Mamac, thus:

(1) The first written notice to be served on the employees should contain the specific causes or
grounds for termination against them, and a directive that the employees are given the opportunity to
submit their written explanation within a reasonable period. Reasonable opportunity under the
Omnibus Rules means every kind of assistance that management must accord to the employees to
enable them to prepare adequately for their defense. This should be construed as a period of at
least five calendar days from receipt of the notice x x x. Moreover, in order to enable the employees
to intelligently prepare their explanation and defenses, the notice should contain a detailed narration
of the facts and circumstances that will serve as basis for the charge against the employees. A
general description of the charge will not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds under Art. 288 [of the Labor
Code] is being charged against the employees.

(2) After serving the first notice, the employees should schedule and conduct a hearing or
conference wherein the employees will be given the opportunity to (1) explain and clarify their
defenses to the charge against them; (2) present evidence in support of their defenses; and (3) rebut
the evidence presented against them by the management. During the hearing or conference, the
employees are given the chance to defend themselves personally, with the assistance of a
representative or counsel of their choice x x x.

(3) After determining that termination is justified, the employer shall serve the employees a written
notice of termination indicating that:

(1) all the circumstances involving the charge against the employees have been considered; and (2)
grounds have been established to justify the severance of their employment.  (emphasis in the
45

original)

In the present case, it is uncontested that petitioner failed to give respondent ample opportunity to
contest the legality of his dismissal since he was neither given a notice to explain nor a notice of
termination. The first and second notice requirements have not been properly observed; thus,
respondent's dismissal, albeit with valid grounds, is tainted with illegality.

The award of backwages and separation pay is deleted but respondent is entitled to nominal
damages

Considering that there were valid and substantive grounds to terminate respondent's employment,
the award of backwages and separation pay is deleted. However, petitioner's violation of
respondent's right to statutory procedural due process warrants the payment of indemnity in the form
of nominal damages.

Nominal damages may be awarded to a plaintiff whose right has been violated or invaded by the
defendant, for the purpose of vindicating or recognizing that right, and not for indemnifying the
plaintiff for any loss suffered by him. Its award is thus not for the purpose of indemnification for a loss
but for the recognition and vindication of a right.
46

In fixing the amount of nominal damages whose determination is addressed to our sound discretion,
the Court should take into account several factors surrounding the case, such as: (1) the employer's
financial, medical, and/or moral assistance to the sick employee; (2) the flexibility and leeway that
the employer allowed the sick employee in performing his duties while attending to his medical
needs; (3) the employer's grant of other termination benefits in favor of the employee; and (4)
whether there was a bona fide attempt on the part of the employer to comply with the twin-notice
requirement as opposed to giving no notice at all.
47

Based on the factual considerations of the present case, We deem it appropriate to award nominal
damages in the amount of Thirty Thousand Pesos (₱30,000) in favor of respondent as a result of
petitioner's act of violating his right to procedural due process.

WHEREFORE, the petition is hereby PARTIALLY GRANTED. The Decision dated September 12,

2014 and the Resolution dated June 9, 2015 of the Court of Appeals-Cebu City in CA-G.R. CEB SP
No. 02906 are hereby AFFIRMED with MODIFICATION. Since Race Cleaners Inc. is a labor-only
contractor, petitioner Allied Banking Corporation now merged with Philippine National Bank is
declared to be the employer of respondent Reynold Calumpang, whose dismissal is declared to be
substantively valid for being based on sufficient and valid grounds. However, he was denied his right
to procedural due process for lack of the required twin notices to explain and of dismissal.

Consequently, petitioner is ordered to pay respondent nominal damages in the amount of ₱30,000
for its non-compliance with procedural due process.

SO ORDERED.

G.R. No. 225125, June 06, 2018

MARLON L. ARCILLA, Petitioner, v. ZULISIBS, INC., PIANDRE SALON, AND

ROSALINDA FRANCISCO, Respondents.

RESOLUTION

CARPIO, J.:

The Case

This is a petition for review to set aside the 10 February 2016  Decision1 of the
Court of Appeals in CA-G.R. SP No. 141953 which affirmed with modifications the
Resolutions dated 30 April 20152 and 26 June 20153 of the National Labor Relations
Commission (NLRC), Third Division, in NLRC LAC No. 04-001028-15/NLRC NCR No.
10-12582-14.

The Facts

Respondent Zulisibs, Inc. (Zulisibs) is a corporation organized and existing under

Philippine laws with respondent Rosalinda Francisco (Francisco) as its President and
Chief Executive Officer. Zulisibs operates respondent Piandre Salon (Piandre), an
establishment engaged in the operation of beauty salons.

Petitioner Marlon L. Arcilla (Marlon) was hired by Piandre on 8 February 2000 and
was assigned to the Alabang, Muntinlupa City branch. Maricel Arcilla (Maricel),
Marlon's wife, was hired on 12 November 2000 and was assigned to the Salcedo
Village, Makati City branch. After several years, both Marlon and Maricel were
promoted as senior hair stylists earning a monthly salary of P11,672.00 plus
commissions from customers and sale of products.

Sometime in September 2014, Zulisibs, through its officers, received information

that Marlon was establishing a beauty salon somewhere in Daang Hari, Alabang,
Muntinlupa City, near the Piandre Salon where Marlon was working.

On 6 September 2014, Marlon received a notice from Piandre and Francisco placing
Marlon under preventive suspension from 6 to 14 September 2014 and requiring
him to appear on 12 September 2014 at Francisco's office in Sta. Ana, Manila.

During the 12 September 2014 investigative hearing, Marlon was accused of,
among other things, being involved in the opening of a salon near Piandre Alabang.
Marlon denied that he had an agreement or contract with the owner of the salon
along Daang Hari, Alabang. However, he admitted the following: (1) that he
extended help to the salon owner who happens to be his brother-in-law; (2) that he
called up two former employees of Piandre and recommended them to his brother-
in-law; and (3) that he gave P50,000.00 to the salon owner which amount was a
portion of the P250,000.00 loan he borrowed from the employees' cooperative of
Piandre.4

Further investigation revealed that Marlon was often absent from work and
whenever he was working, he would entertain phone calls, thus, disrupting his
work. He would be absent on days when he would be the only stylist available.
Francisco and other supervisors of Piandre verified the existence of a new salon
along Daang Hari, Alabang and alleged that "the interiors of said salon, already with
equipment, mirrors and chairs, [sic] all set to operate, with towels folded and
presented the 'Piandre' way."5 They also learned from neighboring establishments
that the salon was set to open on 8 September 2014.

On 11 September 2014, Maricel received a notice from Piandre and Francisco,

asking her to explain her alleged involvement with her husband, Marlon, in setting
up a salon along Daang Hari, Alabang and requiring her to appear on 13 September
2014 at the Sta. Ana office. On 14 September 2014, Maricel received a notice
placing her under preventive suspension from 14 September to 13 October 2014.

Marlon received a copy of his notice of termination on 14 September 2014. Maricel

received her notice of termination on 26 September 2014. Both were found guilty of
violating Piandre's Code of Discipline 3F No. 2: Pagkawala ng tiwala dahil sa
ginawang masama.

Subsequently, Marlon and Maricel filed two separate complaints6 for illegal

dismissal, underpayment of wages, non-payment of overtime pay, service incentive
leave, 13th month pay, Emergency Cost of Living Allowance, and separation pay,
and illegal suspension, with prayer for moral and exemplary damages, and
attorney's fees.
 The Ruling of the Labor Arbiter

On 9 March 2015, the Labor Arbiter rendered a Decision7 dismissing Marlon and

Maricel's complaints for lack of merit. The Labor Arbiter held that:

WHEREFORE, the complaint[s] for illegal dismissal and x x x money claims [are]
DISMISSED for lack of merit.8

The Ruling of the NLRC

On 30 April 2015, the NLRC denied Marlon and Maricel's appeal and affirmed the
Labor Arbiter's decision. The NLRC held that:

WHEREFORE, premises considered, Complainants-Appellants' appeal is hereby

DENIED. The March 9, 2015 Decision of Labor Arbiter Gaudencio P. Demaisip, Jr. is
hereby AFFIRMED.9

On 26 June 2015, Marlon and Maricel's Motion for Reconsideration10 was denied by

the NLRC for lack of merit, holding that "The resolution of [the] Commission dated
April 30, 2015 STANDS undisturbed."11

The Ruling of the Court of Appeals

On 10 February 2016, Marlon and Maricel's petition for certiorari under Rule 65 was
partially granted. Marlon's termination was held to be valid. As to Maricel, the Court
of Appeals held that the NLRC and the Labor Arbiter erred in upholding the legality
of her dismissal. The dispositive portion of the Decision12 reads:

WHEREFORE, the petition is PARTIALLY GRANTED. The Resolutions dated April 30,
2015 and June 26, 2015 of public respondent National Labor Relations Commission,
Third Division, in NLRC LAC No. 04-001028-15/NLRC NCR No. 10-12582-14 are
hereby AFFIRMED with MODIFICATIONS, in that the private respondents are
ORDERED to pay MARICEL ARCILLA the following:

1) Backwages and all other benefits from September 26, 2014 until finality of this Decision;
2) Separation pay equivalent to one (1) month salary for every year of service;
3) Moral and exemplary damages in the amount of Php 50,000.00
4) Attorney's fees equivalent to ten percent (10%) of the total monetary award; and
5) Legal interest of six percent (6%) per annum on the total monetary awards from the
finality of this Decision until full payment thereof.
The appropriate Computation Division of the National Labor Relations Commission is
hereby ordered to COMPUTE and UPDATE the award as herein determined WITH
DISPATCH.

All other aspects of the assailed Resolutions STAND.

SO ORDERED.13

The Issues

Marlon presents the following issues:

1. Whether the Court of Appeals erred in upholding the two resolutions of the NLRC,
finding Marlon's dismissal to be valid and for just cause, and effected after due
notice and hearing; and

2. Whether the Court of Appeals gravely erred in upholding the two resolutions of
the NLRC, finding that Marlon was not entitled to his money claims.

The Ruling of this Court

We deny the petition.

Dismissals under the Labor Code have two facets: the legality of the act of
dismissal, which constitutes substantive due process; and the legality of the
manner of dismissal, which constitutes procedural due process.14

In this case, we do not dispute the findings of the Labor Arbiter, the NLRC, and the
Court of Appeals that the manner of Marlon's dismissal was legal and in accordance
with law.15 The requirement of procedural due process was met when Marlon was
served with a first written notice containing the specific causes or grounds for his
termination, when Marlon was called to attend an investigative hearing to explain
his side, and when Marlon was served with a second written notice containing the
justification for his termination.

Thus, the only issue to be resolved is the legality of the act of dismissal by re-
examining the facts and evidence on record. Given that this Court is not a trier of
facts, and the scope of its authority under Rule 45 of the Rules of Court is confined
only to errors of law and does not extend to questions of fact, which are for labor
tribunals to resolve, one of the recognized exceptions to the rule is when the factual
findings and conclusion of the labor tribunals are contradictory or inconsistent with
those of the Court of Appeals.16 In this case, however, the factual findings and
conclusion of the labor tribunals and the Court of Appeals regarding Marlon's
dismissal are consistent and one. As to Maricel, the decision in her favor was not
appealed to us anymore. Thus, the decision of the Court of Appeals insofar as
Maricel is concerned is final and executory.

Respondents Zulisibs, Francisco, and Piandre alleged that Marlon committed serious
misconduct or willful disobedience of the company's lawful orders, and of fraud or
willful breach of the trust reposed in him by the company when he helped his
brother-in-law open a salon along Daang Hari, Alabang. They justified Marlon's
dismissal by citing paragraphs (a) and (c), Article 297 of the Labor Code.17 The
provision reads:

Article 297. TERMINATION BY EMPLOYER.  An employer may terminate an employee

for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders
of his employer or representative in connection with his work.

(c) Fraud or willful breach by the employee of the trust reposed in him by his
employer or duly authorized representative.

The Labor Arbiter, the NLRC, and the Court of Appeals all held that the respondents
presented substantial evidence to justify Marlon's dismissal. We affirm all the
rulings. We adopt in toto the Court of Appeals' decision with regard to Marlon's
dismissal. It held:

From the facts and circumstances obtaining with respect to petitioner Marlon Arcilla,
there exists a valid cause in terminating his employment. It was clearly stated in
paragraph 8 of the Agreement or "Kasunduan"  signed by petitioners that they are
prohibited from setting up or being involved in a business similar to that of private
respondents' during the course of their employment. Considering that the
petitioners have neither controverted nor denied the existence of
the Kasunduan, they are therefore bound by the terms and conditions thereof.
Petitioners cannot likewise deny the existence of the Code of Discipline and feign
ignorance of the offense they committed and its corresponding penalty by holding
that the private respondents did not present a copy of said Code in the proceedings
below. They are deemed to have acknowledged the existence of said Code and
presumed to have understood the provisions contained therein when they signed
the Kasunduan and agreed to abide by the Code of Discipline and the rules and
regulations of the company in paragraph 2 of their agreement. As private
respondents' trusted Senior Hairstylists for quite a number of years, it is
incumbent upon them to have read and understood its provisions and be
fully aware of the prohibitions and penalties imposed upon erring
employees.

Collorarily, as briefly summed up by the public respondent, petitioners were later

discovered to be involved in setting up another salon near the private respondents'
salon in Alabang, albeit the involvement was only indirect by means of extending a
Php50,000.00 financial assistance to the owner of the new salon who happens to be
the brother-in-law of Marlon or his wife Maricel's brother. We agree with public
respondent that it is immaterial whether the new salon was under the petitioners'
name or not, or that they established a salon of their own. The important fact
remains that petitioner Marlon made an admission that he gave funds to
his brother-in-law for the new salon in Alabang which directly competes
with the business of his employer. It is not disputed that the new beauty
salon is located less than a kilometer away from Piandre Salon in Alabang.

Furthermore, Marlon's admission susbtantially proves two things: 1) that a new

salon has indeed been established; and 2) that he willfully disobeyed his contract of
employment with the private respondents. His involvement in setting up a
competing salon, which albeit indirect, constitutes serious misconduct
because of his blatant disregard [of] the terms and conditions of his
contract/agreement with the private respondents. His act of allowing
himself to be involved with his brother-in-law's business displays an act of
disloyalty to the company which is likewise sufficient to warrant his
dismissal for loss of trust and confidence. To our mind, his apology in his
written letter to private respondent Francisco [was] a mere afterthought after
realizing the gravity of his offense after he became the subject of an investigation
by the private respondents. Substantial proof, and not clear and convincing
evidence or proof beyond reasonable doubt, is a sufficient basis for the imposition
of any disciplinary action upon the employee. The standard of substantial evidence
is satisfied where the employer has reasonable ground to believe that the employee
is responsible for the misconduct that renders the latter unworthy of the trust and
confidence demanded by his or her position.18 (Emphasis supplied)

All told, there is sufficient basis to dismiss Marlon on the grounds of serious
misconduct or willful disobedience of the company's lawful orders, and of fraud or
willful breach of the trust reposed in him by the company when he helped his
brother-in-law open a salon along Daang Hari, Alabang. The Court of Appeals acted
in accordance with the evidence on record and case law when it affirmed and
upheld the resolutions of the NLRC.

WHEREFORE, the petition is DENIED for lack of merit.

SO ORDERED.

G.R. No. 212003, February 28, 2018

PHILIPPINE SPAN ASIA CARRIERS CORPORATION (FORMERLY SULPICIO

LINES, INC.), Petitioner, v. HEIDI PELAYO, Respondent.

DECISION
 LEONEN, J.:

"Not every inconvenience, disruption, difficulty, or disadvantage that an employee

must endure sustains a finding of constructive dismissal."1 It is an employer's right
to investigate acts of wrongdoing by employees. Employees involved in such
investigations cannot ipso facto claim that employers are out to get them. Their
involvement in investigations will naturally entail some inconvenience, stress, and
difficulty. However, even if they might be burdened - and, in some cases, rather
heavily so - it does not necessarily mean that an employer has embarked on their
constructive dismissal.

This resolves a Petition for Review on Certiorari2 under Rule 45 of the 1997 Rules of
Civil Procedure praying that the assailed Court of Appeals July 4, 2013
Decision3 and February 12, 2014 Resolution4 in CA-G.R. SP No. 04622 be reversed
and set aside.

The assailed Court of Appeals July 4, 2013 Decision found grave abuse of discretion
on the part of the National Labor Relations Commission in issuing its May 27, 2011
Decision5 and August 31, 2011 Decision6 holding that respondent Heidi Pelayo
(Pelayo) was not constructively dismissed. The assailed Court of Appeals February
12, 2014 Resolution denied the Motion for Reconsideration7 of petitioner Philippine
Span Asia Carriers Corporation, then Sulpicio Lines, Inc. (Sulpicio Lines).

Pelayo was employed by Sulpicio Lines as an accounting clerk at its Davao City
branch office. As accounting clerk, her main duties were "to receive statements and
billings for processing of payments, prepare vouchers and checks for the approval
and signature of the branch manager, and release checks for payment."8

Sulpicio Lines uncovered several anomalous transactions in its Davao City branch
office. Most notably, a check issued to a certain "J. Josol"9 had been altered from its
original amount of P20,804.58 to P820,804.58. The signatories to the check were
branch manager Tirso Tan (Tan) and cashier Fely Sobiaco (Sobiaco).10

There were also apparent double disbursements. In the first double disbursement,
two (2) checks amounting to P5,312.15 each were issued for a single P5,312.15
transaction with Davao United Educational Supplies. This transaction was covered
by official receipt no. 16527, in the amount of P5,312.15 and dated January 12,
2008. The first check, Philippine Trust Company (PhilTrust Bank) check no.
2043921, was issued on December 15, 2007. This was covered by voucher no.
227275. The second check, PhilTrust Bank check no. 2044116, was issued on
January 19, 2008 and was covered by voucher no. 227909.11

There was another double disbursement for a single transaction. Two (2) checks for
P20,804.58 each in favor of Everstrong Enterprises were covered by official receipt
no. 5129, dated January 25, 2008. The first check, PhilTrust Bank check no.
2044156, was dated January 26, 2008 and covered by voucher no. 228034. The
second check, PhilTrust Bank check no. 2044244, was dated February 9, 2008 and
covered by voucher no. 228296.12
Another apparent anomaly was a discrepancy in the amounts reflected in what
should have been a voucher and a check corresponding to each other and covering
the same transaction with ARR Vulcanizing. Voucher no. 232550 dated October 30,
2008 indicated only P17,052.00, but the amount disbursed through check no.
2051313 amounted to P29,306.00.13

Sulpicio Lines' Cebu-based management team went to Davao to investigate from

March 3 to 5, 2010. Pelayo was interviewed by members of the management team
as "she was the one who personally prepared the cash vouchers and checks for
approval by Tan and Sobiaco."14

The management team was unable to complete its investigation by March 5, 2010.
Thus, a follow-up investigation had to be conducted. On March 8, 2010, Pelayo was
asked to come to Sulpicio Lines' Cebu main office for another interview.15 Sulpicio
Lines shouldered all the expenses arising from Pelayo's trip.16

In the midst of a panel interview, Pelayo walked out.17 She later claimed that she
was being coerced to admit complicity with Tan and Sobiaco.18 Pelayo then returned
to Davao City,19 where she was admitted to a hospital "because of depression and a
nervous breakdown."20 She eventually filed for leave of absence and ultimately
stopped reporting for work.21

Following an initial phone call asking her to return to Cebu, Sulpicio Lines served on
Pelayo a memorandum dated March 15, 2010,22 requiring her to submit a written
explanation concerning "double disbursements, payments of ghost purchases and
issuances of checks with amounts bigger than what [were] stated in the
vouchers."23 Sulpicio Lines also placed Pelayo on preventive suspension for 30
days.24 It stated:

Among your duties is to receive statements and billings for processing of payments,
prepare vouchers and checks for the signature of the approving authority. In the
preparation of the vouchers and the checks, you also are required to check and to
make sure that the supporting documents are in order. Thus, the double payments
and other payments could not have been perpetra[t]ed without your cooperation
and/or neglect of duty/gross negligence.

You are hereby required to submit within three (3) days from receipt of this letter a
written explanation why no disciplinary action [should] be imposed against you for
dishonesty and/or neglect of duty or gross negligence.25

Sulpicio Lines also sought the assistance of the National Bureau of Investigation,
which asked Pelayo to appear before it on March 19, 2010.26

Instead of responding to Sulpicio Lines' memorandum or appearing before the

National Bureau of Investigation, Pelayo filed a Complaint against Sulpicio Lines
charging it with constructive dismissal.27
Sulpicio Lines denied liability asserting that Pelayo was merely asked to come to
Cebu "to shed light on the discovered anomalies"28 and was "only asked to
cooperate in prosecuting Tan and Sobiaco."29 It also decried Pelayo's seeming
attempt at "distanc[ing] herself from the ongoing investigation of financial
anomalies discovered."30

In her September 17, 2010 Decision,31 Labor Arbiter Merceditas C. Larida (Labor

Arbiter Larida) held that Sulpicio Lines constructively dismissed Pelayo. She faulted
Sulpicio Lines for harassing Pelayo when her participation in the uncovered
anomalies was "far-fetched."32 Labor Arbiter Larida relied mainly on the affidavit of
Alex Te (Te),33 an employee of Sulpicio Lines assigned at the Accounting
Department of its Cebu City main office. Te's affidavit was attached to the
Secretary's Certificate,34 attesting to Sulpicio Lines' Board Resolution authorizing Te
to act in its behalf in prosecuting Tan and Sobiaco. This affidavit detailed the duties
of Tan and Sobiaco, as branch manager and cashier, respectively, and laid out the
bases for their prosecution.35 Labor Arbiter Larida noted that the affidavit's silence
on how Pelayo could have been involved demonstrated that it was unjust to suspect
her of wrongdoing.36

In its May 27, 2011 Decision,37 the National Labor Relations Commission reversed
Labor Arbiter Larida's Decision. It explained that the matter of disciplining
employees was a management prerogative and that complainant's involvement in
the investigation did not necessarily amount to harassment.38 The dispositive
portion of this Decision read:

WHEREFORE, foregoing premises considered, the appeal is GRANTED and the

appealed decision is SET ASIDE and VACATED. In lieu thereof, a new judgment is
rendered DISMISSING the above-entitled case for lack of merit.

SO ORDERED.39

In its assailed July 4, 2013 Decision, the Court of Appeals found grave abuse of
discretion on the part of the National Labor Relations Commission in reversing
Labor Arbiter Larida's Decision.40

Following the denial of its Motion for Reconsideration,41 Sulpicio Lines filed the
present Petition.

For resolution is the issue of whether or not the Court of Appeals erred in finding
grave abuse of discretion on the part of the National Labor Relations Commission in
ruling that respondent Heidi Pelayo's involvement in the investigation conducted by
petitioner did not amount to constructive dismissal.

The Court of Appeals must be reversed.

An employer who conducts investigations following the discovery of misdeeds by its

employees is not being abusive when it seeks information from an employee
involved in the workflow which occasioned the misdeed. Basic diligence impels an
employer to cover all bases and inquire from employees who, by their inclusion in
that workflow, may have participated in the misdeed or may have information that
can lead to the perpetrator's identification and the employer's adoption of
appropriate responsive measures. An employee's involvement in such an
investigation will naturally entail difficulty. This difficulty does not mean that the
employer is creating an inhospitable employment atmosphere so as to ease out the
employee involved in the investigation.

While adopted with a view "to give maximum aid and protection to labor,"42 labor
laws are not to be applied in a manner that undermines valid exercise of
management prerogative.

Indeed, basic is the recognition that even as our laws on labor and social justice
impel a "preferential view in favor of labor,"

[e]xcept as limited by special laws, an employer is free to regulate, according to his

own discretion and judgment, all aspects of employment, including hiring, work
assignments, working methods, time, place and manner of work, tools to be used,
processes to be followed, supervision of workers, working regulations, transfer of
employees, work supervision, lay-off of workers and the discipline, dismissal and
recall of work.43 (Emphasis supplied).

The validity of management prerogative in the discipline of employees was

sustained by this Court in Philippine Airlines v. National Labor Relations
Commission,44 "In general, management has the prerogative to discipline its
employees and to impose appropriate penalties on erring workers pursuant to
company rules and regulations."45

The rationale for this was explained in Rural Bank of Cantilan, Inc. v. Julve:46

While the law imposes many obligations upon the employer, nonetheless, it also
protects the employer's right to expect from its employees not only good
performance, adequate work, and diligence, but also good conduct and loyalty. In
fact, the Labor Code does not excuse employees from complying with valid
company policies and reasonable regulations for their governance and guidance.47

Accordingly, in San Miguel Corporation v. National Labor Relations Commission:48

An employer has the prerogative to prescribe reasonable rules and regulations

necessary for the proper conduct of its business, to provide certain disciplinary
measures in order to implement said rules and to assure that the same would be
complied with. An employer enjoys a wide latitude of discretion in the promulgation
of policies, rules and regulations on work-related activities of the employees.

It is axiomatic that appropriate disciplinary sanction is within the purview of

management imposition. Thus, in the implementation of its rules and policies, the
employer has the choice to do so strictly or not, since this is inherent in its right to
control and manage its business effectively.49

II

Disciplining employees does not only entail the demarcation of permissible and
impermissible conduct through company rules and regulations, and the imposition
of appropriate sanctions. It also involves intervening mechanisms "to assure that
[employers' rules] would be complied with."50 These mechanisms include the
conduct of investigations to address employee wrongdoing.

While due process, both substantive and procedural, is imperative in the discipline
of employees, our laws do not go so far as to mandate the minutiae of how
employers must actually investigate employees' wrongdoings. Employers are free to
adopt different mechanisms such as interviews, written statements, or probes by
specially designated panels of officers.

In the case of termination of employment for offenses and misdeeds by employees,

i.e., for just causes under Article 282 of the Labor Code,51 employers are required
to adhere to the so-called "two-notice rule."52King of Kings Transport v.
Mamac53 outlined what "should be considered in terminating the services of
employees"54 :

(1) The first written notice to be served on the employees should contain the specific causes
or grounds for termination against them, and a directive that the employees are given the
opportunity to submit their written explanation within a reasonable period. "Reasonable
opportunity" under the Omnibus Rules means every kind of assistance that management
must accord to the employees to enable them to prepare adequately for their defense. This
should be construed as a period of at least five (5) calendar days from receipt of the notice
to give the employees an opportunity to study the accusation against them, consult a
union official or lawyer, gather data and evidence, and decide on the defenses they will
raise against the complaint. Moreover, in order to enable the employees to intelligently
prepare their explanation and defenses, the notice should contain a detailed narration of
the facts and circumstances that will serve as basis for the charge against the employees.
A general description of the charge will not suffice. Lastly, the notice should specifically
mention which company rules, if any, are violated and/or which among the grounds under
Art. 282 is being charged against the employees.

(2) After serving the first notice, the employers should schedule and conduct a hearing or
conference wherein the employees will be given the opportunity to: (1) explain and
clarify their defenses to the charge against them; (2) present evidence in support of their
defenses; and (3) rebut the evidence presented against them by the management. During
the hearing or conference, the employees are given the chance to defend themselves
personally, with the assistance of a representative or counsel of their choice. Moreover,
this conference or hearing could be used by the parties as an opportunity to come to an
amicable settlement.
(3) After determining that termination of employment is justified, the employers shall serve
the employees a written notice of termination indicating that: (1) all circumstances
involving the charge against the employees have been considered; and (2) grounds have
been established to justify the severance of their employment.55 (Citation omitted)

The two-notice rule applies at that stage when an employer has previously
determined that there are probable grounds for dismissing a specific employee. The
first notice implies that the employer already has a cause for termination. The
employee then responds to the cause against him or her. The two-notice rule does
not apply to anterior, preparatory investigations precipitated by the initial discovery
of wrongdoing. At this stage, an employer has yet to identify a specific employee as
a suspect. These preparatory investigations logically lead to disciplinary
proceedings against the specific employee suspected of wrongdoing, but are not yet
part of the actual disciplinary proceedings against that erring employee. While the
Labor Code specifically prescribes the two-notice rule as the manner by which an
employer must proceed against an employee specifically charged with wrongdoing,
it leaves to the employer's discretion the manner by which it shall proceed in
initially investigating offenses that have been uncovered, and whose probable
perpetrators have yet to be pinpointed.

Thus, subject to the limits of ethical and lawful conduct, an employer is free to
adopt any means for conducting these investigations. They can, for example, obtain
information from the entire roster of employees involved in a given workflow. They
can also enlist the aid of public and private investigators and law enforcers,
especially when the uncovered iniquity amounts to a criminal offense just as much
as it violates company policies.

When employee wrongdoing has been uncovered, employers are equally free to
adopt contingency measures; lest they, their clients, and other employees suffer
from exigencies otherwise left unaddressed. These measures may be enforced as
soon as an employee's wrongdoing is uncovered, may extend until such time that
disciplinary proceedings are commenced and terminated, and in certain instances,
even made permanent. Employers can rework processes, reshuffle assignments,
enforce stopgap measures, and put in place safety checks like additional approvals
from superiors. In Mandapat v. Add Force Personnel Services, Inc.,56 this Court
upheld the temporary withholding of facilities and privileges as an incident to an
ongoing investigation. Thus, this Court found no fault in the disconnection of an
employee's computer and the suspension of her internet access
privilege.57 Employers can also place employees under preventive suspension, not
as a penalty in itself, but as an intervening means to enable unhampered
investigation and to foreclose "a serious and imminent threat to the life or property
of the employer or of the employee's co-workers."58 As Artificio v. National Labor
Relations Commission59 illustrated:

In this case, Artificio's preventive suspension was justified since he was employed
as a security guard tasked precisely to safeguard respondents' client. His continued
presence in respondents' or its client's premises poses a serious threat to
respondents, its employees and client in light of the serious allegation of conduct
unbecoming a security guard such as abandonment of post during night shift duty,
light threats and irregularities in the observance of proper relieving time.

Besides, as the employer, respondent has the right to regulate, according to its
discretion and best judgment, all aspects of employment, including work
assignment, working methods, processes to be followed, working regulations,
transfer of employees, work supervision, lay-off of workers and the discipline,
dismissal and recall of workers. Management has the prerogative to discipline its
employees and to impose appropriate penalties on erring workers pursuant to
company rules and regulations.

This Court has upheld a company's management prerogatives so long as they are
exercised in good faith for the advancement of the employer's interest and not for
the purpose of defeating or circumventing the rights of the employees under special
laws or under valid agreements.60

III

The standards for ascertaining constructive dismissal are settled:

There is constructive dismissal when an employer's act of clear discrimination,

insensibility or disdain becomes so unbearable on the part of the employee so as to
foreclose any choice on his part except to resign from such employment. It exists
where there is involuntary resignation because of the harsh, hostile and
unfavorable conditions set by the employer. We have held that the standard for
constructive dismissal is "whether a reasonable person in the employee's position
would have felt compelled to give up his employment under the circumstances."61

This Court has, however, been careful to qualify that "[n]ot every inconvenience,
disruption, difficulty, or disadvantage that an employee must endure sustains a
finding of constructive dismissal."62 In a case where the employee decried her
employers' harsh words as supposedly making for a work environment so
inhospitable that she was compelled to resign, this Court explained:

The unreasonably harsh conditions that compel resignation on the part of an

employee must be way beyond the occasional discomforts brought about by the
misunderstandings between the employer and employee. Strong words may
sometimes be exchanged as the employer describes her expectations or as the
employee narrates the conditions of her work environment and the obstacles she
encounters as she accomplishes her assigned tasks. As in every human
relationship, there are bound to be disagreements.

However, when these strong words from the employer happen without palpable
reason or are expressed only for the purpose of degrading the dignity of the
employee, then a hostile work environment will be created. In a sense, the doctrine
of constructive dismissal has been a consistent vehicle by this Court to assert the
dignity of labor.63
Resolving allegations of constructive dismissal is not a one-sided affair impelled by
romanticized sentiment for a preconceived underdog. Rather, it is a question of
justice that "hinges on whether, given the circumstances, the employer acted fairly
in exercising a prerogative."64 It involves the weighing of evidence and a
consideration of the "totality of circumstances."65

IV

This Court fails to see how the petitioner's investigation amounted to respondent's
constructive dismissal.

The assailed Court of Appeals July 4, 2013 Decision devoted all of three (3)
paragraphs66 in explaining why respondent was constructively dismissed. It
anchored its conclusion on how "petitioner was made to admit the commission of
the crime,"67 and on how "[respondent] was compelled to give up her employment
due to [petitioner's] unfounded, unreasonable and improper accusations, which
made her employment unbearable."68

The Court of Appeals was in serious error.

The most basic flaw in the Court of Appeals' reasoning is its naive credulity. It did
not segregate verified facts from impressions and bare allegations. It was quick to
lend credence to respondent's version of events and her bare claim that she "was
made to admit the commission of the crime."69

As it stands, all that have been ascertained are that: first, petitioner discovered
anomalies in its Davao branch; second, members of its management team went to
Davao to investigate ; third, the investigation involved respondent considering that,
as accounting clerk, her main duties were "to receive statements and billings for
processing of payments, prepare vouchers and checks for the approval and
signature of the Branch Manager, and release the checks for cash
payment";70 fourth, the investigation in Davao could not be completed for lack of
time; fifth, respondent was made to come to petitioner's Cebu main office - all
expense paid - for the continuation of the investigation; sixth, in Cebu, respondent
was again interviewed; seventh, respondent walked out in the midst of this
interview.

There is no objective proof demonstrating how the interview in Cebu actually

proceeded. Other than respondent's bare allegation, there is nothing to support the
claim that her interviewers were hostile, distrusting, and censorious, or that the
interview was a mere pretext to pin her down. Respondent's recollection is riddled
with impressions, unsupported by independently verifiable facts. These impressions
are subjective products of nuanced perception, personal interpretation, and
ingrained belief that cannot be appreciated as evidencing "the truth respecting a
matter of fact."71

Respondent's subsequent hospitalization does not prove harassment or coercion to

make an admission either. The mere fact of its occurrence is not an attestation that
respondent's interview proceeded in the manner that she claimed it did. While it
proves that she was stressed, it does not prove that she was stressed specifically
because she was cornered into admitting wrongdoing.

Human nature dictates that involvement in investigations for wrongdoing, even if

one is not the identified suspect, will entail discomfort and difficulty. Indeed, stress
is merely the "response to physical or psychological demands on a person."72 Even
positive stimuli can become stressors.73 Stress, challenge, and adversity are the
natural state of things when a problematic incident is revealed and begs to be
addressed. They do not mean that an employer is bent on inflicting suffering on an
employee.

Different individuals react to stress differently "and some people react to stress by
getting sick."74 Stress is as much a matter of psychological perception as it is of
physiological reaction. Respondent's confinement at a hospital proves that, indeed,
she was stressed at such a degree that it manifested physically. It may also be
correlated with the stressors that respondent previously encountered. Among these
stressors was her interview. One can then reasonably say that respondent's
interview may have been difficult for her. However, any analysis of causation and
correlation can only go as far as this. The evidence does not lead to an inescapable
conclusion that respondent's confinement was solely and exclusively because of
how respondent claims her interviewers incriminated her.

The discomfort of having to come to the investigation's venue, the strain of

recalling and testifying on matters that transpired months prior, the frustration that
she was being dragged into the wrongdoing of other employees—if indeed she was
completely innocent—or the trepidation that a reckoning was forthcoming—if indeed
she was guilty—and many other worries doubtlessly weighed on respondent. Yet,
these are normal burdens cast upon her plainly on account of having to cooperate
in the investigation. They themselves do not translate to petitioner's malice.
Respondent's physical response may have been acute, but this, by itself, can only
speak of her temperament and physiology. It would be fallacious to view this
physical response as proof of what her interviewers actually told her or did to her.

Indeed, it was possible that respondent was harassed. But possibility is not proof.
Judicial and quasi-judicial proceedings demand proof. Respondent's narrative is rich
with melodramatic undertones of how she suffered a nervous breakdown, but is
short of prudent, verifiable proof. In the absence of proof, it would be a miscarriage
of justice to sustain a party-litigant's allegation.

What is certain is that there were several anomalies in petitioner's Davao branch. It
made sense for petitioner to investigate these anomalies. It also made sense for
respondent to be involved in the investigation.

Contrary to Labor Arbiter Larida's conclusion, respondent's connection with the

uncovered anomalies was not "far-fetched."75 The anomalies related to
discrepancies between vouchers and checks, multiple releases of checks backed by
as many vouchers (even if there had only been one transaction), and a check
altered to indicate a larger amount, thereby enabling a larger disbursement.
Certainly, it made sense to involve in the investigation the accounting clerk whose
main duty was to "prepare vouchers and checks for the approval and signature of
the Branch Manager, and release the checks for cash payment."76

Labor Arbiter Larida's reliance on Te's affidavit is misplaced. That affidavit was
prepared to facilitate the criminal prosecution of Tan, the branch manager, and
Sobiaco, the cashier.77 It naturally emphasized Tan's and Sobiaco's functions, and
related these to the uncovered anomalies. It would have been absurd to make
respondent a focal point as she was extraneous to the criminal suit against Tan and
Sobiaco. The affidavit was reticent about respondent because it did not have to
discuss her.

If at all, Te's affidavit even militates against respondent's claim that petitioner was
out to get her. For if petitioner was indeed bent on pinning her down, it was
foolhardy for it to concentrate its attempts at criminal prosecution on Tan and
Sobiaco.

Respondent cannot point to petitioner's referral to the National Bureau of

Investigation as proof of petitioner's malevolence. In the first place, petitioner was
free to refer the commission of crimes to the National Bureau of Investigation.
Republic Act No. 157,78 which was in effect until the National Bureau of
Investigation's functions were calibrated in 2016 by Republic Act No.
10867,79 enabled the National Bureau of Investigation "[t]o render assistance,
whenever properly requested in the investigation or detection of crimes and other
offenses."80 Moreover, petitioner's efforts show that it opted to avail of legitimate,
official channels for conducting investigations. Petitioner's actions demonstrate that
rather than insisting on its own position and proceeding with undue haste, it was
submitting to the wisdom of an independent, official investigator and was willing to
await the outcome of an official process. While this could have also led to criminal
prosecution, it still negates malicious fixation. Indeed, if petitioner's focus was to
subvert respondent, it could have just lumped her with Tan and Sobiaco. This would
have even been to petitioner's advantage as joining all defendants in a single case
would have been more efficient and economical.

In any case, for the very reason of her main functions as accounting clerk, it made
sense to view respondent with a degree of suspicion. It was only logical for
petitioner to inquire into how multiple vouchers and checks could have passed the
scrutiny of the officer tasked to prepare them. It was not capricious for petitioner to
ponder if its accounting clerk acted negligently or had allowed herself to be used, if
not acted with deliberate intent to defraud.

Even if petitioner were to completely distance itself from judicious misgivings

against respondent, elect to not treat her as a suspect, and restrict itself to Tan's
and Sobiaco's complicity, it was still reasonable for it to involve respondent in its
investigation. Given her direct interactions with Tan and Sobiaco and her role in the
workflow for payments and disbursements, it was wise, if not imperative, to invoke
respondent as a witness.
In prior jurisprudence, this Court has been so frank as to view an employee's
preemption of investigation as a badge of guilt. In Mandapat v. Add Force
Personnel Services, Inc.,81 this Court quoted with approval the following findings of
the Court of Appeals:

Unfortunately, however, before the investigation could proceed to the second step
of the termination process into a hearing or conference, Mandapat chose to resign
from her job. Mandapat's bare allegation that she was coerced into resigning can
hardly be given credence in the absence of clear evidence proving the same. No
doubt, Mandapat read the writing on the wall, knew that she would be fired for her
transgressions, and beat the company to it by resigning. Indeed, by the
disrespectful tenor of her memorandum, Mandapat practically indicated that she
was no longer interested in continuing cordial relations, much less gainful
employment with Add Force.82 (Citation omitted)

This Court will not be so intrepid in this case as to surmise that respondent was
truly complicit in the uncovered anomalies and that termination of employment for
just cause was a foregone conclusion which she was merely trying to evade by
ceasing to report to work. Still, fairness dictates that this Court decline to condone
her acts in preempting and refusing to cooperate in a legitimate investigation, only
to cry constructive dismissal. To do so would be to render inutile legitimate
measures to address employee iniquity. It would be to send a chilling effect against
bona fide investigations, for to investigate - riddled as it is with the strain on
employees it naturally entails - would be to court liability for constructive dismissal.
Employees cannot tie employers' hands, incapacitating them, and preemptively
defeating investigations with laments of how the travails of their involvement in
such investigations translates to their employers' fabrication of an inhospitable
employment atmosphere so that an employee is left with no recourse but to resign.

WHEREFORE, the Petition for Review on Certiorari is GRANTED. The assailed July
4, 2013 Decision and February 12, 2014 Resolution of the Court of Appeals in CA-
G.R. SP No. 04622 are REVERSED and SET ASIDE. The National Labor Relations
Commission May 27, 2011 and August 31, 2011 Decisions in NLRC No. MAC-01-
011835-2011 (RAB-XI-03-00352-2010) are REINSTATED.

SO ORDERED.