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January 1, 2010



Serious Misconduct
Maribago Resort vs. Dual, July 20, 2010
G.R. No. 180660 July 20, 2010

Facts: On January 5, 2005, a group of Japanese guests and their companions

dined at Maribago Beach Resort’s Poolbar/Restaurant. Captain waiter Alvin
Hiyas took their dinner orders comprising of 6 sets of lamb and 6 sets of fish.
As per company procedure, Hiyas forwarded one copy of the order slip to the
kitchen and another copy to Nito Dual. Pursuant to the order slip, fourteen
(14) sets of dinner were prepared by the chef. Hiyas and waiter Genaro
Mission, Jr. served 12 set dinners to the guests, and another 2 sets to their
guides free of charge (total of 14 sets of dinner). After consuming their
dinner, the guests paid the amount indicated in their bill and thereafter left
in a hurry. The receipt show that only P3,036.00 was remitted by cashier
Dual corresponding to 6 sets of dinner. A discrepancy was found between the
order slip and the receipt issued which prompted petitioner Maribago to ask
for an explanation from Dual and the waiters why they should not be
penalized. Clarificatory hearings were made and it was found out that the
guests gave P10,500.00 to Mission as payment for the bill of P10,100.00. It
was discovered later that only P3,036.00 was entered by Dual in the cash
register. The rest of the payment was missing. The original transaction
receipt for P10,100.00 was likewise missing and in its place, only a
transaction receipt for P3.036.00 was registered. Upon verification, it was
also found out that the order slip was tampered by Alcoseba to make it
appear that only six (6) set dinners were ordered. Respondent Dual was
found guilty of dishonesty for his fabricated statements and for asking one of
the waiters (Mission) to corroborate his allegations. He was terminated for
dishonesty based on his admission that he altered the order slip.
Dual then filed a complaint for illegal dismissal. The Labor Arbiter found that
respondent’s termination was without valid cause and ruled that respondent
is entitled to separation pay. The NLRC set aside the Labor Arbiter’s decision
and dismissed the complaint. The Court of Appeals however reversed the
decision and resolution of the NLRC. Finding no sufficient valid cause to
justify respondent’s dismissal, the Court of Appeals ordered petitioner to pay
respondent full backwages and separation pay. Thus a petition for review
under Rule 45 was filed in the SC.
ISSUE: Whether or not respondent was illegally dismissed.
HELD: No. Petitioner’s evidence proved that respondent is guilty of
dishonesty and of stealing money entrusted to him as cashier. Instead of
reporting P10,100.00 as payment by the guests for their dinner, respondent
cashier only reported P3,036.00 as shown by the receipt which he admitted
to have issued. Respondent’s acts constitute serious misconduct which is a

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

just cause for termination under the law. Theft committed by an employee is
a valid reason for his dismissal by the employer. Although as a rule this Court
leans over backwards to help workers and employees continue with their
employment or to mitigate the penalties imposed on them, acts of
dishonesty in the handling of company property, petitioner’s income in this
case, are a different matter.

Nagkakaisang Lakas ng Mangagawa sa Keihin v. Keihin Phils Corp., GR No.

171115, August 9, 2010
Petitioner Helen Valenzuela (Helen) was a production associate in
respondent Keihin Philippines Corporation (Keihin), a company engaged in
the production of intake manifold and throttle body used in motor
vehicles manufactured by Honda.
It is a standard operating procedure of Keihin to subject all its employees to
reasonable search before they leave the company premises. On September
5, 2003, while Helen was about to leave the company premises, she saw a
packing tape near her work area and placed it inside her bag because it
would be useful in her transfer of residence. When the lady guard on duty
inspected Helen’s bag, she found the packing tape inside her bag. The guard
confiscated it and submitted an incident report dated September 5, 2003 to
the Guard-in-Charge, who, in turn, submitted a memorandum regarding the
incident to the Human Resources and Administration Department on the
same date.
The following day, or on September 6, 2003, respondent company issued a
show cause notice to Helen accusing her of violating F.2 of the company’s
Code of Conduct, which says, "Any act constituting theft or robbery, or any
attempt to commit theft or robbery, of any company property or other
associate’s property. Penalty: D (dismissal)." Helen’s supervisor, called her
to his office and directed her to explain in writing why no disciplinary action
should be taken against her.
Helen, in her explanation, admitted the offense and even manifested that
she would accept whatever penalty would be imposed upon her. She,
however, did not reckon that respondent company would terminate her
services for her admitted offense.
On September 26, 2003, Helen received a notice of disciplinary action
informing her that Keihin has decided to terminate her services. On October
15, 2003, petitioners filed a complaint against respondent for illegal
dismissal, non-payment of 13th month pay, with a prayer for reinstatement
and payment of full backwages, as well as moral and exemplary damages.
Petitioners alleged that Helen’s act of taking the packing tape did not
constitute serious misconduct, because the same was done with no malicious
intent. Keihin, on the other hand, maintained that Helen was guilty of

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

serious misconduct because there was a deliberate act of stealing from the
The Labor Arbiter rendered his Decision dismissing the complaint of illegal
dismissal. He brushed aside petitioners’ argument that the penalty imposed
on Helen was disproportionate to the offense committed, and held that she
indeed committed a serious violation of the company’s policies amounting to
serious misconduct. The Labor Arbiter further held that Keihin observed the
requirements of procedural due process in implementing the dismissal of
Helen. He ruled that the following circumstances showed that the company
observed the requirements of procedural due process: a) there was a show
cause letter informing Helen of the charge of theft and requiring her to
submit an explanation; b) there was an administrative hearing giving her an
opportunity to be heard; and c) the respondent company furnished her with
notice of termination stating the facts of her dismissal, the offense for which
she was found guilty, and the grounds for her dismissal.20
On appeal, the NLRC dismissed the appeal of the petitioners and affirmed in
toto the Decision of the Labor Arbiter. It held that petitioners admitted in
their Position Paper that Helen took the packing tape strewn on the floor
near her production line within the company premises. By the strength of
petitioners’ admission, the NLRC held that theft is a valid reason for Helen’s
However, in a Resolution dated November 2, 2005, the CA dismissed the
petition outright for not having been filed by an indispensable party in
interest under Section 2, Rule 3 of the Rules of Court.
1. Whether, in taking the packing tape for her own personal use, Helen
committed serious misconduct, which is a just cause for her dismissal from
service. (substantive aspect of the case)
2. Whether the petition of petitioners is out rightly dismissible for not having
been filed by an indispensable party in interest (procedural aspect of the
1. Yes. Article 282 of the Labor Code enumerates the just causes for
termination. Misconduct is defined as "the transgression of some established
and definite rule of action, a forbidden act, a dereliction of duty, willful in
character, and implies wrongful intent and not mere error in judgment." For
serious misconduct to justify dismissal under the law, "(a) it must be serious,
(b) must relate to the performance of the employee’s duties; and (c) must
show that the employee has become unfit to continue working for the
In the case at bar, Helen took the packing tape with the thought that she
could use it for her own personal purposes. When Helen was asked to explain
in writing why she took the tape, she stated, "Kumuha po ako ng isang
packing tape na gagamitin ko sa paglilipat ng gamit ko sa bago kong
lilipatang bahay." In other words, by her own admission, there was intent on

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

her part to benefit herself when she attempted to bring home the packing
tape in question.
It is noteworthy that prior to this incident, there had been several cases of
theft and vandalism involving both respondent company’s property and
personal belongings of other employees. In order to address this issue of
losses, respondent company issued two memoranda implementing an
intensive inspection procedure and reminding all employees that those who
will be caught stealing and performing acts of vandalism will be dealt with in
accordance with the company’s Code of Conduct. Despite these reminders,
Helen took the packing tape and was caught during the routine inspection.
All these circumstances point to the conclusion that it was not just an error of
judgment on the part of Helen, but a deliberate act of theft of company
The petitioners also argue that the penalty of dismissal is too harsh and
disproportionate to the offense committed since the value of the thing taken
is very minimal. Petitioners cite the case of Caltex Refinery Employees
Association v. National Labor Relations Commission where Arnelio M. Clarete
(Clarete) was found to have willfully breached the trust and confidence
reposed in him by taking a bottle of lighter fluid. In said case, we refrained
from imposing the supreme penalty of dismissal since the employee had no
violations "in his eight years of service and the value of the lighter fluid is
very minimal compared to his salary.
After a closer study of both cases, we are convinced that the case
of Caltex is different from the case at hand. Although both Clarete and Helen
had no prior violations, the former had a clean record of eight years with his
employer. On the other hand, Helen was not even on her second year of
service with Keihin when the incident of theft occurred. And what further
distinguishes the instant case from Caltex is that respondent company was
dealing with several cases of theft, vandalism, and loss of company and
employees’ property when the incident involving Helen transpired.
Regarding the requirement of procedural due process in dismissal of
employees, petitioners argue that the first notice failed to explain the charge
being leveled against Helen. According to the petitioners, the notice was
vague and lacked sufficient definitiveness.
2. It is clear that petitioners failed to include the name of the dismissed
employee Helen Valenzuela in the caption of their petition for certiorari filed
with the CA as well as in the body of the said petition. Instead, they only
indicated the name of the labor union Nagkakaisang Lakas ng Manggagawa
sa Keihin (NLMK-OLALIA) as the party acting on behalf of Helen. As a result,
the CA rightly dismissed the petition based on a formal defect.
Under Section 7, Rule 3 of the Rules of Court, "parties in interest without
whom no final determination can be had of an action shall be joined as
plaintiffs or defendants." If there is a failure to implead an indispensable
party, any judgment rendered would have no effectiveness.31 It is "precisely
‘when an indispensable party is not before the court (that) an action should

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

be dismissed.’ The absence of an indispensable party renders all subsequent

actions of the court null and void for want of authority to act, not only as to
the absent parties but even to those present."32 The purpose of the rules on
joinder of indispensable parties is a complete determination of all issues not
only between the parties themselves, but also as regards other persons who
may be affected by the judgment. A decision valid on its face cannot attain
real finality where there is want of indispensable parties.
Loss of Trust and Confidence
Century Canning Corp., et. al. v. Ramil, GR No. 171630, August 8, 2010


Petitioner Century Canning Corporation, a company engaged in canned food

manufacturing, employed respondent Vicente Randy Ramil in August 1993
as technical specialist. Prior to his dismissal, his job included, among others,
the preparation of the purchase requisition (PR) forms and capital
expenditure (CAPEX) forms, as well as the coordination with the purchasing
department regarding technical inquiries on needed products and services of
petitioner's different departments.

On 3 March, 1999, respondent prepared a CAPEX form for external fax

modems and terminal server, per order of Technical Operations Manager
Jaime Garcia, Jr. and endorsed it to Marivic Villanueva, Secretary of Executive
Vice-President Ricardo T. Po, for the latter's signature. The CAPEX form,
however, did not have the complete details and some required signatures.
The following day, with the form apparently signed by Po, respondent
transmitted it to Purchasing Officer Lorena Paz in Taguig Main Office. Paz
processed the paper and found that some details in the CAPEX form were left
blank. She also doubted the genuineness of the signature of Po, as appearing
in the form. Paz then transmitted the CAPEX form to Purchasing Manager
Virgie Garcia and informed her of the questionable signature of Po.
Consequently, the request for the equipment was put on hold due to Po's
forged signature. However, due to the urgency of purchasing badly needed
equipment, respondent was ordered to make another CAPEX form, which
was immediately transmitted to the Purchasing Department.

Suspecting him to have committed forgery, respondent was asked to explain

in writing the events surrounding the incident. He vehemently denied any
participation in the alleged forgery. Respondent was, thereafter, suspended
on 21 April 1999. Subsequently, he received a Notice of Termination from
Armando C. Ronquillo, on 20 May 1999, for loss of trust and confidence.

Respondent, on May 24, 1999, filed a Complaint for illegal dismissal, non-
payment of overtime pay, separation pay, moral and exemplary damages

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

and attorney's fees against petitioner and its officers before the Labor Arbiter

LA Potenciano S. Canizares rendered a Decision dismissing the complaint for

lack of merit. Aggrieved by the LA's finding, respondent appealed to the
National Labor Relations Commission (NLRC). The NLRC First Division in its
Decision set aside the ruling of LA Canizares. The NLRC declared
respondent's dismissal to be illegal and directed petitioner to reinstate
respondent with full backwages and seniority rights and privileges. It found
that petitioner failed to show clear and convincing evidence that respondent
was responsible for the forgery of the signature of Po in the CAPEX form.

Petitioner filed a motion for reconsideration. To respondent's surprise and

dismay, the NLRC reversed itself and rendered a new Decision upholding LA
Canizares' dismissal of his complaint. Respondent filed a motion for
reconsideration, which was denied by the NLRC.

Frustrated by this turn of events, respondent filed a petition for certiorari

with the Court of Appeals (CA). The CA rendered judgment in favor of
respondent and reinstated the earlier decision of the NLRC. It ordered
petitioner to reinstate respondent, without loss of seniority rights and
privileges, and to pay respondent full backwages from the time his
employment was terminated up to the time of the finality of its decision. The
CA, likewise, remanded the case to the LA for the computation of backwages
of the respondent. Hence, this petition for review on certiorari.


Whether or not respondent was validly dismissed.

Petitioner's main allegation is that there are factual and legal grounds
constituting substantial proof that respondent was clearly involved in the
forgery of the CAPEX form. Petitioner insists that the mere existence of a
basis for believing that respondent employee has breached the trust and
confidence of his employer suffices for his dismissal. Finally, petitioner
maintains that aside from respondent's involvement in the forgery of the
CAPEX form, his past violations of company rules and regulations are more
than sufficient grounds to justify his termination from employment.

However, the record of the case is bereft of evidence that would clearly
establish Ramil's involvement in the forgery. They did not even submit any

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

affidavit of witness or present any during the hearing to substantiate their

claim against Ramil.

Respondent alleged in his position paper that after preparing the CAPEX
form on 3 March 1999, he endorsed it to Marivic Villanueva for the signature
of the Executive Vice-President Ricardo T. Po. The next day, respondent
received the CAPEX form containing the signature of Po. Petitioner never
controverted these allegations in the proceedings before the NLRC and the
CA despite its opportunity to do so. Petitioner's belated allegations in its
reply filed before this Court that Marivic Villanueva denied having seen the
CAPEX form cannot be given credit. Points of law, theories, issues and
arguments not brought to the attention of the lower court, administrative
agency or quasi-judicial body need not be considered by a reviewing court,
as they cannot be raised for the first time at that late stage. When a party
deliberately adopts a certain theory and the case is decided upon that theory
in the court below, he will not be permitted to change the same on appeal,
because to permit him to do so would be unfair to the adverse party.

Thus, if respondent retrieved the form on March 4, 1999 with the signature
of Po, it can be correctly inferred that he is not the forger. Had the CAPEX
form been returned to respondent without Po's signature, Villanueva or any
officer of the petitioner's company could have readily noticed the lack of
signature, and could have easily attested that the form was unsigned when it
was released to respondent.

Furthermore, while employers are allowed a wider latitude of discretion in

terminating the services of employees who perform functions which by their
nature require the employers' full trust and confidence and the mere
existence of basis for believing that the employee has breached the trust of
the employer is sufficient, this does not mean that the said basis may be
arbitrary and unfounded.

The right of an employer to dismiss an employee on the ground that it has

lost its trust and confidence in him must not be exercised arbitrarily and
without just cause. Loss of trust and confidence, to be a valid cause for
dismissal, must be based on a willful breach of trust and founded on clearly
established facts. The basis for the dismissal must be clearly and
convincingly established, but proof beyond reasonable doubt is not
necessary. It must rest on substantial grounds and not on the employer’s
arbitrariness, whim, caprice or suspicion; otherwise, the employee would
eternally remain at the mercy of the employer.

G.R. No. 164640 June 13, 2008

CYNTHIA GANA, petitioner,

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010


INC., and CARL **WOZNIAK, respondents.
FACTS: On December 1, 1996, Cynthia Gana (petitioner) commenced her
employment as marketing manager of Total Distribution and Logistics
System, Inc. (TDLSI), another sister company of Aboitiz Transport, Aboitiz
Container and Aboitiz Haullers, respondent company. As marketing manager,
petitioner received a monthly salary of P20,000.00 plus a monthly allowance
of P15,000.00; and she availed herself of the company car plan.
On August 15, 1997, petitioner was transferred from TDLSI to respondent
company retaining the same position as marketing manager.
On April 21, 1998, petitioner was required by private respondent Carl
Wozniak (Wozniak), the Senior Vice-President and General Manager of
Aboitiz Haulers, to explain in writing why she should not be penalized for
having violated company rules on offenses against company interest.
Wozniak directed her to appear in an investigation to be conducted
by the company and defend herself with respect to the electronic
mails (e-mails) she sent to an official of Trans-America, divulging
various confidential information about the business operations and
transactions of Aboitiz Container which are detrimental to the said
On April 24, 1998, petitioner, through her counsel, sent a letter to Wozniak
denying the charges against her.
In a letter dated May 22, 1998, Wozniak informed petitioner that her
explanations during the investigation with respect to the charges leveled
against her were found to be unacceptable; that she was found guilty of
Betrayal of Confidential Information which constitutes sufficient reason for
the company to lose the high degree of trust and confidence which it
reposed upon her as its manager; and that as a result, her employment with
respondent company has been terminated.
Petitioner then filed a Complaint for illegal dismissal with the National Labor
Relations Commission (NLRC) in Quezon City. On June 14, 1999, the Labor
Arbiter (LA) rendered a Decision finding respondent company guilty of
illegally dismissing petitioner.
On appeal, the NLRC set aside the Decision of the LA. Petitioner filed a
Motion for Reconsideration but the same was denied by the NLRC in its Order
promulgated on May 3, 2002.
Petitioner then filed a petition for certiorari with the CA questioning the
Decision and Order of the NLRC.On April 30, 2004, the CA promulgated its
presently assailed Decision dismissing the petition for certiorari and affirming
the questioned Decision and Order of the NLRC.
Petitioner filed a Motion for Reconsideration but it was denied by the CA in its
Resolution dated July 26, 2004.
ISSUE: Whether Petitioner is illegally dismissed.

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

HELD: NO. Petitioner relies on the conclusion of the LA that there is no

sufficient evidence to justify petitioner's termination from employment on
the ground of loss of trust and confidence. However, evidence shows
otherwise. The LA cited private respondent's letter terminating petitioner
from her employment to prove that respondent company failed to show
sufficient evidence to establish the charges against petitioner. Contrary to
the conclusion of the LA, it is very clear in the said letter that respondent
company enumerated the facts and circumstances upon which petitioner's
termination was based. Pertinent portions of the letter are as follows:
Last April 22, 1998, an investigation was conducted in order to give you the
chance to present your side of matters that were contained in the letter to
explain dated April 21, 1998 that was sent to you and which you received
last April 21, 1998 also.
During the said investigation, it was established that:
a) You sent email messages/reports to Leslie Leow of Transamerica last
March 9, 1998 and March 25, 1998 regarding the company's internal
problems with the truckers, depot and special permit to load (spl) and the
rates charge[d] by ACSI to its customers.
b) You sent again email message last April 16, 1998 to Leslie Leow
concerning the complaints of Mr. Carmelo Garcia regarding the company's
poor services which puts the company's credibility to deliver good service in
c) You have literally provided Transamerica information about the
inefficiencies and inflexibility of the company in catering to the needs of the
d) The Officers of the company only learned of the complaints of Mr. Carmelo
Garcia because of your email messages to Transamerica.
e) You declared that your loyalty is to Transamerica and not to your
employer, AHI.
The settled rule is that the mere existence of a basis for believing that a
managerial employee has breached the trust of the employer justifies
Petitioner does not deny having sent the subject e-mails to Trans-America.
The Court finds no error in the conclusion of the CA that petitioner's intention
in sending these e-mails was to inform Trans-America of the supposed
inefficiency in the operations of respondent company as well as the
company's poor services to its clients. These pieces of information
necessarily diminish the credibility of respondent company and besmirch its
reputation. In fact, Trans-America wrote Wozniak expressing its
disappointment in the services that the Aboitiz companies were rendering.
Hence, respondent company cannot be faulted for having lost its trust and
confidence in petitioner and in refusing to retain her as its employee
considering that her continued employment is patently inimical to
respondent company's interest. The law, in protecting the rights of labor,
authorizes neither oppression nor self-destruction of an employer company

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

which itself is possessed of rights that must be entitled to recognition and


Santos vs. Shing Hung Plastics Co., Inc., Sept. 29, 2008


Respondent Shing Hung Plastics Co., Inc. hired Michael V. Santos (petitioner)
as administrative assistant whose responsibilities included purchasing
equipment and supplies of the corporation.
He was, by Memorandum, asked to explain within 24 hours why, in the
purchase of silkscreen and paint thinner from JPN, Inc., only acknowledgment
receipts, instead of official receipts, were received and recorded by the
corporation’s accounting department.
Petitioner explained that the purchase of the above-stated items were
urgent, and the thinner was purchased from JPN Inc., instead of the
corporation’s then supplier Alto Chemicals, because the former charged a
lower price.
On March 11, 2002, Chueh ordered him to rent a forklift and crane to move a
26-ton machinery of the corporation, hence, he asked the firm Bormahueco
for a quotation thereof. The quotation given by Bormahueco was found to be
too high by Chueh who thus ordered him to get one from another firm. Roos
Industrial Construction, Inc. (Roos) quoted a lower rental rate of P28,000,
hence, he, on the instruction of Chan and Chueh, asked the accounting
department to issue a check for the purpose.
On April 2, 2002, he was informed of the termination of his employment on
account of "money involvement with suppliers like JPN and Roos etc."
The corporation went on to claim as follows:
Upon investigation by Chueh, it was found out that petitioner manipulated
the price of purchased items and earned commissions therefrom; that
petitioner had been an employee of JPN, Inc. "but was forced to resign due to
some irregularities" and that petitioner refused to sign the termination letter
and to receive his salary and other benefits, and had not been reporting for
work since April 3, 2002.
By Decision of January 30, 2004, the Labor Arbiter found petitioner to have
been illegally dismissed. He thus ordered the corporation to reinstate
petitioner and pay his full backwages, unpaid salary, moral and exemplary
damages, and attorney’s fees.
On appeal, the National Labor Relations Commission (NLRC), by Resolution of
August 20, 2004, found petitioner’s dismissal for just cause but that due
process requirements were not complied with. The NLRC thus set aside the
Labor Arbiter’s decision but awarded petitioner "one (1) month salary as
indemnity, and his unpaid salary."

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

Issue: Whether petitioner was dismissed for just cause.

Held: Yes.By its evidence, the corporation duly established the acts imputed
to petitioner which rendered him unworthy of the trust and confidence
demanded of his position.
Petitioner further claimed that JPN, Inc. sold thinner at P500 per gallon lower
than the P1,500 price of the corporation’s usual supplier, Alto Chemicals. The
corporation controverted this claim, however, by presenting a document
from Alto Chemicals quoting the price of thinner at P300 per gallon.
In administrative proceedings, the law does not require proof beyond
reasonable doubt. Substantial evidence suffices. The Court finds that the
corporation had established reasonable grounds-bases of its decision finding
petitioner unworthy of the trust and confidence his position demands.
Petitioner, at all events, argues that respondent failed to prove its claim that
he is a confidential employee, hence, his tenure depended not on the trust
and confidence he enjoyed from it. He advances that he is "not involved in
the labor relation matter[s] in the respondent company."
Petitioner’s position fails. For the purpose of applying the provisions of the
Labor Code on who may join unions of the rank-and-file employees,
jurisprudence defines "confidential employees" as those who "assist or act in
a confidential capacity to persons who formulate, determine, and effectuate
management policies in the field of labor relations." However, for the
purpose of applying the Labor Code provision on loss of confidence as a just
cause for the dismissal of an employee, jurisprudence teaches that:
x x x [L]oss of confidence should ideally apply only to cases involving
employees occupying positions of trust and confidence or to those situations
where the employee is routinely charged with the care and custody of the
employer’s money or property. To the first class belong managerial
employees, i.e., those vested with the powers or prerogatives to lay down
management policies and/or to hire, transfer, suspend, lay-off, recall,
discharge, assign or discipline employees or effectively recommend such
managerial actions; and [to] the second class belong cashiers, auditors,
property custodians, etc., or those who, in the normal and routine exercise of
their functions, regularly handle significant amounts of money or property.
(Emphasis and underscoring supplied)
As stated early on, petitioner’s duties included purchasing supplies and
equipment of the corporation.
Enriquez vs. BPI, February 12, 2008
Enriquez vs. BPI
Feb 12, 2008
Enriquez and Sia were the branch manager and assistant branch
manager, respectively of the BPI- Bacolod Singcang Branch. Enriquez had
been an employee thereon for 32 years and Sia for 29 years.
On December 27,2002, their branch experienced a heavy volume of
transactions owing to the fact that it was the last banking day of the year.

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

When banking hours came to a close, teller Geraldine Descartin (Descartin)

purportedly discovered that she had a cash shortage of P36,000.00. It was
later admitted by a co-teller Fregil that the shortage was incurred because
Descartin had temporarily borrowed the money that week to pay her
financial obligations but intended to return the same on the first week of
January. Teller Fregil reported the matter to Sia and Enriquez, both of whom
suggested that teller Descartin fill the shortage with a loan from her family.
Teller Descartin replied that her family did not have the money, she instead
borrowed the amount from her in-laws. Thus, at 5:21 p.m., teller Descartin
posted the unsigned withdrawal slip for the amount of P36,000.00 against
the joint account of her parents-in-law. As the amount exceeded the floor
limit for tellers which would require the approval of a superior officer, either
Enriquez or Sia approved the transaction at 5:22 p.m. as reflected on the
account records. Teller Descartin thereafter left the bank to secure the
signature of her mother-in-law Remedios and returned at past 7:00 p.m. with
the signed withdrawal slip.
An investigation was made by the BPI head office and petitioners were
directed to show cause to explain in writing why they should not be
sanctioned for conflict of interest and breach of trust. Later on, petitioners
were dismissed from employment on grounds of breach of trust and
confidence and dishonesty.
Hence, a complaint was filed for illegal dismissal. The Labor Arbiter
rendered a decision that petitioners had been illegally dismissed ordering
respondents to pay full backwages and moral and exemplary damages
amounting to more than 7million pesos. On appeal, The NLRC reversed the
decision but ordered respondents to give petitioners financial assistance
equivalent to one-half month’s pay for every year of service.

Whether or not petitioners were illegally dismissed.

HELD: No. There is no denying that loss of trust and confidence is a valid
ground for termination of employment. Hence, the basic requisite for
dismissal on the ground of loss of confidence is that the employee concerned
holds a position of trust and confidence or is routinely charged with the care
and custody of the employer’s money or property. Moreover, the breach
must be related to the performance of the employee’s function. Also, it must
be shown that the employee is a managerial employee, since the term “trust
and confidence” is restricted to said class of employees. The failure of
petitioners to report the cash shortage of teller Descartin, even if done in
good faith, nonetheless resulted in their abetting the dishonesty committed
by the latter. Under the personnel policies of respondent bank, this act of
petitioners justifies their dismissal even on the first offense. Even assuming
the version of petitioners as the truth, the fact remains that they willfully
decided against reporting the shortage that occurred. As a result, in either

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

situation, petitioners’ acts have caused respondents to have a legitimate

reason to lose the trust reposed in them as senior managerial employees.
Their participation in the cover-up of the misconduct of teller Descartin
makes them unworthy of the trust and confidence demanded by their
Willful Disobedience
Tongko vs. The Manufacturer’s Life Insurance Co., Inc. November 7, 2008
G.R. No. 167622, November 07, 2008

Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) is a domestic

corporation engaged in life insurance business. Renato A. Vergel De Dios
was, during the period material, its President and Chief Executive Officer.
Gregorio V. Tongko started his professional relationship with Manulife on July
1, 1977 by virtue of a Career Agent's Agreement (Agreement) he executed
with Manulife.

In the Agreement, it is provided that:

It is understood and agreed that the Agent is an independent contractor and

nothing contained herein shall be construed or interpreted as creating an
employer-employee relationship between the Company and the Agent.

The Company may terminate this Agreement for any breach or violation of
any of the provisions hereof by the Agent by giving written notice to the
Agent within fifteen (15) days from the time of the discovery of the breach.
No waiver, extinguishment, abandonment, withdrawal or cancellation of the
right to terminate this Agreement by the Company shall be construed for any
previous failure to exercise its right under any provision of this Agreement.

Either of the parties hereto may likewise terminate his Agreement at any
time without cause, by giving to the other party fifteen (15) days notice in

In 1983, Tongko was named as a Unit Manager in Manulife's Sales Agency

Organization. In 1990, he became a Branch Manager. As the CA found,
Tongko's gross earnings from his work at Manulife, consisting of
commissions, persistency income, and management overrides. The problem
started sometime in 2001, when Manulife instituted manpower development
programs in the regional sales management level. Relative thereto, De Dios
addressed a letter dated November 6, 2001 to Tongko regarding an October
18, 2001 Metro North Sales Managers Meeting. Stating that Tongko’s Region
was the lowest performer (on a per Manager basis) in terms of recruiting in
2000 and, as of today, continues to remain one of the laggards in this area.

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

Other issues were:"Some Managers are unhappy with their earnings and
would want to revert to the position of agents." And "Sales Managers are
doing what the company asks them to do but, in the process, they earn less."
Tongko was then terminated.

Therefrom, Tongko filed a Complaint dated November 25, 2002 with the
NLRC against Manulife for illegal dismissalIn the Complaint. In a Decision
dated April 15, 2004, Labor Arbiter dismissed the complaint for lack of an
employer-employee relationship.

The NLRC's First Division, while finding an employer-employee relationship

between Manulife and Tongko applying the four-fold test, held Manulife liable
for illegal dismissal. Thus, Manulife filed an appeal with the CA. Thereafter,
the CA issued the assailed Decision dated March 29, 2005, finding the
absence of an employer-employee relationship between the parties and
deeming the NLRC with no jurisdiction over the case. Hence, Tongko filed
this petition.

1. WON Tongko was an employee of Manulife
2. WON Tongko was illegally dismissed.
1. Yes
In the instant case, Manulife had the power of control over Tongko that
would make him its employee. Several factors contribute to this conclusion.

In the Agreement dated July 1, 1977 executed between Tongko and Manulife,
it is provided that:
The Agent hereby agrees to comply with all regulations and requirements of
the Company as herein provided as well as maintain a standard of
knowledge and competency in the sale of the Company's products which
satisfies those set by the Company and sufficiently meets the volume of new
business required of Production Club membership.Under this provision, an
agent of Manulife must comply with three (3) requirements: (1) compliance
with the regulations and requirements of the company; (2) maintenance of a
level of knowledge of the company's products that is satisfactory to the
company; and (3) compliance with a quota of new businesses.

Among the company regulations of Manulife are the different codes of

conduct such as the Agent Code of Conduct, Manulife Financial Code of
Conduct, and Manulife Financial Code of Conduct Agreement, which
demonstrate the power of control exercised by the company over Tongko.
The fact that Tongko was obliged to obey and comply with the codes of
conduct was not disowned by respondents.

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

Thus, with the company regulations and requirements alone, the fact that
Tongko was an employee of Manulife may already be established. Certainly,
these requirements controlled the means and methods by which Tongko was
to achieve the company's goals.

More importantly, Manulife's evidence establishes the fact that Tongko was
tasked to perform administrative duties that establishes his employment
with Manulife.

Additionally, it must be pointed out that the fact that Tongko was tasked with
recruiting a certain number of agents, in addition to his other administrative
functions, leads to no other conclusion that he was an employee of Manulife.

2. Yes

In its Petition for Certiorari dated January 7, 2005[26] filed before the CA,
Manulife argued that even if Tongko is considered as its employee, his
employment was validly terminated on the ground of gross and habitual
neglect of duties, inefficiency, as well as willful disobedience of the lawful
orders of Manulife. Manulife stated:

In the instant case, private respondent, despite the written reminder from
Mr. De Dios refused to shape up and altogether disregarded the latter's
advice resulting in his laggard performance clearly indicative of his willful
disobedience of the lawful orders of his superior. As private respondent has
patently failed to perform a very fundamental duty, and that is to yield
obedience to all reasonable rules, orders and instructions of the Company, as
well as gross failure to reach at least minimum quota, the termination of his
engagement from Manulife is highly warranted and therefore, there is no
illegal dismissal to speak of.
It is readily evident from the above-quoted portions of Manulife's petition
that it failed to cite a single iota of evidence to support its claims. Manulife
did not even point out which order or rule that Tongko disobeyed. More
importantly, Manulife did not point out the specific acts that Tongko was
guilty of that would constitute gross and habitual neglect of duty or
disobedience. Manulife merely cited Tongko's alleged "laggard
performance," without substantiating such claim, and equated the same to
disobedience and neglect of duty.

Apropos thereto, Art. 277, par. (b), of the Labor Code mandates in explicit
terms that the burden of proving the validity of the termination of
employment rests on the employer. Failure to discharge this evidential
burden would necessarily mean that the dismissal was not justified, and,
therefore, illegal.

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

The Labor Code provides that an employer may terminate the services of an
employee for just cause and this must be supported by substantial evidence.
The settled rule in administrative and quasi-judicial proceedings is that proof
beyond reasonable doubt is not required in determining the legality of an
employer's dismissal of an employee, and not even a preponderance of
evidence is necessary as substantial evidence is considered sufficient.
Substantial evidence is more than a mere scintilla of evidence or relevant
evidence as a reasonable mind might accept as adequate to support a
conclusion, even if other minds, equally reasonable, might conceivably opine

Here, Manulife failed to overcome such burden of proof. It must be reiterated

that Manulife even failed to identify the specific acts by which Tongko's
employment was terminated much less support the same with substantial
evidence. To repeat, mere conjectures cannot work to deprive employees of
their means of livelihood. Thus, it must be concluded that Tongko was
illegally dismissed.

Moreover, as to Manulife's failure to comply with the twin notice rule, it

reasons that Tongko not being its employee is not entitled to such notices.
Since we have ruled that Tongko is its employee, however, Manulife clearly
failed to afford Tongko said notices. Thus, on this ground too, Manulife is
guilty of illegal dismissal.


G.R. No. 157870, 3 November 2008


The constitutionality of Section 36 of Republic Act No. (RA) 9165, otherwise

known as the Comprehensive Dangerous Drugs Act of 2002, insofar as it
requires mandatory drug testing of candidates for public office, students of
secondary and tertiary schools, officers and employees of public and private
offices, and persons charged before the prosecutor's office with certain
offenses, among other personalities, is put in issue.

As far as pertinent, the challenged section reads as follows:

SEC. 36. Authorized Drug Testing. - Authorized drug testing shall be done by
any government forensic laboratories or by any of the drug testing
laboratories accredited and monitored by the DOH to safeguard the quality
of the test results. The drug testing shall employ, among others, two (2)

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

testing methods, the screening test which will determine the positive result
as well as the type of drug used and the confirmatory test which will confirm
a positive screening test. The following shall be subjected to undergo drug

(d) Officers and employees of public and private offices. - Officers and
employees of public and private offices, whether domestic or overseas, shall
be subjected to undergo a random drug test as contained in the company's
work rules and regulations, for purposes of reducing the risk in the
workplace. Any officer or employee found positive for use of dangerous
drugs shall be dealt with administratively which shall be a ground for
suspension or termination, subject to the provisions of Article 282 of the
Labor Code and pertinent provisions of the Civil Service Law;

Whether or not paragraph (d) Sec. 36 of RA 9165 is unconstitutional?

The first factor to consider in the matter of reasonableness is the nature of
the privacy interest upon which the drug testing, which effects a search
within the meaning of Sec. 2, Art. III of the Constitution, intrudes. In this
case, the office or workplace serves as the backdrop for the analysis of the
privacy expectation of the employees and the reasonableness of drug testing
requirement. The employees' privacy interest in an office is to a large extent
circumscribed by the company's work policies, the collective bargaining
agreement, if any, entered into by management and the bargaining unit, and
the inherent right of the employer to maintain discipline and efficiency in the
workplace. Their privacy expectation in a regulated office environment is, in
fine, reduced; and a degree of impingement upon such privacy has been

Sec. 36 of RA 9165 contains provisions specifically directed towards

preventing a situation that would unduly embarrass the employees or place
them under a humiliating experience. While every officer and employee in a
private establishment is under the law deemed forewarned that he or she
may be a possible subject of a drug test, nobody is really singled out in
advance for drug testing. The goal is to discourage drug use by not telling in
advance anyone when and who is to be tested. And as may be observed,
Sec. 36(d) of RA 9165 itself prescribes what is a narrowing ingredient by
providing that the employees concerned shall be subjected to "random drug
test as contained in the company's work rules and regulations for purposes
of reducing the risk in the work place."

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

The random drug testing shall be undertaken under conditions calculated to

protect as much as possible the employee's privacy and dignity. As to the
mechanics of the test, the law specifies that the procedure shall employ two
testing methods, i.e., the screening test and the confirmatory test, doubtless
to ensure as much as possible the trustworthiness of the results. But the
more important consideration lies in the fact that the test shall be conducted
by trained professionals in access - controlled laboratories monitored by the
Department of Health (DOH) to safeguard against results tampering and to
ensure an accurate chain of custody. All told, therefore, the intrusion into the
employees' privacy, under RA 9165, is accompanied by proper safeguards,
particularly against embarrassing leakages of test results, and is relatively

Taking into account the foregoing factors, i.e., the reduced expectation of
privacy on the part of the employees, the compelling state concern likely to
be met by the search, and the well - defined limits set forth in the law to
properly guide authorities in the conduct of the random testing, we hold that
the challenged drug test requirement is, under the limited context of the
case, reasonable and, ergo, constitutional.

G.R. No. 164774 April 12, 2006

CHUA, Petitioners,
FACTS: Petitioner Star Paper Corporation (the company) is a corporation
engaged in trading – principally of paper products. Josephine Ongsitco is its
Manager of the Personnel and Administration Department while Sebastian
Chua is its Managing Director.
Respondents Ronaldo D. Simbol (Simbol), Wilfreda N. Comia (Comia) and
Lorna E. Estrella (Estrella) were all regular employees of the company.
Simbol was employed by the company on October 27, 1993. He met Alma
Dayrit, also an employee of the company, whom he married on June 27,
1998. Prior to the marriage, Ongsitco advised the couple that should they
decide to get married, one of them should resign pursuant to a company
policy promulgated in 1995, viz.:
1. New applicants will not be allowed to be hired if in case he/she has [a]
relative, up to [the] 3rd degree of relationship, already employed by the
2. In case of two of our employees (both singles [sic], one male and another
female) developed a friendly relationship during the course of their

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

employment and then decided to get married, one of them should resign to
preserve the policy stated above.
Simbol resigned on June 20, 1998 pursuant to the company policy.
Comia was hired by the company on February 5, 1997. She met Howard
Comia, a co-employee, whom she married on June 1, 2000. Ongsitco likewise
reminded them that pursuant to company policy, one must resign should
they decide to get married. Comia resigned on June 30, 2000.
Estrella was hired on July 29, 1994. She met Luisito Zuñiga (Zuñiga), also a
co-worker. Petitioners stated that Zuñiga, a married man, got Estrella
pregnant. The company allegedly could have terminated her services due to
immorality but she opted to resign on December 21, 1999.
The respondents each signed a Release and Confirmation Agreement. They
stated therein that they have no money and property accountabilities in the
company and that they release the latter of any claim or demand of
whatever nature.
Respondents offer a different version of their dismissal. Simbol and Comia
allege that they did not resign voluntarily; they were compelled to resign in
view of an illegal company policy. As to respondent Estrella, she alleges that
she had a relationship with co-worker Zuñiga who misrepresented himself as
a married but separated man. After he got her pregnant, she discovered that
he was not separated. Thus, she severed her relationship with him to avoid
dismissal due to the company policy. On November 30, 1999, she met an
accident and was advised by the doctor at the Orthopedic Hospital to
recuperate for twenty-one (21) days. She returned to work on December 21,
1999 but she found out that her name was on-hold at the gate. She was
denied entry. She was directed to proceed to the personnel office where one
of the staff handed her a memorandum. The memorandum stated that she
was being dismissed for immoral conduct. She refused to sign the
memorandum because she was on leave for twenty-one (21) days and has
not been given a chance to explain. The management asked her to write an
explanation. However, after submission of the explanation, she was
nonetheless dismissed by the company. Due to her urgent need for money,
she later submitted a letter of resignation in exchange for her thirteenth
month pay.
Respondents later filed a complaint for unfair labor practice, constructive
dismissal, separation pay and attorney’s fees. They averred that the
aforementioned company policy is illegal and contravenes Article 136 of the
Labor Code. They also contended that they were dismissed due to their
union membership.
On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the
complaint for lack of merit. On appeal to the NLRC, the Commission affirmed
the decision of the Labor Arbiter on January 11, 2002.
Respondents filed a Motion for Reconsideration but was denied by the NLRC
in a Resolution dated August 8, 2002. They appealed to respondent court via
Petition for Certiorari. In its assailed Decision dated August 3, 2004, the

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

Court of Appeals reversed the NLRC decision.

On appeal to this Court, petitioners contend that the Court of Appeals erred
in holding that:
ISSUE: Whether the subject 1995 policy/regulation is violative of the
constitutional rights towards marriage and the family of employees and of
Article 136 of the Labor Code
HELD: YES.These courts find the no-spouse employment policy invalid for
failure of the employer to present any evidence of business necessity
other than the general perception that spouses in the same workplace might
adversely affect the business. They hold that the absence of such a bona
fide occupational qualification invalidates a rule denying employment to
one spouse due to the current employment of the other spouse in the same
office. Thus, they rule that unless the employer can prove that the
reasonable demands of the business require a distinction based on marital
status and there is no better available or acceptable policy which would
better accomplish the business purpose, an employer may not discriminate
against an employee based on the identity of the employee’s spouse. This is
known as the bona fide occupational qualification exception.
To justify a bona fide occupational qualification, the employer must prove
two factors: (1) that the employment qualification is reasonably related to
the essential operation of the job involved; and, (2) that there is a factual
basis for believing that all or substantially all persons meeting the
qualification would be unable to properly perform the duties of the job.
We do not find a reasonable business necessity in the case at bar.
Petitioners’ sole contention that "the company did not just want to have two
(2) or more of its employees related between the third degree by affinity
and/or consanguinity" is lame. That the second paragraph was meant to give
teeth to the first paragraph of the questioned rule is evidently not the valid
reasonable business necessity required by the law.
It is significant to note that in the case at bar, respondents were hired after
they were found fit for the job, but were asked to resign when they married a
co-employee. Petitioners failed to show how the marriage of Simbol, then a
Sheeting Machine Operator, to Alma Dayrit, then an employee of the
Repacking Section, could be detrimental to its business operations. Neither
did petitioners explain how this detriment will happen in the case of Wilfreda
Comia, then a Production Helper in the Selecting Department, who married
Howard Comia, then a helper in the cutter-machine. The policy is premised
on the mere fear that employees married to each other will be less efficient.
If we uphold the questioned rule without valid justification, the employer can
create policies based on an unproven presumption of a perceived danger at
the expense of an employee’s right to security of tenure.
The failure of petitioners to prove a legitimate business concern in
imposing the questioned policy cannot prejudice the employee’s
right to be free from arbitrary discrimination based upon
stereotypes of married persons working together in one company.

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

Thus, for failure of petitioners to present undisputed proof of a reasonable

business necessity, we rule that the questioned policy is an invalid exercise
of management prerogative. Corollarily, the issue as to whether respondents
Simbol and Comia resigned voluntarily has become moot and academic.
As to respondent Estrella, the Labor Arbiter and the NLRC based their ruling
on the singular fact that her resignation letter was written in her own
handwriting. Both ruled that her resignation was voluntary and thus valid.
The respondent court failed to categorically rule whether Estrella voluntarily
resigned but ordered that she be reinstated along with Simbol and Comia.
Estrella avers that she went back to work on December 21, 1999 but was
dismissed due to her alleged immoral conduct. At first, she did not want to
sign the termination papers but she was forced to tender her resignation
letter in exchange for her thirteenth month pay.
The contention of petitioners that Estrella was pressured to resign because
she got impregnated by a married man and she could not stand being looked
upon or talked about as immoral is incredulous. If she really wanted to avoid
embarrassment and humiliation, she would not have gone back to work at
all. Nor would she have filed a suit for illegal dismissal and pleaded for
reinstatement. We have held that in voluntary resignation, the employee is
compelled by personal reason(s) to dissociate himself from employment. It is
done with the intention of relinquishing an office, accompanied by the act of
abandonment. Thus, it is illogical for Estrella to resign and then file a
complaint for illegal dismissal. Given the lack of sufficient evidence on the
part of petitioners that the resignation was voluntary, Estrella’s dismissal is
declared illegal.

Gross and Habitual Neglect of Duty

School of the Holy Spirit of Quezon City vs. Taguiam, GR NO. 165565, July 14,

[G.R. No. 165565, July 14, 2008]






By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

Respondent Corazon P. Taguiam was the Class Adviser of Grade 5-Esmeralda

of the petitioner, School of the Holy Spirit of Quezon City. On March 10,
2000, the class president, wrote a letter to the grade school principal
requesting permission to hold a year-end celebration at the school grounds.
The principal authorized the activity and allowed the pupils to use the
swimming pool. In this connection, respondent distributed the
parent's/guardian's permit forms to the pupils.

Respondent admitted that Chiara Mae Federico's permit form was unsigned.
Nevertheless, she concluded that Chiara Mae was allowed by her mother to
join the activity since her mother personally brought her to the school with
her packed lunch and swimsuit.

Before the activity started, respondent warned the pupils who did not know
how to swim to avoid the deeper area. However, while the pupils were
swimming, two of them sneaked out. Respondent went after them to verify
where they were going.

Unfortunately, while respondent was away, Chiara Mae drowned.

Petitioners issued a Notice of Administrative Charge to respondent for

alleged gross negligence and required her to submit her written explanation.
Thereafter, petitioners conducted a clarificatory hearing which respondent
attended. Respondent also submitted her Affidavit of Explanation.

Petitioners dismissed respondent on the ground of gross negligence resulting

to loss of trust and confidence.

In dismissing the complaint, the Labor Arbiter declared that respondent was
validly terminated for gross neglect of duty. He opined that Chiara Mae
drowned because respondent had left the pupils without any adult
supervision. He also noted that the absence of adequate facilities should
have alerted respondent before allowing the pupils to use the swimming
pool. The Labor Arbiter further concluded that although respondent's
negligence was not habitual, the same warranted her dismissal since death
resulted therefrom.

Respondent appealed to the NLRC which, however, affirmed the dismissal of

the complaint.

Aggrieved, respondent instituted a petition for certiorari before the Court of

Appeals, which ruled in her favor. The appellate court observed that there
was insufficient proof that respondent's negligence was both gross and

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

Issue: Whether respondent's dismissal on the ground of gross negligence

resulting to loss of trust and confidence was valid.

Held: Under Article 282 of the Labor Code, gross and habitual neglect of
duties is a valid ground for an employer to terminate an employee. Gross
negligence implies a want or absence of or a failure to exercise slight care or
diligence, or the entire absence of care. It evinces a thoughtless disregard of
consequences without exerting any effort to avoid them. Habitual neglect
implies repeated failure to perform one's duties for a period of time,
depending upon the circumstances.

Our perusal of the records leads us to conclude that respondent had been
grossly negligent. First , it is undisputed that Chiara Mae's permit form was
unsigned. Yet, respondent allowed her to join the activity because she
assumed that Chiara Mae's mother has allowed her to join it by personally
bringing her to the school with her packed lunch and swimsuit.

The purpose of a permit form is precisely to ensure that the parents have
allowed their child to join the school activity involved. Respondent cannot
simply ignore this by resorting to assumptions. Respondent admitted that
she was around when Chiara Mae and her mother arrived. She could have
requested the mother to sign the permit form before she left the school or at
least called her up to obtain her conformity.

Second, it was respondent's responsibility as Class Adviser to supervise her

class in all activities sanctioned by the school. Thus, she should have
coordinated with the school to ensure that proper safeguards, such as
adequate first aid and sufficient adult personnel, were present during their
activity. She should have been mindful of the fact that with the number of
pupils involved, it would be impossible for her by herself alone to keep an
eye on each one of them.

As it turned out, since respondent was the only adult present, majority of the
pupils were left unsupervised when she followed the two pupils who sneaked
out. In the light of the odds involved, respondent should have considered
that those who sneaked out could not have left the school premises since
there were guards manning the gates. The guards would not have allowed
them to go out in their swimsuits and without any adult accompanying
them. But those who stayed at the pool were put at greater risk, when she
left them unattended by an adult.

Notably, respondent's negligence, although gross, was not habitual. In view

of the considerable resultant damage, however, we are in agreement that
the cause is sufficient to dismiss respondent. This is not the first time that we

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

have departed from the requirements laid down by the law that neglect of
duties must be both gross and habitual. In Philippine Airlines, Inc. v. NLRC,
we ruled that Philippine Airlines (PAL) cannot be legally compelled to
continue with the employment of a person admittedly guilty of gross
negligence in the performance of his duties although it was his first offense.
In that case, we noted that a mere delay on PAL's flight schedule due to
aircraft damage entails problems like hotel accommodations for its
passengers, re-booking, the possibility of law suits, and payment of special
landing fees not to mention the soaring costs of replacing aircraft parts. In
another case, Fuentes v. National Labor Relations Commission, we held that
it would be unfair to compel Philippine Banking Corporation to continue
employing its bank teller. In that case, we observed that although the
teller's infraction was not habitual, a substantial amount of money was lost.
The deposit slip had already been validated prior to its loss and the amount
reflected thereon is already considered as current liabilities in the bank's
balance sheet. Indeed, the sufficiency of the evidence as well as the
resultant damage to the employer should be considered in the dismissal of
the employee. In this case, the damage went as far as claiming the life of a

Analogous Cases
John Hancock Life Insurance Corp. vs. Davis, September 3, 2008
G.R. No. 169549 September 3, 2008
Respondent Cantre, an agency administration officer of petitioner
corporation was accused of qualified theft for stealing Patricia Yuseco’s
credit card which the latter used to purchase items in various stores in the
City of Manila. The NBI identified Cantre in a security video obtained from
Abenson’s Robinsons Place where a proposed transaction was disapproved
for giving the wrong information upon verification. However, the complaint
was dismissed by the prosecutor because the affidavits presented by the NBI
was not properly verified.
Meanwhile, petitioner placed respondent under preventive
suspension and instructed her to cooperate with its ongoing investigation.
Instead of doing so, however, respondent filed a complaint for illegal
dismissal alleging that petitioner terminated her employment without cause.
The Labor Arbiter found that the respondent committed serious misconduct
thus there was a valid cause for dismissal. Respondent appealed to the NLRC
which affirmed the assailed decision. The CA found that the labor arbiter and
NLRC merely adopted the findings of the NBI regarding respondent's
culpability. Because the affidavits of the witnesses were not verified, they did
not constitute substantial evidence. The labor arbiter and NLRC should have
assessed evidence independently as "unsubstantiated suspicions,

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

accusations and conclusions of employers (did) not provide legal justification

for dismissing an employee."
ISSUE: Whether or not there is a valid cause for termination
HELD: Yes. Article 282 of the Labor Code provides:

Article 282. Termination by Employer. - An employer may terminate an

employment for any of the following causes:

(a) Serious misconduct or willful disobendience by the employee of the lawful

orders of his employer or his representatives in connection with his work;

(e) Other causes analogous to the foregoing.

Misconduct involves "the transgression of some established and definite rule

of action, forbidden act, a dereliction of duty, willful in character, and implies
wrongful intent and not mere error in judgment." For misconduct to be
serious and therefore a valid ground for dismissal, it must be:

1. of grave and aggravated character and not merely trivial or unimportant


2. connected with the work of the employee.

In this case, petitioner dismissed respondent based on the NBI's finding that
the latter stole and used Yuseco's credit cards. But since the theft was not
committed against petitioner itself but against one of its employees,
respondent's misconduct was not work-related and therefore, she could not
be dismissed for serious misconduct.

Nonetheless, Article 282(e) of the Labor Code talks of other analogous

causes or those which are susceptible of comparison to another in general or
in specific detail. For an employee to be validly dismissed for a cause
analogous to those enumerated in Article 282, the cause must involve a
voluntary and/or willful act or omission of the employee.

A cause analogous to serious misconduct is a voluntary and/or willful act or

omission attesting to an employee's moral depravity. Theft committed by an
employee against a person other than his employer, if proven by substantial
evidence, is a cause analogous to serious misconduct.

Yrasuegui vs. PAL October 17, 2008

G.R. No. 168081, October 17, 2008


By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

REYES, R.T., J.:

Petitioner Armando G. Yrasuegui was a former international flight steward of

Philippine Airlines, Inc. (PAL). He stands five feet and eight inches (5'8") with
a large body frame. The proper weight for a man of his height and body
structure is from 147 to 166 pounds, the ideal weight being 166 pounds, as
mandated by the Cabin and Crew Administration Manual of PAL.

The weight problem of petitioner dates back to 1984. Back then, PAL advised
him to go on an extended vacation leave from December 29, 1984 to March
4, 1985 to address his weight concerns. Apparently, petitioner failed to meet
the company's weight standards, prompting another leave without pay from
March 5, 1985 to November 1985.After meeting the required weight,
petitioner was allowed to return to work. But petitioner's weight problem
recurred. He again went on leave without pay from October 17, 1988 to
February 1989.

On April 26, 1989, petitioner weighed 209 pounds, 43 pounds over his ideal
weight. In line with company policy, he was removed from flight duty
effective May 6, 1989 to July 3, 1989. He was formally requested to trim
down to his ideal weight and report for weight checks on several dates. He
was also told that he may avail of the services of the company physician
should he wish to do so. He was advised that his case will be evaluated on
July 3, 1989.

On February 25, 1989, petitioner underwent weight check. It was discovered

that he gained, instead of losing, weight. He was overweight at 215 pounds,
which is 49 pounds beyond the limit. Consequently, his off-duty status was

On October 17, 1989, PAL Line Administrator Gloria Dizon personally visited
petitioner at his residence to check on the progress of his effort to lose
weight. Petitioner weighed 217 pounds, gaining 2 pounds from his previous
weight. After the visit, petitioner made a commitment to reduce weight in a
letter addressed to Cabin Crew Group Manager Augusto Barrios.

Despite the lapse of a ninety-day period given him to reach his ideal weight,
petitioner remained overweight. On January 3, 1990, he was informed of the
PAL decision for him to remain grounded until such time that he satisfactorily
complies with the weight standards. Again, he was directed to report every
two weeks for weight checks.

Petitioner failed to report for weight checks. Despite that, he was given one
more month to comply with the weight requirement. As usual, he was asked
to report for weight check on different dates. He was reminded that his

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

grounding would continue pending satisfactory compliance with the weight


Again, petitioner failed to report for weight checks, although he was seen
submitting his passport for processing at the PAL Staff Service Division.

On April 17, 1990, petitioner was formally warned that a repeated refusal to
report for weight check would be dealt with accordingly. He was given
another set of weight check dates. Again, petitioner ignored the directive
and did not report for weight checks. On June 26, 1990, petitioner was
required to explain his refusal to undergo weight checks.When petitioner
tipped the scale on July 30, 1990, he weighed at 212 pounds. Clearly, he was
still way over his ideal weight of 166 pounds.

From then on, nothing was heard from petitioner until he followed up his
case requesting for leniency on the latter part of 1992. He weighed at 219
pounds on August 20, 1992 and 205 pounds on November 5, 1992.

On November 13, 1992, PAL finally served petitioner a Notice of

Administrative Charge for violation of company standards on weight
requirements. He was given ten (10) days from receipt of the charge within
which to file his answer and submit controverting evidence.

On December 7, 1992, petitioner submitted his Answer. Notably, he did not

deny being overweight. What he claimed, instead, is that his violation, if any,
had already been condoned by PAL since "no action has been taken by the
company" regarding his case "since 1988." He also claimed that PAL
discriminated against him because "the company has not been fair in
treating the cabin crew members who are similarly situated."

On December 8, 1992, a clarificatory hearing was held where petitioner

manifested that he was undergoing a weight reduction program to lose at
least two (2) pounds per week so as to attain his ideal weight.

On June 15, 1993, petitioner was formally informed by PAL that due to his
inability to attain his ideal weight, "and considering the utmost leniency"
extended to him "which spanned a period covering a total of almost five (5)
years," his services were considered terminated "effective immediately."

His motion for reconsideration having been denied,petitioner filed a

complaint for illegal dismissal against PAL.

Labor Arbiter, NLRC and CA Dispositions

On November 18, 1998, Labor Arbiter ruled that petitioner was illegally
dismissed. The Labor Arbiter held that the weight standards of PAL are

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

reasonable in view of the nature of the job of petitioner. However, the weight
standards need not be complied with under pain of dismissal since his weight
did not hamper the performance of his duties. Assuming that it did,
petitioner could be transferred to other positions where his weight would not
be a negative factor. Notably, other overweight employees, i.e., Mr. Palacios,
Mr. Cui, and Mr. Barrios, were promoted instead of being disciplined.

According to the NLRC, "obesity, or the tendency to gain weight

uncontrollably regardless of the amount of food intake, is a disease in
itself." As a consequence, there can be no intentional defiance or serious
misconduct by petitioner to the lawful order of PAL for him to lose weight.

Like the Labor Arbiter, the NLRC found the weight standards of PAL to be
reasonable. However, it found as unnecessary the Labor Arbiter holding that
petitioner was not remiss in the performance of his duties as flight steward
despite being overweight. According to the NLRC, the Labor Arbiter should
have limited himself to the issue of whether the failure of petitioner to attain
his ideal weight constituted willful defiance of the weight standards of PAL.

PAL moved for reconsideration to no avail. Thus, PAL elevated the matter to
the Court of Appeals (CA) via a petition for certiorari under Rule 65 of the
1997 Rules of Civil Procedure. The CA reversed the NLRC. The CA opined that
there was grave abuse of discretion on the part of the NLRC because it
"looked at wrong and irrelevant considerations" in evaluating the evidence of
the parties.

Our Ruling
The obesity of petitioner is a ground for dismissal under Article
282(e) of the Labor Code.

In the case at bar, the evidence on record militates against petitioner's

claims that obesity is a disease. That he was able to reduce his weight from
1984 to 1992 clearly shows that it is possible for him to lose weight given the
proper attitude, determination, and self-discipline. Indeed, during the
clarificatory hearing on December 8, 1992, petitioner himself claimed that
"[t]he issue is could I bring my weight down to ideal weight which is 172,
then the answer is yes. I can do it now."

True, petitioner claims that reducing weight is costing him "a lot of
expenses." However, petitioner has only himself to blame. He could have
easily availed the assistance of the company physician, per the advice of
PAL. He chose to ignore the suggestion. In fact, he repeatedly failed to report
when required to undergo weight checks, without offering a valid

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

explanation. Thus, his fluctuating weight indicates absence of willpower

rather than an illness.

In fine, We hold that the obesity of petitioner, when placed in the context of
his work as flight attendant, becomes an analogous cause under Article
282(e) of the Labor Code that justifies his dismissal from the service. His
obesity may not be unintended, but is nonetheless voluntary. As the CA
correctly puts it, "[v]oluntariness basically means that the just cause is solely
attributable to the employee without any external force influencing or
controlling his actions. This element runs through all just causes under
Article 282, whether they be in the nature of a wrongful action or omission.
Gross and habitual neglect, a recognized just cause, is considered voluntary
although it lacks the element of intent found in Article 282(a), (c), and (d)."

The dismissal of petitioner can be predicated on the bona fide

occupational qualification defense.

Employment in particular jobs may not be limited to persons of a particular

sex, religion, or national origin unless the employer can show that sex,
religion, or national origin is an actual qualification for performing the job.
The qualification is called a bona fide occupational qualification (BFOQ). In
the United States, there are a few federal and many state job discrimination
laws that contain an exception allowing an employer to engage in an
otherwise unlawful form of prohibited discrimination when the action is
based on a BFOQ necessary to the normal operation of a business or

Petitioner contends that BFOQ is a statutory defense. It does not exist if

there is no statute providing for it. Further, there is no existing BFOQ statute
that could justify his dismissal.

Both arguments must fail.

First, the Constitution, the Labor Code, and RA No. 7277 or the Magna Carta
for Disabled Persons contain provisions similar to BFOQ.

Second, in British Columbia Public Service Employee Commission (BSPSERC)

v. The British Columbia Government and Service Employee's Union
(BCGSEU), this Court held that in order to justify a BFOQ, the employer must
prove that (1) the employment qualification is reasonably related to the
essential operation of the job involved; and (2) that there is factual basis for
believing that all or substantially all persons meeting the qualification would
be unable to properly perform the duties of the job.

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

In short, the test of reasonableness of the company policy is used because it

is parallel to BFOQ. BFOQ is valid "provided it reflects an inherent quality
reasonably necessary for satisfactory job performance."

Verily, there is no merit to the argument that BFOQ cannot be applied if it

has no supporting statute. Too, the Labor Arbiter, NLRC, and CA are one in
holding that the weight standards of PAL are reasonable. A common carrier,
from the nature of its business and for reasons of public policy, is bound to
observe extraordinary diligence for the safety of the passengers it
transports. It is bound to carry its passengers safely as far as human care
and foresight can provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances.

The law leaves no room for mistake or oversight on the part of a common
carrier. Thus, it is only logical to hold that the weight standards of PAL show
its effort to comply with the exacting obligations imposed upon it by law by
virtue of being a common carrier.

Petitioner is also in estoppel. He does not dispute that the weight standards
of PAL were made known to him prior to his employment. He is presumed to
know the weight limit that he must maintain at all times. In fact, never did he
question the authority of PAL when he was repeatedly asked to trim down his
weight. Bona fides exigit ut quod convenit fiat. Good faith demands that
what is agreed upon shall be done. Kung ang tao ay tapat kanyang
tutuparin ang napagkasunduan.

Too, the weight standards of PAL provide for separate weight limitations
based on height and body frame for both male and female cabin attendants.
A progressive discipline is imposed to allow non-compliant cabin attendants
sufficient opportunity to meet the weight standards. Thus, the clear-cut rules
obviate any possibility for the commission of abuse or arbitrary action on the
part of PAL.

Petitioner is entitled to separation pay.

Be that as it may, all is not lost for petitioner.

Normally, a legally dismissed employee is not entitled to separation pay. This

may be deduced from the language of Article 279 of the Labor Code that
"[a]n 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." Luckily for

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

petitioner, this is not an ironclad rule.

Exceptionally, separation pay is granted to a legally dismissed employee as

an act "social justice," or based on "equity." In both instances, it is required
that the dismissal (1) was not for serious misconduct; and (2) does not
reflect on the moral character of the employee.

Here, We grant petitioner separation pay equivalent to one-half (1/2)

month's pay for every year of service. It should include regular allowances
which he might have been receiving. We are not blind to the fact that he was
not dismissed for any serious misconduct or to any act which would reflect
on his moral character. We also recognize that his employment with PAL
lasted for more or less a decade.

Sexual Harassment
Domingo vs. Rayala, February 18, 2008
G.R. No. 155831, 18 February 2008


On 16 November 1998, Ma. Lourdes T. Domingo, then Stenographic Reporter

III at the NLRC, filed a Complaint for sexual harassment against Rayala
before Department of Labor and Employment (DOLE). To support the
Complaint, Domingo executed an Affidavit narrating the incidences of sexual
harassment complained of.
Accordingly, the following acts were committed by Rayala: holding and
squeezing Domingo’s shoulders, running his fingers across her neck and
tickling her ear, having inappropriate conversations with her, giving her
money allegedly for school expenses with a promise of future privileges, and
making statements with unmistakable sexual overtones.

After the last incident, Domingo filed for leave of absence and asked to be
immediately transferred. Thereafter, she filed the Complaint for sexual
harassment on the basis of Administrative Order No. 250, in the Department
of Labor and Employment.

Upon receipt of the Complaint, the DOLE Secretary referred the Complaint
to the Office of the President (OP), Rayala being a presidential appointee.

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

The OP, through then Executive Secretary Ronaldo Zamora, ordered

Secretary Laguesma to investigate the allegations in the Complaint and
create a committee for such purpose. On December 4, 1998, Secretary
Laguesma constituted a Committee on Decorum and Investigation
(Committee) for that purpose.

Later the Committee found Rayala guilty of the offense charged and
recommended the imposition of the minimum penalty provided under AO
250, which is suspension for six (6) months and one (1) day.

Rayala filed a Motion for Reconsideration, which the OP denied. He then filed
a Petition for Certiorari and Prohibition with Prayer for Temporary Restraining
Order under Rule 65 of the Revised Rules on Civil Procedure before the
Supreme Court. However, the same was dismissed for disregarding
thehierarchy of courts. Another Motion for Reconsideration was filed which
led to the referral of the Supreme Court of the petition to the Court of
Appeals (CA) for appropriate action.

The Court of Appeals dismissed the petition and held that there was
sufficient evidence on record to create moral certainty that Rayala
committed the acts he was charged with. Rayala filed a Petition for Review
before the Supreme Court.


Whether or not Rayala committed sexual harassment.

That Rayala committed the acts complained of – and was guilty of sexual
harassment – is the common factual finding of not just one, but three
independent bodies: the Committee, the Office of the President and the
Court of Appeals.

Rayala insists, however, that his acts do not constitute sexual harassment,
because Domingo did not allege in her complaint that there was a demand,
request, or requirement of a sexual favor as a condition for her continued
employment or for her promotion to a higher position.

The law penalizing sexual harassment in our jurisdiction is RA 7877. Section

3 thereof defines work-related sexual harassment in this wise:

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

Sec. 3. Work, Education or Training-related Sexual Harassment Defined. –

Work, education or training-related sexual harassment is committed by an
employer, manager, supervisor, agent of the employer, teacher, instructor,
professor, coach, trainor, or any other person who, having authority,
influence or moral ascendancy over another in a work or training or
education environment, demands, requests or otherwise requires any sexual
favor from the other, regardless of whether the demand, request or
requirement for submission is accepted by the object of said Act.

(a) In a work-related or employment environment, sexual harassment is

committed when:

(1) The sexual favor is made as a condition in the hiring or in the

employment, re-employment or continued employment of said individual, or
in granting said individual favorable compensation, terms, conditions,
promotions, or privileges; or the refusal to grant the sexual favor results in
limiting, segregating or classifying the employee which in a way would
discriminate, deprive or diminish employment opportunities or otherwise
adversely affect said employee;

(2) The above acts would impair the employee’s rights or privileges under
existing labor laws; or

(3) The above acts would result in an intimidating, hostile, or offensive

environment for the employee.

It is true that this provision calls for a “demand, request or requirement of a

sexual favor.” But it is not necessary that the demand, request or
requirement of a sexual favor be articulated in a categorical oral or written
statement. It may be discerned, with equal certitude, from the acts of the
offender. Holding and squeezing Domingo’s shoulders, running his fingers
across her neck and tickling her ear, having inappropriate conversations with
her, giving her money allegedly for school expenses with a promise of future
privileges, and making statements with unmistakable sexual overtones – all
these acts of Rayala resound with deafening clarity the unspoken request for
a sexual favor.

Likewise, contrary to Rayala’s claim, it is not essential that the demand,

request or requirement be made as a condition for continued employment or
for promotion to a higher position. It is enough that the respondent’s acts
result in creating an intimidating, hostile or offensive environment for the
employee. That the acts of Rayala generated an intimidating and hostile
environment for Domingo is clearly shown by the common factual finding of
the Investigating Committee, the OP and the CA that Domingo reported the

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

matter to an officemate and, after the last incident, filed for a leave of
absence and requested transfer to another unit.

AMA Computer College v. Garcia, April 14, 2008

Smart Communications vs. Astorga, January 28, 2008

Regina M. Astorga (Astorga) was employed by respondent Smart
Communications, Incorporated (SMART) on May 8, 1997 as District Sales
Manager of the Corporate Sales Marketing Group/ Fixed Services Division
SMART launched an organizational realignment to achieve more efficient
operations. This was made known to the employees on February 27, 1998.
Part of the reorganization was the outsourcing of the marketing and sales
force. Thus, SMART entered into a joint venture agreement with NTT of
Japan, and formed SMART-NTT Multimedia, Incorporated (SNMI). Since SNMI
was formed to do the sales and marketing work, SMART abolished the
CSMG/FSD, Astorga’s division.
To soften the blow of the realignment, SNMI agreed to absorb the CSMG
personnel who would be recommended by SMART. SMART then conducted a
performance evaluation of CSMG personnel and those who garnered the
highest ratings were favorably recommended to SNMI. Astorga landed last in
the performance evaluation, thus, she was not recommended by SMART.
SMART, nonetheless, offered her a supervisory position in the Customer Care
Department, but she refused the offer because the position carried lower
salary rank and rate.
Despite the abolition of the CSMG/FSD, Astorga continued reporting for work.
But on March 3, 1998, SMART issued a memorandum advising Astorga of the
termination of her employment on ground of redundancy, effective April 3,
1998. Astorga received it on March 16, 1998.
The termination of her employment prompted Astorga to file a Complaint for
illegal dismissal, non-payment of salaries and other benefits with prayer for
moral and exemplary damages against SMART and Ann Margaret V. Santiago
(Santiago). She claimed that abolishing CSMG and, consequently,
terminating her employment was illegal for it violated her right to security of
tenure. She also posited that it was illegal for an employer, like SMART, to
contract out services which will displace the employees, especially if the
contractor is an in-house agency.
SMART responded that there was valid termination. It argued that Astorga
was dismissed by reason of redundancy, which is an authorized cause for

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

termination of employment, and the dismissal was effected in accordance

with the requirements of the Labor Code. The redundancy of Astorga’s
position was the result of the abolition of CSMG and the creation of a
specialized and more technically equipped SNMI, which is a valid and
legitimate exercise of management prerogative.
The Labor Arbiter ordered that the dismissal of Astorga is illegal and unjust.
On appeal the National Labor Relations Commission (NLRC) sustained
Astorga’s dismissal. Declaring the abolition of CSMG and the creation of SNMI
to do the sales and marketing services for SMART as a valid organizational
action. It overruled the Labor Arbiter’s ruling that SNMI is an in-house
agency, holding that it lacked legal basis.
Astorga filed a motion for reconsideration, but the NLRC denied it.
Astorga then went to the CA via certiorari. The CA agreed with the NLRC that
the reorganization undertaken by SMART resulting in the abolition of CSMG
was a legitimate exercise of management prerogative. It rejected Astorga’s
posturing that her non-absorption into SNMI was tainted with bad faith.
However, the CA found that SMART failed to comply with the mandatory one-
month notice prior to the intended termination. Accordingly, the CA imposed
a penalty equivalent to Astorga’s one-month salary for this non-compliance.
Astorga filed a motion for reconsideration, while SMART sought partial
reconsideration, the CA partially granted astorga’s motion while SMART was
Issue: Whether Astorga’s dismissal based on redundancy is valid?
The nature of redundancy as an authorized cause for dismissal is explained
in the leading case of Wiltshire File Co., Inc. v. National Labor Relations
Commission,35 viz:
x x x redundancy in an employer’s personnel force necessarily or even
ordinarily refers to duplication of work. That no other person was holding the
same position that private respondent held prior to termination of his
services does not show that his position had not become redundant. Indeed,
in any well organized business enterprise, it would be surprising to find
duplication of work and two (2) or more people doing the work of one person.
We believe that redundancy, for purposes of the 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 characterization of an employee’s services as superfluous or no longer
necessary and, therefore, properly terminable, is an exercise of business
judgment on the part of the employer. The wisdom and soundness of such
characterization or decision is not subject to discretionary review provided,
of course, that a violation of law or arbitrary or malicious action is not shown.

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

It is extremely difficult to believe that SMART would enter into a joint venture
agreement with NTT, form SNMI and abolish CSMG/FSD simply for the sole
purpose of easing out a particular employee, such as Astorga. Moreover,
Astorga never denied that SMART offered her a supervisory position in the
Customer Care Department, but she refused the offer because the position
carried a lower salary rank and rate. If indeed SMART simply wanted to get
rid of her, it would not have offered her a position in any department in the
Astorga also states that the justification advanced by SMART is not true
because there was no compelling economic reason for redundancy. But
contrary to her claim, an employer is not precluded from adopting a new
policy conducive to a more economical and effective management even if it
is not experiencing economic reverses. Neither does the law require that the
employer should suffer financial losses before he can terminate the services
of the employee on the ground of redundancy.
However, as aptly found by the CA, SMART failed to comply with the
mandated one (1) month notice prior to termination. The record is clear that
Astorga received the notice of termination only on March 16, 1998 or less
than a month prior to its effectivity on April 3, 1998. Likewise, the
Department of Labor and Employment was notified of the redundancy
program only on March 6, 1998.
Article 283 of the Labor Code clearly provides:
Art. 283. 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 operation 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
Ministry of Labor and Employment at least one (1) month before the
intended date thereof x x x.
SMART’s assertion that Astorga cannot complain of lack of notice because
the organizational realignment was made known to all the employees as
early as February 1998 fails to persuade. Astorga’s actual knowledge of the
reorganization cannot replace the formal and written notice required by the
law. In the written notice, the employees are informed of the specific date of
the termination, at least a month prior to the effectivity of such termination,
to give them sufficient time to find other suitable employment or to make
whatever arrangements are needed to cushion the impact of termination. In
this case, notwithstanding Astorga’s knowledge of the reorganization, she
remained uncertain about the status of her employment until SMART gave
her formal notice of termination. But such notice was received by Astorga
barely two (2) weeks before the effective date of termination, a period very
much shorter than that required by law.
Be that as it may, this procedural infirmity would not render the termination
of Astorga’s employment illegal. The validity of termination can exist

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

independently of the procedural infirmity of the dismissal. In DAP

Corporation v. CA, we found the dismissal of the employees therein valid and
for authorized cause even if the employer failed to comply with the notice
requirement under Article 283 of the Labor Code. This Court upheld the
dismissal, but held the employer liable for non-compliance with the
procedural requirements.

Constructive Dismissal
Uniwide Sales Warehouse Club vs. NLRC, February 29, 2008
G.R. No. 154503 February 29, 2008
Amalia Kawada, a Full Assistant Store Manager received a
Memorandum issued by the Store Manager Apduhan summarizing the
various reported incidents signifying unsatisfactory performance on the
latter's part which include the commingling of good and damaged items, sale
of a voluminous quantity of damaged toys and ready-to-wear items at
unreasonable prices, and failure to submit inventory reports. Another
Memorandum was issued which claimed that the answers given by the
private respondent were all hypothetical and did not answer directly the
allegations attributed to her. Apduhan sent another Memorandum seeking
from the private respondent an explanation regarding the incidents reported
by Uniwide employees and security personnel for alleged irregularities
committed by the private respondent such as allowing the entry of
unauthorized persons inside a restricted area during non-office hours,
falsification of or inducing another employee to falsify personnel or company
records, sleeping and allowing a non-employee to sleep inside the private
office, unauthorized search and bringing out of company records, purchase
of damaged home furnishing items without the approval from superior,
taking advantage of buying damaged items in large quantity, alteration of
approval slips for the purchase of damaged items and abandonment of work.
In a letter, private respondent answered the allegations made against her.
On July 27, 1998, private respondent sought medical help from the company
physician, Dr. Zambrano, due to complaints of dizziness. Finding private
respondent to be suffering from hypertension, Dr. Zambrano advised her to
take five days sick leave.
Subsequently, private respondent was able to obtain from Dr. Zambrano a
certificate of fitness to work, which she presented to Apduhan the following
day. It turned out that Dr. Zambrano inadvertently wrote "Menia," the
surname of the company nurse, in the medical certificate instead of private
respondent's surname. Thereafter, private respondent claims that Apduhan
shouted at her and prevented her from resuming work because she was not
the person referred to in the medical certificate. After private respondent left

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

Apduhan's office, Apduhan's assistant approached the private respondent to

get the certification so that it may be photocopied. When she refused to give
the certification, private respondent claims that Apduhan once again shouted
at her which caused her hypertension to recur and eventually caused her to
collapse. Private respondent's head hit the edge of the table before she fell
down on the ground for which she suffered contusions at the back of her
On August 2, 1998, Apduhan issued a Memorandum, advising Kawada of a
hearing scheduled on August 12, 1998 and warning her that failure to appear
shall constitute as waiver and the case shall be submitted for decision based
on available papers and evidence.
On August 3, 1998, private respondent filed a case for illegal dismissal
before the Labor Arbiter (LA).
On August 8, 1998, Apduhan sent a letter addressed to private respondent,
which the latter received on even date, advising private respondent to report
for work, as she had been absent since August 1, 1998; and warning her that
upon her failure to do so, she shall be considered to have abandoned her job.
On September 1, 1998, Apduhan issued a Memorandum stating that since
private respondent was unable to attend the scheduled August 12, 1998
hearing, the case was evaluated on the basis of the evidence on record; and
enumerating the pieces of evidence of the irregularities and violations of
company rules committed by private respondent, the latter's defenses and
the corresponding findings by Uniwide. Kawada was thereafter terminated
from her employment on the grounds of violations of Company Rules,
Abandonment of Work and loss of trust and confidence.
The Labor Arbiter denied the complaint of Kawada for lack of merit while the
NLRC on appeal reversed the decision of the Labor Arbiter ordering UNiwide
to pay separation pay, backwages and moral and exemplary damages.
According to the NLRC, private respondent was subjected to inhuman and
anti-social treatment oppressive to labor. Private respondent received
successive memoranda from Apduhan accusing the former of different
infractions, some of which offenses complainant was informed of only a year
after the alleged commission. Further, Apduhan's ill will and motive to edge
private respondent out of her employ was displayed by Apduhan's stubborn
refusal to allow private respondent to continue her work on the flimsy excuse
that the medical certificate did not bear her correct surname, while Apduhan
knew for a fact that the same could not have referred to another person but
to private respondent.
Also, the NLRC observed that private respondent was not afforded due
process by petitioners because the former was not given an opportunity to a
fair hearing in that the investigation was conducted after private respondent
had been constructively dismissed; and that there was no point for private
respondent to still attend the investigation set on August 12, 1998 after her
constructive dismissal on July 31, 1998 and after she had already filed her

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

Whether or not resondent was constructively dismissed.

HELD: No. Case law defines constructive dismissal as a cessation of work

because continued employment is rendered impossible, unreasonable or
unlikely; when there is a demotion in rank or diminution in pay or both; or
when a clear discrimination, insensibility, or disdain by an employer becomes
unbearable to the employee.

The test of constructive dismissal is whether a reasonable person in the

employee's position would have felt compelled to give up his position under
the circumstances. It is an act amounting to dismissal but made to appear as
if it were not. In fact, the employee who is constructively dismissed may be
allowed to keep on coming to work. Constructive dismissal is therefore a
dismissal in disguise. The law recognizes and resolves this situation in favor
of employees in order to protect their rights and interests from the coercive
acts of the employer.
The Court finds that private respondent's allegation of harassment is a
specious statement which contains nothing but empty imputation of a fact
that could hardly be given any evidentiary weight by this Court. Private
respondent's bare allegations of constructive dismissal, when
uncorroborated by the evidence on record, cannot be given credence.
The right to impose disciplinary sanctions upon an employee for just and
valid cause, as well as the authority to determine the existence of said cause
in accordance with the norms of due process, pertains in the first place to
the employer. Precisely, petitioners gave private respondent successive
memoranda so as to give the latter an opportunity to controvert the charges
against her. Clearly, the memoranda are not forms of harassment, but
petitioners' compliance with the requirements of due process.
The July 31, 1998 confrontation where Apduhan allegedly shouted at private
respondent which caused the latter's hypertension to recur and eventually
caused her to collapse cannot by itself support a finding of constructive
dismissal by the NLRC and the CA. Even if true, the act of Apduhan in
shouting at private respondent was an isolated outburst on the part of
Apduhan that did not show a clear discrimination or insensibility that would
render the working condition of private respondent unbearable.

On petitioners' claim of abandonment by private respondent, well-settled is

the rule that to constitute abandonment of work, two elements must concur:
(1) the employee must have failed to report for work or must have been
absent without valid or justifiable reason, and (2) there must have been a
clear intention on the part of the employee to sever the employer-employee
relationship manifested by some overt act. The employer has the burden of
proof to show the employee's deliberate and unjustified refusal to resume his
employment without any intention of returning. Mere absence is not

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

sufficient. There must be an unequivocal intent on the part of the employee

to discontinue his employment.

Private respondent's failure to report for work despite the August 8, 1998
letter sent by Apduhan to private respondent advising the latter to report for
work is not sufficient to constitute abandonment. It is a settled rule that
failure to report for work after a notice to return to work has been served
does not necessarily constitute abandonment.

Private respondent mistakenly believed that the successive memoranda sent

to her from March 1998 to June 1998 constituted discrimination, insensibility
or disdain which was tantamount to constructive dismissal. Thus, private
respondent filed a case for constructive dismissal against petitioners and
consequently stopped reporting for work.
The Court finds that petitioners were not able to establish that private
respondent deliberately refused to continue her employment without
justifiable reason. To repeat, the Court will not make a drastic conclusion
that private respondent chose to abandon her work on the basis of her
mistaken belief that she had been constructively dismissed by Uniwide.

Nonetheless, the Court agrees with the findings of the LA that the
termination of private respondent was grounded on the existence of just
cause under Article 282 (c) of the Labor Code or willful breach by the
employee of the trust reposed on him by his employer or a duly authorized

Private respondent occupies a managerial position. As a managerial

employee, mere existence of a basis for believing that such employee has
breached the trust of his employer would suffice for his dismissal.

Penaflor vs. Outdoor Clothing Manufacturing Corp., January 21, 2010

G.R. No. 177114 January 21, 2010
SYFU, President, MEDYLENE M. DEMOGENA, Finance Manager, and PAUL U.
LEE, Chairman
Peñaflor was hired on September 2, 1999 as probationary Human Resource
Department (HRD) Manager of respondent Outdoor Clothing Manufacturing
Corporation (Outdoor Clothing or the company). As HRD head, Peñaflor was
expected to (1) secure and maintain the right quality and quantity of
people needed by the company; (2) maintain the harmonious
relationship between the employees and management in a role that
supports organizational goals and individual aspirations; and (3)

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

represent the company in labor cases or proceedings. Two staff

members were assigned to work with him to assist him in
undertaking these functions.
Peñaflor claimed that his relationship with Outdoor Clothing went well during
the first few months of his employment; he designed and created the
company’s Policy Manual, Personnel Handbook, Job Expectations, and
Organizational Set-Up during this period. His woes began when the
company’s Vice President for Operations, Edgar Lee (Lee), left the
company after a big fight between Lee and Chief Corporate Officer
Nathaniel Syfu (Syfu). Because of his close association with Lee,
Peñaflor claimed that he was among those who bore Syfu’s ire.
When Outdoor Clothing began undertaking its alleged downsizing program
due to negative business returns, Peñaflor alleged that his department had
been singled out. On the pretext of retrenchment, Peñaflor’s two staff
members were dismissed, leaving him as the only member of Outdoor
Clothing’s HRD and compelling him to perform all personnel-related work. He
worked as a one-man department, carrying out all clerical, administrative
and liaison work; he personally went to various government offices to
process the company’s papers.
When an Outdoor Clothing employee, Lynn Padilla (Padilla), suffered
injuries in a bombing incident, the company required Peñaflor to
attend to her hospitalization needs; he had to work outside office
premises to undertake this task. As he was acting on the company’s
orders, Peñaflor considered himself to be on official business, but
was surprised when the company deducted six days’ salary
corresponding to the time he assisted Padilla. According to Finance
Manager Medylene Demogena (Demogena), he failed to submit his trip
ticket, but Peñaflor belied this claim as a trip ticket was required only when a
company vehicle was used and he did not use any company vehicle when he
attended to his off-premises work.
After Peñaflor returned from his field work on March 13, 2000, his
officemates informed him that while he was away, Syfu had
appointed Nathaniel Buenaobra (Buenaobra) as the new HRD
Manager. This information was confirmed by Syfu’s memorandum of March
10, 2000 to the entire office stating that Buenaobra was the concurrent HRD
and Accounting Manager. Peñaflor was surprised by the news; he also felt
betrayed and discouraged. He tried to talk to Syfu to clarify the matter, but
was unable to do so. Peñaflor claimed that under these circumstances, he
had no option but to resign. He submitted a letter to Syfu declaring his
irrevocable resignation from his employment with Outdoor Clothing effective
at the close of office hours on March 15, 2000.
Peñaflor then filed a complaint for illegal dismissal with the labor arbiter,
claiming that he had been constructively dismissed. He included in his
complaint a prayer for reinstatement and payment of backwages, illegally
deducted salaries, damages, attorney’s fees, and other monetary claims.

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

In his August 15, 2001 decision, the labor arbiter found that Peñaflor had
been illegally dismissed. Outdoor Clothing was consequently ordered to
reinstate Peñaflor to his former or to an equivalent position, and to pay him
his illegally deducted salary for six days, proportionate 13th month pay,
attorney’s fees, moral and exemplary damages.
Outdoor Clothing appealed the labor arbiter’s decision with the NLRC. It
insisted that Peñaflor had not been constructively dismissed, claiming that
Peñaflor tendered his resignation on March 1, 2000 because he saw no
future with the corporation due to its dire financial standing. The NLRC
apparently found Outdoor Clothing’s submitted memoranda sufficient to
overturn the labor arbiter’s decision. It characterized Peñaflor’s resignation
as a response, not to the allegedly degrading and hostile treatment that he
was subjected to by Syfu, but to Outdoor Clothing’s downward financial
spiral. Buenaobra’s appointment was made only after Peñaflor had submitted
his resignation letter, and this was made to cover the vacancy Peñaflor’s
resignation would create. Thus, Peñaflor was not eased out from his position
as HRD manager. No malice likewise was present in the company’s decision
to dismiss Peñaflor’s two staff members; the company simply exercised its
management prerogative to address the financial problems it faced.
Peñaflor, in fact, drafted the dismissal letters of his staff members. In the
absence of any illegal dismissal, no basis existed for the monetary awards
the labor arbiter granted.
In a decision dated December 29, 2006, the CA affirmed the NLRC’s decision,
stating that Peñaflor failed to present sufficient evidence supporting his
claim that he had been constructively dismissed. The CA ruled that
Peñaflor’s resignation was knowingly and voluntarily made.Faced with these
CA actions, Peñaflor filed with us the present petition for review on certiorari.
The Court finds the petition meritorious.
The petition turns on the question of whether Peñaflor’s undisputed
resignation was a voluntary or a forced one, in the latter case making it a
constructive dismissal equivalent to an illegal dismissal. A critical fact
necessary in resolving this issue is whether Peñaflor filed his letter of
resignation before or after the appointment of Buenaobra as the
new/concurrent HRD manager. This question also gives rise to the side issue
of when Buenaobra’s appointment was made. If the resignation letter was
submitted before Syfu’s appointment of Buenaobra as new HRD manager,
little support exists for Peñaflor’s allegation that he had been forced to
resign due to the prevailing abusive and hostile working environment.
Buenaobra’s appointment would then be simply intended to cover the
vacancy created by Peñaflor’s resignation. On the other hand, if the
resignation letter was submitted after the appointment of Buenaobra, then
factual basis exists indicating that Peñaflor had been constructively
dismissed as his resignation was a response to the unacceptable
appointment of another person to a position he still occupied.

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

The question of when Peñaflor submitted his resignation letter arises

because this letter – undisputably made – was undated. Despite Peñaflor’s
claim of having impressive intellectual and academic credentials, his
resignation letter, for some reason, was undated. Thus, the parties have
directly opposing claims on the matter. Peñaflor claims that he wrote and
filed the letter on the same date he made his resignation effective – March
15, 2000. Outdoor Clothing, on the other hand, contends that the letter was
submitted on March 1, 2000, for which reason Syfu issued a memorandum of
the same date appointing Buenaobra as the concurrent HRD manager; Syfu’s
memorandum cited Peñaflor’s intention to resign so he could devote his time
to teaching. The company further cites in support of its case Buenaobra’s
March 3, 2000 memorandum accepting his appointment. Another piece of
evidence is the Syfu memorandum of March 10, 2000, which informed the
office of the appointment of Buenaobra as the concurrent Head of HRD – the
position that Peñaflor occupied. Two other memoranda are alleged to exist,
namely, the AWOL memoranda of March 6 and 11, 2000, allegedly sent to
Several reasons arising directly from these pieces of evidence lead us to
conclude that Peñaflor did indeed submit his resignation letter on March, 15,
2000, i.e., on the same day that it was submitted.
The circumstances and other evidence surrounding Peñaflor’s resignation
support his claim that he was practically compelled to resign from the
Foremost among these is the memorandum of March 10, 2000 signed by
Syfu informing the whole office ("To: All concerned") about the designation of
Buenaobra as concurrent Accounting and HRD Manager. In contrast with the
suspect memoranda we discussed above, this memorandum properly bore
signatures acknowledging receipt and dates of receipt by at least five
company officials, among them the readable signature of Demogene and one
Agbayani; three of them acknowledged receipt on March 13, 2000, showing
that indeed it was only on that day that the appointment of Buenaobra to the
HRD position was disclosed. This evidence is fully consistent with Peñaflor’s
position that it was only in the afternoon of March 13, 2000 that he was told,
informally at that, that Buenaobra had taken over his position. It explains as
well why as late as March 13, 2000, Peñaflor still prepared and signed a
security report, and is fully consistent with his position that on that day he
was still working on the excuse letter of certain sales personnel of the
In our view, it is more consistent with human experience that Peñaflor indeed
learned of the appointment of Buenaobra only on March 13, 2000 and
reacted to this development through his resignation letter after realizing that
he would only face hostility and frustration in his working environment. Three
very basic labor law principles support this conclusion and militate against
the company’s case.

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

The first is the settled rule that in employee termination disputes, the
employer bears the burden of proving that the employee’s dismissal was for
just and valid cause. That Peñaflor did indeed file a letter of resignation does
not help the company’s case as, other than the fact of resignation, the
company must still prove that the employee voluntarily resigned. There can
be no valid resignation where the act was made under compulsion or under
circumstances approximating compulsion, such as when an employee’s act
of handing in his resignation was a reaction to circumstances leaving him no
alternative but to resign. In sum, the evidence does not support the
existence of voluntariness in Peñaflor’s resignation. Last but not the
least, we have repeatedly given significance in abandonment and
constructive dismissal cases to the employee’s reaction to the termination of
his employment and have asked the question: is the complaint against the
employer merely a convenient afterthought subsequent to abandonment or
a voluntary resignation? We find from the records that Peñaflor sought
almost immediate official recourse to contest his separation from service
through a complaint for illegal dismissal. This is not the act of one who
voluntarily resigned; his immediate complaints characterize him as one who
deeply felt that he had been wronged.

Floating Status
G.R. No. 169812, 23 February 2007


Federito B. Pido (petitioner) was hired on October 1, 1995 by Cherubim

Security and General Services, Inc. (respondent) as a security guard. He was
assigned at the Ayala Museum, but was later transferred on December 1,
1995 to the Tower and Exchange Plaza of Ayala Center where he worked as a
computer operator at the Console Room, responsible for observing
occurrences that transpire inside elevators and other areas in buildings
which are recorded by surveillance cameras and relayed to monitors.

Like the other guards deployed by respondent at the Ayala Center, petitioner
was under the operational control and supervision of the Ayala Security
Force (ASF) of the Ayala Group of Companies.

On January 21, 2000, petitioner had an altercation with Richard Alcantara

(Alcantara) of the ASF, arising from a statement of Alcantara that petitioner’s
security license for his .38 caliber revolver service firearm and duty detail
order had already expired. On even date, Alcantara filed a complaint for

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

Gross Misconduct, claiming that when he directed petitioner to present his

security license, petitioner angrily and on top of his voice questioned his
authority. And Alcantara recommended that petitioner be relieved from his
post, and that immediate disciplinary action against him be taken.

On January 23, 2000, petitioner reported for work at the Ayala Center but he
was not allowed to stay in the premises, a Recall Order having been issued
by respondent through its Operations Manager. Petitioner thus filed an
information report wherein he narrated that Alcantara confronted him on
January 21, 2000 about his right to carry a firearm and afterwards tried to
grab it from its holster, resulting in a heated argument between them.

As more than nine months had elapsed since the investigation was
conducted by respondent with no categorical findings thereon made,
petitioner filed on October 23, 2000 a complaint for illegal constructive
dismissal, illegal suspension, and non-payment and underpayment of
salaries, holiday pay, rest day, service incentive leave, 13th month pay, meal
and travel allowance and night shift differential against respondent, along
with its employee Rosario K. Balais (Rosario) who was allegedly responsible
for running the day to day affairs of respondent’s business. Petitioner
likewise prayed for reinstatement and payment of full backwages, attorney’s
fees and other money claims.

In its position paper, respondent denied that it dismissed petitioner from the
service, it claiming that while it was still in the process of investigating the
January 21, 2000 incident, it offered petitioner another assignment which he
declined, saying “pahinga muna ako [I will in the meantime take a rest].”

The Labor Arbiter ruled that petitioner’s suspension for more than nine
months had ripened into constructive termination, on account of which he
ordered the payment of separation pay equivalent to one month salary of
P8,000 for every year of service, or for the total amount of P32,000. The
Arbiter, however, found that there was insufficient evidence to support
petitioner’s assertion that he was entitled to his money claims.

Both parties appealed to the National Labor Relations Commission (NLRC).

The NLRC modified the decision of the Labor Arbiter. While it found that
petitioner was indeed constructively dismissed, it set aside the award of
separation pay, given respondent’s willingness to assign petitioner to
another post which he declined. On the same ground, the NLRC denied
petitioner’s claim for backwages. It merely ordered his reinstatement.

Petitioner’s motion for reconsideration having been denied by the NLRC by

Resolution, he filed a petition for certiorari with the Court of Appeals,

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

maintaining that his suspension for more than nine months amounted to
constructive dismissal to entitle him to separation pay and backwages.

The appellate court upheld the NLRC decision and accordingly dismissed
petitioner’s appeal. The appellate court sustained the findings of the Labor
Arbiter and the NLRC that while a security guard, like petitioner, may be
lawfully placed on a “floating status,” the same should continue only for six
months, otherwise the security agency could be liable for constructive
dismissal under Article 286 of the Labor Code, viz:

ART. 286. When employment not deemed terminated. - The bona fide
suspension of the operation of a business or undertaking for a period not
exceeding six (6) months, or the fulfillment of the employee of a military or
civic duty shall not terminate employment. In all such cases, the employer
shall reinstate the employee to his former position without loss of seniority
rights if he indicates his desire to resume his work not later than one (1)
month from the resumption of operations of his employer or from his relief
from the military or civic duty.


Whether or not petitioner’s nine-month suspension is tantamount to

constructive dismissal.


The Supreme Court finds that, indeed, petitioner was constructively

dismissed, but not on the grounds advanced by the appellate court, which
echoed those of the NLRC and the Labor Arbiter.

Article 286 applies only when there is a bona fide suspension of the
employer's operation of a business or undertaking for a period not exceeding
six (6) months. In such a case, there is no termination of employment but
only a temporary displacement of employees, albeit the displacement should
not exceed six (6) months. The paramount consideration should be the dire
exigency of the business of the employer that compels it to put some of its
employees temporarily out of work. In security services, the temporary "off-
detail" of guards takes place when the security agency's clients decide not to
renew their contracts with the security agency, resulting in a situation where
the available posts under its existing contracts are less than the number of
guards in its roster.

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

Verily, a floating status requires the dire exigency of the employer's bona
fide suspension of operation of a business or undertaking. In security
services, this happens when the security agency’s clients which do not
renew their contracts are more than those that do and the new ones that the
agency gets. Also, in instances when contracts for security services stipulate
that the client may request the agency for the replacement of the guards
assigned to it even for want of cause, the replaced security guard may be
placed on temporary “off-detail” if there are no available posts under
respondent’s existing contracts.

When a security guard is placed on a “floating status,” he does not receive

any salary or financial benefit provided by law. Due to the grim economic
consequences to the employee, the employer should bear the burden of
proving that there are no posts available to which the employee temporarily
out of work can be assigned. This, respondent failed to discharge.

As per the Recall Order, it can be gathered that respondent intended to put
petitioner under preventive suspension for an indefinite period of time
pending the investigation of the complaint against him. The allowable period
of suspension in such a case is not six months but only 30 days, following
Sections 8 and 9 of Rule XXIII, Book V of the Omnibus Rules Implementing
the Labor Code (Implementing Rules). Hence, in the event the employer
chooses to extend the period of suspension, he is required to pay the wages
and other benefits due the worker and the worker is not bound to reimburse
the amount paid to him during the extended period of suspension even if,
after the completion of the hearing or investigation, the employer decides to
dismiss him.

Respondent did not inform petitioner that it was extending its investigation,
nor did it pay him his wages and other benefits after the lapse of the 30-day
period of suspension. Neither did respondent issue an order lifting
petitioner’s suspension, or any official assignment, memorandum or detail
order for him to assume his post or another post. Respondent merely chose
to dawdle with the investigation, in absolute disregard of petitioner’s welfare.

At the time petitioner filed the complaint for illegal suspension and/or
constructive dismissal on October 23, 2000, petitioner had already been
placed under preventive suspension for nine months. To date, there is no
showing or information that, if at all, respondent still intends to conclude its

This Court thus rules that petitioner’s prolonged suspension, owing to

respondent’s neglect to conclude the investigation, had ripened to
constructive dismissal.

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

Kimberly Clark Phils. Inc. vs. Dimayuga, September 18, 2009

Magdadaro vs. PNB, July 17, 2009

G.R. No. 166198 July 17, 2009
Marcelino A. Magdadaro (petitioner) was employed by Philippine National
Bank (respondent) since 8 January 1968. On 21 September 1998, petitioner
filed his application for early retirement under respondent’s Special
Separation Incentive Program (SSIP). Petitioner was then holding the position
of Senior Assistant Manager of respondent’s Branch Operations and
Consumer Finance Division for the Visayas. Petitioner stated in his
application that 31 December 1999 was his preferred effective date of
Respondent approved petitioner’s application for early retirement but made
it effective on 31 December 1998. Petitioner protested the acceleration of his
retirement. He received, under protest, his retirement and separation
benefits amounting to P908,950.44. On 18 October 1999, petitioner filed a
complaint for illegal dismissal and payment of moral, exemplary and actual
damages against respondent before the Regional Arbitration Branch No. VII
of the National Labor Relations Commission (NLRC), Cebu City.
The Ruling of the Labor Arbiter and the NLRC
In a Decision dated 3 August 2000, the Labor Arbiter ruled that respondent
had the discretion and prerogative to set the effective date of retirement
under the SSIP. The Labor Arbiter ruled that respondent’s insistence on the
date of effectivity of petitioner’s retirement was not tantamount to illegal
dismissal. The Labor Arbiter ruled that there was no dismissal to speak of
because petitioner voluntarily availed of the SSIP. Still, the Labor Arbiter
granted petitioner’s preferred date of retirement and awarded him additional
retirement benefits.
Both petitioner and respondent appealed from the Labor Arbiter’s Decision.
In its 4 March 2003 Decision, the NLRC affirmed the Labor Arbiter’s Decision.
However, the NLRC considered petitioner’s retirement on 31 December 1998
as tantamount to illegal dismissal. The NLRC ruled that while it recognized
respondent’s prerogative to change petitioner’s retirement date,
management prerogative should be exercised with prudence and without
Petitioner and respondent filed their respective motions for reconsideration.
In its 24 July 2003 Resolution, the NLRC denied both motions for
reconsideration for lack of merit.
Respondent filed a petition for certiorari before the Court of Appeals.
The Ruling of the Court of Appeals

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

The Court of Appeals granted the petition. The Court of Appeals ruled that
the NLRC acted with grave abuse of discretion in affirming the decision of the
Labor Arbiter, while at the same time finding that petitioner’s retirement was
tantamount to illegal dismissal.
The Court of Appeals held that petitioner voluntarily applied for the SSIP. The
Court of Appeals ruled that petitioner could not claim to have been illegally
dismissed just because the date of effectivity of his retirement did not
conform to his preferred retirement date.
Petitioner filed a motion for reconsideration. In its 6 December 2004
Resolution, the Court of Appeals denied the motion.
The Issue
The only issue in this case is whether petitioner was illegally dismissed from
The Ruling of this Court
The petition has no merit.
Retirement is the result of a bilateral act of the parties, a voluntary
agreement between the employer and the employee whereby the latter,
after reaching a certain age, agrees to sever his or her employment with the
former. Retirement is provided for under Article 287 of the Labor Code, as
amended by Republic Act No. 7641, or is determined by an existing
agreement between the employer and the employee.
In this case, respondent offered the SSIP to overhaul the bank structure and
to allow it to effectively compete with local peer and foreign banks. SSIP was
not compulsory on employees. Employees who wished to avail of the SSIP
were required to accomplish a form for availment of separation benefits
under the SSIP and to submit the accomplished form to the Personnel
Administration and Industrial Relations Division (PAIRD) for approval.
Petitioner voluntarily availed of the SSIP. He accomplished the application
form and submitted it to the PAIRD. He only questioned the approval of his
retirement on a date earlier than his preferred retirement date.
The Labor Arbiter ruled that petitioner was not illegally dismissed from the
service. Even the NLRC ruled that petitioner could no longer withdraw his
application for early retirement under the SSIP. However, the NLRC ruled that
respondent could not accelerate the petitioner’s retirement date. The NLRC
ruled that it could not imagine how petitioner’s continued employment until
31 December 1999 would impair the delivery of bank services and attribute
bad faith on respondent when it accelerated petitioner’s retirement.1avvphi1
We do not agree. Whether petitioner’s early retirement within the SSIP
period will improve or impair the delivery of bank services is a business
decision properly within the exercise of management prerogative. More
importantly, the SSIP provides:
7. Management shall have the discretion and prerogative in approving the
applications filed under the Plan, as well as in setting the effectivity
dates for separation within the implementation period of the Plan.
(Emphasis supplied)

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

It is clear that it is within respondent’s prerogative to set the date of

effectivity of retirement and it may not be necessarily what is stated in the

Serrano vs. Severino Santos Transit, August 9, 2010

G.R. No. 187698 August 9, 2010



Petitioner Rodolfo Serrano has been an employee of Severino Santos Transit
for 14 years. Petitioner applied for optional retirement from the company
whose representative advised him that he must first sign the already
prepared Quitclaim before his retirement pay could be released. As
petitioner’s request to first go over the computation of his retirement pay
was denied, he signed the Quitclaim on which he wrote "U.P." (under protest)
after his signature, indicating his protest to the amount of P75,277.45 which
he received, computed by the company at 15 days per year of service.
Petitioner soon after filed a complaint before the Labor Arbiter, alleging that
the company erred in its computation since under Republic Act No. 7641,
otherwise known as the Retirement Pay Law, his retirement pay should have
been computed at 22.5 days per year of service to include the cash
equivalent of the 5-day service incentive leave (SIL) and 1/12 of the 13th
month pay which the company did not. The company maintained, however,
that the Quitclaim signed by petitioner barred his claim and, in any event, its
computation was correct since petitioner was not entitled to the 5-day SIL
and pro-rated 13th month pay for, as a bus conductor, he was paid on
commission basis.
The Labor Arbiter ruled in favor of Serrano. In the same Labor Advisory on
Retirement Pay Law, it was likewise decisively made clear that "the law
expanded the concept of "one-half month salary" from the usual one-month
salary divided by two. However, the National Labor Relations Commission
(NLRC) to which respondents appealed reversed the Labor Arbiter’s ruling
and dismissed petitioner’s complaint.
ISSUE: Whether or not petitioner is entitled to the computation of retirement
pay as given by RA 7641
HELD: Yes. Admittedly, petitioner worked for 14 years for the bus company
which did not adopt any retirement scheme. Even if petitioner as bus
conductor was paid on commission basis then, he falls within the coverage of
R.A. 7641 and its implementing rules. As thus correctly ruled by the Labor
Arbiter, petitioner’s retirement pay should include the cash equivalent of the
5-day SIL and 1/12 of the 13th month pay.

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

For purposes, however, of applying the law on SIL, as well as on retirement,

the Court notes that there is a difference between drivers paid under the
"boundary system" and conductors who are paid on commission basis.

In practice, taxi drivers do not receive fixed wages. They retain only those
sums in excess of the "boundary" or fee they pay to the owners or operators
of the vehicles.7 Conductors, on the other hand, are paid a certain
percentage of the bus’ earnings for the day.

A careful perusal of said provisions of law will result in the conclusion that
the grant of service incentive leave has been delimited by the Implementing
Rules and Regulations of the Labor Code to apply only to those employees
not explicitly excluded by Section 1 of Rule V. According to the Implementing
Rules, Service Incentive Leave shall not apply to employees classified as
"field personnel." The phrase "other employees whose performance is
unsupervised by the employer" must not be understood as a separate
classification of employees to which service incentive leave shall not be
granted. Rather, it serves as an amplification of the interpretation of the
definition of field personnel under the Labor Code as those "whose actual
hours of work in the field cannot be determined with reasonable certainty."
The same is true with respect to the phrase "those who are engaged on task
or contract basis, purely commission basis." Said phrase should be related
with "field personnel," applying the rule on ejusdem generis that general and
unlimited terms are restrained and limited by the particular terms that they
follow. Hence, employees engaged on task or contract basis or paid on
purely commission basis are not automatically exempted from the grant of
service incentive leave, unless, they fall under the classification of field

As a general rule, [field personnel] are those whose performance of their

job/service is not supervised by the employer or his representative, the
workplace being away from the principal office and whose hours and days of
work cannot be determined with reasonable certainty; hence, they are paid
specific amount for rendering specific service or performing specific work. If
required to be at specific places at specific times, employees including
drivers cannot be said to be field personnel despite the fact that they are
performing work away from the principal office of the employee.

Probationary Status of Fixed Term Employees

Mercado vs. AMA Computer College, April 13, 2010
G.R. No. 183572- April 13, 2010



By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

AMACC is an educational institution engaged in computer-based
education in the country. One of AMACC’s biggest schools in the country is
its branch at Parañaque City. The petitioners were faculty members who
started teaching at AMACC on May 25, 1998. The petitioner Mercado was
engaged as a Professor 3, while petitioner Tonog was engaged as an
Assistant Professor 2. On the other hand, petitioners De Leon, Lachica and
Alba, Jr., were all engaged as Instructor 1. The petitioners executed
individual Teacher’s Contracts for each of the trimesters that they were
engaged to teach.
For the school year 2000-2001, AMACC implemented new faculty
screening guidelines, set forth in its Guidelines on the Implementation of
AMACC Faculty Plantilla. Under the new screening guidelines, teachers
were to be hired or maintained based on extensive teaching
experience, capability, potential, high academic qualifications and
research background. The performance standards under the new
screening guidelines were also used to determine the present faculty
members’ entitlement to salary increases. The petitioners failed to
obtain a passing rating based on the performance standards; hence
AMACC did not give them any salary increase.
Because of AMACC’s action on the salary increases, the petitioners
filed a complaint with the Arbitration Branch of the NLRC on July 25, 2000, for
underpayment of wages, non-payment of overtime and overload
compensation, 13th month pay, and for discriminatory practices.
On September 7, 2000, the petitioners individually received a
memorandum from AMACC, through Human Resources Supervisor Mary
Grace Beronia, informing them that with the expiration of their contract to
teach, their contract would no longer be renewed.
The petitioners amended their labor arbitration complaint to include
the charge of illegal dismissal against AMACC. In their Position Paper, the
petitioners claimed that their dismissal was illegal because it was made in
retaliation for their complaint for monetary benefits and discriminatory
practices against AMACC. The petitioners also contended that AMACC failed
to give them adequate notice; hence, their dismissal was ineffectual. AMACC
contended in response that the petitioners worked under a contracted term
under a non-tenured appointment and were still within the three-year
probationary period for teachers. Their contracts were not renewed for the
following term because they failed to pass the Performance Appraisal System
for Teachers (PAST) while others failed to comply with the other
requirements for regularization, promotion, or increase in salary. This move,
according to AMACC, was justified since the school has to maintain its high
academic standards.
On March 15, 2002, Labor Arbiter declared in his decision that the
petitioners had been illegally dismissed, and ordered AMACC to reinstate

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

them to their former positions without loss of seniority rights and to pay
them full backwages, attorney’s fees and 13th month pay. The LA ruled that
Article 281 of the Labor Code on probationary employment applied to the
case; that AMACC allowed the petitioners to teach for the first semester of
school year 2000-2001; that AMACC did not specify who among the
petitioners failed to pass the PAST and who among them did not comply with
the other requirements of regularization, promotions or increase in salary;
and that the petitioners’ dismissal could not be sustained on the basis of
AMACC’s “vague and general allegations” without substantial factual basis.
On appeal, the NLRC in a Resolution dated July 18, 2005 denied
AMACC’s appeal for lack of merit and affirmed in toto the LA’s
ruling. The NLRC, however, observed that the applicable law is Section 92
of the Manual of Regulations for Private Schools (which mandates a
probationary period of nine consecutive trimesters of satisfactory service for
academic personnel in the tertiary level where collegiate courses are offered
on a trimester basis), not Article 281 of the Labor Code (which prescribes a
probationary period of six months) as the LA ruled. The NLRC ruled that the
new screening guidelines for the school year 2000-20001 cannot be imposed
on the petitioners and their employment contracts since the new guidelines
were not imposed when the petitioners were first employed in 1998. In a
decision issued on November 29, 2007, the CA granted AMACC’s petition
for certiorari and dismissed the petitioners’ complaint for illegal
dismissal. The CA ruled that under the Manual for Regulations for Private
Schools, a teaching personnel in a private educational institution (1) must be
a full time teacher; (2) must have rendered three consecutive years of
service; and (3) such service must be satisfactory before he or she can
acquire permanent status.The CA noted that the petitioners had not
completed three (3) consecutive years of service (i.e. six regular semesters
or nine consecutive trimesters of satisfactory service) and were still within
their probationary period; their teaching stints only covered a period of two
(2) years and three (3) months when AMACC decided not to renew their
contracts on September 7, 2000.
1) WON CA gravely erred in not ordering their reinstatement with full,
We find the petition meritorious.
Rule on Employment on Probationary Status

Fixed-period Employment
The use of employment for fixed periods during the teachers’ probationary
period is likewise an accepted practice in the teaching profession. We
mentioned this in passing in Magis Young Achievers’ Learning Center v.
Adelaida P. Manalo, albeit a case that involved elementary, not tertiary,
education, and hence spoke of a school year rather than a semester or a
trimester. We noted in this case:

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

The common practice is for the employer and the teacher to enter into a contract,
effective for one school year. At the end of the school year, the employer has the option not to
renew the contract, particularly considering the teacher’s performance. If the contract is not renewed,
the employment relationship terminates. If the contract is renewed, usually for another school year,
the probationary employment continues. Again, at the end of that period, the parties may opt to
renew or not to renew the contract. If renewed, this second renewal of the contract for another school
year would then be the last year – since it would be the third school year – of probationary
employment. At the end of this third year, the employer may now decide whether to extend
a permanent appointment to the employee, primarily on the basis of the employee having
met the reasonable standards of competence and efficiency set by the employer. For the
entire duration of this three-year period, the teacher remains under probation. Upon the
expiration of his contract of employment, being simply on probation, he cannot
automatically claim security of tenure and compel the employer to renew his employment
contract. It is when the yearly contract is renewed for the third time that Section 93 of the Manual
becomes operative, and the teacher then is entitled to regular or permanent employment status.

It is important that the contract of probationary employment specify the period or term of its
effectivity. The failure to stipulate its precise duration could lead to the inference that the contract is
binding for the full three-year probationary period.

c. Academic and Management Prerogative

AMACC’s right to academic freedom is particularly important in the
present case, because of the new screening guidelines for AMACC faculty put
in place for the school year 2000-2001. We agree with the CA that AMACC
has the inherent right to establish high standards of competency and
efficiency for its faculty members in order to achieve and maintain academic
excellence. The school’s prerogative to provide standards for its teachers
and to determine whether or not these standards have been met is in
accordance with academic freedom that gives the educational institution the
right to choose who should teach.
The same academic freedom grants the school the autonomy to decide
for itself the terms and conditions for hiring its teacher, subject of course to
the overarching limitations under the Labor Code. Academic freedom, too, is
not the only legal basis for AMACC’s issuance of screening guidelines. The
authority to hire is likewise covered and protected by its management
prerogative – the right of an employer to regulate all aspects of employment,
such as hiring, the freedom to prescribe work assignments, working
methods, process to be followed, regulation regarding transfer of employees,
supervision of their work, lay-off and discipline, and dismissal and recall of
workers. Thus, AMACC has every right to determine for itself that it
shall use fixed-term employment contracts as its medium for hiring
its teachers. It also acted within the terms of the Manual of
Regulations for Private Schools when it recognized the petitioners
to be merely on probationary status up to a maximum of nine
The Conflict: Probationary Status and Fixed-term Employment
The existence of the term-to-term contracts covering the petitioners’
employment is not disputed, nor is it disputed that they were on
probationary status – not permanent or regular status – from the time they

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

were employed on May 25, 1998 and until the expiration of their Teaching
Contracts on September 7, 2000. As the CA correctly found, their teaching
stints only covered a period of at least seven (7) consecutive trimesters or
two (2) years and three (3) months of service. This case, however, brings
to the fore the essential question of which, between the two factors
affecting employment, should prevail given AMACC’s position that
the teachers contracts expired and it had the right not to renew
them. In other words, should the teachers’ probationary status be
disregarded simply because the contracts were fixed-term?
On the one hand, employment on probationary status affords management
the chance to fully scrutinize the true worth of hired personnel before the full force
of the security of tenure guarantee of the Constitution comes into play. Based on
the standards set at the start of the probationary period, management is given the
widest opportunity during the probationary period to reject hirees who fail to
meet its own adopted but reasonable standards. These standards, together
with the just and authorized causes for termination of employment the Labor Code
expressly provides, are the grounds available to terminate the employment of a
teacher on probationary status. For example, the school may impose reasonably
stricter attendance or report compliance records on teachers on probation, and
reject a probationary teacher for failing in this regard, although the same
attendance or compliance record may not be required for a teacher already on
permanent status. At the same time, the same just and authorizes causes for
dismissal under the Labor Code apply to probationary teachers, so that they may be
the first to be laid-off if the school does not have enough students for a given
semester or trimester. Termination of employment on this basis is an authorized
cause under the Labor Code.
Labor, for its part, is given the protection during the probationary period of
knowing the company standards the new hires have to meet during the
probationary period, and to be judged on the basis of these standards, aside from
the usual standards applicable to employees after they achieve permanent
status. Under the terms of the Labor Code, these standards should be made known
to the teachers on probationary status at the start of their probationary period, or at
the very least under the circumstances of the present case, at the start of the
semester or the trimester during which the probationary standards are to be
applied. Of critical importance in invoking a failure to meet the probationary
standards, is that the school should show – as a matter of due process – how
these standards have been applied. This is effectively the second notice in a
dismissal situation that the law requires as a due process guarantee supporting the
security of tenure provision, and is in furtherance, too, of the basic rule in employee
dismissal that the employer carries the burden of justifying a dismissal. These rules
ensure compliance with the limited security of tenure guarantee the law extends to
probationary employees.
When fixed-term employment is brought into play under the above
probationary period rules, the situation – as in the present case – may at first blush
look muddled as fixed-term employment is in itself a valid employment mode under
Philippine law and jurisprudence. The conflict, however, is more apparent than real
when the respective nature of fixed-term employment and of employment on
probationary status is closely examined.

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

The fixed-term character of employment essentially refers to the

period agreed upon between the employer and the employee; employment exists
only for the duration of the term and ends on its own when the term expires. In a
sense, employment on probationary status also refers to a period because of the
technical meaning “probation” carries in Philippine labor law – a maximum period of
six months, or in the academe, a period of three years for those engaged in
teaching jobs. Their similarity ends there, however, because of the overriding
meaning that being “on probation” connotes, i.e., a process of testing and
observing the character or abilities of a person who is new to a role or job.

Understood in the above sense, the essentially protective character of

probationary status for management can readily be appreciated. But this same
protective character gives rise to the countervailing but equally protective rule that
the probationary period can only last for a specific maximum period and under
reasonable, well-laid and properly communicated standards. Otherwise stated,
within the period of the probation, any employer move based on the probationary
standards and affecting the continuity of the employment must strictly conform to
the probationary rules.

Under the given facts where the school year is divided into trimesters, the
school apparently utilizes its fixed-term contracts as a convenient arrangement
dictated by the trimestral system and not because the workplace parties really
intended to limit the period of their relationship to any fixed term and to finish this
relationship at the end of that term. If we pierce the veil, so to speak, of the
parties’ so-called fixed-term employment contracts, what undeniably comes out at
the core is a fixed-term contract conveniently used by the school to define and
regulate its relations with its teachers during their probationary period.

To be sure, nothing is illegitimate in defining the school-teacher relationship

in this manner. The school, however, cannot forget that its system of fixed-term
contract is a system that operates during the probationary period and for this
reason is subject to the terms of Article 281 of the Labor Code. Unless this
reconciliation is made, the requirements of this Article on probationary
status would be fully negated as the school may freely choose not to
renew contracts simply because their terms have expired. The inevitable
effect of course is to wreck the scheme that the Constitution and the
Labor Code established to balance relationships between labor and

Given the clear constitutional and statutory intents, we cannot but conclude
that in a situation where the probationary status overlaps with a fixed-term
contract not specifically used for the fixed term it offers, Article 281 should
assume primacy and the fixed-period character of the contract must give
way. This conclusion is immeasurably strengthened by the petitioners’ and the
AMACC’s hardly concealed expectation that the employment on probation could
lead to permanent status, and that the contracts are renewable unless the
petitioners fail to pass the school’s standards.

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao
January 1, 2010

To highlight what we mean by a fixed-term contract specifically used for the

fixed term it offers, a replacement teacher, for example, may be contracted for a
period of one year to temporarily take the place of a permanent teacher on a one-
year study leave. The expiration of the replacement teacher’s contracted term,
under the circumstances, leads to no probationary status implications as she was
never employed on probationary basis; her employment is for a specific purpose
with particular focus on the term and with every intent to end her teaching
relationship with the school upon expiration of this term.

If the school were to apply the probationary standards (as in fact it says it did
in the present case), these standards must not only be reasonable but must have
also been communicated to the teachers at the start of the probationary period, or
at the very least, at the start of the period when they were to be applied. These
terms, in addition to those expressly provided by the Labor Code, would serve as
the just cause for the termination of the probationary contract. As explained above,
the details of this finding of just cause must be communicated to the affected
teachers as a matter of due process.

While we can grant that the standards were duly communicated to the
petitioners and could be applied beginning the 1 st trimester of the school year 2000-
2001, glaring and very basic gaps in the school’s evidence still exist. The exact
terms of the standards were never introduced as evidence; neither does the
evidence show how these standards were applied to the petitioners. Without these
pieces of evidence (effectively, the finding of just cause for the non-renewal of the
petitioners’ contracts), we have nothing to consider and pass upon as valid or
invalid for each of the petitioners. Inevitably, the non-renewal (or effectively, the
termination of employment of employees on probationary status) lacks the
supporting finding of just cause that the law requires and, hence, is illegal. In this
light, the CA decision should be reversed. Thus, the LA’s decision, affirmed as to
the results by the NLRC, should stand as the decision to be enforced, appropriately
re-computed to consider the period of appeal and review of the case up to our

Given the period that has lapsed and the inevitable change of circumstances
that must have taken place in the interim in the academic world and at AMACC,
which changes inevitably affect current school operations, we hold that - in lieu of
reinstatement - the petitioners should be paid separation pay computed on a
trimestral basis from the time of separation from service up to the end of the
complete trimester preceding the finality of this Decision. The separation pay shall
be in addition to the other awards, properly recomputed, that the LA originally

By: Louie Limcolioc, Ramil Austria, Jai Castillo, Mikhail Tumacder, Patrick Maglinao