[G.R. No. 117040.

January 27, 2000]

RUBEN SERRANO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and

ISETANN DEPARTMENT STORE, respondents.

FACTS
Ruben Serrano was the head of the security checkers section of Isetann Department Store. He
was charged with the task of supervising security checkers in their jobs (apprehending shoplifters
and preventing pilfirege of merchandise). On October 11, 1991, the management sent him a
letter immediately terminating his services as security section head, effective on the same day.
The reason given by the management was retrenchment; they had opted to hire an
independent security agency as a cost-cutting measure. Serrano filed a complaint for ID, illegal
layoff, ULP, underpayment of wages and nonpayment of salary and OT pay with the LA.

The LA rendered a decision in favor of Serrano. It stated that Isetann failed to establish that it
had retrenched its security division, that the petitioner was not accorded due process, etc. and
even stated that the day after Serranos dismissal, Isetann employed a safety and security
supervisor with similar duties to that of the former.

The NLRC on the other hand reversed the LA but ordered Isetann to pay separation pay
equivalent to one month per year of service, unpaid salary, et al. It held that the phase-out of the
security section was a valid exercise of management prerogative on the part of Isetann, for
which the NLRC cannot substitute its judgment in the absence of bad faith or abuse of discretion
on the part of the latter; and that the security and safety supervisors position was long in place
prior to Serranos separation from the company, or the phase-out of the Security Section.

ISSUE
Whether the petitioners dismissal was illegal.

RULING: Valid, but ineffectual (without legal effect) payment of backwages,

separation pay and other monetary claims
No. The Court held that the dismissal was due to an authorized cause under Art. 283 of the Labor
Code, i.e. redundancy. However, while an authorized cause exists, Isetann failed to follow the

procedural requirement provided by Art. 283 of LC. For termination due to authorized causes, the
employer must give a written notice of termination to the employee concerned and to the DOLE
at least 30 days prior to its effectivity. This Isetann failed to do.

The question now arises as to whether the failure of Isetann to comply with the procedural
requirements renders the dismissal invalid, or, in the event that it is valid, what the appropriate
sanction or penalty must be meted out.

Prior to the doctrine laid down in the decision rendered in Wenphil Corp. NLRC in 1989, the
termination of an employee, even for just cause but without following the requisite procedure,
renders such dismissal illegal, and therefore null and void.

In the Wenphil doctrine, this was reversed; the said rule was unjust to employers. Instead, the
dismissal was held to be still valid but the employer was sanctioned by way of the payment of
indemnity (damages) in that case, P1,000. The amount of indemnity will be depended on the
circumstances of each case, taking into account the gravity of the offense committed by the
employer.

Now, the Court once again examines the Wenphil doctrine. Puno says that the effect of the
Wenphil doctrine was such that there has been a dismiss now, pay later policy where the
employers were able to circumvent the procedural requisites of termination, which is more
convenient than the compliance with the 30-day notice. Panganiban said that the monetary
sanctions were too insignificant, niggardly, sometimes even late. Both justices are of the
opinion that the deprivation of due process which must be accorded to the employee renders the
dismissal illegal. Puno quoted that Legislative, Executive and Judicial proceedings that deny due
process do so under the pain of nullity. Panganiban stated that such denial of due process
renders decisions and proceedings void for lack of jurisdiction.

The present ruling of the Court held that the dismissal of the employee is merely ineffectual,
not void. The dismissal was upheld but it is ineffectual. The sanction provided was the
payment of backwages from the time of dismissal up to the decision of the court finding just or
authorized cause. This was thought to balance the interests of both parties, recognizing the
employees right to notice and at the same time the right of the employer to dismiss for any of
the just and authorized causes.

The Court also responded to the arguments of Justices Puno and Panganiban by stating that
the violation in the procedural requirement of termination is not a denial of the fundamental right
to due process. This is because of the ff reasons:
1) The due process clause is a limitation on governmental powers, inapplicable to the
exercise of private power, such as in this case. The provision No person shall be deprived
of life, liberty and property without due process of law pertains only to the State, as only
it has the authority to do the same.
2) The purpose of the notice and hearing under the Due process clause is to provide an
opportunity for the employee to be heard before the power of the organized society is
brought upon the individual. Under Art. 283, however, the purpose is to give him time to
prepare for the eventual loss of his job and for DOLE to determine whether economic
causes exist to justify termination. It is not to give opportunity to be heard there is no
charge against the employee under Art. 283
3) The employer cannot be expected to be an impartial judge of his own cause.
4) Not all notice requirements are requisites of due process. Some are simply a part of a
procedure to be followed before a right granted to party can be exercised; others are an
application of the Justinian precept. Such is the case here. The failure of the employer to
observe a procedure for the termination of employment which makes the termination of
employment merely ineffectual.
5) Art. 279 of the LC provides that only dismissal without just or authorized cause renders
such dismissal illegal. To consider termination without observing procedural reqts as also
ID is to add another ground for ID, thereby amending Art. 279.; Further, there is a
disparity in legal treatment, as employees who resign without giving due notice are only
liable for damages; it does not make their resignation void.

In this case, the separation pay was a distinct award from the payment of backwages as a
way of penalty.

Petition was denied.

AGABON v.NLRC
FACTS
Virgilio and Jenny Agabon worked for respondent Riviera Home Improvements, Inc. as gypsum
and cornice installers from January 1992 until Feb 1999. Their employment was terminated when
they were dismissed for allegedly abandoning their work. Petitioners Agabon then filed a case of
illegal dismissal. /// The LA ruled in favor of the spouses and ordered Riviera to pay them their
money claims. The NLRC reversed the LA, finding that the Agabons were indeed guilty of
abandonment. The CA modified the LA by ruling that there was abandonment but ordering
Riviera to pay the Agabons money claims.///
The arguments of both parties are as follows:
The Agabons claim, among others that Riviera violated the requirements of notice and
hearing when the latter did not send written letters of termination to their addresses.
Riviera admitted to not sending the Agabons letters of termination to their last known addresses
because the same would be futile, as the Agabons do not reside there anymore. However, it also
claims that the Agabons abandoned their work. More than once, they subcontracted installation
works for other companies. They already were warned of termination if the same act was
repeated, still, they disregarded the warning.
ISSUES
1. Whether the Agabons were illegally dismissed
2. Whether Riviera violated the requirements of notice and hearing
3. Is the violation of the procedural requirements of notice and hearing for termination of
employees a violation of the Constitutional due process?
4. What are the consequences of violating the procedural requirements of termination?
RULING: Valid dismissal but violation of statutory due process = payment of nominal
damages (P30,000) & balance of 13th month pay, etc.
1. No. There was just cause for their dismissal, i.e., abandonment. Art. 282 specifies the grounds
for just dismissal, to wit:
a. Serious misconduct or willful disobedience of the lawful orders of the employer or his duly
authorized representative in connection with the employees work
b. Gross and habitual neglect of the by the employee of his duties (includes abandonment)
c. Fraud or willful breach of the trust reposed by the employer or his duly authorized
representative to the employee
d. Commission of a crime or offense by the employee against the person of the employer or
any member of his immediate family or his duly authorized representative
e. Any other causes analogous to the foregoing.
To establish abandonment, two elements must be present:
a. The unjustified failure of the employee to report for work
b. A clear intention to sever e-e relationship, manifested by overt acts
Here, the Agabons were frequently absent from work for having performed installation work
for another company, despite prior warning given by Riviera. This clearly establishes an
intention to sever the e-e relationship between them, and which constitutes abandonment.
2. Yes. While the employer has the right to expect good performance, diligence, good conduct
and loyalty from its employees, it also has the duty to provide just compensation to his
employees and to observe the procedural requirements of notice and hearing in the
termination of his employees.
Procedure of termination (Omnibus Rules Implementing the Labor Code):
a. A written notice to the employee specifying the grounds for termination and giving the
employee reasonable opportunity to be heard

b. A hearing where the employee is given the opportunity to respond to the charges against
him and present evidence or rebut the evidence presented against him (if he so requests)
c. A written notice of termination indicating that grounds have been established to justify his
termination upon due consideration of all circumstances
In this case, Riviera failed to notify the Agabons of their termination to their last known
addresses. Hence, they violated the procedural requirement laid down by the law in the
termination of employees.
3. No. Constitutional due process is that provided under the Constitution, which involves the
protection of the individual against governmental oppression and the assurance of his rights In
civil, criminal and administrative proceedings; statutory due process is that found in the
Labor Code and its Implementing Rules and protects the individual from being unjustly
terminated without just or authorized cause after notice and hearing.
The two are similar in that they both have two aspects: substantive due process and
procedural due process. However, they differ in that under the Labor Code, the first one
refers to the valid and authorized causes of employment termination, while the second one
refers to the manner of dismissal. A denial of statutory due process is not the same as a denial
of Constitutional due process for reasons enunciated in Serrano v. NLRC.
4.

The dismissal is valid, but Riviera should pay nominal damages to the Agabons in vindication
of the latter for violating their right to notice and hearing. The penalty is in the nature of a
penalty or indemnification, the amount dependent on the facts of each case, including the
nature of gravity of offense of the employer.
In this case, the Serrano doctrine was re-examined.
First, in the Serrano case, the dismissal was upheld, but it was held to be ineffectual (without
legal effect). Hence, Serrano was still entitled to the payment of his backwages from the time
of dismissal until the promulgation of the court of the existence of an authorized cause.
Further, he was entitled to his separation pay as mandated under Art. 283. The ruling is unfair
to employers and has the danger of the following consequences:
a. The encouragement of filing frivolous suits even by notorious employees who were justly
dismissed but were deprived of statutory due process; they are rewarded by invoking due
process
b. It would create absurd situations where there is just or authorized cause but a procedural
infirmity invalidates the termination, ie an employee who became a criminal and
threatened his co-workers lives, who fled and could not be faound
c. It could discourage investments that would generate employment in the economy
Second, the payment of backwages is unjustified as only illegal termination gives the
employee the right to be paid full backwages. When the dismissal is valid or upheld, the
employee has no right to backwages.
ADDITIONAL NOTES:
1. Dismissals based on just causes: acts or omissions attributable to the employee; no
right to claim backwages or to pay separation pay (separation pay is subject to exception,
ie if termination is not based on serious misconduct or a conduct reflecting the moral
depravity of a person, separation pay may be granted by reason of social justice)
Dismissals based on authorized causes: involve grounds provided under the Labor
Code; employee (and DOLE) is entitled the payment of separation pay (redundancy and
installation of labor-saving devices: 1 month pay or 1 month/yr of service, whichever is
higher; retrenchment and closure or cessation of business: 1 month pay or month per
year of service, whichever is higher)
Illegal termination: employee is entitled to the payment of full backwages as well as
reinstatement without loss of seniority rights and other privileges, inclusive of allowances

and other monetary claims from the time compensation was withheld until reinstatement;
if reinstatement is not possible, separation pay shall be given.