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Gilles v.

CA (2009)
Ponente: Nachura
Petitioner: Bienvenido C. Gilles
Respondents: Court of Appeals, Schema Konsult, and Edgardo Abores
Gilles worked as the principal engineer of SKI. He was assigned as a Water
Systems/Irrigation Engineer for a project in India. However, he ended up not receiving any
salary for 3 months. Consequently, he decided to resign from his position as the project
engineer he was instructed to stay till a replacement was found, but he opted to leave
immediately. Later, the Board of Directors of SKI met; the Board decided to terminate
Gilles employment. Gilles filed a complaint for illegal dismissal. The Labor Arbiter held
that Gilles had been illegally dismissed. This decision was affirmed by the NLRC. However,
the CA later reversed, holding that the case involved an inter-corporate dispute, and was
thus cognizable by the CA; and, that Gilles had not been illegally dismissed, in view of the
fact of his resignation prior to the finding of a replacement.
The SC reversed the CA. Although Gilles non-compliance with the lawful order of SKI
requiring Gilles to stay in India till a replacement had been found falls under Wilfull
Disobedience as a ground for termination, this was preceded in time by Gilles constructive
dismissal through the non-payment of wages for 3 months. Neither could Gilles have
been dismissed under the ground of neglect of duties the act of neglect only happened

The Parties
Schema Konsult, Inc. (SKI): a project consulting, management, and supervision
services firm vis--vis industrial plants, installations, infrastructure, and development
Bienvenido Gilles: incorporator, stockholder; at various points was member of the
board of directors, VP for Finance, and Principal Engineer of SKI
Edgardo Abores: President of SKI
The Antecedents
SKI entered into an agreement with Carl Bro Int. (CBI), a Danish orporation that had a
joint venture agreement with Aquatic Farms Ltd (AFL) to give consultancy assistance on
the Shrimp and Fish Culture Project of India.
The (government-backed) project involved the development of shrimp farms in
various parts of India.
CBI contracted with SKI to provide a qualified aquaculture engineer for the
o Gilles was chosen to be the Water Systems/Irrigation Engineer
2 years, beginning 24 January 1993
CBI would pay SKI a monthly fee of 4,000 USD Gilles basic
salary of 2,500 USD would be taken from said fee

During Gilles first 60 days in India, he would receive a

subsistence allowance of 87 USD per day to defray his
expenses for accommodation etc.
Gilles would be considered as a regular employee of
SKI, but all the condition in the agreement between SKI and
CBI would apply

January 1993, Gilles left for India.

He received 5,000 USD from SKI as an advance of his subsistence allowance for
the first couple of months.
o He also received ~P43k twice, to cover his expenses for April and the first
half of May 1993.
On 10 May 1993, however, Gilles tendered his resignation letter to Mr.
Schou of CBI because of financial and personal problems that affected
hiw physical condition and capacity to concentrate on his work.
o On 11 May 1993, he left India for the Philippines even before
finding a replacement
o A few days later, Schou faxed a letter to Abores, informing the latter of
Gilles departure.
According to Schou, the Indian Government and AFL had reported
that Gilles had rendered very unsatisfactory work in the
weeks leading up to his departure.
On 15 May: a board meeting was called to discuss Gilles resignation from the project in
In a letter written by Gilles (dated 15 May 1993) and read out lound by Abores,
Gilles explained why he decided to leave his work in India, even before a
replacement could be found:
o The project advisor to the World Bank and the Indian government
committed to a very demanding schedule Gilles ended up having to
work 18 hours a day, 7 days a week just to keep up.
o CBI had not paid his salary for 3 months, nor had it paid Gilles
subsistence allowance.
This made it difficult for Gilles to support his 80 year old mother
and his other relatives, as well as to pay various loans in a timely
And this was in the context of Gilles having been booked to stay in
5-star hotels he had to spend 4,200 USD on hotel
accommodations for 60 days.
o He felt abandoned by SKI.
Gilles asked for separation pay (1 mo./year of service) as well as other benefits
normally given to leaving employees..
o He also asked to be given the unpaid 3 months salary.
On the other hand, Abores explained that management was unaware of the
alleged difficulties.
o He said that Gilles never communicated his experience officially or
The board decided to terminate the services of Gilles, effective 7 June
o A notice of termination was sent to Gilles.

The Case
Gilles filed a complaint for illegal dismissal against SKI and Abores, seeking
reinstatement and moral damages and other monetary claims
Claimed that there was a deliberate scheme to ease him out of the project and
ultimately out of SKI.
His salary from the project was not given to him on time even if he tried
to communicate with SKI
The 20 March 1993 Election of officers was not relayed to him which resulted in
his failure to attend the meeting or to send a proxy.
o Consequently, he was not elected as an officer of the company.
He also alleged that the 19 May 1993 BoD Meeting was a hoax never having
taken place.
SKI and Abores counterarguments:
Gilles was well provided in India
Resignation from CBI and departure from India were not approved by SKI.
19 May meeting was real.
o Gilles had been informed and his side had been heard.
Gilles had been asked to step outside for displaying a temper.
That SKI had given Gilles what was due to the latter even if CBI had yet to pay
the consultancy fees.
The Labor Arbiter decided in favor of Gilles.
It ordered the reinstatement of Gilles as VP, and awarded full backwages
(P1.274M); it also awarded P500k as moral damages, and P127,400 as atty.s
In the event that reinstatement was improbable it held that Gilles should be
awarded separation pay (1/2 Month salary/year of service).
The NLRC affirmed the decision of the Labor Arbiter, the only modification being
the reduction of moral damages to P100k.
The CA annulled and set aside the NLRCs decision.
The appellate court held that the case involved an intra-corporate dispute
exclusively cognizable by the SEC.
It also held that Gilles had not been illegally dismissed, considering that he had
resigned from his assignment even before a replacement could be found
(*) Does the NLRC have jurisdiction over the illegal dismissal case? (YES. What Gilles
sought was reinstatement, backwages, and damages. He did not seek to retain his seat
in the BoD this was not an intra-corporate dispute. The Labor Arbiter, however, erred
in ordering Gilles reinstatement as VP Gilles asked to be reinstated as Principal
(1) Was Gilles illegally dismissed? (YES.)

2 requisites of a valid termination:
1. Dismissal is for any of the just causes provided under Art. 282 (must be
supported by clear and convincing evidence);
2. Employee must be afforded an opportunity to be heard and to defend himself.
Gilles was terminated for wilful disobedience of lawful order, one of the just
causes under 282 of the LC.
Elements of Willful Disobedience:
o Assailed conduct must have been willfull characterized by a wrongful
and perverse attitude;
o Order violated must have been reasonable, lawful, made known to the
employee, and must pertain to the duties which the employee had been
engaged to discharge.
Alleged act of wilful disobedience: leaving the project (India) despite the clear
and lawful instructions of management for him to stay.
o SC: this was wilful disobedience, BUT
SKI violated Art 103 because it was remiss in paying compensation of
Gilles on time. Note that Art. 103 mandates that wages shall be paid at least
once every 2 weeks with payment every 16 days as the longest allowable
interval. Art. 103 also states that no employer shall make payment with less
frequency than once a month.
o The money given to Gilles before leaving for india was already spent. His
salary was only given to him when he got back in the Philippines.
Consequently, while he was still in India, Gilles was not able to fulfil
his financial obligations back home.
The Agreement not only clearly expressed that Gilles would still be
principally employed by SKI the principal employer has the
responsibility of paying the employees salaries.
o Thus, Gilles had been constructively dismissed.
Constructive dismissal exists when the employee involuntarily
resigns due to the harsh, hostile, and unfavorable conditions set by
the employer. It arises when there is clear discrimination,
insensibility, or disdain by an employer and this becomes
unbearable to the employee.
Test: whether a reasonable person in the employee's
position would have felt compelled to give up his position
under the circumstances.
SKI showed utter disregard of the welfare and well-being of its
Gilles was not guilty of neglect of duty because neglect of duty must not only
be gross but also habitual.
In this case, he only neglected his duty once and because of financial
o He did not have any prior derogatory record.

Art 279 mandates that an employee who was 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, as well as to other benefits or their monetary
equivalent computed from the time his compensation was withheld up to the time of his
actual reinstatement.
In case at bar, reinstatement is not possible so an award of separation pay in lieu
of reinstatement equivalent to one month pay for every year of service in
addition to full backwages allowances and other benefits is in order.
There being no proof that Abores acted with malice or bad faith he is absolved.
Assailled decision SET ASIDE.