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UP Law F2021 303 Leopard Security and Investigation Agency v.

Quitoy
Labor 1 Reliefs and Remedies in Illegal Dismissal Cases; 2013 Perez, J.
Resignation; Arts. 294 [279] and 301 [286], LC

SUMMARY Quitoy, Sabang, and Morales worked as security guards for LSIA, and were assigned to different
branches of Unionbank. Unionbank terminated its contract with LSIA on April 1, 2005, to be effective on April
30, but the guards were informed on April 29. The 3 guards filed a complaint for illegal dismissal with the LA,
which eventually ruled in their favor, and awarded backwages and separation pay. The NLRC modified the LA’s
decision in that there was no illegal dismissal, but sustained the separation pay; the CA affirmed the NLRC. The
SC ruled that there was no illegal dismissal; thus, separation pay is not a proper award.

FACTS1
 Numeriano Ondong, Tomas Quitoy, Raul Sabang, and Diego Morales were hired as security guards by
Leopard Security and Investigation Agency (“LSIA”). The 4 were assigned to different branches of its
client in Cebu City, Union Bank of the Philippines (“Unionbank”).
 On April 1, 2005, Unionbank notified LSIA of the termination of the security service contract, effective
April 30, 2005. LSIA, however, informed the guards only on April 29, 2005.
 On May 3, 2005, Quitoy, Sabang, and Morales (Ondong executed a quitclaim) filed a Complaint for Illegal
Dismissal, Unpaid 13th Month Pay and Service Incentive Leave Pay, Moral and Exemplary Damages, and
Attorney’s Fees against (1) LSIA, (2) Jose Poe (“Poe”), LSIA President, and (3) Unionbank (other
respondents were later dropped). The 3 security guards averred that they were hired and assigned to
different Unionbank branches by LSIA; that Unionbank directly paid their salaries and the bank’s branch
managers exercised direct control and supervision over them; that they took their orders directly from
the branch managers.
 Meanwhile, LSIA asserted that it had directed the 3 to report for work on May 10, 2005 at LSIA’s
Mandaluyong office. Because they did not show up, LSIA issued show-cause letters on June 21, 2005,
requiring them to explain their absences. Unionbank, in turn, contended that the complaint should be
dismissed for lack of cause of action, as the security service contract would indicate the lack of employer-
employee relationship.
 LABOR ARBITER: The LA found LSIA liable for illegal dismissal of Quitoy, Sabang, and Morales. The LA
held that the May 10, 2005 order to report to work did not show a sincere intention on LSIA’s part to
provide them with other assignments. It ordered LSIA to pay backwages and separation pay, on the
ground that reinstatement was no longer feasible. Unionbank was held solidarily liable with LSIA for the
payment of 13th month pay and service incentive leave pay.
 NLRC: Found that Quitoy, Sabang, and Morales were not illegally dismissed, applying the principle that
security agencies are allowed to put security guards on temporary off-detail or floating status for a period
not exceeding 6 months. The NLRC deleted the award of backwages, but sustained the grant of
separation pay, on the same ground i.e. reinstatement was no longer viable. Likewise, the awards of 13th
month pay and service incentive leave pay were sustained.
 LSIA belatedly submitted documents proving payment of service incentive leave pay; nevertheless, the
NLRC denied LSIA’s Motion for Reconsideration.
 CA: Affirmed the NLRC’s finding that there was no illegal dismissal, by applying the principle that the
security guards could not be considered illegally dismissed before the lapse of 6 months. However, the
CA sustained the awards of separation pay (because reinstatement is no longer feasible, as the
relationship had “turned sour”) & 13th month pay and service incentive leave pay (for failure of LSIA to
prove payment).
RATIO
[RELEVANT] W/N Quitoy, Sabang, and Morales were illegally dismissed
NO. Applying by analogy Article 301 [286] of the Labor Code2, the SC has held that security guards may be
sidelined temporarily as their assignments depend on the contracts entered into by the agency with 3 rd parties.

1
Please note that I underlined each of the characters’ names at the first instance that each appeared in the facts; meanwhile, dates, periods,
and article numbers (along with some emphasized facts) are in bold letters.
This takes place when, as in this case, some clients decide not to renew their contract; thus, the agency’s
available posts are less than its roster of employees. As long as this period does not exceed 6 months, this will
not be equivalent to dismissal.

Thus, in this case, since the 3 were directed to report for work on May 10, 2005, or just 10 days from the
expiration of the agency’s contract with Unionbank, it would show that they cannot be considered as
DISMISSED, much less illegally (yet).

[RELEVANT] W/N the award of separation pay, absent a finding of illegal dismissal, is proper
NO. According to Article 294 [279] of the Labor Code3, an illegally dismissed employee is entitled to both full
backwages and reinstatement without loss of seniority rights. Furthermore, separation pay is instead awarded
when reinstatement is no longer feasible because of strained relations between the employer and employee.

The doctrine of “strained relations” is not alone sufficient to justify an award of separation pay—there must
be a finding that the employee was dismissed.4 Even in illegal dismissal, the doctrine of strained relations is not
applied indiscriminately to prevent reinstatement, especially when the employee (a) has not indicated aversion
to return to work, (b) does not occupy a position of trust and confidence, or (c) has no say in the operation of the
employer’s business.

In this case, not only was there no dismissal (much less an illegal one), the 3 security guards also failed to
provide proof of strained relations and even prayed for reinstatement alongside the payment of separation pay.
Thus, there being no illegal dismissal on LSIA’s part nor abandonment on the security guards’ part,
separation pay is an improper award; instead, the SC ordered for the guards’ reinstatement without
backwages.

[NOT RELEVANT] W/N the NLRC correctly brushed aside the evidence presented by LSIA of the payment
of Service Incentive Leave Pay
NO. The NLRC is not precluded from receiving evidence, even for the first time on appeal, because technical
rules of procedure are not binding in labor cases. Labor officials are encouraged to use all reasonable means to
ascertain the facts, with little resort to technicalities of procedure. Thus, the NLRC should have entertained the
documents presented by LSIA regarding payment of service incentive leave pay, even at the appeal stage.

Thus, as the Bank Advice Slips and On Demand Statement of Account submitted by LSIA before the NLRC
showed payment of service incentive leave pay of P1,025 for 2004, this amount should be deducted from the
award of said benefit.

DISPOSITIVE “WHEREFORE, premises considered, the petition is GRANTED and the assailed Decision dated 26
September 2008 is, accordingly, MODIFIED to direct the reinstatement of respondents in lieu of the award of
separation pay and to deduct the sum of P1,025.00 from the SILP individually awarded in favor of respondents.
The rest is AFFIRMED. SO ORDERED.”

2
ARTICLE 301. [286] When Employment not Deemed Terminated. — The bonafide suspension of the operation of a business or
undertaking for a period not exceeding six (6) months, or the fulfillment by 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.
3
ARTICLE 294. [279] Security of Tenure. — In cases of regular employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits
or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.
4
Other provisions which provide for the award of separation pay but dismissal was for an authorized cause: Articles 298 and 299.