145. GR.NO.

103575 APRIL 5, 1993

BUSINESSDAY INFORMATION SYSTEMS AND SERVICES, INC. VS. NLRC
PONENTE: GRIÑO-AQUINO, J:

FACTS:

BSSI was engaged in the manufacture and sale of computer forms. Due to financial reverses, its creditors,
the Development Bank of the Philippines (DBP) and the Asset Privatization Trust (APT), took possession of its
assets, including a manufacturing plant in Marilao, Bulacan.

As a retrenchment measure, some plant employees, including the private respondents, were laid-off on May
16, 1988, after prior notice, and were paid separation pay equivalent to one-half (1/2) month pay for every year of
service. Upon receipt of their separation pay, the private respondents signed individual releases and quitclaims in
favor of BSSI.

BSSI retained some employees in an attempt to rehabilitate its business as a trading company.

However, barely two and a half months later, these remaining employees were likewise discharged because
the company decided to cease business operations altogether. Unlike the private respondents, that batch of
employees received separation pay equivalent to a full month’s salary for every year of service plus mid-year bonus.

Protesting against the discrimination in the payment of their separation benefits, the 27 private respondents
filed three separate complaints against the BSSI and Raul Locsin. These cases were later consolidated.

At the conciliation proceedings before the LA, petitioners denied that there was unlawful discrimination in
the payment of separation benefits to the employees. They argued that the first batch of employees was paid
“retrenchment” benefits mandated by law, while the remaining employees were granted higher “separation” benefits
because their termination was on account of the closure of the business.

Based on the pleadings of the parties, LA rendered a decision in favor of the complainants. Upon appeal by
the company to the NLRC, the Second Division affirmed the decision of the LA.

Petitioner’s MR of the resolution having been denied, they have taken the present recourse.

ISSUE:

WHETHER OR NOT THE RESPONDENTS WERE VALIDLY RETRENCH

RULING:

In case of retrenchment of a company to prevent losses and closure of business operation, the law
provides:

ART. 283. Closure of establishment and reduction of personnel. The employer may also terminate the
employment of any employee due to installation of labor-saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the
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 worker and the DOLE at least
one (1) month before the intended date thereof. In case of termination due to installation of labor-saving
devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at
least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to
prevent losses and in cases of closure or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the separation pay shall be
 equivalent to at least one (1) month pay or at least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be considered as one (1) whole year.

Undoubtedly, petitioner’s right to terminate employees on account of retrenchment to prevent losses or

closure of business operations, is recognized by law, but it may not pay separation benefits unequally for such
discrimination breeds resentment and ill-will among those who have been treated less generously than others.

Clearly, there was impermissible discrimination against the private respondents in the payment of their
separation benefits. The law requires an employer to extend equal treatment to its employees. It may not, in the
guise of exercising management prerogatives, grant greater benefits to some and less to others. Management
prerogatives are not absolute prerogatives but are subject to legal limits, collective bargaining agreements, or general
principles of fair play and justice. (UST vs. NLRC,190 SCRA 758) Article 283 of the Labor Code, as amended
protects workers whose employment is terminated because of closure of the establishment or reduction of
personnel (Abella vs. NLRC, 152 SCRA 141, 145)

146.

147. GR.NO. 127718 MARCH 2, 2000

NATIONAL FEDERATION OF LABOR VS. NLRC
PONENTE: DE LEON, JR, J:

FACTS:

Petitioners are bona fide members of the NFL, a legitimate labor organization duly recognized with the
DOLE. They were employed by private respondents Charlie Reith and Susie Galle Reith, general manager and
owner, respectively, of the 354 hectare Patalo Coconut Estate located at Patalon, Zamboanga City. Patalon Coconut
Estate was engaged in growing agricultural products and in raising livestock.

In 1988, Congress enacted into law RA 6657, otherwise known as the Comprehensive Agrarian Reform Law
(CARL), which mandated the compulsory acquisition of all covered agricultural lands for distribution to qualified
farmer beneficiaries under the so-called CARP.

Pursuant to RA 6657, the Patalon Coconut Estate was awarded to the Patalon Estate Agrarian Reform
Association (PEARA), a cooperative accredited by the DAR, of which petitioners are members and co-owners.

As a result of this acquisition, private respondents shut down the operation of the Patalon Coconut Estate
and the employment of the petitioners was severed on July 31, 1994. Petitioners did not receive any separation pay.

On August 1, 1994, the cooperative took over the estate. A certain Abelardo Sangadan informed
respondents of such takeover via a letter which was received by the respondents on July 26, 1994. Being
beneficiaries of the Patalon Coconut Estate pursuant to the CARP, the petitioners became part-owners of the land.

On April 25, 1995, petitioners filed individual complaints before the Regional Arbitration Branch (RAB) of the
NLRC in Zamboanga City, praying for their reinstatement with full backwages on the ground that they were illegally
dismissed. The petitioners were represented by their labor organizations, the NFL.

The RAB rendered a decision dismissing complainant’s charge for illegal dismissal for lack of merit, but
ordering respondents thru its owner-manager or its duly authorized representative to pay complainant’s separation
pay in view of the latter’s cessation of operations or forced sale.

Appeal was taken by private respondents to public respondent NLRC. The NLRC modified the RAB decision
finding the respondent not guilty of illegally dismissing complainants. Respondent’s cessation of operation was not
due to a unilateral action on their part resulting in the cutting off of the employment relationship between the parties.
The severance of employer-employee relationship between the parties came about INVOLUNTARY as a result of an
act of the State. Consequently, complainants are not entitled to any separation pay.

Petitioners filed an MR which was denied by the NLRC. Hence, this petition.

ISSUE:

WHETHER OR NOT AN EMPLOYER THAT WAS COMPELLED TO CEASE ITS OPERATION BECAUSE
OF THE COMPULSORY ACQUISITION BY THE GOVERNMENT OF ITS LAND FOR PURPOSES OF AGRARIAN
REFORM, IS LIABLE TO PAY SEPARATION PAY TO ITS AFECTED EMPLOYEES

RULING:

NO. ART. 283. Closure of establishment and reduction of personnel. The employer may also terminate the
employment of any employee due to installation of labor-saving devices, redundancy, retrenchment to prevent losses
or the closing or cessation of operation of the establishment or undertaking unless the 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 worker and the DOLE at least one (1) month before the intended date thereof. In case
of termination due to installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled
to a separation pay equivalent to at least one (1) month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closure or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to
at least one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered as one (1) whole year.

It is clear that Art. 283 of the Labor Code applies in cases of closures of establishment and reduction of
personnel. The peculiar circumstances in the case at bar, however, involves neither the closure of an establishment
nor a reduction of personnel as contemplated under the aforesaid article. When the Patalon Coconut Estate was
closed because a large portion of the estate was acquired by DAR pursuant to CARP, the ownership of that large
portion of the estate was precisely transferred to PEARA and ultimately to the petitioners as members thereof and as
agrarian lot beneficiaries. Hence, Art. 283 of the Labor Code is not applicable to the case at bench.

The closure contemplated under Art. 283 of the Labor Code is a unilateral and voluntary act on the part of
the employer to close the business establishment as may be gleaned from the wording of the said legal provision that
“The employer may also terminate the employment of any employee due to ….” The use of the word “may,” in a
statute, denotes that it is directory in nature and generally permissive only. The “plain meaning rule” or verba legis in
statutory construction is thus applicable in this case. Where the words of a statute are clear, plain and free from
ambiguity, it must be given its literal meaning and applied without attempted interpretation.”

In other words, Article 283 of the Labor Code does not contemplate a situation where the closure of the
business establishment is forced upon the employer and ultimately for the benefit of the employees.

As earlier stated, the Patalon Coconut Estate was close down because a large portion of the said estate
was acquired by the DAR pursuant to the CARP. Hence, the closure of the Patalon Coconut Estate was not effected
voluntarily by private respondents who even filed a petition to have said estate exempted from the coverage of RA
6657. Unfortunately, their petition was denied by the DAR. Since the closure was due to the act of the
government to benefit the petitioners, as members of the Patalon Estate Agrarian Reform Association, by
making them agrarian lot beneficiaries of said estate, the petitioners are not entitled to separation pay. The
termination of their employment was not caused by the private respondents.

148. GR.NO. L – 58639 AUGUST 12, 1987

CEBU ROYAL PLANT VS. DEPUTY MINISTER OF LABOR
PONENTE: CRUZ, J:
FACTS:

The private respondent was removed by the petitioner and complained to the Ministry of Labor. His
complaint was dismissed by the regional director, who was, however, reversed by the public respondent. Required to
reinstate the separated employee and pay him back wages, the petitioner has come to us, faulting the Deputy
Minister with grave abuse of discretion. We have issued in the meantime a temporary restraining order.

The public respondent held that Ramon Pilones, the private respondent, was already a permanent
employee at the time of his dismissal and so was entitled to security of tenure. The alleged ground for his removal, to
wit: “pulmonary tuberculosis minimal,” was not certified as incurable within six months as to justify his separation.
Additionally, the private respondent insists that the petitioner should have first obtained a clearance, as required by
the regulations then in force, for the termination of his employment.

The petitioner for its part claims that the private respondent was still on probation at the time of his dismissal
and so had no security of tenure. His dismissal was not only in conformity with company policy but also necessary for
the protection of the public health, as he was handling ingredients in the processing of soft drinks which were being
sold to the public. It is also argued that the findings of the regional director, who had direct access to the facts, should
not have been disturbed on appeal. For these same reasons, it contends, the employee’s reinstatement as ordered
by the public respondent should not be allowed.

The original findings were contained in a one-page order reciting simply that “complainant was employed on
a probationary period of employment for six (6) months. After said period, he underwent medical examination for
qualification as regular employee but the results showed that he is suffering from PTB minimal. Consequently, he
was informed of the termination of his employment by respondent.” The order then concluded that the termination
was “justified.”

ISSUE:

WHETHER OR NOT RESPONDENT’S TERMINATION IS VALID

RULING:

The applicable rule on the ground for dismissal invoked against him is Section 8, Rule I, Book VI, of the
Rules and Regulations Implementing the Labor Code as follows:

Sec. 8. Disease as a ground for dismissal. Where the employee suffers from a disease and his continued
employment is prohibited by law or prejudicial to his health or to the health of his co-employees, the employer shall
not terminate his employment unless there is a certification by a competent public health authority that the disease is
of such nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical
treatment. If the disease or ailment can be cured within the period, the employer shall not terminate the employee but
shall ask the employee to take a leave. The employer shall reinstate such employee to his former position
immediately upon the restoration of his normal health.”

The record does not contain the certification required by the above rule. The medical certificate offered by
the petitioner came from its own physician, who was not a “competent public health authority,” and merely stated the
employee’s disease, without more. We may surmise that if the required certification was not presented, it was
because the disease was not of such a nature or seriousness that t could not be cured within a period of six months
even with proper medical treatment. If so, dismissal was unquestionably a severe and unlawful sanction.

It is also worth noting that the petitioner’s application for clearance to terminate the employment of the
private respondent was filed with the Ministry of Labor only on August 28, 1978, or seven days after his dismissal. As
the NLRC has repeatedly and correctly said, the prior clearance rule was not a “trivial technicality.” It required “not
just the mere filing of a petition or the mere attempt to procure a clearance” but that “the said clearance be obtained
prior to the operative act of termination.”

We agree that there was here an attempt to circumvent the law by separating the employee after five
months’ service to prevent him from becoming a regular employee, and then rehiring him on probation, again without
security of tenure. We cannot permit this subterfuge if we are to be true to the spirit and mandate of social justice. On
the other hand, we have also the health of the public and of the dismissed employee himself to consider. Hence,
although we must rule in favor of his reinstatement, this must be conditioned on his fitness to resume his work, as
certified by competent authority.

149. GR.NO.110261 AUGUST4, 1994

SICANGCO VS. NLRC
PONENTE: CRUZ, J:

FACTS:

Sometime in April 1985, Rey Pablo D. Sicangco was appointed Senior Attorney in the Metro Drug
Corporation. In 1986, he was promoted to the position of Assistant Vice-President for Legal Affairs. Later that same
year, MDC was acquired by another company and subsequently renamed Metro Drug Inc. (MDI). Sicangco retained
his position in MDI. As Assistant Vice-President for Legal Affairs, he was in charge of labor relations, personnel
administration, and all other corporate concerns of MDI.

In 1989, Sicangco was assigned to the legal staff of the mother company, First Pacific Metro Corporation,
under the supervision of its general counsel. In a letter dated June 2, 1989, the company informed him that his
position would be declared redundant effective July 2, 1989. He was assured of benefits due him under the law.

Sicangco did not protest and instead successful negotiated for higher separation benefits. The separation
pay was only P93,436.10, but the company agreed to write off his outstanding car loan of P162,000.00 as part of his
separation package. On July 18, 1989, Sicangco was paid an extra amount of P13,291.57, representing his pay
adjustment and proportionate bonuses for the period covering January to June 1989. All in all, the separation benefits
awarded to him amounted to P268,727.67.

In accordance with his agreement with the company and before the declared redundancy of his position
took effect, Sicangco tendered his resignation.

On June 15, 1989, upon receipt of his separation benefits, Sicangco signed a document entitled “Release,
Waiver and Quitclaim.” This document was prepared by him and the other lawyers of the company. Before he signed
it, its contents were explained to him by another company lawyer, Atty. Elmer Nitura.

On February 26, 1990, Sicangco filed an action against the company for unfair labor practice and illegal
dismissal. On April 5, 1990, he amended the complaint to include a prayer for damages.

The LA declared Sicangco’s dismissal as illegal and ordered his reinstatement with back wages, moral and
exemplary damages and attorney’s fees. However, the NLRC reversed the decision of the LA when it held that
Sicangco’s termination from employment was due to his voluntary resignation and not because of redundancy. It did
not give credence to Sicangco’s claim of “dire necessity” as the reason that compelled him to execute the quitclaim.
Sicangco’s allegation of coercion and undue influence was also dismissed for lack of evidence. The NLRC said that
by negotiating for a bigger separation package, he was deemed to have waived whatever defects may have attended
the declaration of his redundancy. Hence, this petition.

ISSUE:
 WHETHER OR NOT THE PETITIONER WAS ILLEGALLY DISMISSED

RULING:

NO. The petitioner was not illegally dismissed. It would appear that when he was informed that his position
had become redundant, he decided to resign and was allowed to do so before his redundancy took effect. We have
said that there is nothing illegal with the practice of allowing an employee to resign instead of being separated for just
cause, so as not to smear his employment record.

Moreover, the petitioner cannot renege on the release, waiver and quitclaim he executed. His contention
that it was coerced, considered especially in the light of the fact that he is a lawyer, must be rejected. Lawyers are
not easily coerced into signing legal documents.

Quitclaims executed by employees are commonly frowned upon as contrary to public policy and ineffective
to bar claims for the full measure of the worker’s legal rights. Neither does acceptance of benefits estop the
employee from prosecuting his employer for unfair labor practice acts. The reason is plain. Employer and employee
obviously do not stand on the same footing.

Nevertheless, the above rule is not without exception, as this Court held in Periquet vs. NLRC:

Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily
entered into and represents a reasonable settlement, it is binding on the parties and may not later be disowned
simply because of a change of mind. It is only where there is clear proof that the waiver was wangled from an
unsuspecting or gullible person, or the terms of settlement are unconscionable on its face, that the law will step in to
annul the questionable transaction. But where it is shown that the person making the waiver did so voluntarily, with
full understanding of what he was doing, and the consideration for the quitclaim is credible and reasonable, the
transaction must be recognized as a valid and binding undertaking.

151. GR.NO.115795 MARCH 6, 1998

SANTOS, JR. VS. NLRC
PONENTE: ROMERO, J:

FACTS:

Petitioner, a married man, was employed as a teacher by the private respondent Hagonoy Institute, Inc.
from June 1980 until his dismissal on June 1, 1991. Likewise working as a teacher for the private respondent was
Mrs. Marlene T. Martin, also married. In the course of their employment the couple fell in love. Thereafter, rumors
regarding the couple’s relationship spread, especially among the faculty members and school officials.

Concerned about the rumors, the private respondent advised Mrs. Martin to take a leave of absence which
she ignored, as she continued to report for work. Consequently, on November 9, 1990, she was barred from
reporting for work and was not allowed to enter the private respondent’s premises, effectively dismissing her from her
employment.

In view of her termination from service, Mrs. Martin filed a case for illegal dismissal before the NLRC
Regional Arbitration Branch No. III, San Fernando, Pampanga against the private respondent. After the parties had
submitted their respective evidence and position paper, LA rendered a decision dismissing the complaint.

On appeal, the NLRC reversed the decision of the LA ordering respondent to pay complainant her back
wages and separation pay in the total amount of P83,392.40. Complainant’s other claims are dismissed for lack of
merit. The reversal was anchored on the failure by the private respondent, in dismissing Mrs. Martin, to accord her
the necessary procedural due process..
 Meanwhile, private respondent set up a committee to investigate the veracity of the rumors. After two weeks
of inquiry, the committee rendered its report confirming the illicit relationship between the petitioner and Mrs. Martin.

In view of the committee’s finding, petitioner was charged administratively for immorality and was required to
present his side on the controversy. Five months later, petitioner was informed by the private respondent’s Board of
Directors of his dismissal effective June 1, 1991. Unable to accept such verdict, petitioner filed a complaint for illegal
dismissal on August 12, 1991 before the NLRC Regional Arbitration Branch No. III, San Fernando Pampanga. After a
full blown trial was conducted, LA rendered a decision dismissing the complaint but at the same time awarding
monetary sums as financial assistance.

ISSUE:

WHETHER OR NOT THE ILLICIT RELATIONSHIP BETWEEN THE PETITIONER AND MRS. MARTIN
COULD BE CONSIDERED IMMORAL AS TO CONSTITUTE JUST CAUSE TO TERMINATE AN EMPLOYEE
UNDER ART. 282 OF THE LABOR CODE

RULING:

YES. On the outset, it must be stressed that to constitute immorality, the circumstances of each particular
case must be holistically considered and evaluated in light of the prevailing norms of conduct and applicable laws.
American jurisprudence has defined immorality as a course of conduct which offends the morals of the
community and is a bad example to the youth whose ideals a teacher is supposed to foster and to elevate,
the same including sexual misconduct. Thus, in petitioner’s case, the gravity and seriousness of the charges against
him stem from his being a married man and at the same time a teacher.

We cannot overemphasize that having an extra-marital affair is an affront to the sanctity of marriage, which
is a basic institution of society. Even our Family Code provides that husband and wife must live together, observe
mutual love, respect and fidelity. This is rooted in the fact that both our Constitution and our laws cherish the validity
of marriage and unity of the family. Our laws, in implementing this constitutional edict on marriage and the family
underscore their permanence, inviolability and solidarity.

As a teacher, petitioner serves as an example to his pupils, especially during their formative years and
stands in loco parentis to them. To stress their importance in our society, teachers are given substitute and special
parental authority under our laws.

Consequently, it is but stating the obvious to assert that teachers must adhere to the exacting standards of
morality and decency. There is no dichotomy of morality. A teacher, both in his official and personal conduct, must
display exemplary behavior. He must freely and willingly accept restrictions on his conduct that might be viewed
irksome by ordinary citizens. In other words, the personal behavior of teachers, in and outside the classroom, must
be beyond reproach.

Accordingly, teachers must abide by a standard of personal conduct which not only proscribes the
commission of immoral acts, but also prohibits behavior creating a suspicion of immorality because of the harmful
impression it might have on the students. Likewise, they must observe a high standard of integrity and honesty.

From the foregoing, it seems obvious that when a teacher engages in extra-marital relationship, especially
when the parties are both married, such behavior amounts to immorality, justifying his termination from employment.

Having concluded that immorality is a just cause for dismissing petitioner, it is imperative that the private
respondent prove the same. Since the burden of proof rests upon the employer to show that the dismissal was for a
just and valid cause, the same must be supported by substantial evidence.

152. GR. NO. 49549 AUGUST 30, 1990

CHUA-QUA VS. CLAVE
PONENTE: REGALADO, J:

FACTS:

Private respondent Tay Tung High School, Inc. is an educational institution in Bacolod City. Petitioner had
been employed therein as a teacher since 1963 and, in 1976 when this dispute arose, was the class adviser in the
sixth grade where one Bobby Qua was enrolled. Since it was the policy of the school to extend remedial instructions
to its students, Bobby Qua was imparted such instructions in school by petitioner. In the course thereof, the couple
fell in love and on December 24, 1975, they got married in a civil ceremony solemnized in Iloilo City by Hon. Cornelio
G. Lazaro, City Judge of Iloilo. Petitioner was then 30 years of age but Bobby Qua, being 16 years old, consent and
advice to the marriage was given by his mother, Mrs. Concepcion Ong. Their marriage was ratified in accordance
with the rites of their religion in a church wedding solemnized by Fr. Nick Melicor at Bacolod City on January 10,
1976.

On February 4, 1976, private respondent filed with the sub-regional office of the DOLE an application for
clearance to terminate the employment of petitioner on the ground: “For abusive and unethical conduct unbecoming
of a dignified school teacher and that her continued employment is inimical to the best interest, and would downgrade
the high moral values, of the school.

Petitioner was placed under suspension without pay on March 12, 1976. The LA of NLRC, Bacolod City
required the parties to submit their position papers and supporting evidence. The LA without conducting any formal
hearing, rendered an “Award” in favor of private respondent granting the clearance to terminate the employment of
petitioner.

Petitioner appealed to the NLRC claiming denial of due process for not having been furnished copies of the
aforesaid affidavits relied on by the LA. The NLRC unanimously reversed the LA’s decision and ordered petitioner’s
reinstatement with backwages.

The case was elevated by private respondent to the Minister of Labor who reversed the decision of the
NLRC. The petitioner was, however, awarded six (6) months salary as financial assistance.

The petitioner appealed to the decision to the Office of the President of the Philippines. After the
corresponding exchanges, the said office, through Presidential Executive Assistant Jacobo C. Clave, rendered its
decision reversing the appealed decision. Private respondent was ordered to reinstate petitioner to her former
position without loss of seniority rights and other privileges and with full back wages from the time she was not
allowed to work until the date of her actual reinstatement.

Private respondent filed an MR, the public respondent reconsidered and modified the aforesaid decision
giving due course to the application of Tay Tung High School, Inc. to terminate the services of petitioner as
classroom teacher but giving her separation pay equivalent to her six (6) months salary. Hence, this petition.

ISSUE:

WHETHER OR NOT PETITIONER COMMITED AN IMMORAL ACTS THAT WOULD WARRANT HER
DISMISSAL FROM WORK

RULING:

NO. With the finding that there is no substantial evidence of the imputed immoral acts, it follows that the
alleged violation of the Code of Ethics governing school teachers would have no basis. Private respondent utterly
failed to show that petitioner took advantage of her position to court her student. If the two fell in love, despite the
disparity in their ages and academic levels, this only lends substance to the truism that the heart has
reasons of its own which reason does not know. The deviation of the circumstances of their marriage from the
usual societal pattern cannot be considered as a defiance of contemporary social mores.

It would seem quite obvious that the avowed policy of the school in rearing and educating children is being
unnecessarily bannered to justify the dismissal of petitioner. This policy, however, is not at odds with and should not
be capitalized on to defeat the security of tenure granted by the Constitution to labor. In termination cases, the
burden of proving just and valid cause for dismissing an employee rests on the employer and his failure to do so
would result in a finding that the dismissal is unjustified.

The charge against petitioner not having been substantiated, we declare her dismissal as unwarranted and
illegal. It being apparent, however, that the relationship between petitioner and private respondent has been
inevitably and severely strained, we believe that it would neither be to the interest of the parties nor would any
prudent purpose be served by ordering her reinstatement.

153. GR.NO. 108891 JULY 17, 1995

JRS BUSINESS VS. NLRC
PONENTE: QUIASON, J:

FACTS:

Petitioner employed private respondent on April 7, 1980. Subsequently, private respondent was promoted
as Station Manager of petitioner’s Davao branch office.

In September 1988, petitioner’s Internal Auditor conducted an audit of its Davao office. The audit revealed a
shortage totaling P145,564.33 arising from undeposited cash sales and unexplained cash shortages from charge
sales.

On the basis that it was the responsibility of petitioner to deposit the proceeds of sales with the office
cashier, Milady Muñoz, petitioner’s treasurer, called private respondent’s attention to the cash shortage. He was
directed to explain in writing within 72 hours from receipt of the notice why he should not be relieved from his
position.

Four days later, private respondent was informed by petitioner’s Personnel Manager of the appointment of
Fernando T. Dela Cerna as officer-in-charge of the Davao office. He was further instructed to report to Dela Cerna for
his new duties pending petitioner’s final decision regarding the result of the audit report.

The employees of petitioner signed statements which detailed the irregularities committed by private
respondent and his wife.

On October 12, 1988, private respondent was directed by Ernesto Gonzales to go on leave without pay
effective October 15, 1988 until further notice, in view of the ongoing investigation.

The next day, private respondent wrote petitioner a letter rebutting the allegations contained in the affidavits
submitted against him. He alleged that he merely requested his wife to assist him in the preparation of reports as she
was a former employee of petitioner. Furthermore, he denied any participation in the cash shortage.

On November 17, 1988, private respondent and his wife received separate demand letters for the
immediate restitution of the amount of P145,564.33

Considering his indefinite forced leave without pay as a constructive dismissal, private respondent filed a
complaint against petitioner with the Regional Arbitration Branch IX of Davao City for illegal dismissal, reinstatement
with back wages, vacation leave and sick leave pay, moral and exemplary damages.
 The LA rendered a decision dismissing the complaint of private respondent for lack of merit. Private
respondent appealed to the NLRC which set aside the LA’s decision and ruled that private respondent was illegally
dismissed. However, instead of reinstatement, NLRC merely granted private respondent separation pay at the rate of
one month salary for every year of service.

Petitioner filed an MR which was denied. Hence, this petition.

ISSUE:

WHETHER OR NOT THE PETITIONER WAS ILLEGALLY DISMISSED.

RULING:

YES. Section 3 and 4, Rule XIV, Book V of the Omnibus Rules Implementing the Labor Code, Termination
of Employment, provide:

“Section 3. Preventive Suspension. The employer may place the worker concerned under preventive
suspension if his continued employment poses a serious and imminent threat to the life or property of the employer
or his co-workers.

Section 4. Period of suspension. No preventive suspension shall last longer than 30 days. The employer
shall thereafter reinstate the worker in his former or in a substantially equivalent position or the employer may extend
the period of suspension provided that during the period of extension, he pays the wages and other benefits due to
the worker. In such case, the worker shall not be bound to reimburse the amount paid to him during the extension if
the employer decides, after contemplation of the hearing, to dismiss the worker.”

Petitioner having been violated the maximum 30-day preventive suspension under Section 4, Rule XIV,
Book V of the Omnibus Rules Implementing the Labor Code, a sanction is imposed on him in consonance with our
ruling in Great Pacific Life Assurance Corporation vs. National Labor Commission, 187 SCRA 694. Petitioner must
indemnify private respondent in the amount of One Thousand Pesos (P1,000.00)

154. GR. NO. 104690 FEBRUARY 23, 1994

GACO VS. NLRC
PONENTE: NOCON, J:

FACTS:

Petitioner was hired by private respondent on April 17, 1974 for the position of Picker. In 1975, after a year
of service, she was promoted to the position of Production Recorder. She held this position for a period of 14 years
until the end of private respondent’s working season in 1989. In April 1990, when petitioner reported for work at the
start of the working season for that year, she found out that her position was already occupied by another employee
and that she was being demoted to the position of Picker.

Petitioner believed that, having been with private respondent for 15 years without any derogatory record, her
demotion was not justified. Considering it as constructive dismissal, petitioner refused to report for work and filed a
complaint before the LA for payment of separation pay.

Private respondent raised the defense that the demotion of petitioner was effected on valid ground, that is
gross inefficiency. The LA rendered a judgment in favor of the petitioner. The LA declared that petitioner’s demotion
was unjustified and she was not accorded due process by private respondent.

On appeal before the NLRC by private respondent, the decision was modified by computing the separation
pay in accordance with the above or in the total amount of P15, 015.00 and deleting the award of back wages.
 Hence, the present petition.

ISSUE:

WHETHER OR NOT THE PETITIONER WAS CONTRUCTIVELY DISMISSED

RULING:

The case of Philippine Japan Active Carbon Corporation, et al. vs. NLRC, which was cited in the recent
case of Lemery Savings and Loan Bank, et al vs. NLRC, defines constructive dismissal as a quitting because
continued employment is rendered impossible, unreasonable or unlikely; as, an offer involving a demotion in rank
and a diminution in pay. As we have stated previously, both the LA and the NLRC arrived at a factual finding that
petitioner was demoted to her former position without any justifiable cause. However, they differed in the conclusions
they arrived therefrom: the LA considered petitioner’s demotion as constructive dismissal whereas respondent NLRC
held that constructive dismissal could not be deduced from the circumstances. On the basis of the foregoing
jurisprudence defining the term constructive dismissal, we sustain the ruling of the LA and his rationalization thereon.
Consequently, petitioner is entitled to her full backwages, inclusive of allowances, and other benefits or their
monetary equivalent computed from the time her compensation was withheld from her up to the time of her actual
reinstatement. In ascertaining the total amount of backwages payable to her, we enunciated in the case of Pines City
Educational Center, et al. vs. NLRC, et al. the doctrine that:

“x x x we go back to the rule prior to the Mercury Drug rule that the total amount derived from
employment elsewhere by the employee from the date of dismissal up to the date of reinstatement, if any,
should be deducted therefrom. x x x”

However, we shall not follow Article 279 of the Labor Code to the letter regarding the period of backwages in
view of the peculiar circumstances of the present case, namely, “there is now a strained relationship between the
petitioner and private respondent and petitioner prays for payment of separation pay in lieu of reinstatement. Instead,
the period thereof shall be reckoned from the time her compensation was withheld from her, or in April 1990 up to the
finality of our decision

156. GR. NO. 156963 NOVEMBER 11, 2004

THE PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE CO. VS. GRAMAJE
PONENTE: CHICO-NAZARIO, J:

FACTS:

Private respondent Philippine American Life and General Insurance Company is a corporation duly
organized and existing under Philippine laws.

Petitioner was employed on October 28, 1997 by private respondent as Assistant Vice-President and Head
of the Pensions Department and in concurrent capacity as Trust Officer of Philam Savings Bank, a Philam Life
subsidiary. She was to be paid P750,000 per annum and is entitled to the benefits given by private respondent to its
employees.

Working as Assistant Vice President of Pensions Department of Philamlife, petitioner was offered an
additional position by respondent Cuisia, which was then resolved and approved by Philam Savings Bank’s Board of
Directors, for the position of Head of Trust Banking Division or AVP Trust Officer on a concurrent capacity and under
a separate compensation.

Effective January 1998, however, petitioner’s marketing manager and marketing officer were immediately
transferred to Group Insurance Division. Petitioner, thereafter, was never given replacements for the marketing
manager and marketing officer, contrary to private respondent Cuisia’s assurance. Thus, petitioner ran the Pensions
Department single-handedly with only one administrative assistant as her staff. Petitioner did the field work, the desk
work (administrative, legal, finance, marketing), the out of town meetings, the client presentations, aside from her
work with the Philam Savings Bank as fund manager, wherein private respondent Cuisia offered her for a separate
compensation, but has still remain unpaid.

Sometime in November 1998, petitioner availed of her housing and car benefits and applied for a car loan
and housing loan.

On November 18, 1998, however, private respondent through Centeno and Sotelo, offered her P250,000.00
for her to vacate her position by December 1998. Petitioner declined the offer considering that there was no valid
reason for her to leave. Private respondents Centeno and Sotelo admonished her that her filing of suit would prompt
respondent Cuisia to blacklist her in companies where he holds directorships and advised her that Philamlife is big ad
can stand the long ordeal of justice system, whereas she may not withstand the phase of the trial. Evidence that this
meeting and matter took place was the formal letter of rejection dated November 25, 1998 sent by petitioner and duly
received by the offices of respondents Cuisia, Centen and Sotelo.

On December 6, 1998, respondent Cuisia met with petitioner and cajoled her to reconsider and accept the
offer of settlement. Cuisia even volunteered to help her look for another job. Petitioner declined, and reiterated that
the actuations f respondents clearly intended to harass and humiliate her and have caused her and her family
extreme emotional stress.

On December 8, 1998, respondents issued her a memorandum instructing her to transfer to the Legal
Department effective December 14, 1998 and to make proper turnover and submit the status report not later than
December 11, 1998.

By her letter dated December 10, 1998, petitioner protested the sudden unexplained transfer, more so a
non-existing position, and stressed that she was hired because of her marketing, finance and fund management
skills, not her legal skills. She also made of record that her department surpassed the target fund level volume set by
the company. Also, respondent Centeno declined the car loan benefit of petitioner.

On December 16, 1998, petitioner, while on Official Sick Leave, received a message in her pager that the
Pensions Department, which was then holding office at the fifth floor of the Philamlife Building at United Nations
Avenue was assumed to be headed by Corine Moralda as her successor, and the Pensions Department was to be
immediately physically transferred on said date at the Philamlife Gammon Center in Makati City. Though sick and on
official sick leave, petitioner went to the office on December 17, 1998 to verify, and upon seeing the Pensions
Department totally dark, without any staff and with left over fixtures, petitioner emotionally shattered, opted to just
leave the premises.

On December 18, 1998, respondent Cuisia through a memorandum appointed Ms. Corine Moralda, as
replacement of petitioner as Head of the Pensions Department effective December 14, 1998. It was onl at that time
that petitioner learned that as early as August 23, 1998, respondents had advertised in the Manila Bulletin for her
replacement.

Also, although, it is the tradition of Philamlife to give, during the Christmas season, officers and employees a
traditional Season’s giveaways, i.e., ham and queso de bola, petitioner then, thru her authorized representatives,
asked for her share, but she was not in the list of recipients. Petitioner’s name was not in the Legal Department, not
in the Pensions Department, and not in the list of Employees of Philamlife when verified with the Personnel
Department.

Hence, on December 23, 1998, petitioner filed the instant case for illegal or constructive dismissal against
herein private respondents.
 The LA found that respondent was not illegally dismissed. The NLRC, affirmed in toto the decision of the LA.
Respondent appealed to the CA, which reversed and set aside the decision of the NLRC.

ISSUE:

WHETHER OR NOT THE RESPONDENT WAS CONSTRUCTIVELY DISMISSED

RULING:

YES. The SC do not agree with the finding of the LA. It may be true that in the transfer of respondent from
the Pensions Department to the Legal Department, there was no demotion in rank nor diminution of the salaries,
benefits and privileges. But this is not the only standard that must be satisfied in order to substantiate the transfer. In
the pursuit of its legitimate business interests, management has the prerogative to transfer or assign
employees from one office or area of operation to another – provided there is no demotion in rank or
diminution of salary, benefits, and other privileges; and the action is not motivated by discrimination, made in
bad faith, or effected as a form of punishment or demotion without sufficient cause.

Discrimination is the unequal treatment of employees which is proscribed as an unfair labor practice by
Art. 248(e) of the Labor Code. It is the failure to treat all persons equally when no reasonable distinction can be found
between those favored and those not favored.

Bad faith has been defined as a state of mind affirmatively operating with furtive design or with some
motive of self-interest or ill will or for an ulterior purpose. It implies a conscious and intentional design to do a
wrongful act for a dishonest purpose or moral obliquity.

In the case at bar, bad faith and discrimination on the part of petitioner are profusely perceived from its
actions.

First, as early as 23 August 1998, unbeknown to respondent, petitioner had already advertised in the
Manila Bulletin for the former’s replacement. Respondent was not even notified in advance of an impending
transfer.

Second, the President and CEO of petitioner corporation in his memorandum dated December 18,
1998, announced the appointment of respondent’s replacement effective December 14, 1998, or during the
time that respondent was still on official sick leave. It is worthy to note that on December 10, 1998, respondent
through a letter protested her sudden unexplained transfer, more so, to a non-existing position. Respondent, in said
letter, likewise pointed out that her department surpassed the target fund level volume set by the company (which
negates petitioner’s allegation of ineptness on the part of respondent, used as ground by the former to justify the
transfer), and thereby requested for status quo, until all issues were resolved. No response was made.

Third, the transfer of respondent to the Legal Department was unreasonable, inconvenient and
prejudicial to her. Petitioner must have known that respondent has no adequate exposure in the field of litigation,
and yet she was transferred to the Legal Department, and as AVP at that. The position of AVP-Legal would have
placed respondent in a very inopportune position because she would be heading a team of lawyers who are far more
experienced than she was in the area of litigation. It was a poor business decision and it is unlikely that the officers of
petitioner would have made such a decision, except to inconvenience or prejudice respondent. Under the
circumstances, the decision to transfer was unreasonable.

Fourth, there was, likewise, discrimination against respondent, as shown from the following: (a) the
Pensions Department was run by respondent with practically no support from management. Respondent was
left to fend for herself, and yet was required to bring in the numbers, i.e., generate and develop accounts. As found
by the Court of Appeals, effective January 1998, respondent’s marketing manager and marketing officer were
transferred to Group Insurance Division. Respondent, thereafter, was never given replacements for said positions,
contrary to Cuisia’s assurance. Respondent herein ran the Pensions Department single-handedly and with only one
Administrative Assistant as her staff. Respondent did the field work, the desk work (administrative, legal, finance,
marketing), out-of-town meetings, client presentations, aside from her work with Philam Savings Bank as fund
manager; (b) respondent tried to avail herself of her car loan benefit sometime in November 1998 by filing the
appropriate application. However, action on this application was deferred by Reynaldo Centeno to his letter dated
December 10 1998, saying that respondent’s employment status has been the subject of several discussions
between the high ranking officers of petitioner; and (c) it is a tradition on the part of petitioner, during the Christmas
season, to give its officers and employees a season’s giveaway, i.e., ham and queso de bola. Respondent sent an
authorized representative to ask for her share, but, unfortunately, she was not in the list of recipients. Her name was
not listed in the Legal Department, nor in the Pensions Department. Respondent’s name, when verified with the
Personnel Department, was not in the list of employees of Philamlife.

Fourth, as clearly pointed out by respondent, she formally rejected the offer of P250,000 for her to
leave the company. The refutation was done in writing and duly received by the three highest offices of petitioner,
namely: the Office of the President; the Office of the Executive Vice-President; and the Office of the Senior Vice-
President and Head Human Resources. Incongruously, taking into consideration the said contents of the formal letter
of rejection, there was no response whatsoever from the aforesaid offices. It may be true, as stated by petitioner, that
“the alleged memorandum pertaining to the meeting held on November 18, 1998 on the alleged P250,000 settlement
offer was prepared by respondent alone without any participation from the company,” but the fact remains that no
formal response was ever made by any of the three offices which received the same. The contents thereof, if untrue,
would have elicited a stark and strong reaction from any of the three offices.

In fine, this Court rules that there was constructive dismissal, and therefore, the petition must fail.

Constructive dismissal exists when an act of clear discrimination, insensibility or disdain by an employer
has become so unbearable to the employee leaving him with no option but to forego with his continued employment.
The circumstances which prevailed in the working environment of the respondent of the respondent clearly
demonstrate this. The failure of the LA to resolutely consider these prevailing circumstances before respondent was
asked to transfer was a major flaw in his decision. Clearly, had the LA considered them, he would have concluded
that the transfer of respondent from the Pensions Department to the Legal Department was not a legitimate exercise
of management prerogative on the part of the petitioner. Before the order to transfer was made, discrimination, bad
faith, and disdain towards respondent were already displayed by petitioner.

157. GR. NO. 94294 MARCH 22, 1991

JOEL MENDOZA VS. NLRC
PONENTE: GANCAYCO, J:

FACTS:

Petitioner was a regular employee (salesman) of private respondent San Miguel Corporation (SMC),
Magnolia Division, assigned to its Baguio Sales Office.

On June 2, 1988, petitioner submitted to private respondent Conrad B. Yumang III, the then Regional Sales
Supervisor, an accident report. When private respondent Yumang made his own inquiries pursuant to superior
instructions to conduct a formal investigation, he found out that the police traffic report shows that the date and time
of the accident was on June 1, 1988 at 1:00 o’clock in the early morning thereof not at 7:00 o’clock in the evening of
May 31, 1988 as per petitioner’s report. Hence, respondent Yumang conducted a formal investigation on June 16,
1988 to determine the truth about the accident.

In a memorandum dated July 5, 1988, petitioner was relieved by private respondent SMC of the duties and
responsibilities as tetra salesman of the Baguio Sales office.
 On August 15, 1988, petitioner was served a letter of termination. Consequently on August 23, 1988,
petitioner filed a complaint for illegal dismissal with the LA. With due course a decision was rendered by the LA
finding that the complainant was illegally dismissed, hence respondents are directed to reinstate him to his former
position without loss of seniority rights and backwages to be computed from the time that it was withheld from him up
to the time of his reinstatement; further, respondents are directed to pay 10% of the totality of the award as attorney’s
fees; and the counterclaim of the respondent was denied.

Private respondent SMC appealed said decision to the NLRC which dismissed petitioner’s complaint for lack
of merit. Hence, this petition.

ISSUE:

WHETHER OR NOT THE TOTALITY OF THE INFRACTIONS OF PETITIONER JUSTIFIES THE PENALTY
OF DISMISSAL.

RULING:

YES. During the investigation it appears that the petitioner knew all the time that the investigation involves
his administrative responsibility to his superior, as he made this statement:

A: Sir tulungan mo naman ako for the last time, please. I am appealing for the offense committed which is in
your behalf causes you a big problem. I am really very sorry sir for what has been done. I realized the gravity of my
offense and I know that a heavy penalty would be imposed upon me. And for this, I am begging for your
consideration and hoping that you will extend a helping hand not just for the but also for my family.

In no uncertain terms he admitted the gravity of his offense and asked that a heavy penalty should be
imposed on him.

At such investigation private respondent SMC found that petitioner violated the company’s policy on
employees conduct on three counts, namely (1) driving under the influence of liquor; (2) unauthorized use of
company vehicle; and (3) damage to company vehicle which was a total wreck. As a matter of fact, the owner of the
house the kitchen of which was hit by the delivery truck driven by petitioner sought from SMC the amount of
P50,000.00 for actual damages.

The rules laid down by the company for the investigation of an employee before his termination need not be
observed to the letter. It is enough that there was due notice and a hearing before a judgment or resolution thereof is
made.

Due process contemplates freedom from arbitrariness. What it requires is fairness or justice; the
substance rather than the form being paramount. When a party has been given the opportunity to be heard,
then he was afforded due process.

Petitioner also assails the severity of the penalty imposed upon him alleging that he should have merited a
suspension only considering his past performance.

Unfortunately petitioner does not appear to be a first offender. Aside from the infractions he was found to
have committed, it appears that petitioner falsified the truth when he made a false report about the incident to private
respondent SMC to cover up for his misdeeds. Moreover on previous occasion, petitioner committed violations of
company rules and regulations concerning pricing as a salesman of the company in a way that is detrimental to his
employer. On one occasion, he failed to remit collections, so that in 1986 he was suspended for thirty days. Thus,
the totality of the infractions that petitioner has committed justifies the penalty of dismissal.

158. GR. NO. 114129 OCTOBER 24, 1996

MANILA ELECTRIC COMPANY VS. NLRC
PONENTE: HERMOSISIMA, JR. J:

FACTS:

Private respondent Jeremias C. Cortez, Jr. was employed on probationary status by Manila Electric
Company (MERALCO) on September 15, 1975 as lineman driver. Six months later, he was regularized as a 3 rd class
lineman-driver assigned at petitioner’s North Distribution Division. In 1977, and until the time of his dismissal, he
worked as 1st class lineman-driver whose duties and responsibilities among others, includes the maintenance of
MERALCO’s distribution facilities (electric lines) by responding to customer’s complaints of power failure,
interruptions, line trippings and other line troubles.

Characteristic, however, of private respondent’s service with petitioner is his perennial suspension from
work. Due to his numerous infractions, private respondent was administratively investigated for violation of
MERALCO’s Code of Employee Discipline, particularly his repeated and unabated absence from work without prior
notice from his superiors specifically from August 2 to September 19, 1989.

After such administrative investigation was conducted by petitioner, it concluded that private respondent
was found to have grossly neglected his duties by not attending t his work as lineman from August 2, 1989 to
September 19, 1989 without notice to his superiors.

In a letter dated January 19, 1990, private respondent was notified of the investigation result and
consequent termination of his services effective January 19, 1990.

On March 7, 1990, private respondent filed a complaint for illegal dismissal against petitioner. The LA
rendered a decision dismissing the case for lack of merit. Aggrieved with the LA’s decision, private respondent
elevated the case on appeal to public respondent. The NLRC set aside the decision of the LA and ordered petitioner
to reinstate respondent with backwages. Petitioner filed an MR which was denied. Hence, this petition.

ISSUE:

WHETHER OR NOT PRIVATE RESPOND or willful diENT’S DISMISSAL FROM SERVICE WAS ILLEGAL

RULING:

Art. 283 of the Labor Code enumerate the just cause for termination. Among such cause are the following.

a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work.
b) Gross and habitual neglect by the employee of his duties.
xxx xxx xxx

This cause includes gross inefficiency, negligence and carelessness. Such just causes is derived from
the right of the employer to select and engage his employees. For indeed, regulation of manpower by the company
clearly falls within the ambit of management prerogative. This court had defined a valid exercise of management
prerogative as one which covers: hiring, work assignment, working methods, time, place and manner of work, tools to
be used, processes to be followed, supervision of workers, working regulations, transfer of employees, work
supervision, lay-off of workers, and the discipline, dismissal and recall of workers. Except as provided for, or
limited by, special laws, an employer is free to regulate, according to his own discretion and judgment, all aspects
of employment.
 Moreover, this Court has upheld a company’s management prerogatives so long as they are exercised in
good faith for the advancement of the employer’s interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid agreements.

In the case at bar, the service record of private respondent with petitioner is perpetually characterized by
unexplained absences and unauthorized sick leave extensions. The nature of his job i.e., as a lineman-driver
requires his physical presence to minister to incessant complaints often faulted with electricity. As aptly stated by the
Solicitor General:

Habitual absenteeism of an errant employee is not concordant with the public service that
petitioner has not assiduously provide. To have delayed power failure in a certain district simply
because a MERALCO employee assigned to such area was absent and cannot immediately be replaced is
a breach of public service of the highest order. A deep sense of duty would, therefore, command that
private respondent should, at the very least, limit his absence for justifiable reasons.

The perchant of private respondent to continually incur unauthorized absences and/or a violation of
petitioner’s sick leave policy finally rendered his dismissal as imminently proper. Private respondent cannot expect
compassion from this Court by totally disregarding his numerous previous infractions and take into consideration only
the period covering August 2, 1989 to September 19, 1989. As ruled by this Court in the cases of Mendoza vs. NLRC
and National Service Corporation vs. Leogardo, Jr., it is the totality, not the compartmentalization, of such
company infractions that private respondent had consistently committed which justified his penalty of
dismissal.

In the case at bar, it was established that complainant violated respondent’ Code on Employee Discipline,
not only once, but ten (10) times. On the first occasion, complainant was simply warned. On the second time, he was
suspended for 5 days. With the hope of reforming the complainant, respondent generously imposed penalties of
suspension for his repeated unauthorized absences and violations of sick leave policy which constitute violations of
the Code. On the ninth time, complainant was already warned that the penalty of dismissal will be imposed for similar
or equally serious violation.

In total disregard of respondent’s warning, complainant, for the tenth time did not report for work without
prior authority from respondent; hence, unauthorized. Worse, in total disregard of his duties as lineman, he did not
report for work from August 1, 1989 to September 19, 1989; thus, seriously affected respondent’s operations as a
public utility. This constitute(s) a violation of respondent’s Code and gross neglect of duty and serious misconduct
under Article 283 of the Labor Code.

Habitual absenteeism should not and cannot be tolerated by petitioner herein which is a public utility
company engaged in the business of distributing and selling electric energy within its franchise areas and that the
maintenance of Meralco’s distribution facilities(electric lines) by responding to customer’s complaints of power failure,
interruptions, line trippings and other line troubles is of paramount importance to the consuming public.

Hence, an employee’s habitual absenteeism without leave, which violated company rules and regulations is
sufficient cause to justify termination from service.
159. GR.NO. 146621 JULY 30, 2004
VALIAO VS. COURT OF APPEALS
PONENTE: QUISUMBING,J:

FACTS:

On February 5, 1990, petitioner Rene Valiao was appointed by private respondent West Negros College
(WNC) as Student Affairs Office (SAO) Director, with a starting salary of P2,800.00 per month. On May 14, 1990,he
was assigned as Acting Director, Alumni Affairs Office.

On July 29, 1990, petitioner was transferred to a staff position and designated as Records Chief at the
Registrar’s Office but was again re-assigned as a typist on June 24, 1991.

The latest reassignment was due to his tardiness and absences, as reflected in the summary of tardiness
and absences report, which showed him to have been absent or late for work from a minimum of seven (7) to a
maximum of seventy-five (75) minutes from a period March to October 31, 1991, and to have reported late almost
every day for the period November to December 1991.

Copies of his tardiness/ absences reports were furnished petitioner, along with memoranda requiring him to
explain but his explanations were either unacceptable or unsatisfactory. Subsequent reports also showed that he did
not change his habits resulting in tardiness and absences. He was even caught one time manipulating the bundy
clock, thus necessitating another memorandum to him asking him to explain his dishonest actuations in
accomplishing the daily attendance logbook and in using the bundy clock.

On December 10, 1991, petitioner received a suspension order without pay for fifteen (15) days effective
January 1, 1992 because of dishonesty in reporting his actual attendance. After serving the suspension, the
petitioner reported back to office on January 16, 1992.

On January 15, 1992, another adverse report on tardiness and absences from the Registrar was made
against the petitioner prompting WNC to send him another memorandum with an attached tardiness and absences
report, calling his attention on his tardiness and absences for the period February to April 1992.

On June 20, 1992, petitioner sent a letter of appeal and explained his side to the new college president who
gave petitioner another chance. The petitioner was then appointed as Information Assistant effective immediately.
However, petititoner did not immediately assume the post of Information Assistant prompting the President of WNC
to call his attention. When the petitioner finally assumed his post, he was allowed a part-time teaching job in the
same school to augment his income.

Sometime in December 1992, WNC won a case against the officials of the union before the NLRC.
Petitioner was ordered to prepare a media blitz of this victory but the petitioner did not comply with the order on the
ground that such a press release would only worsen the already aggravated situation and strained relations between
WNC management and the union officials.

When petitioner reported for work on the first day of January 1993, he was relieved from his post and
transferred to the College of Liberal Arts as Record Evaluator. However, the Dean of CLA complaint to the HR
Manager about the petitioner’s poor performance and habitual absenteeism, as shown in the daily absence reports.

On January 18, 1993, petitioner was again absent from work without permission or notice to his immediate
superior. It turned out that he went to Bacolod City and on January 28, 1993, the petitioner was one of those arrested
during a raid in the house of one “Toto Ruiz”, a suspected drug pusher and was brought to the Bacolod Police Station
along with four (4) other suspects. They were charged with violation of the Dangerous Drugs Act of 1972.
 Petitioner was asked to explain within 24 hours why he should not be terminated as a result of the raid and
the charges against him for violation of RA 6425 as amended. Petitioner allegedly was not able to answer
immediately since he was in jail and received said memorandum only on January 30, 1993, although his wife had
earlier received the memorandum on January 28, 1993.

On January 29, 1993, the petitioner was dismissed for failure to answer said memorandum. On February 1,
1993, the petitioner wrote to the President of WNC explaining his side and asking for due process. WNC cancelled its
Notice of Termination and granted the petitioner’s request. The petitioner was notified about the grant of his request
and that a hearing would be conducted. He was then placed under preventive suspension and an investigation
committee was organized to conduct the probe. After the investigation conducted, the investigation committee
recommended his dismissal.

On January 19, 1995, petitioner filed a complaint against WNC for illegal suspension, illegal dismissal,
backwages, salary differential for salary increases and other benefits granted after his dismissal as well as for moral
and exemplary damages and attorney’s fees.

The LA rendered a decision directing respondent West Negros College to pay complainant Rene P. Valiao
(a) P3,300.00 as salary for the period of his preventive suspension, and (b) P330.00 as attorney’s fees, or the total
amount of P3,630.00. The LA found no justifiable reason to place the petitioner under preventive suspension as there
was no serious or imminent threat to the life or property of his employer or coworkers. However, the LA found the
dismissal of the petitioner from WNC to be valid due to absenteeism and tardiness and after he was accorded the
procedural due process aspect of the law as reflected in the records showing that the petitioner was formally
investigated and given the opportunity to refute the alleged findings by the management of WNC.

On appeal to the NLRC, the latter affirmed the decision of the LA, sustained the latter’s findings of facts, and
made its own findings on the apprehension of the petitioner for possession of prohibited drugs.

Petitioner then filed a Petition for Certiorari under Rule 65 before the CA but this was dismissed for lack of
merit. The CA held that the petitioner was validly dismissed for serious misconduct and gross habitual neglect of
duties, which was aggravated by his arrest for violation of RA 6425, as amended and that he was afforded the twin
requirements of notice and hearing and the opportunity to defend himself by the investigating committee.

Petitioner filed an MR but it was denied by the CA.

ISSUE:

WHETHER OR NOT THE PETITIONER WAS VALIDLY DISMISSED FROM EMPLOYMENT ON THE
GROUND OF SERIOUS MISCONDUCT AND GROSS HABITUAL NEGLECT OF DUTIES, INCLUDING HABITUAL
TARDINESS AND ABSENTEEISM.

RULING:

YES. The SC found that petitioner’s dismissal from employment is valid and justified.

For an employee’s dismissal to be valid: (a) the dismissal must be for a valid cause, and (b) the
employee must be afforded due process.

Serious misconduct and habitual neglect of duties are among the just causes for terminating an employee
under the Labor Code of the Philippines. Gross Negligence connotes want of care in the performance of one’s
duties. Habitual neglect implies repeated failure to perform one’s duties for a period of time, depending upon the
circumstances. The LA’s findings that petitioner’s habitual absenteeism and tardiness constitute gross and habitual
neglect of duties that justified his termination of employment are sufficiently supported by evidence on record.
Petitioner’s repeated acts of absences without leave and his frequent tardiness reflect his indifferent attitude to and
lack of motivation in his work. More importantly, his repeated and habitual infractions, committed despite several
warnings, constitute gross misconduct unexpected from an employee of petitioner’s stature. This Court held that
habitual absenteeism without leave constitute gross negligence and is sufficient to justify termination of an employee.

However, petitioner claims that he was dismissed not for his tardiness or absences but for his arrest as a
suspected drug user. His claim, however, is merely speculative. We find such contention devoid of basis.

Indeed, even without the arrest incident, WNC had more than enough basis for terminating petitioner from
employment. It bears stressing that petitioner’s absences and tardiness were not isolated incidents but manifested a
pattern of habituality. In one case, we held that where the records clearly show that the employee has not only been
charged with the offense of highgrading but also has been warned 21 times for absences without official leave, these
repeated acts of misconduct and willful breach of trust by an employee justify his dismissal and forfeiture of his right
to security of tenure. The totality of infractions or the number of violations committed during the period of
employment shall be considered in determining the penalty to be imposed upon an erring employee. The
offenses committed by him should not be taken singly and separately but in their totality. Fitness for
continued employment cannot be compartmentalized into tight little cubicles of aspects of character,
conduct and ability separate and independent of each other.

160.

161.

162.

163. GR.NO. 166208 JUNE 29, 2007

KING OF KINGS TRANSPORT, INC. VS. MAMAC
PONENTE: VELASCO, JR. J:

FACTS:

Petitioner KKTI is a corporation engaged in public transportation and managed by Claire Dela Fuente and
Melissa Lim.

Respondent Mamac was hired as bus conductor of Don Mariano Transit Corporation (DMTC) on April 29,
1999. The DMTC employees including respondent formed the Damayan ng mga Manggagawa, Tsuper at Conductor-
Transport Workers Union and registered it with the DOLE. Pending the holding of a certification election in DMTC,
petitioner KKTI was incorporated with the SEC which acquired new buses. Many DMTC employees were
subsequently transferred to KKTI and excluded from the election.

The KKTI employees later organized the Kaisahan ng mga Kawani sa King of Kings (KKKK) which was
registered with the DOLE. Respondent was elected as KKKK president.

Respondent was required to accomplish a “Conductor’s Trip Report” and submit it to the company after
each trip. As a background, this report indicates the ticket opening and closing for the particular day of duty. After
submission, the company audits the reports. Once an irregularity is discovered, the company issues an “Irregularity
Report” against the employee, indicating the nature and details of the irregularity. Thereafter, the concerned
employee is asked to explain the incident by making a written statement or counter-affidavit at the back of the same
Irregularity Report. After considering the explanation of the employee, the company then makes a determination of
whether to accept the explanation or impose upon the employee a penalty for committing an infraction. That decision
shall be stated on said Irregularity Report and will be furnished to the employee.

Upon audit of the October 28, 2001 Conductor’s Report of respondent, KKTI noted an irregularity. It
discovered that respondent declared several sold tickets as returned tickets causing KKTI to lose an income of eight
hundred and ninety pesos. While no irregularity report was prepared on the October 28, 2001 incident, KKTI
nevertheless asked respondent to explain the discrepancy. In his letter, respondent said that the erroneous
declaration in his October 28, 2001 Trip Report was unintentional. He explained that during that day’s trip, the
windshield of the bus assigned to them was smashed; and they had to cut short the trip in order to immediately report
the matter to the police. As a result of the incident, he got confused in making the trip report.

On November 26, 2001, respondent received a letter terminating his employment effective November 29,
2001. The dismissal letter alleged that the October 28, 2001 irregularity was an act of fraud against the company.
KKTI also cited as basis for respondent’s dismissal the other offenses he allegedly committed since 1990.

On December 11, 2001, respondent filed a complaint for illegal dismissal, illegal deductions, non-payment of
13thmonth pay, service incentive leave, and separation pay. He denied committing any infraction and alleged that his
dismissal was intended to bust union activities. Moreover, he claimed that his dismissal was effected without due
process.

The LA rendered a judgment dismissing respondent’s complaint for lack of merit.

Aggrieved, respondent appealed to the NLRC which rendered a decision ordering King of King Transport
Inc. to indemnify complainant in the amount of P10,000.00 for failure to comply with due process prior to termination.

Respondent moved for reconsideration but it was denied through the November 14, 2003 resolution of the
NLRC.

Thereafter, respondent filed a petition for certiorari before the CA urging the nullification of the NLRC
decision and resolution. The CA affirmed the NLRC. The CA held that there was just cause for respondent’s
dismissal. It ruled that respondent’s act in declaring the sold tickets as returned tickets constituted fraud or acts of
dishonesty justifying his dismissal. Also, the CA sustained the finding that petitioner’s failed to comply with the
required procedural due process prior to respondent’s termination. Hence, this petition

ISSUE:

WHETHER OR NOT THE RESPONDENT WAS VALIDLY DISMISSED

RULING:

Due process under the Labor Code involves two aspects: first, substantive – the valid and authorized
causes of termination of employment under the Labor Code; and second, procedural – the manner of dismissal. in
the present case, the CA affirmed the findings of the LA and the NLRC that the termination of employment of
respondent was based on just cause.

The following should be considered in terminating the services of employees:

 (1) The first written notice to be served on the employees should contain the specific causes or grounds for
termination against them, and a directive that the employees are given the opportunity to submit their written
explanation within a reasonable period. Reasonable opportunity under the Omnibus Rules means every
kind of assistance that management must accord to the employees to enable them to prepare adequately
for their defense. This should be construed as a period of at least five (5) calendar days from receipt of
notice to give the employees an opportunity to study the accusation against them, consult a union official or
lawyer, gather data and evidence, and decide on the defenses they will raise against the complaint.
Moreover, in order to enable the employees to intelligently prepare their explanation and defenses, the
notice should contain a detailed narration of the facts and circumstances that will serve as basis for the
charge against the employees. A general description of the charge will not suffice. Lastly, the notice should
specifically mention which company rules, if any, are violated and/or which among the grounds under Art.
282 is being charged against the employees.
(2) After serving the first notice, the employers should schedule and conduct a hearing or conference wherein
the employees will be given the opportunity to: (1) explain and clarify their defenses to the charge against
them; (2) present evidence in support of their defenses; and (3) rebut the evidence presented against them
by the management. During the hearing or conference, the employees are given the chance to defend
themselves personally, with the assistance of a representative or counsel of their choice. Moreover, this
conference or hearing could be used by the parties as an opportunity to come to an amicable settlement.
(3) After determining that termination of employment is justified, the employers shall serve the employees a
written notice of termination indicating that: (1) all circumstances involving the charge against the
employees have been considered; and (2) grounds have been established to justify the severance of their
employment.

In the instant case, KKTI admits that it had failed to provide respondent with a “charge sheet.” However, it
maintains that it had substantially complied with the rules, claiming that “respondent would not have issued a written
explanation had he not been informed of the charges against him.” We are not convinced.

First, respondent was not issued a written notice charging him of committing an infraction. The law is clear
on the matter. A verbal appraisal of the charges against an employee does not comply with the first notice
requirement. In Pepsi Cola Bottling Co. vs. NLRC, the Court held that consultations or conferences are not a
substitute for the actual observance of notice and hearing. Also, in Loadstar Shipping Co., Inc. cs. Mesano, the
Court, sanctioning the employer for disregarding the due process requirements, held that the employee’s written
explanation did not excuse the fact that there was a complete absence of the first notice.

Second, even assuming that petitioner KKTI was able to furnish respondent an Irregularity Report notifying
him of his offense, such would not comply with the requirements of the law. We observe from the irregularity reports
against respondent for his other offenses that such contained merely a general description of the charges against
him. The reports did not even state a company rule or policy that the employee had allegedly violated. Likewise,
there is no mention of any of the grounds for termination of employment under Art. 282 of the Labor Code. Thus,
KKTI’s standard charge sheet is not sufficient notice to the employee.

Third, no hearing was conducted. Regardless of respondent’s written explanation, a hearing was still
necessary in order for him to clarify and present evidence in support of his defense. Moreover, respondent made the
letter merely to explain the circumstances relating to the irregularity in his October 28, 2001 Conductor’s Trip Report.
He was unaware that a dismissal proceeding was already being effected. Thus, he was surprised to receive the
November 26, 2001 termination letter indicating as grounds, not only his October 28, 2001 infraction, but also his
previous infractions.

For non-compliance with the due process requirements in the termination of respondent’s employment,
petitioner KKTI is sanctioned to pay respondent the amount of thirty thousand pesos (Php30,000) as damages.

164.

165.

166. GR.NO. 158693 NOVEMBER 17, 2004

AGABON VS. NLRC
PONENTE: YNARES-SANTIAGO, J.:

FACTS:

Private respondent Riviera Home Improvements, Inc. is engaged in the business of selling and installing
ornamental and construction materials. It employed petitioners Virgilio Agabon and Jenny Agabon as gypsum board
and cornice installers on January 2, 1992 until February 23, 1999 when they were dismissed for abandonment of
work.

Petitioners then filed a complaint for illegal dismissal and payment of money claims and on December 28,
1999, the Labor Arbiter rendered a decision declaring the dismissals illegal and ordered private respondent to pay
the monetary claims.

On appeal, the NLRC reversed the Labor Arbiter because it found that the petitioners had abandoned their
work, and were not entitled to backwages and separation pay. The other money claims awarded by the Labor Arbiter
were also denied for lack of evidence.

Upon denial of their motion for reconsideration, petitioners filed a petition for certiorari with the CA. The CA in
turn ruled that the dismissal of the petitioners was not illegal because they had abandoned their employment but
ordered the payment of money claims.

Hence, this petition.

ISSUE:

WHETHER OR NOT THE PETITIONERS WERE ILLEGALLY DISMISSED

RULING:

NO. To dismiss an employee, the law requires not only the existence of a just and valid cause but also
enjoins the employer to give the employee the opportunity to be heard and to defend himself. Article 282 of
the Labor Code enumerates the just causes for termination by the employer: (a) serious misconduct or willful
disobedience by the employee of the lawful orders of his employer or the latter’s representative in connection with the
employee’s work; (b) gross and habitual neglect by the employee of his duties; (c) fraud or willful breach by the
employee of the trust reposed in him by his employer or his duly authorized representative; (d) commission of a crime
or offense by the employee against the person of his employer or any immediate member of his family or his duly
authorized representative; and (e) other causes analogous to the foregoing.

Abandonment is the deliberate and unjustified refusal of an employee to resume his employment. It is a form
of neglect of duty, hence, a just cause for termination of employment by the employer. For a valid finding of
abandonment, these two factors should be present: (1) the failure to report for work or absence without valid or
justifiable reason; and (2) a clear intention to sever employer-employee relationship, with the second as the
more determinative factor which is manifested by overt acts from which it may be deduced that the employees has no
more intention to work. The intent to discontinue the employment must be shown by clear proof that it was deliberate
and unjustified.

In February 1999, petitioners were frequently absent having subcontracted for an installation work for another
company. Subcontracting for another company clearly showed the intention to sever the employer-employee
relationship with private respondent. This was not the first time they did this. In January 1996, they did not report
for work because they were working for another company. Private respondent at that time warned petitioners that
they would be dismissed if this happened again. Petitioners disregarded the warning and exhibited a clear intention
to sever their employer-employee relationship. The record of an employee is a relevant consideration in determining
the penalty that should be meted out to him.

In Sandoval Shipyard v. Clave, we held that an employee who deliberately absented from work without leave
or permission from his employer, for the purpose of looking for a job elsewhere, is considered to have abandoned his
job. We should apply that rule with more reason here where petitioners were absent because they were already
working in another company.

The law imposes many obligations on the employer such as providing just compensation to workers,
observance of the procedural requirements of notice and hearing in the termination of employment. On the other
hand, the law also recognizes the right of the employer to expect from its workers not only good performance,
adequate work and diligence, but also good conduct[19] and loyalty. The employer may not be compelled to continue
to employ such persons whose continuance in the service will patently be inimical to his interests.[20]

After establishing that the terminations were for a just and valid cause, we now determine if the procedures for
dismissal were observed.

The procedure for terminating an employee is found in Book VI, Rule I, Section 2(d) of the Omnibus Rules
Implementing the Labor Code:

Standards of due process: requirements of notice. – In all cases of termination of employment, the following
standards of due process shall be substantially observed:

I. For termination of employment based on just causes as defined in Article 282 of the Code:

(a) A written notice served on the employee specifying the ground or grounds for termination, and giving
to said employee reasonable opportunity within which to explain his side;

(b) A hearing or conference during which the employee concerned, with the assistance of counsel if the
employee so desires, is given opportunity to respond to the charge, present his evidence or rebut the evidence
presented against him; and

(c) A written notice of termination served on the employee indicating that upon due consideration of all
the circumstances, grounds have been established to justify his termination.

In case of termination, the foregoing notices shall be served on the employee’s last known address.

Dismissals based on just causes contemplate acts or omissions attributable to the employee while
dismissals based on authorized causes involve grounds under the Labor Code which allow the employer to
terminate employees. A termination for an authorized cause requires payment of separation pay. When the
termination of employment is declared illegal, reinstatement and full backwages are mandated under Article
279. If reinstatement is no longer possible where the dismissal was unjust, separation pay may be granted.
 Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give the
employee two written notices and a hearing or opportunity to be heard if requested by the employee before
terminating the employment: a notice specifying the grounds for which dismissal is sought a hearing or an opportunity
to be heard and after hearing or opportunity to be heard, a notice of the decision to dismiss; and (2) if the dismissal
is based on authorized causes under Articles 283 and 284, the employer must give the employee and the
Department of Labor and Employment written notices 30 days prior to the effectivity of his separation.

From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just cause under
Article 282 of the Labor Code, for an authorized cause under Article 283, or for health reasons under Article 284, and
due process was observed; (2) the dismissal is without just or authorized cause but due process was observed; (3)
the dismissal is without just or authorized cause and there was no due process; and (4) the dismissal is for just or
authorized cause but due process was not observed.

In the first situation, the dismissal is undoubtedly valid and the employer will not suffer any liability.

In the second and third situations where the dismissals are illegal, Article 279 mandates that the employee
is entitled to reinstatement without loss of seniority rights and other privileges and full backwages, inclusive of
allowances, and other benefits or their monetary equivalent computed from the time the compensation was not paid
up to the time of actual reinstatement.

In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot be cured, it
should not invalidate the dismissal. However, the employer should be held liable for non-compliance with the
procedural requirements of due process.

The present case squarely falls under the fourth situation. The dismissal should be upheld because it was
established that the petitioners abandoned their jobs to work for another company. Private respondent,
however, did not follow the notice requirements and instead argued that sending notices to the last known addresses
would have been useless because they did not reside there anymore. Unfortunately for the private respondent, this
is not a valid excuse because the law mandates the twin notice requirements to the employee’s last known
address. Thus, it should be held liable for non-compliance with the procedural requirements of due process.

A review and re-examination of the relevant legal principles is appropriate and timely to clarify the various
rulings on employment termination in the light of Serrano v. National Labor Relations Commission.[22]

Prior to 1989, the rule was that a dismissal or termination is illegal if the employee was not given any
notice. In the 1989 case of Wenphil Corp. v. National Labor Relations Commission,[23] we reversed this long-standing
rule and held that the dismissed employee, although not given any notice and hearing, was not entitled to
reinstatement and backwages because the dismissal was for grave misconduct and insubordination, a just ground for
termination under Article 282. The employee had a violent temper and caused trouble during office hours, defying
superiors who tried to pacify him. We concluded that reinstating the employee and awarding backwages “may
encourage him to do even worse and will render a mockery of the rules of discipline that employees are required to
observe.”[24] We further held that:

Under the circumstances, the dismissal of the private respondent for just cause should be maintained. He has
no right to return to his former employment.

However, the petitioner must nevertheless be held to account for failure to extend to private respondent his
right to an investigation before causing his dismissal. The rule is explicit as above discussed. The dismissal of an
employee must be for just or authorized cause and after due process. Petitioner committed an infraction of the
second requirement. Thus, it must be imposed a sanction for its failure to give a formal notice and conduct an
investigation as required by law before dismissing petitioner from employment. Considering the circumstances of this
case petitioner must indemnify the private respondent the amount of P1,000.00. The measure of this award depends
on the facts of each case and the gravity of the omission committed by the employer.
 The rule thus evolved: where the employer had a valid reason to dismiss an employee but did not follow the
due process requirement, the dismissal may be upheld but the employer will be penalized to pay an indemnity to the
employee. This became known as the Wenphil or Belated Due Process Rule.

On January 27, 2000, in Serrano, the rule on the extent of the sanction was changed. We held that the
violation by the employer of the notice requirement in termination for just or authorized causes was not a denial of
due process that will nullify the termination. However, the dismissal is ineffectual and the employer must pay full
backwages from the time of termination until it is judicially declared that the dismissal was for a just or authorized
cause.

The rationale for the re-examination of the Wenphil doctrine in Serrano was the significant number of cases
involving dismissals without requisite notices. We concluded that the imposition of penalty by way of damages for
violation of the notice requirement was not serving as a deterrent. Hence, we now required payment of full
backwages from the time of dismissal until the time the Court finds the dismissal was for a just or authorized cause.

Serrano was confronting the practice of employers to “dismiss now and pay later” by imposing full
backwages.

We believe, however, that the ruling in Serrano did not consider the full meaning of Article 279 of the Labor
Code which states:

ART. 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.

This means that the termination is illegal only if it is not for any of the justified or authorized causes provided
by law. Payment of backwages and other benefits, including reinstatement, is justified only if the employee was
unjustly dismissed.

The fact that the Serrano ruling can cause unfairness and injustice which elicited strong dissent has
prompted us to revisit the doctrine.

To be sure, the Due Process Clause in Article III, Section 1 of the Constitution embodies a system of rights
based on moral principles so deeply imbedded in the traditions and feelings of our people as to be deemed
fundamental to a civilized society as conceived by our entire history. Due process is that which comports with the
deepest notions of what is fair and right and just.[26] It is a constitutional restraint on the legislative as well as on the
executive and judicial powers of the government provided by the Bill of Rights.

Due process under the Labor Code, like Constitutional due process, has two aspects: substantive, i.e., the valid
and authorized causes of employment termination under the Labor Code; and procedural, i.e., the manner of
dismissal. Procedural due process requirements for dismissal are found in the Implementing Rules of P.D. 442, as
amended, otherwise known as the Labor Code of the Philippines in Book VI, Rule I, Sec. 2, as amended by
Department Order Nos. 9 and 10. Breaches of these due process requirements violate the Labor
Code. Therefore statutory due process should be differentiated from failure to comply with constitutional due
process.

Constitutional due process protects the individual from the government and assures him of his rights in criminal,
civil or administrative proceedings; while statutory due process found in the Labor Code and Implementing Rules
protects employees from being unjustly terminated without just cause after notice and hearing.
 In Sebuguero v. National Labor Relations Commission, the dismissal was for a just and valid cause but the
employee was not accorded due process. The dismissal was upheld by the Court but the employer was
sanctioned. The sanction should be in the nature of indemnification or penalty, and depends on the facts of each
case and the gravity of the omission committed by the employer.

In Nath v. National Labor Relations Commission, it was ruled that even if the employee was not given due
process, the failure did not operate to eradicate the just causes for dismissal. The dismissal being for just
cause, albeit without due process, did not entitle the employee to reinstatement, backwages, damages and attorney’s
fees.

Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc. v. National Labor Relations
Commission which opinion he reiterated in Serrano, stated:

C. Where there is just cause for dismissal but due process has not been properly observed by an
employer, it would not be right to order either the reinstatement of the dismissed employee or the payment of
backwages to him. In failing, however, to comply with the procedure prescribed by law in terminating the services of
the employee, the employer must be deemed to have opted or, in any case, should be made liable, for the payment
of separation pay. It might be pointed out that the notice to be given and the hearing to be conducted generally
constitute the two-part due process requirement of law to be accorded to the employee by the employer.
Nevertheless, peculiar circumstances might obtain in certain situations where to undertake the above steps would be
no more than a useless formality and where, accordingly, it would not be imprudent to apply the res ipsa loquitur rule
and award, in lieu of separation pay, nominal damages to the employee. x x x.

After carefully analyzing the consequences of the divergent doctrines in the law on employment termination,
we believe that in cases involving dismissals for cause but without observance of the twin requirements of notice and
hearing, the better rule is to abandon the Serrano doctrine and to follow Wenphil by holding that the dismissal was for
just cause but imposing sanctions on the employer. Such sanctions, however, must be stiffer than that imposed
in Wenphil. By doing so, this Court would be able to achieve a fair result by dispensing justice not just to employees,
but to employers as well.

The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but not complying
with statutory due process may have far-reaching consequences.

This would encourage frivolous suits, where even the most notorious violators of company policy are rewarded
by invoking due process. This also creates absurd situations where there is a just or authorized cause for dismissal
but a procedural infirmity invalidates the termination. Let us take for example a case where the employee is caught
stealing or threatens the lives of his co-employees or has become a criminal, who has fled and cannot be found, or
where serious business losses demand that operations be ceased in less than a month. Invalidating the dismissal
would not serve public interest. It could also discourage investments that can generate employment in the local
economy.

The constitutional policy to provide full protection to labor is not meant to be a sword to oppress
employers. The commitment of this Court to the cause of labor does not prevent us from sustaining the employer
when it is in the right, as in this case. Certainly, an employer should not be compelled to pay employees for work not
actually performed and in fact abandoned.

The employer should not be compelled to continue employing a person who is admittedly guilty of
misfeasance or malfeasance and whose continued employment is patently inimical to the employer. The law
protecting the rights of the laborer authorizes neither oppression nor self-destruction of the employer.

It must be stressed that in the present case, the petitioners committed a grave offense, i.e., abandonment,
which, if the requirements of due process were complied with, would undoubtedly result in a valid dismissal.
 An employee who is clearly guilty of conduct violative of Article 282 should not be protected by the
Social Justice Clause of the Constitution. Social justice, as the term suggests, should be used only to correct an
injustice. As the eminent Justice Jose P. Laurel observed, social justice must be founded on the recognition of the
necessity of interdependence among diverse units of a society and of the protection that should be equally
and evenly extended to all groups as a combined force in our social and economic life, consistent with the
fundamental and paramount objective of the state of promoting the health, comfort, and quiet of all persons, and of
bringing about “the greatest good to the greatest number.”[34]

This is not to say that the Court was wrong when it ruled the way it did in Wenphil, Serrano and related
cases. Social justice is not based on rigid formulas set in stone. It has to allow for changing times and
circumstances.

Justice Isagani Cruz strongly asserts the need to apply a balanced approach to labor-management relations and
dispense justice with an even hand in every case:

We have repeatedly stressed that social justice – or any justice for that matter – is for the deserving, whether
he be a millionaire in his mansion or a pauper in his hovel. It is true that, in case of reasonable doubt, we are to tilt
the balance in favor of the poor to whom the Constitution fittingly extends its sympathy and compassion. But never is
it justified to give preference to the poor simply because they are poor, or reject the rich simply because they are rich,
for justice must always be served for the poor and the rich alike, according to the mandate of the law.

Justice in every case should only be for the deserving party. It should not be presumed that every case of
illegal dismissal would automatically be decided in favor of labor, as management has rights that should be fully
respected and enforced by this Court. As interdependent and indispensable partners in nation-building, labor and
management need each other to foster productivity and economic growth; hence, the need to weigh and balance the
rights and welfare of both the employee and employer.

Where the dismissal is for a just cause, as in the instant case, the lack of statutory due process should not
nullify the dismissal, or render it illegal, or ineffectual. However, the employer should indemnify the employee for
the violation of his statutory rights, as ruled in Reta v. National Labor Relations Commission. The indemnity to be
imposed should be stiffer to discourage the abhorrent practice of “dismiss now, pay later,” which we sought to deter
in the Serrano ruling. The sanction should be in the nature of indemnification or penalty and should depend
on the facts of each case, taking into special consideration the gravity of the due process violation of the
employer.

Under the Civil Code, nominal damages is adjudicated in order that a right of the plaintiff, which has
been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him.

As enunciated by this Court in Viernes v. National Labor Relations Commissions, an employer is liable to
pay indemnity in the form of nominal damages to an employee who has been dismissed if, in effecting such
dismissal, the employer fails to comply with the requirements of due process. The Court, after considering the
circumstances therein, fixed the indemnity at P2,590.50, which was equivalent to the employee’s one month
salary. This indemnity is intended not to penalize the employer but to vindicate or recognize the employee’s right to
statutory due process which was violated by the employer.

The violation of the petitioners’ right to statutory due process by the private respondent warrants the payment
of indemnity in the form of nominal damages. The amount of such damages is addressed to the sound discretion of
the court, taking into account the relevant circumstances. Considering the prevailing circumstances in the case
at bar, we deem it proper to fix it at P30,000.00. We believe this form of damages would serve to deter employers
from future violations of the statutory due process rights of employees. At the very least, it provides a vindication or
recognition of this fundamental right granted to the latter under the Labor Code and its Implementing Rules.
167. GR. NO. 151378 MARCH 28, 2005
JAKA FOOD PROCESSING CORPORATION VS. PACOT
PONENTE: GARCIA, J:

FACTS:

Respondent Darwin Picot, Robert Parohinog, David Bisnar, Marlon Domingo, Rhoel Lescano and Jonathan
Cagabcab were earlier hired by petitioner JAKA Foods Processing Corporation (JAKA) until the latter terminated their
employment on August 29, 1997 because the corporation was “in dire financial straits”. It is not disputed, however,
that the termination was effected without JAKA complying with the requirement under Article 283 of the Labor Code
regarding the service of a written notice upon the employees and the DOLE at least one (1) month before the
intended date of termination.

In time, respondents separately filed with the Regional Arbitration Branch of the NLRC complaints for illegal
dismissal, underpayment of wages and non-payment of service incentive leave and 13th month pay against JAKA
and its HRD Manager, Rosana Castelo.

After due proceedings, the LA rendered a decision declaring the termination illegal and ordering JAKA and
its HRD Manager to reinstate respondents with full backwages, and separation pay if reinstatement is not possible.

Therefrom, JAKA went on appeal to the NLRC, which affirmed in toto the decision of the LA. JAKA filed an
MR. The NLRC came out with another decision modifying its earlier decision by reversing and setting aside the
awards of backwages, service incentive leave pay. Each of the complainants-appellee shall be entitled to a
separation pay equivalent to one month. In addition, respondent-appellants is ordered to pay each of the
complainants-appellees the sum of P2,000.00 as indemnification for its failure to observe due process in effecting the
retrenchment.

Respondent went to the CA via petition for certiorari. The CA applying the doctrine laid down in Serrano vs.
NLRC, reversed and set aside the NLRC’s decision.

This time, JAKA moved for reconsideration but it was denied by the CA in its resolution. Hence, this petition.

ISSUE:

WHETHER OR NOT RESPONDENT WAS VALIDLY DISMISSED

RULING:

The records before us reveal that, indeed, JAKA was suffered from serious business losses at the time it
terminated respondents’ employment. As aptly by the NLRC:

A careful study of the evidence presented by the respondent-appellant corporation shows that the audited
Financial Statement of the corporation for the periods 1996, 1997 and 1998 were submitted by the respondent-
appellant corporation. The Statement of Income and Deficit found in the Audited Financial Statement of the
respondent-appellant corporation clearly shows the following, 1996, the deficit of the respondent-appellant
corporation was P188,218,419.00 or 94.11% of the stockholder’s equity which amounts to P200,000,000.00. In 1997
when the retrenchment program of respondent-appellant corporation was undertaken, the deficit ballooned to
P247,222,569.00 or 123.61% of the stockholder’s equity, thus a capital deficiency or impairment of equity ensued. In
1998, the deficit grew to P355,794,897.00 or 177% of the stockholders’ equity. From 1996 to 1997, the deficit grew
by more than 31% while in 1998 the deficit grew by more than 47%.

The Statement of Income and Deficit of the respondent appellant corporation to prove its alleged losses was
prepared by an independent auditor, SGV & Co. it convincingly shows that the respondent-appellant corporation was
in dire financial straits, which the complainants-apellees failed to dispute. The losses incurred by the respondent-
appellant corporation are clearly substantial and sufficiently proven with clear and satisfactory evidence. Losses
incurred were adequately shown with respondent-appellant’s audited financial statement. Having established the loss
incurred by the respondent-appellant corporation, it necessarily follows that the ground in support of retrenchment
existed at the time the complainants-appellees were terminated. We cannot therefore sustain the findings of the LA
and the alleged losses of the respondent-appellant was not well substantiated by the substantial proofs. It is therefore
logical for the corporation to implement a retrenchment program to prevent further losses.

Noteworthy it is, moreover, to state that herein respondents did not assail the foregoing finding of the NLRC
which, incidentally, was also affirmed by the CA.

It is, therefore, established that there was ground for respondents’ dismissal, i.e., retrenchment, which is
one of the authorized causes enumerated under Article 283 of the Labor Code. Likewise, it is established that JAKA
failed to comply with the notice requirement under the same Article. Considering the factual circumstances in the
instant case and the above ratiocination, we, therefore, deem it proper to fix the indemnity at P50,000.00.